The 5 new reverse mortgage rules
You might not qualify for a loan
Default rates on reverse mortgages hit 9.4% in 2012 – almost double the default rate on traditional mortgages – according to the Consumer Financial Protection Bureau, leading the FHA to take steps to ensure reverse mortgage borrowers have the funds to cover property taxes and insurance for the life of their loan.
Starting in January 2014, borrowers must undergo a financial assessment to qualify for the loan, which includes an analysis of mortgage debts, payment history and confirmation of up-to-date insurance policies. The assessment also will check for unpaid liens against the property and delinquent or defaulted debts owed to the federal government.
Lenders today don't check credit reports or analyze an applicant's financial situation, one factor contributing to defaults.
Even so, this new rule could mean some borrowers who would have won reverse mortgages in the past, may be rejected.
"A lot of vulnerable seniors are house rich but cash poor and can benefit from timely access to home equity," notes Amy Ford, director of reverse mortgage council services network for the National Council on Aging."(A financial assessment) could squeeze out low- to moderate-income borrowers."
October 4, 2013