The reverse mortgage industry has seen many changes over the last few months and years. The government along with industry leaders have decided to make the product as safe as possible for the borrower, non-borrowing spouses and even investors. In years past there have been negative conotations and misconceptions when people thought about reverse mortgages. Recent years have seen them become safer and more desirable particularly to the potential borrower and their family. Below we will discuss some other those changes and a new one coming August 4th that will really safeguard those spouses who are not old enough to be on the loan.
In recent years FHA has sought to make the reverse mortgage safer. Mainly safer for the investor and HUD itself. Many of these changes were negative in respect to the borrower depending on how you look at it. Every time a change was put into place it either lowered the amount the borrower can receive or raised the fees (fees collected directly by HUD) for the loan. These changes lowered the risk of offering the loans however so in that way it was good simply because it made sure the loan would still be available at all. Most people feel much safer knowing that the HECM (Home Equity Conversion Mortgage) is Government insured and the Government needed to lower the risk in offering the loan in order to make sure they could always do just that.
On August 4th there will be changes put in place that will allow the non-borrowing spouse to stay in the home even after the borrowing spouse has passed away or moved into a care facility. A non-borrowing spouse is a husband or wife who is not old enough (at least 62) to be on the loan. Some people need the reverse mortgage even if their spouse is not of age for various reasons. In the past once the borrowing spouse died or no longer occupied the property, the non-borrowing spouse was forced to sell or refi or face foreclosure. On August 4th FHA will start allowing non-borrowing spouses to stay in the home until they pass away or vacate even if the borrowing spouse has already vacated. With reverse mortgages, the older you are the more money you get so that will be the one potential downside. HUD will base the loan amount (principal limit) on the age of the non-borrowing spouse meaning there will be less money. The safety of knowing the non-borrowing spouse will be allowed to remain in the home once the borrowing spouse has vacated is most certainly a good thing though. The best way to get more info about a reverse mortgage or the new changes coming is to call us and speak to a qualified loan officer.