New Financial Assessment Date Gives Industry Time to Breathe
When the first effective date for the financial assessment was first announced to be March 2015, there was a collective groan in the industry.
It was finally here, that which would determine the eligibility of a borrower based on income and credit, the one thing that set the reverse mortgage apart from all other loans, and the potential implications (good and bad) of this action have yet to determined.
This is why when HUD announced that there would be an extension to the financial assessment of possibly 30 to 60 days, the industry realized it had time to breath, gauge the situation and make sure everyone, from brokers to their computer systems, were correctly set up, trained and ready to go.
Officially, HUD has finally set the new effective date for the financial assessment: April 27, 2015.
I Went to the Podiatrist for Brain Surgery…
If you needed brain surgery, would you go to the Doctor who happens to be a podiatrist just because you know someone who works there?
A Medical Doctor after all is a Medical Doctor and they can all help people with any ailment, right? ABSOLUTELY NOT!
Now that’s just silly and we all know that to not be the case. Yet people think a mortgage company is a mortgage company and can offer all kinds of mortgages, and this couldn’t be farther from the truth. This is the story about a client who experienced this contrast first hand, but first let’s learn about the differences between the types of mortgages.
Reverse Mortgages and Forward Mortgages (conventional, FHA, VA, etc. that all require payments) are, simply, polar opposites. When a Mortgage Loan Originator takes their 24 hour course to get licensed, the portion of the course and test that comprise the Reverse Mortgage is approximately 1%, simply addressing what a reverse mortgage is and not the details surrounding it.
How Much Can a Borrower Receive With a Reverse Mortgage?
That is the question a lot of clients seeking information about the reverse mortgage first ask.
In truth, while how much a borrower can receive is an important question, there are many other things that should be considered before giving numbers to potential clients.
This is the difference between speaking with a flesh and blood broker and punching information on a website calculator and hoping to get an exact amount.
One of the misconceptions consumers have about website calculators is that they will give you accurate numbers. In addition, many think that the reverse mortgage is not for them after looking over numbers in a website calculator.
I can’t stress this enough: a calculator is not an accurate representation of the variety of options available using a Reverse Mortgage Loan. A calculator typically only offers one blank program (that may be a more or less accurate representation of the typical reverse mortgage borrower) but it does not, by any means, mold to every borrower’s specific situation who may be looking into getting a reverse mortgage.
Reverse Mortgage Financial Assessment Will Take Effect on March 2015
The Department of Housing and Urban Development has finally announced that the financial assessment will come into effect on MARCH 2015.
While the financial assessment was previously announced as an upcoming change last October, it was not implemented in the past year. Next March, however, the financial assessment is poised to be one of the biggest changes in the reverse mortgage industry while adding another safeguard for future borrowers.
Age is an Increasingly Important Factor in Retirement Planning
More than ever, age is quickly becoming an important factor in long term retirement planning. Baby boomers are living longer currently than any other generation that came before (and that’s without getting into generations that plan to retire 30+ years from now.
The ideal retirement age is no longer 62 but 65 and is poised to become 70 in the next decade. By 2050, the number of Americans that will be 65 years of age and older is projected to be 88.5million, more than double the 2010 population of 40.2 million.
According to an article in Reverse Mortgage Daily, Raymond James Financial launched a new retirement planning initiative that will give advisors the tools to help them respond appropriately and effectively to older clients if and when they need help down the line.
Changes to the Reverse Mortgage Loan Has Positive Effect
Amid the news that the positive press for the reverse mortgage loans have surged in the past months and FINRA’s declaration that the reverse mortgage is no longer a loan of last resort, individual financial planners are beginning to see the advantage of the reverse mortgage loan as a long term retirement planning tool as well as an alternative way of paying off one’s mortgage and using those funds for other uses.
In the past, misuse of reverse mortgages lead to borrower defaults when they were unable to pay their property taxes and insurance. In addition, because most borrowers received their funds in a lump sum, there were instances where little was left over for unexpected expenses.
In an effort to make the program safer for borrowers, changes were made to the program to make it a more advantageous, long-term retirement planning tool and NOT a loan of last resort.
Positive Press Surges for Reverse Mortgages During June
The recent changes to the reverse mortgage cam swiftly last September 30 and changed the landscape of the reverse mortgage program for future borrowers.
One of the biggest hurdles since the changes, however, has been combating the established reputation of the reverse mortgage program as a “loan of last resort,” that should only be used if (and only if) you have no other options.
Slowly, but surely, the reputation of the reverse mortgage is on the up and up and, NRMLA reports, the press results for the month of June 2014 are the most positive since August of 2013.
Nationally, states the article, there were 195 positive stories last month and just 14 negative, a 13:1 ratio or 93% of a favorable result.
NRMLA Reissues Ethics Guidance for HECM-to-HECM Refinance After Recent Changes
The reverse mortgage program continues to change for the better, this time making more proceeds for older borrowers.
According to an article published by Reverse Mortgage Daily, at an interest rate of 6% borrowers who are 78 and older will potentially have access to greater principal limits than before.
This change means more money for older borrowers and a greater chance of a HECM-to-HECM Refinance for borrowers who obtained a reverse mortgage before the changes were announced.
While borrower(s) must wait at least 6 months from the closing date of their reverse mortgage in order to be eligible for a refinance, NRMLA once again stresses the importance of maintaining ethical values while speaking with potential clients about the possibility of a HECM-to-HECM Refinance.
Senate Launches Senior Anti-Fraud Hotline for Seniors
In an effort to better protect seniors from falling victim to investment scams or internet thief, the Senate Aging Committee has launched an anti-fraud hotline where seniors or relatives can call and report if they suspect or feel they have fallen victim to a scheme.
In launching a hotline directly geared toward helping out the senior community, the Aging Committee is taking the necessary steps to make sure people or companies who scam seniors are caught and/or investigated. The lack of concern for the senior community is becoming a thing of the past as, day-by-day, new programs are launched in an effort to help seniors.
Most importantly, relatives can report suspected fraud as well. In the past, even if seniors have fallen victim to a scam, they’ve been too embarrased to report it, even to a family member. This way, if a relative feels something out of the norm has happened to their relative they can take action themselves and ask questions later.
New FHA Regulations Created to Protect Non-Borrowing Spouses
Recent changes to the reverse mortgage program have made it a more advantageous retirement planning tool for the future. However, for some borrowers, there was still the lingering question of what would happen to their spouse upon their passing.
Non-borrowing spouses can finally sleep soundly, thanks to the recent changes made by the Federal Housing Administration regarding non-borrowing spouses.
In a recently released mortgagee letter, outlined by Reverse Mortgage Daily, non-borrowing spouses will be able to remain in their homes, after the borrower has passed away, if they were married to the borrower at the time of closing and their status as a married couple was disclosed at the time through a certified letter.
While not an all inclusive solution, it does demonstrate that FHA is making the necessary changes to protect borrowers and non-borrowing spouses. The new regulations will be set forth for new case numbers assigned on or after August 4th.