The National Reverse Mortgage Lenders Association (NRMLA) has recently asked that regulators develop a “qualified mortgage” rule that lenders can apply to proprietary reverse mortgages. Ideally, this rule would outline the terms that must be included in a proprietary reverse mortgage for the loan to be securitized without triggering unwanted risk retention requirements.
On May 9th, reverse mortgage industry experts met with congressional leaders to discuss the Federal Housing Administration’s (FHA) Home Equity Conversion Mortgage (HECM) program. While many areas of the program were discussed, AARP introduced the topic of the FHA reverse mortgage cap set by congress. Currently, this cap allows FHA to insure 275,000 reverse mortgages.
Before applying for a reverse mortgage, seniors are required to complete one counseling session administered by a HUD-approved housing counselor. During counseling, seniors will discuss their potential loan, their options and other information that seniors need to know before making an informed decision. Counseling is one of the most important and educational aspects of the loan process.
According to mid-year data recently released by the Department of Housing and Urban Development (HUD), 40,587 seniors have already applied for a Home Equity Conversion Mortgage (HECM) this year. Only 28,920 of those applicants have been approved. While some applicants might still be completing the loan process or have elected not to accept a loan, a portion of applicants have been denied. While this may seem surprising, there are instances in which a 62-year-old homeowner might not qualify for a reverse mortgage.
Many seniors are aware of the benefits of getting a reverse mortgage. With a reverse mortgage, seniors are able to repay their existing mortgage loans, eliminate their monthly mortgage payments and sometimes walk away with extra cash. While the benefits are apparent, the disadvantages are often less obvious. While these loans benefit many seniors, there are times when a reverse mortgage for home might not be the most beneficial option.
The reverse mortgage industry is constantly evolving. In recent months, the National Reverse Mortgage Lenders Association (NRMLA) proposed the idea of an innovative new HECM hybrid. The Department of Housing and Urban Development (HUD) gave the public an idea of when to expect their new financial assessment. The Consumer Financial Protection Bureau (CFPB) even began making improvements to mortgage servicing.
In 2011, funding for reverse mortgage counseling was completely eliminated from the federal budget. The economic crisis left policy makers desperate to cut spending, and funding for the reverse mortgage was not deemed an essential expense. In late 2011, the Mini-bus appropriations bill restored funding for Home Equity Conversion Mortgage (HECM) counseling.
The Department of Housing and Urban Development (HUD) is constantly working to improve their reverse mortgage programs. To continue improving the loan process, HUD is now working to understand how current reverse mortgage counseling is helping seniors.
On October 20, 2008, the Department of Housing and Urban Development (HUD) released a program that allowed seniors to purchase a new home using a reverse mortgage. However, since its release, this program has been less popular than most experts expected. Recently, experts have been reviewing pertinent reverse mortgage information and uncovering why these loans have been underperforming.
Choosing between fixed and adjustable reverse mortgage rates can be exceptionally difficult. Currently, fixed reverse mortgage rates are only available on lump sum loans. While a fixed interest rate offers security, it does not offer much in the way of payment options.
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