New reverse mortgage guidelines as of October 2013 comes with many changes both good and bad. All of the new guidelines went into effect on September 30th, 2013, so any reverse mortgage written from that point on will have to adhere to these rules. Two major changes are how much money you will be eligible for based on your age and how much the upfront mortgage insurance will be based on how much you take out.The reverse mortgage program was in trouble because many seniors were defaulting on their loans. Most defaults were coming from the borrowers not paying their property taxes on the home. And since the Federal Housing Administration (FHA) insures almost all reverse mortgages in the United States, they are going to have to be bailed out by the treasury with a $1.7 billion package partly because of these defaults on the reverse mortgages. These new guidelines are a direct result of the bailout.
The first major change will be the amount of money each senior is eligible for based on their age. Essentially, there will be less money available to the senior as a whole and upfront depending on on which reverse mortgage product they choose, which is either the HECM Plus 60 or HECM Minus 60.
Also, the upfront mortgage insurance premiums are changing. The HECM Plus 60 carries a 2.5% FHA fee, but the HECM Minus 60 only carries a .50% FHA fee. Depending on the type of loan you need or want to take out can make a difference in the final costs of the loan.
For example, if you were to take out the HECM Plus 60 and you are 72 years old and the current interest rates today are at 4.5% for a reverse mortgage, then the max loan limit would be 57.5% of your home value. Let’s say the value of your home is $300,000, then 57.5% of that number would be $172,500. So the maximum loan amount you could take out would be $172,500. Then your initial mortgage insurance premium would be 2.5% of $300,000 or $7,500, which can be rolled into the new reverse mortgage.
If you elect to take the HECM Minus 60 and only need 60% or less of the $172,500, then your initial mortgage insurance premium would be .50% of $300,000 or $1,500, which can be rolled into the new reverse mortgage.
As you can see it is a big difference between the HECM Plus 60 and HECM Minus 60 costs to the loan.
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New Reverse Mortgage Guidelines as of October 2013
![New Reverse Mortgage Guidelines as of October 2013]()
Reviewed by Merlyn Rosell
Published :
Rating : 4.5
Published :
Rating : 4.5