What are the new rules for Reverse Mortgages on April 27th 2015?

The Home Equity Conversion Mortgage, aka Reverse Mortgage will have new requirements after the 27th of April, 2015.

The borrower seeking a HECM will have to undergo a financial assessment done as a part of the process.  If the borrower is deemed to be incapable of handling the ongoing responsibilities of the loan, ie property taxes and insurance, a portion of the loan will be set aside to cover property taxes and insurance.

The most common way Reverse Mortgage borrowers get in trouble late is being unable to pay their insurance and taxes.  Defaulting on those items can put them into default and eventually foreclosure.

If a borrower has a good credit payment history and sufficient income, they can probably handle the property taxes and insurance.  If they are lacking income or have a history of delinquent payments, then it’s probably a good idea to set aside some of the funds to cover these future expenses.

Now, if you are currently in process of getting a reverse mortgage, this will not apply to you.  Anyone who starts an application after the 26th, the new rules will apply.

 

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