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Encore
A blog about living in and planning for retirement

New Barriers To Reverse Mortgages

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Changes are in store for the way reverse mortgages are processed that might make it more difficult for some borrowers to qualify.

For fees that can amount to as much as 5% of a home’s value, reverse mortgages allow people age 62 or older to convert their home equity into cash. The homeowner can elect to receive a lump sum, a line of credit or monthly payments. The loan is due, with interest, when the borrower dies, moves, sells the house or fails to pay property taxes or homeowner’s insurance.

In the past, the amount a borrower received was determined by his or her age and property value, says Peter Bell, president of the National Reverse Mortgage Lenders Association. But on Oct. 5, the Federal Housing Administration, which insures virtually all reverse mortgages, told lenders that they are also free to consider a borrower’s “financial capacity and credit assessment criteria … in the origination and approval of” reverse mortgages.

Starting a week ago, MetLife Bank, the largest originator of reverse mortgages, began examining applicants’ finances. The goal: To gauge whether they have enough in the way of income and assets to cover the ongoing costs of defraying property taxes and homeowner’s insurance premiums.

Mr. Bell says the U.S. Department of Housing and Urban Development, which oversees FHA, is working on new regulations–likely to debut in 2012–that would require lenders to perform such financial underwriting. As a result, he adds, “it is possible that some borrowers who could have gotten a reverse mortgage before” will no longer qualify.

Still, Mr. Bell says, the number of people likely to be affected will be nowhere near the numbers impacted when, in response to falling home values, HUD cut the amount of equity that reverse-mortgage borrowers could extract from their homes. From fiscal year 2008 to 2011, the volume of Federally-insured “home-equity-conversion” reverse mortgages fell 35%.

The new regulations are also likely to give lenders the right to require borrowers with smaller financial cushions to receive monthly payments, rather than a lump sum. To ensure that borrowers have enough cash to cover their property taxes and homeowner’s insurance premiums, the new regulations may also allow lenders to set aside a portion of a reverse mortgage’s proceeds for those expenses.

In recent years, the number of reverse mortgage borrowers at risk of default on these loans due to an inability to pay insurance and property tax bills has risen. Mr. Bell says a new counseling program has put about 60% to 70% of those in arrears on a path towards retaining their homes.

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    • Despite the new barriers to reverse mortgages, many companies are utilizing technology to get better offers for the visitors. I stumbled across this website before finding this article and they specialize on reverse mortgage Florida. http://www.shopreversemortgages.com/florida/

    • Wow! this cartoon type YouTube video I have viewed when I was in primary level and at the present I am in university and viewing that over again at this time.

    • he was fed up with quote my bitching so he beilad because i would not pay him anymore to do nothing. He refused to change my decree papers prior to a final sign off on them to state for Adultery he worded the papers to state i got 1/2 of all of the 401K, IRA, Bonus program, and the company stock as of what was left in it as of the day before the decree papers were signed instead of what was in those accounts at the beginning of the divorce for the last yr. Of course my ex pulled out over $14,000.00 out of just one of his 401K’s and pulled out all the other money out just before the signing of the decree. Now that atty. contends because my previous atty.’s did not do Discovery that he had no way to find out what my ex had in those acct.’s. But i was Pro Se for 2 wks and I DID do the Interrogatories and Discovery. That same atty. was aware of it and had them in his office for the last 7 months. My ex’s atty. told me he refused to respond to them as i did not respond to his. Which i did but the first atty. I had did not send them to him. I have no job and have filed for disability and just got news yesterday i was approved( after waiting 2 yrs). the mortgage co. for the Boise home is GMAC. I am going to send them the 41 page questionaire on who owns the note. My home in Oregon is in the same situation. I actually had to get written permission from my ex to even talk to Carrington Mortgage to make house payments on the home i owned prior to marrying this idiot. I know that the note on it has been bought out at least once as Carrington was not the original holder of the note. I am filing complaints with the Idaho State Bar for the 3 atty.’s i have had who have screwed up my divorce beyond belief but in the mean time i am looking at two foreclosures. My ex filed bankruptcy on May 19, 2009 and remarried another sucker on May 22, 2009 so her income would not count against his bankruptcy. between the two of them they have approx. $6,500.00 a month in income and are now in the process of buying a new $300,000.00 home one month after his bankruptcy was discharged. I have spent all my money that should have gone to paying house payments on Atty.’s I sold my 52 Chevy to pay the last one then after the last payment i made to him which i had to use my house payment to pay him another $900.00 he told me i was bitching too much about the QDRO not being done. Any ideas? I am desperate. I have no where to go and i also have the poor innocent cats my ex left with me who will be put to sleep if i have no home for them either. I am taking my ex back into court Pro Se again for contempt charges but he has a very good atty. court is Nov. 18, 2009.

    • Finding this “new program” is like looking for needle in hay stack. I have called a lot of organizations and they say there is no program and they do not have support counseling to HELP homeowners. Only counseling is to assist in analyzing their ability to get a reverse mortgage. Funds are being used to screen potential borrowers, NOT TO HELP HOMEOWNERS.

    • Reverse mortgages are definitely not right for everyone. However, they are also able to save people who cannot pay their current mortgage. For a great resource, visit http://www.seniorreversemortgage.com for free information.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.

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