The Department of Housing and Urban Development has finally made a decision in regards to the implementation of the financial assessment to the reverse mortgage program. In addition, it has also made a decision regarding the non-borrowing spouse by making changes to the amount of funds a borrower may have access to if they have a non-borrowing spouse.
In a report from the National Reverse Mortgage Lenders Association, HUD stated that it will publish two Mortgagee Letters in the following weeks to better explain the new rules to industry professionals.
The first, which will deal with the non-borrowing spouse, states that the age of the younger member of the couple will be used to determine the principal limit factor. While HUD is expected to modify PLF tables in order to cover spouses 62 years of age and older, it will potentially decrease the amount of money a couple can qualify for when doing a reverse mortgage.
This is will potentially harm the non-borrowing spouse market, especially taking into consideration the changes that came into play in October. In the past, a non-borrowing spouse would simply not be on the loan and the amount of money a borrower could potentially receive was determined by the age of the sole borrower. By implementing this clause, HUD is killing off a sector of the market that may be looking into reverse mortgages in order to fund their retirement in the long term.
The second mortgagee letter, which will be published a couple of weeks afterward will finally reveal to the industry how the forthcoming financial assessment will work. The letter is expected to be issued mid-February and the financial assessment is due to be implemented 90 days afterward.
If anything good can be said about the financial assessment is that at least HUD has taken the time to listen to the industry’s comments on the topic and have possibly adjusted the financial assessment based on their advice.
One of the changes to the financial assessment being considered is the mandatory set-aside which may not longer be mandatory after the implementation of the financial assessment. In short, lenders may have the option of requiring a set-aside to cover any shortfalls, on a case by case basis, and not as a mandatory stipulation.
Big changes are underway for the program, as always, let’s hope they’re for the best, making the program safer for borrowers, and the industry as a whole.
Interested in the reverse mortgage program or have any question? Give PS Financial Services a call at (888) 845-6630 or via email at info@PSReverseMortgage.com. We do not pressure those who inquire. We are simply here to help.