Gold Star Mortgage Financial says America's reverse mortgage program is in trouble—and with new regulations in the works, reverse mortgages might soon become even less appealing to homeowners and consumers. The company highlights a recent report from AARP, which highlights some of the troubles currently facing America's reverse mortgage program, and also indicates some of the pending changes to federal regulations. The basic takeaway of the report is that reverse mortgages may soon become much less attractive to lenders; the AARP report has merited a new press statement from Gold Star Mortgage Financial.
In its press statement, Gold Star Mortgage Financial notes the dire situation currently facing the reverse mortgage, but notes that it has largely been exempt from the bulk of these problems.
"The nation's reverse mortgage program alone lost $2.8 billion last year," the company states, in its press release. "This doesn't bode well for a majority of lenders. However, Gold Star wasn't affected nearly as much as other lenders, as we've stopped offering the reverse mortgage product to our customers."
According to the report filed by AARP, the Federal Housing Administration (FHA) is currently weighing "aggressive action," precisely because of this $2.8 billion loss. This aggressive action includes new regulations, to be implemented both right now and in the future. One of the most significant changes to the reverse mortgage program is that borrowers will now be limited in the amount they can take up front and in a lump sum, drawing from the equity in their home.
Other changes to federal reverse mortgage regulations include new incentives for the executors of the estates of borrowers who have died, urging them to sell properties instead of conveying them to the FHA; new restrictions to closing costs for borrowers; and more.
The FHA opted to take this action after the number of reverse mortgage borrowers in default suddenly surged last year. About one in 10 of these loans were delinquent and in risk of foreclosure, mostly because borrowers simply ran out of money. The recently-announced changes to federal policy were designed to protect the FHA and also to reduce the number of borrower defaults and delinquencies.