HECM Loan Changes...What They Mean for Borrowers: Part 3 of 3
The changes to the reverse mortgage program will affect everyone. From HUD to brokers to borrowers, these new changes are poised to change the reverse mortgage program (as we know it) completely.
For borrowers, these changes will affect the amount they can potentially receive, if they are able to qualify at all. The new financial assessment, coupled with mandatory set-asides, which will be implemented on January 13, will affect who will and who will not qualify for a reverse mortgage.
It's scary to think about, especially for those borrowers who see the reverse mortgage as a "last resort," but maybe that's the problem. The more the reverse mortgage is used a last resort, the greater risk of that the borrower will go into default because they don't have the funds to pay their financial obligations (homeowners insurance, property taxes and regular home maintenance).
According to an article in Reverse Mortgage Daily, two in every 10 past borrowers will not qualify for the reverse mortgage after the changes are implemented.
The upcoming changes, though restrictive, will make more greatly guarantee that borrowers who qualify are able to keep up with their obligations, therefore, avoid loan defaults. It's a small price to pay to make sure the program continues to be a safe alternative for senior Americans.
In order for this to work though, the principal limit factor a borrower can potentially receive will be cut by at least 15%.
Since PLF's are affect by home price appreciation, recent market trends, namely, a 10% increase in home price appreciation across the county, can potentially balance out the amount of money consumers will receive. The higher the home value, the higher the amount of money a borrower can receive, even if it will be 15% less than it used to be.
The industry has a lot of changing to do when these changes come into play. It won't affect just one aspect of the business, but many. The sooner we adapt, the better off we'll all be.
Interested in a reverse mortgage or simply want more information? 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.