Not All Regulations Cast a Dark Shadow...

By
Mortgage and Lending with PS Mortgage Lending 305-791-4874 or 888-845-6630 365768

Not All Regulations Cast a Dark Shadow....

Potential changes to the FHA-insured reverse mortgage continue, according to Government May Crack Down Harder on Reverse Mortgages...and there is no sign of them slowing down.

One of the biggest problems the reverse mortgage program is facing today is the potential loss of $943 billion on loans made when housing values were much higher, namely pre-recession home values. 

A potential solution came earlier this year with the elimination the Standard Fixed-Rate Reverse Mortgage, which allowed consumers to receive large lump sums upfront at fixed interest rates. The problem was that most homeowners would use their lump sum to pay off large debts--mortgages, car payments and credit cards--at the beginning of their loan, run out of money, and be unable to pay their homeowners insurance and property taxes. Homeowners that were unable to pay their requirements, or keep up with their home maintenance, faced foreclosure for defaulting on their loan.

In order to better control the cash flow available to homeowners as well as prevent future foreclosures, the Department of Housing and Urban Development plans to include: an upfront financial assessment to determine a homeowner's free cash flow, hazard insurance, utilities, credit scores and other forms of debt.

The proposed requirements, while extensive, could potentially help reverse mortgage applicants live better during their retirement. For instance, if the borrower is foundd to have a precarious financial profile, funds from the loans would be set aside in order to cover future tax and insurance obligations. This proposed obligation would ensure that borrowers will be save from foreclosure while still having enough money from their reverse mortgage to live comfortably.

What can, on the surface, look like a crack down on who can get a reverse mortgage, is actually a safeguard for future reverse mortgage applicants. The financial obligations associated with a reverse mortgage have always been there, this is just a way to make sure that borrowers are able to pay their financial obligations.

In addition, the HUD is also looking to cap reverse mortgage loans at lower amounts. For example, if a borrower, with bad credit, qualifies for a $300,000 lump sum, instead they will receive 60% of that amount ($180,000) and the rest will be set aside to pay for future financial obligations.

While this regulates the amount of money a borrower can potentially receive, it also creates the perfect environment for a HECM Saver ("Standby" Reverse Mortgage), which carries less upfront fees and a non-cancellable, tax-free line of credit but the amount a homeowner can borrow decreases by 10-18%. Withdrawals from the line of credit, however, can be made in unscheduled installments.

Regulations are coming to reverse mortgages, sure, but are they all bad?

Interested in a reverse mortgage program? There are many options available to you with a reverse mortgage and plenty of ways to use it during retirement. Give PS Financial Services a call at (888) 845-6630 or email us at info@PSReverseMortgage.com. We do not pressure those who inquire, we're just here to help.

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Information and content in this blog is original to Phil Stevenson

Please click the "SUBSCRIBE TO MY BLOG" button on the right, and receive more Traditional and Reverse Mortgage information in Florida and other parts of the US & Puerto Rico.

 

Phil Stevenson

PS Financial Services

Owner and Principal Mortgage Originator

Certified Reverse Mortgage Professional (CRMP)

LO #365768

NMLS #968090

Cell: 888.845.6630

Miami Mortgages & Florida Mortgages

Copyright © 2013 by Phil Stevenson & PS Financial Services, LLC

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Rainmaker
2,904,063
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

Phil, Now there is a concept "an upfront financial assessment to determine a homeowner's free cash flow, hazard insurance, utilities, credit scores and other forms of debt" ... we really need to be smarter about reverse mortgages which typically go to the elderly who may need the help of "babysitting" funds to ensure that taxes and insurance are paid. I don't think these changes are bad. I feel they are necessary in many cases. 

Jul 31, 2013 03:33 AM #1
Rainmaker
271,377
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Kathleen,

I agree with you. it creates a safer environment for reverse mortgage applicants. These changes are based on past consumer experiences so they're being implemented with the consumer in mind.

Jul 31, 2013 03:43 AM #2
Ambassador
2,029,346
Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

Phil, not only do I think these changes are appropriate, I can't believe, people were not qualified for reverse mortgages just as they would for "normal" mortgages regarding their financials.  I knew a person whose husband had taken out a reverse mortgage and then all the money went toward medical care until he passed away.  Although the widow had a roof over her head, there was very little income and she was in a real tough spot as the home was worth much less than when the reverse mortgage was taken out.  Had those changes been in effet then, her situation might have been better.

Jul 31, 2013 08:31 AM #3
Rainmaker
658,657
Christine O'Shea
Christine E O'Shea Broker - Naples, FL

Phil, Interesting, the more I read your posts, the more I learn.  Thanks for the information.

Jul 31, 2013 11:52 AM #4
Rainmaker
271,377
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Silvia, we continue to get better as time goes on. Not everything runs smoothly the first time around so with these new considerations in mind, we're working together to keep the program strong and thriving in the future.

Aug 01, 2013 12:20 AM #5
Rainmaker
271,377
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Christine, thank you! Happy to help you learn more about reverse mortgages.

Aug 01, 2013 12:21 AM #6
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Rainmaker
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Phil Stevenson, CRMP

"Mortgage Nerd" in Miami, Florida and Texas
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