It has been said that the only thing constant in life is change. In my 15 years working with reverse mortgages I can attest that this product has constantly evolved. Years ago, the hard rule was that only those over 62 could get a reverse mortgage. This caused many younger spouses to come off of title so the older spouse could qualify. Unfortunately if the older spouse died the younger spouse was vulnerable and did not have the protections of the reverse mortgage and was forced to sell their home upon the death of their partner. To fix this challenge, HUD created the non-borrowing spouse protections. This allows a spouse less than 62 years of age that is married to someone over 62 years of age to receive the protections of a reverse mortgage. The younger spouse is not on the loan, but is guaranteed to live in the home for life without a mortgage payment.
HUD announced recently that it needs to strengthen the HECM Reverse Mortgage program ensuring that it stays solvent for future generations of Americans. HUD has proposed changes that any reverse mortgages started 10/2/2017 or later will be required to pay a 2% Initial Mortgage Insurance Premium (IMIP). For example, a 2% premium on a $300,000 home value would be $6,000. This IMIP is prorated and is only used up if the borrower stays in the home until age 100. Any unused portions are refunded upon the refinance or sale of the home. For example, a person that is 62 and has a IMIP fee of $6,000 would use up $157.89 per year of that $6,000, any leftover funds are refunded to borrower or the heir(s). Currently the IMIP fee is either ½ % or 2 ½ % depending on how much money is taken out on the RM. The good news is that the annual MIP fee will be lowered to .50% from 1.25% of the total loan balance.
The second change to the program will be a lowering of payouts across the board anywhere from 6 to 20% effective 10/2/2017. Home values are significantly up, interest rates are down and until October the payouts on the reverse mortgage will be higher. If you have considering redoing your reverse mortgage for more money or you are considering a reverse mortgage for the first time, you may want to start the reverse mortgage process now. Even waiting until closer to 10/2/2017 could cause you to miss the deadline. All potential borrower(s) must complete a mandatory government counseling session before they can lock in the program. Whenever there is a change to the program, the counseling sessions can require waiting 2 to 3 weeks before getting an appointment. The National Reverse Mortgage Lending Association is currently in talks with HUD to try and eliminate these changes. To be safe, if you are considering a reverse mortgage, now would be the time to do it. If you would like to see what you qualify for feel free to email or call me directly. email@example.com or call 877-567-7476.