Tighter Rules Loom for Eligibility for Reverse Mortgages
The Washington Post reminds us that changes to federal law for government-backed reverse mortgages, adiopted in 2014, are about to kick in:
“Interested in a reverse mortgage without a lot of hassles? Better get your application in fast. As of April 27, the federal government is imposing a series of extensive ‘financial assessment’ tests that will make applying for a reverse mortgage tougher — much like applying for a standard home mortgage.
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[D]uring the years of the recession and mortgage bust, thousands of borrowers fell into default because they didn’t pay their required property taxes and hazard insurance premiums. On top of that, real estate values plunged, producing huge losses on defaulted and foreclosed properties for the FHA. The losses got so severe that the Treasury Department had to provide the FHA with a $1.7 billion bailout in 2013, the first in the agency’s history since its creation in the 1930s.
All of which led to the dramatic changes coming April 27. Applicants are now going to need to demonstrate upfront that they have both the ‘willingness’ and the ‘capacity’ to meet their obligations. Reverse-mortgage lenders are going to pull borrowers’ credit reports from the national credit bureaus, just as they do with other mortgages.illion bailout in 2013, the first in the agency’s history since its creation in the 1930s.”
For more details see the full Post article at Window Is Rapidly Closing to Get Hassle-Free Reverse Mortgage.
Many thanks to Maryland-based Elder Law attorney Morris Klein for sending me this article. Additional information on “home equity conversion mortgages”is available on the HUD.gov website.