Depending on who you talk to, the opinion on the reverse mortgage changes will range from “horrible” to “the best thing that ever happened to the program.”
I stand somewhere in the middle.
The financial assessment still has me weary about the future of the program, mainly, because it will bar a lot of potential consumers from the program. Not to mention, make the program less attractive for those who have been considering a reverse mortgage in the future.
Do I think it’s fair? No, but I also have to think about the FHA’s position in all this. They are trying to keep the program alive for consumers who qualify, while making it safer as well. The FHA is hoping these changes prevent future borrowers from defaulting on their loans and ensuring that they are able to keep up with their financial obligations.
An article published in the Boston Herald, “New restrictions limit appeal of reverse mortgages,” however, states: “the changes are likely to reduce the attractiveness of reverse mortgages to large numbers of seniors.”
It’s possible…but I don’t think it’ll be a dead end.
In fact, if what most people are saying is true, then the recent changes will benefit the program more than hinder it considering it will appeal more to the “retirement/financial planner” than the “financially unstable.”
Using any program just to get out of debt, just so that you can be free to acquire more debt is bound to backfire. This is what the changes are trying to prevent–consumers who solely use the reverse as a last resort when it was never meant to be used as such.
In a sense, the upcoming changes are will bring the program back to its original roots by changing the reverse mortgage’s reputation from the inside out. In the end, even if consumers see the reverse mortgage program as a less attractive option because of reduced principal limits, higher fees and mandatory set-asides, the alternative is far less attractive, namely, a home equity line of credit.
While it carries no fees, it’s still a loan you have to pay back, most of the time, in one balloon payment at the end of the time allotted for repayment (usually 10 to 15 years). A reverse mortgage is a loan you don’t have to pay back unless you pass away, sell, or move from your primary residence. In addition, as a non-recourse loan, your heirs aren’t held responsible for the full loan amount, even if the property goes upside down.
A home equity line of credit, on the other hand, can be frozen, reduced, and your heirs are responsible if you were to pass away without repaying the loan amount in full.
There will always be ‘naysayers’ when it comes to the reverse mortgage, despite its benefits. The changes will change the program, as we know it, and the clients that qualify for it, but it will never change the reason the program was created for in the first place…to help retirees, comfortably, age in place.
Interested in a reverse mortgage or simply want more information? Give PS Financial Services a call at (888) 845-6630 or via email at info@PSReverseMortgage.com. We don’t pressure those who inquire. We are simply here to help.