HUD Proposes Changes to the Reverse Mortgage Program
As new regulations continue for the Home Equity Conversion Program (Reverse Mortgage), the National Reverse Mortgage Lenders Association (NRMLA) voiced their support for the proposed changes because they see the "HUD proposal is a model responsive and responsible governing."
"No government program works perfectly from the outset. HUD has carefully observed the results of the 780,000 HECM loans thus far and suggested creative improvements based on the actual experience of owners."
I have stated before that not all regulations cast a dark shadow and the proposed legislation, by the Department of Housing and Urban Development, is one of them. By analyzing and evaluating the current situations of homeowners, who have taken out reverse mortgages, the HUD is planning to make changes based on what's already out there. These regulations aren't a shot in the dark, they are a conscious effort to ensure that future applicants have all the tools they need for a successful transaction.
In a sense, these proposed changes are more about fine tuning the HECM program, not changing it completely. The HUD already knows what works and what doesn't, so they are taking the necessary steps to make sure the program continues full steam ahead.
The changes being considered by the HUD include:
- A financial assessment of the borrower (to determine financial fitness and the amount of debt a borrower is in)
- Mandatory set asides for property taxes and homeowners insurance (to ensure homeowners will be able to pay their financial obligations)
- Restrictions on the amount of funds that can initially be withdrawn (to ensure homeowners have enough cash flow for many years to come, not just in the beginning)
- Include all borrower spouses on the loan (to eliminate risks to non-borrowing spouses should the loan become due)
The proposed changes are there to eliminate risk potential and maximize security for homeowners looking to get a reverse mortgage. Aging in place continues to be a cost effective option for older Americans but rising costs of living, expected (and unexpected) expenses as well as debt continue to put a damper on comfortable retirement plans.
The HUD's proposed legislation is simply a way to ensure present and future applicants continue to be protected during their later years. A reverse mortgage is there to make your life simpler, these proposed changes are ensuring that reverse mortgage continue to be an option for older Americans.