By the end of January 2013, the Federal Housing Administration (FHA) will announce changes to its Home Equity Conversion Mortgage (HECM) program. The changes come on the heels of an audit of the reverse mortgage insurance portfolio that showed a negative net worth of $2.8 billion. Reverse mortgage changes are a part of a larger effort to strengthen FHA’s finances for all mortgage programs.
The anticipated announcement will place a moratorium on the Standard Fixed Rate product. This product requires the borrower to take the full proceeds of the reverse mortgage when the loan closes as opposed to the Standard Adjustable Rate product which allows the borrower to leave any or all of the funds available on a line of credit for future draws. The logic is that the lump sum distribution increases the risk exposure to FHA.
All other products, Standard Adjustable Rate, Saver Fixed Rate, and Saver Adjustable Rate, will continue to be available to borrowers. However, other changes affecting each of these products may also be announced. These changes will involve the establishment of guidelines for conducting financial assessments of borrowers and the creation of escrows for taxes and insurance. The time frame for these additional changes has not been addressed.
Tidewater Home Funding is committed to the Reverse Mortgage program and the many benefits available to older home owners offered by these loans. As these changes are announced, we will be sure to keep our clients updated.
- Charlene Turner, Mortgage Consultant/Reverse Mortgage Specialist, Tidewater Home Funding, LLC – NMLS# 456052 (www.nmlsconsumeraccess.org)