WaPo: Proprietary Reverse Mortgages Worth a Look

As federally backed reverse mortgages volume has “tanked” during the last fiscal year, new proprietary reverse mortgages are a viable option for seniors interested in these retirement loans, housing columnist Kenneth Harney wrote recently in the Washington Post.

In his column “New Options Open for Homeowners Seeking a Reverse Mortgage,” Harney tells readers about the latest private products from Finance of America Reverse, Reverse Mortgage Funding, Longbridge Financial and One Reverse Mortgage.

“All of them allow much larger maximum-loan amounts than [Federal Housing Administration]. They also charge no mortgage-insurance premiums, and may permit loans to owners of condominium units in developments that have not been approved for FHA financing,”  he writes.

He mentions FAR’s latest HomeSafe Second, which is the first and sole second-lien reverse mortgage on the market, allowing borrowers to keep a low-rate traditional mortgage in place, and FAR’s desire to create products that offer “homeowners nationwide more flexibility and innovation than FHA can.”

“Other companies’ proprietary offerings have their own special niche features designed to improve on FHA’s rules: Equity Edge’s program lowers the eligibility age for some borrowers to 60 instead of 62; One Reverse Mortgage permits loans on houses with solar panels, to cite just a couple of examples,” he writes.

Because proprietaries may have limitations like more thorough credit screenings or lower maximums of available equity, Harney writes that the proprietaries have their drawbacks.

“Generally, they are not aimed at the lower-to moderate-cost housing market like FHA, so they screen out potentially large numbers of owners from coverage,” he writes, and said they should be discussed with a financial counselor.

“Bottom line: They’re an important, growing resource for senior homeowners and worth at least a look if you’re considering a reverse mortgage,” according to the column.

In his explanation of how the last rough year for Home Equity Conversion Mortgages has set the stage for proprietary creation, Harney explains the October 2017 rules changes and the latest appraisal process retooling — and the low volume that has followed.

“The program is a financial nightmare for the FHA, performing so poorly that the FHA’s commissioner, Brian D. Montgomery, complained recently that it is ‘still hemorrhaging money,’ despite repeated reform efforts,” he writes.

Read the entire story at the Washington Post.

Written by Maggie Callahan

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