The federal government has tightened the rules regarding reverse mortgages, making it harder for some seniors to get these ty...Read more
Federal Government Is Getting Rid of Popular Reverse Mortgage Option
- May 21st, 2013
The federal government is eliminating its most popular reverse mortgage. Soon homeowners will no longer be able to get a lump-sum payment if they apply for a reverse mortgage under the Home Equity Conversion Mortgage (HECM) Standard program.
A reverse mortgage allows a homeowner aged 62 or older to receive a sum of money from the lender, usually a bank, based largely on the value of the house, the age of the borrower, and current interest rates. The loans do not have to be repaid until the last surviving borrower dies, sells the home, or permanently moves out. The HECM is the only reverse mortgage program insured by the Federal Housing Administration (FHA), and the FHA sets a ceiling on the amount that can be borrowed against a single-family house.
Local Elder Law Attorneys in Ashburn, VA
Needham Mitnick & Pollack, PLC
Susan Pollack served as Chairperson of the Falls Church Senior Citizens Commission from 1997 to 2011 and was on the Executive Board of the Falls Church Education Foundation. She has also served on the Board of Directors of the Alzheimer’s Association of the National Capital Area and is a member of the Arlington B...
Ron M. Landsman, P.A.
Ron M. Landsman has been practicing elder law since 1983, before it was known as elder law, originally with Landsman and Laster, Washington, D.C., then Landsman, Eakes and Laster, also in Arlington, VA, and since 1990 in his own practice in Montgomery County, Maryland. He has been among the most active members of the...
Law Offices of John L. Laster
John Laster is a lawyer licensed to practice in Virginia, Maryland and the District of Columbia. He limits his practice to wealth transfer planning, trusts, wills, powers of attorney, health care decision-making issues, estate administration and related tax, elder law and disability concerns. Listed in The Best Lawyers...
As of April 1, 2013, the federal government is no longer going to allow home owners to apply for a HECM Standard fixed-rate, lump-sum reverse mortgage. Borrowers still can apply for a line of credit or monthly payments at an adjustable interest rate under the HECM Standard program.
The reason for the change is that there were more defaults with this type of loan as opposed to other loans. While it isn't possible to default on a reverse mortgage payment, home owners must make timely payments of property taxes and homeowner's insurance in order to keep the loan in place. If taxes and insurance aren't paid, the loan can default. The high number of defaults on these types of loans indicates that homeowners in serious financial trouble may have been using the loans as a last resort rather than as part of a financial plan.
Borrowers will still be able to get a lump-sum loan using the HECM Saver program, which pays out a smaller percentage of a home's value compared to a Standard loan.
For more information on reverse mortgages, click here.
Last Modified: 05/21/2013