With reverse mortgage changes on the way, those who are thinking about applying can still qualify under the old rules, writes the Wall Street Journal this week.
The new rules could mean less money for borrowers but also reducing the default rate under the program, after authority has been granted by Congress for the Federal Housing Administration to make its desired modifications.
The Department of Housing and Urban Development has alluded to the substance of the changes, though details are forthcoming in a mortgagee letter expected by September 1.
“Regulators plan to merge the two types of reverse mortgages on the market today: the “standard” loan, which currently allows borrowers to tap from 56% to 75% of a home’s appraised value, depending on their age, and the “saver” loan, which currently pays from 4 to 16 percentage points less,” WSJ explains. “The agency has yet to announce the new limit.”
Citing input from National Reverse Mortgage Lenders Association President and CEO Peter Bell, the WSJ notes most homeowners will be able to borrow less than previously under the Standard program, but more than they would have been able to borrow under the Saver program.
“Regulators also plan to cap the amount many borrowers can tap during a loan’s first year,” the article notes.
Assuming for a 60% first-year cap on the upfront draw, WSJ outlines a scenario in which a borrower could borrow $105,000 of a $175,000 loan under a fixed rate option, with an adjustable rate borrower being able to access to the $70,000 balance in later years.
Written by Elizabeth Ecker
