The 5 new reverse mortgage rules
What you should know
Silver-haired celebrities tout them on TV and lenders mail colorful pamphlets promoting their benefits. The promotion is clearly working. More than 660,000 reverse mortgages were issued between 1990 and 2010, according to AARP.
But the loans are risky, both for the borrower and the federal government, which insures nearly all reverse mortgages.
Because of increasing defaults, the federal Home Equity Conversion Mortgage program – the formal name given to reverse mortgages – has seen huge deficits.
In July, Congress passed the Reverse Mortgage Stabilization Act, giving the Federal Housing Administration the power to make changes to the program, which allows homeowners over the age of 62 to withdraw equity in their homes while deferring repayment until the house is sold or the owner dies.
The new rules, rolled out in two phases beginning this fall, are designed to stabilize the program, minimizing the risk and reducing default rates.
If you’re planning to apply for a reverse mortgage, here are five things you need to know about changes to the program.
By Jodi Helmer
Interest.com Contributing Editor
October 4, 2013