Reverse Mortgage Loan Changes May Still Need Some Clarification

While the rush for baby boomers hoping to apply for the reverse mortgage loan, before the new changes are implemented has died down, this doesn’t mean that the industry still doesn’t have some questions for FHA regarding the changes.

After releasing a Mortgagee Letter on September 3, explaining the changes, the HUD continued to to make changes including software updates and staff training, to ensure that the changes ran as smoothly as after September 30.

In truth, the changes to the reverse mortgage loan came swiftly, with little warning and little time to prepare. While it’s true that the HUD had been announcing “changes” for some time now, their descriptions were vague and a far cry from the actual changes that took place September 30.

The result is an industry which, according to an article published in Reverse Mortgage Daily, is quickly trying to make sure it full understands what’s different about the program going forward.

During a conference call with HUD, many industry participants asked for clarifications on what these changes mean for the program in the future. One change in particular, the introduction of repair set asides, which might or might not count as a mandatory obligation, was the subject of some debate.

Karin Hill, director of Single Family Program Development at HUD stated:

“I wouldn’t call it a mandatory obligation, but it’s included the same way. For the purposes of calculating the maximum disbursement, you can treat repairs like a mandatory obligation.”

Another subject of debate was medical emergencies as disbursement exceptions for borrowers. HUD, unfortunately, has yet to establish a sepcific method for dealing with these situations, although it is not against making exceptions in the future. In the future, any exception will likely be determined after careful consideration, on a case by case basis.

Karin Hill stated:

“We’ve had some conversations with industry members and are looking for feedback on how that’s operationalized—how would you assess or determine what’s an emergency? You can’t just call up and say, ‘I need more money.’” 

In the end, “wait and see” seems to be the model for the future. If you’re thinking of applying for a reverse mortgage loan though, it’s crucial not to wait.

While the changes have been put in place to protect consumers, there is no denying that changes in the future may completely change how we look at the program and how much it will help consumers.

There are risks involved with a reverse mortgage loan. While you cannot lose your home under normal circumstances, foreclosure may occur if you do not pay your taxes and insurance and otherwise comply with the loan terms.

If you think a reverse mortgage is right for you or simply want more information, call PS Financial Services, at (888)845-6630 or email us at info@PSReverseMortgage.com. We do not pressure those who inquire, we are simply here to help.