Mortgage Brokers Can Ease the Strain of Getting a Home Loan
There was a time when reverse mortgages could be taken out at the local branch of the bank you’ve trusted with your money for years. However, after the boom and bust, more and more banks bowed out of originating reverse mortgages. And while many lenders have also closed their reverse mortgage departments, there have been many changes to the reverse mortgage loan as well as the landscape for homeowners.
Presently, according to an article published by The Guardian, a little over 60% of all home loans are taken out through a broker.
This information is not surprising, given the amount of changes to various mortgage loans, including reverse mortgages, have gone through the years. It’s no longer enough to fill out a form, hand it to an “order taker” and wait for the “yes,” “no,” or “we need more information.”
In the last year alone, the reverse mortgage industry has gone through at least four major changes. While these changes have made the loan safer for both borrowers and the FHA, it also requires extra education and preparation so that borrowers who are thinking about getting a reverse mortgage, have the most up-to-date information.
Reverse Mortgage Changes Will Protect (and Hurt) Consumers
The beginning of August was an important month for the Reverse Mortgage Program. President Obama signed the Reverse Mortgage Stabilization Act of 2013 in law and with it set into motion a chain of events that will potentially change the reverse mortgage program as we know it.
Most importantly, the Stabilization Act allows the Federal Housing Administration to make changes to the program without prior approval from Congress. In short, FHA has the power to adapt the program as they see fit, based on consumer experiences and need, on their own. I’m sure if a change comes off as less than satisfactory, there will be steps to fix, or eliminate it all together. As of now, however, any changes made by the FHA is fair game.
The Reverse Mortgage Program (As We Know It) Is GONE…October 1st!
The Department of Housing and Urban Development, and reverse mortgage industry as a whole, has begun to slowly reveal what their plans are for the reverse mortgage program, following the Senate and Presidential approval of Reverse Mortgage Stabilization Act of 2013.
According to an article published in Reverse Mortgage Daily, “HUD to Combine Existing Reverse Mortgage Products,” at a recent conference call for the National Reverse Mortgage Lenders Association, the HUD Deputy Assistant Secretary Charles Coulter, explained the proposed changes.
Proposed changes, aside from those initially sought to stabilize the program, include the introduction of a new reverse mortgage loan program all together!
In what has been a long and winded battle, the Senate has finally approved a bill granting the Department of Housing and Urban Development the authority it’s been seeking to closely manage the reverse mortgage program, pending the President’s signature.
The Reverse Mortgage Stabilization Act of 2013, which was introduced by Representative Denny Heck and Representative Mike Fitzpatrick in May, will allow the HUD to establish additional guidelines and regulations to the already existing requirements of 62 years of age and older, live in your primary residence and have enough equity in your home.
The regulations aren’t all bad, in my opinion, and will help better qualify future homeowners for the reverse mortgage program. The HUD has been seeking this authority since last year’s audit of the Federal Housing Administration’s insurance fund which indicated that the reverse mortgage program’s losses could require a Department of the Treasury bailout.
Potential changes to the FHA-insured reverse mortgage continue, according toGovernment 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.
Proposed Changes to the Reverse Mortgage Program
The AARP supports the proposed changes to the Reverse Mortgage Program. These include a financial assessment (to determine Reverse Mortgage Program eligibility), property taxes and homeowners’ insurance set asides (in order to avoid foreclosure) and limited upfront cash withdrawals.
AARP proposes HUD is required report to Congress every two years. This could potentially eliminating any problems that have arisen from HUD’s inability to eliminate problems in the past but also might lead to further changes to the Reverse Mortgage Program. The AARP believes this proposed change will allow Congress members to urge HUD to fix problems fast than they have in the past.