Reverse Mortgage Programbackward mortgage program
Tuesday: Undoing mortgage limitations
Welch Group's Marshall Clay joins us to debate new limitations on reverse mortgage lending and its impact on the elderly. HUD has confirmed its intention to modify the terms of its reverse mortgage program, in particular to increase premium levels and credit lines.
However, such a modification could have an enormous impact on older people, and there is not much planning room; the suggested changes to the schedule will take effect on 2 October. Impact on the HECM Program - The Home Equity Conversion Mortgage Program or HECM has always been seen as a somewhat risky program despite pastvements.
It is one of the most instable parts of the Mutual Mortgage Insurance Funds, the Federal Housing Administration's flag ship funds. Despite its risks, the HECM has been of great use to many senior citizens aged 62 and over still living in their home. Beneath the program, these older people could take some of the equities in their home and introduce a reverse mortgage that provided incomes for them through a flat -rate amount, periodic installments or a line of credit. 4.
New changes will be made by the Trump Board in the hope that the programme will be placed on a more sound basis. Here is a more detailed look at the changes and what they could mean for the older people who use the HECM programme: A new borrower pays 2 per cent of the value of the house in advance, followed by 0.5 per cent each year over the term of the mortgage.
The aim is to mitigate the taxpayer's exposure if the borrowing life is longer than anticipated.
Amendments will only concern new borrowers; existing ones will retain their present interest rate. Purpose of the changes - The general aim is to help the HECM programme to get on a better footing. Specifically, it is designed to help older people not to miss their wealth taxes and insurances and to help them not to get into arrears with their reverse mortgage repayments.
"In view of the loss we see in the HECM program, we have a duty to make changes that align our missions with our responsibilities to safeguard the taxpayer. HECM lending will not have a negative effect on the overall good condition of FHA policy, which will support the funding needs of younger, mostly first-time house owners with conventional FHA mortgage products.
We are taking necessary and careful action to put the HECM programme on a more sustained basis so that it can continue to be a source of resources for older borrower. "Rick Sexton, credit clerk at McGowin-King Mortgage - Office Park in Birmingham, Alabama, also said the changes were a success. "It' still too late to take full benefit of the wider advantages of the Reverse Mortgage Program," Sexton said.
"Older home owners may now and without commitment visit a licenced, authorized FHA mortgage creditor who submits a non-binding, provisional request to the FHA with necessary advice to obtain a "case number" for your real estate to be gradfathered under the current regulations and conclude after October 2. Irrespective of when and despite "false myths", however, a correctly executed reverse credit is still a very useful budgeting instrument for most older people.