The changes to the reverse mortgage program are becoming a reality. By the end of September, the reverse mortgage program (as we know it) will be gone, and with it, the old principal limit factors.
In a nutshell, if a borrower could qualify for a HECM loan for the full 60%, under the new program they would receive 50% of that. Or, if a borrower could qualify for 58% of the HECM loan, they will receive 48% under the new program.
In my opinion, these changes will bring more stabilization to the reverse mortgage program, making the program safer, overall, for current and future consumers, but at what price?
Federal Housing Commissioner Carol Galante said, before announcing the upcoming changes:
“The changes being announced will realign the HECM program with its original intent which will aid in the restoration of the MMI fund and help ensure the continued availability of this important program. Our goal here is to make certain our reverse mortgage program is a financially sustainable option for seniors that will allow them to age in place in their own homes.”
It seems to me that this is a Catch-22.,,,
For the most part, borrowers apply for a reverse mortgage because they need money and the HUD is making changes for the program because they suffered substantial losses as a result. For the program to continue to thrive, the HUD needs to be financially healthy, especially because they are responsible for covering the difference if house were to ever go upside down.
In addition to limiting the amount of money that is received if they qualify for, borrowers will also be limited in the amount of loan proceeds that can be disbursed at the closing of the loan or in the initial one-year period after closing.
I have faith that program will continue to benefit all those who qualify. Having said that, it will get harder to qualify.
In the end, the reverse mortgage program had to adapt as the real estate market had to when the during the recession, and after it. It’s the law of life, things change, and we will change with it.
There’s no other way.
Click here for more information about the elimination of the reverse mortgage program as we know it: