As of August 4th, 2014 , new changes to the HUD Insured Reverse Mortgage will go into effect to allow reverse mortgage surviving spouses to remain in their homes without the threat of foreclosure as long as they continue paying taxes, insurance and association fees if applicable. As of now, the full balance of the loan is due and payable within 1 year of the demise. This leavs a widow or widower whose name is not on the mortgage on the hook for the debt or forced to sell the home. The change defers that payment until after the spouse’s demise.
This change will give spouses who are currently not on the existing reverse mortgage a little more piece of mind knowing they dont have to sell their home or try and scramble to refinance the existing loan.
Reverse mortgages allow seniors 62 or older to convert their home equity into cash. Instead of paying the bank each month, the senior gets paid, either in a lump sum, a line of credit or monthly payments.
Qualifying for a reverse mortgage is significantly easier than another loan because of the limited requirements. Their are no income or credit score requirements, only being above the age of 62, the property being their primary residence and having enough equity in their home. Property type also plays a significant role in qualifiying.
Previously, lack of proper education or simply being misled, afforded a lot of spouses to be taken off the loans.
The new rules also allow a reverse mortgage to be written even if one spouse is younger than 62. But the payout amount will be based on the younger spouse’s age.
The continued changes of the Government Isured HECM program is helping more and more seniors stay in their home and use the existing equity to live a more comfortable retirement. The misconception that these mortgages are only beneficial to the banks are fading away more and more. While the guidelines have changed, the effects have have benefited seniors who need the HECM program and have hampered the seniors that are simply looking to drain their equity for purposes other than that.
In a 2012 report, the protection bureau cited confusion among borrowers about reverse mortgages and expressed concerns that borrowers are taking out loans at younger ages — a potential problem if they outlive their reverse mortgage. According to AARP, the average age of borrowers in 2012 was 72, down from 76 in 2000.