New regulatory restrictions on the federally-insured reverse mortgage program have strengthened lending security by adding safeguards for consumers that will lower the number of eligible borrowers, but protect the ones that do qualify, writes the Motley Fool.
“With the new rules, fewer seniors will be able to qualify for a reverse mortgage. Is this a good thing?” the article asks. “The answer is complex. In the majority of cases, some key factors make a lot of difference in how reverse mortgages work for borrowers.”
Among those factors: whether or not a homeowner has children. If not, it can make sense for them to draw down their home’s equity, says Motley Fool, but having heirs can be complicated, especially if they’re expecting an inheritance.
The terms of the reverse mortgage—along with the context of the loan—determine whether or not it’s a good move for the borrower, according to Motley Fool, and the new rules serve to create “common-sense” standards to ensure fewer reverse mortgage borrowers default or run into financial emergencies down the road.
“The bottom line is that, as with other kinds of similar lending, reverse mortgage fundamentals need to be fully explained to seniors or others who qualify,” says the article. “The lending environment needs to be supportive of the borrower, and the potential outcomes need to be communicated thoroughly.”
Written by Alyssa Gerace
