The federal government has tightened the rules regarding reverse mortgages, making it harder for some seniors to get these ty...Read more
Tougher Reverse Mortgage Rules to Take Effect
- February 27th, 2015
Effective April 27, 2015, borrowers will have to pass a financial assessment before they can take out a reverse mortgage. The new rules are meant to prevent loan defaults, but they will make it much more difficult to get a reverse mortgage. (The rules were originally scheduled to take effect March 2, 2015, but implementation was delayed.)
A reverse mortgage allows a homeowner who is at least 62 years old to use the equity in his or her home to obtain a loan that does not have to be repaid until the homeowner moves, sells, or dies. But the homeowner is required to pay property taxes and homeowners insurance premiums on the property.
Local Elder Law Attorneys in Ashburn, VA
Margaret A. O'Reilly, PC
Margaret A. O’Reilly is an estate planning and elder law attorney with over thirty-five years of legal experience. Attorney O’Reilly graduated from Duke University with a degree in psychology, and received her law degree from Northeastern University School of Law in Boston, Massachusetts. For over 15 y...
Needham Mitnick & Pollack, PLC
Judith Mtinick is well known for acting as a guardian, conservator, trustee or agent on behalf of clients or by court appointment. This experience gives her a wide perspective and extensive practical knowledge that she uses when advising clients in drafting their planning documents. Her experience, as a court appointed...
Hammond and Associates, LLC, Elder Law, Estate Planning, Wills, Trusts, Probate
For Jeffrey Hammond, the practice of Elder Law is personal. Jeff’s many years of experience in law and in business did not prepare him for the crisis he faced in 2005 and 2006 when his father suffered a stroke and both of his parents suffered from dementia and other medical problems. At that time, Jeff began an i...
The loans are expensive and controversial. In recent years there have been complaints over problems with reverse mortgages, including large costs, aggressive marketing techniques, and the danger of default if insurance and property taxes aren't paid on time. Over the past few years, the government has begun addressing problems with the loans, including eliminating a popular loan type.
The new financial assessment rule, which applies to reverse mortgage loans under the Home Equity Conversion Mortgage (HECM) program, requires borrowers to demonstrate the ability to pay property taxes and insurance premiums on the property. For the first time, lenders will look at the borrowers' income and credit histories to ensure they can timely meet their financial obligations.
Borrowers who don't meet the financial requirements for the loan have the option of setting aside money from the loan to pay the property taxes and insurance premiums. The amount of the set-aside depends on a formula, but it can be quite large and may make the loan impractical for some borrowers. Borrowers who meet the credit requirements for the loan, but don't have enough income can do a partial set-aside, which requires them to put aside less money.
Last Modified: 02/27/2015