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New reverse mortgage rules

New Reverse Mortgage Rules Can Ease Concerns With Borrowers

The industry is shifting boundaries, and for the better. The new reverse mortgage rules are helping to alleviate previous concerns regarding these HECM home loans. This sudden turn of events is helping to remove any stigmas that are associated with these loans.

According to a report from the Center for Retirement Research at Boston College, reverse mortgages are considered as a viable option for households that lack the necessary retirement income to secure their lifestyle after leaving the workforce.

Any type of home loan is not without its risks, but no longer are reverse mortgages in the spotlight for this. Over the past three years, since the new rules were enacted, borrowers and lenders alike are closing more deals in confidence.

New underwriting criteria mandates these simple changes: A borrower must be able to demonstrate the financial ability to maintain the home, and pay the property taxes and insurance on it. Following a third-party credit counseling session, homeowners over the age of 62 can borrow against the equity in their primary residence.

The key benefit of these loans is really found in the ease of the approval process. Since the restrictions are different, and since the loans are purely based on the equity of a secured asset, no income or credit verification is required to get people approved. This veers greatly away from any other type of home loan, and makes these loans plausible for lower income families that are seeking to secure their retirement.

According to the aforementioned report, the new rules put a positive spotlight on reverse mortgages, with the ability to permanently reduce default rates by up to 50%, a number that’s unable to be touted with virtually any other kind of bank or home loan.

As demand for reverse mortgage home loans increase, and as refreshing reports like these surface, it’s good to know that older Americans have options for retirement that are outside of 401(k) investments. As America moves away from the previous pension model, many citizens have struggled to form a solid retirement plan. But in the future, this will likely result in a reverse mortgage because of its security, and because of the fact that it eliminates the existing monthly mortgage payment while putting cash in the pocket of the borrower.

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2 comments

  1. why does your article say there are no income or credit requirements for reverse mortgages , since FA, there are absolutely credit and income requirements when underwriting these loans ..

  2. Wow. Where to begin. There are so many inaccuracies in this article it would take a book to respond. Ask one simple question — with all loan interest rates at an all time low, why are interest rates on federally insured reverse mortgages at an all time high? The simple answer — the obscene amount of money in yield spread premiums that the loan officer/broker is making. How about a commission of over 12%+ on the amount of the loan. Too many snake oil salesmen still in the game. Want to loose your house — go with a reverse mortgage!

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