New Changes to Reverse Mortgage Application
For years, seniors have experienced more financial freedom in retirement due to the help of a reverse mortgage. Reverse mortgages allow those 62 years or older to convert the equity in their house to cash and no repayment is necessary unless the homeowner moves, sells, or passes away. While no repayment is necessary, the homeowner must stay up-to-date on property taxes and homeowner’s insurance.
Retirees typically use the money received from their reverse mortgage to supplement cost of living, medical bills, groceries, and more. But in recent years, thousands of borrowers have defaulted on their loan. According to a Washington Post article, “the losses got so severe that the Treasury Department had to provide the FHA with a $1.7 billion bailout in 2013, the first in the agency’s history since its creation in the 1930s.”
As a result, the federal government is requiring that borrowers pass an extensive financial assessment.
Starting April 27th of this year, borrowers will now have to show:
1) They paid real estate taxes, homeowner association fees and other property-related charges on time for at least the past 24 months.
2) Documentation of employment status (if they are still working)
3) Income and financial assets
4) Analysis that examines their monthly expenses and cash flow
The implementation of a financial assessment may exclude thousands of homeowners from obtaining a reverse mortgage, according to industry leaders. But overall, the new changes should make it safer for reverse mortgage borrowers, while also upholding reverse mortgage obligations.
If you have questions, please reach out to one of our reverse mortgage specialists at 1-877-611-1329.