The changes to the reverse mortgage program will affect everyone. From HUD to brokers to borrowers, these new changes are poised to change the reverse mortgage program (as we know it) completely.
For HUD, these changes have been a long time coming. They don’t want to eliminate the program. They just want to make the necessary changes to avoid the same problems from the past to keep popping up in the future, namely, the non-borrowing spouse and originator steering.
By making sure future borrowers (and their non-borrowing spouse) are able to keep up financially with their responsibility as well as limiting the amount borrowers can receive upfront, and in general, HUD is boosting borrowers’ cash flow without hurting their own insurance fund in the process.
For those that consider these changes purely negative, it’s important to remember that HUD could have simply removed the program. If they’re taking the time to strengthen the program, and make it safer, it demonstrates their faith in the program and their desire to keep it around for seniors who qualify.
One of the things that separated the reverse mortgage program from other loans is the fact that, even if the value of your home went upside down, you never owed more than the value of your home. When borrowers defaulted on their loans, the FHA was obliged to take on their debt.
Reverse mortgages will still continue to be FHA-insured. By making sure the loans are safer, though, borrowers can now avoid foreclosure and HUD can avoid having to tab into their insurance fund.
Are all of these changes ideal? No, but no one can deny that they are necessary to the health of the program and HUD. Going forward, the changes will insure the program continues to do what it was intended to, provide an extra source of cash flow for retiring American while making the sure they are well insulated as well.
Interested in a reverse mortgage or simply want more information, give PS Financial Services a call at (888) 845-6630 or email us at info@PSReverseMortgage.com. We do not pressure those who inquire, we’re just here to help.
Click Here for Part 2: HECM Loan Changes…What They Mean for Brokers
Click Here for Part 3: HECM Loan Changes…What They Mean for Borrowers