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Coming Changes to the Reverse Mortgage Program

The U.S. Senate joined the House in passing some new changes to the Federal Housing Administration (FHA) to alter the Home Equity Conversion Mortgage program or HECM for short. These new changes may go into effect as early as Oct. 1, 2013. The new rules will ultimately help protect borrowers and assist in the agency avoiding a federal bailout.

Some of these changes may make it harder for some borrowers to qualify for a reverse mortgage. If you are not familiar with HECM program you can visit FHA’s website and read over the general qualifications.

1. Age requirement for this program is 62 years old

2. Property can only be your primary home and used for collateral

3. No delinquencies on any federal debt, suspensions, debarments or excluded participation from FHA programs

4. HECM counseling

So what is a reverse mortgage? This program will allow seniors who have good equity in their home to be able to use this equity to cover living expenses. If you qualify you would receive money from your home’s equity to assist you in living the life style you may have come accustomed to.

So how do I pay back the equity I’ve borrowed from my home? If you sell your home or you no longer use it as your primary residence, the cash, interest and other HECM finance changes must be repaid. Any proceeds above what was borrowed against the equity will go to the surviving spouse or estate.

Let’s take a closer look at some of the changes that maybe taking place in the next coming months.

Previously applicants for these types of loans did not have to be reviewed for any sort of financial ability. However, because you are still required to make your property taxes, home owners insurance and condo association fee’s FHA as updated this guideline due to recent defaults 9.8 percent on property taxes and other financial obligations that are tied to the property, this new rule will help evaluate whether or not a homeowner can afford to make those payments. 

The possibility of creditworthiness may also play a factor into the new process for these types of loans as well. This could mean some homeowners who do not use credit but are still responsible for their financial obligations maybe at a higher risk of getting denied.

These are just some of the changes that will possibly take affect this coming fall, to learn more about the upcoming changes please visit Federal Housing Administration’s Web site. 

K. Justin Restaino is vice president of Titan List & Mailing Services Inc. For more than 13 years, he has led Titan’s Mortgage Division, helping lenders of all capacities grow their businesses utilizing targeted direct mail. With a specialized focus in refinance and purchase markets, Restaino has the insight for proper data and mail application for success. He may be reached by phone at (800) 544-8060, ext. 204 or e-mail justin@titanlists.com.

About Justin Restaino