New reverse mortgage program changes on June 27, 2014 to the Home Equity Conversion Mortgage(HECM), as it is affectionately known, have swung the direction of who now qualifies for a Reverse Mortgage.
Previously, the youngest borrower allowed to be on the Reverse Mortgage, had to be at least 6 years old. This left a huge void for married couples with age differences trying to obtain a Reverse Mortgage. The bigger problem became the lenders and brokers steering married couple to remove the spouse under the age of 62 from the mortgage and obtaining a Reverse Mortgage in the spouse’s name over the age of 62.
While this may have given temporary relief, in many cases, the spouse left off the mortgage ended up in a very vulnerable spot, and in extreme cases, losing the home or not being able to obtain financing when the spouse on the mortgage passed away. HUD has addressed these issues with its most recent updates by allowing spouses above the age of 18 to be included on the mortgage during the Reverse Mortgage process. The Loan-to-Value (LTV) is based off of the youngest spouse and ranges anywhere from 31% at 18 years old, going up to 75% at 80 years old.
The updated changes to the Reverse Mortgage program should open the floodgates for many homeowners that previously could not qualify or did not want to run the risk of losing their home after their spouse passed away. Full details to the changes can be seen at http://portal.hud.gov/hudportal/documents/huddoc?id=14-12ml.pdf.
Understanding all of your options and educating yourself on what programs are available will give you the best chance of obtaining the ideal mortgage to help ease the financial burden of retiring in comfort. These changes to Principle Limit Factors (PLFs) will go into effect for FHA case #s issued after August 4th, 2014. Realizing the need and making the necessary changes to this program is another step forward by HUD to continue the housing market recovery. Prospective borrowers that have existing FHA case #s will be given the option of canceling their existing FHA case # and having a new one re-issued after August 4th to accommodate the new changes if it in fact benefits them.