The vast majority of reverse mortgages fall under the Home Equity Conversion Mortgage Program and are insured by the Federal Housing Administration. Under that program, the U.S. Department of Housing and Urban Development can make changes that have the potential to impact lenders and borrowers. Market shifts and other factors can also lead to program and loan changes. Here’s what to look out for in 2012:
Reverse Mortgage Loan Limits
Loan limits under the reverse mortgage program were raised as an economic stimulus measure in 2009 and remain at their post-recession limit of $625,500. Borrowers can obtain a reverse mortgage against up to that limit in home equity. While loan limits reverted back to pre-recession limits for “forward” mortgages this fall, government officials have indicated that loan limits are likely to remain in place for reverse mortgages for the foreseeable future. However, it’s possible the limits will go down to their pre-recession level of $417,000. (Update: FHA Confirms $625,500 HECM Limit through 2012)
Housing and Home Prices
After sustained declines across the nation, many economists are projecting home prices will continue to fall in 2011 and into 2012 before stabilizing in most markets. Higher home values allow reverse mortgage borrowers to borrow more, since the loan amount depends directly on how much equity a borrower has in his or her home. A real estate appraisal done as part of the reverse mortgage process will indicate the value of the home.
Lender Composition
While there are a wide array of licensed and government-approved professionals who offer reverse mortgages—from independent brokers to large banks—smaller, reverse mortgage-specific companies are increasing their market share for the products, while national banks that previously offered reverse mortgage through their retail locations are becoming less of the norm. Today, many more seniors are working with lenders who specialize in reverse mortgages, which often take place over the phone. Many of those lenders or brokers are based in one state but are licensed in several states or more so that they can do business across the nation.
Borrower Financial Assessment
Currently, reverse mortgage lenders are beginning to conduct a new financial evaluation of borrowers as part of the reverse mortgage loan application process. In the past, lenders have not been required to conduct a credit check or any other financial review beyond an examination of the borrower’s home equity and age qualifications. While they are not required to do so, many are beginning to look at applicants’ history of tax and insurance payments and financial history, in preparation for an anticipated 2012 rule from the Federal Housing Administration that is expected to mandate the change.
HECM Counseling
Mandatory HECM counseling has historically been offered for free by non-profit organizations that receive government funding, but in 2011, Congress slashed that funding in an effort to reduce government debt. While there are ongoing efforts toward restoring housing counseling funds for the current fiscal year, most counseling agencies have reintroduced their counseling fees, which can be paid up front, or rolled into loan closing costs.
“Reverse Mortgage Changes in 2012″ by www.allrmc.com
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