2017 Reverse Mortgage News and Trends

seniors-holiday-new-year

Happy Holidays and the new year of 2017 is right around the corner.  Here are a few things to summarize about 2016 and look forward to in 2017 within the reverse mortgage world:

 
It’s been an active year for revere mortgages, in addition the government insured RM program reached a milestone: In 2016 1 million reverse mortgage loans completed since the program’s inception in the late 1980’s.

 
Changes and trends for 2017:  Financial planners in greater numbers are looking with favor upon the RM for clients to set up a credit line safety net rather than dip into investments for extra living expenses or they are recommending clients utilize the RM to pay off an existing mortgage. In paying off an existing mortgage the client becomes monthly mortgage payment free increasing monthly household liquidity, thus advances from investments to sustain living expenses may be either reduced or halted altogether. (Borrowers must continue to pay and keep current property taxes and homeowners insurance, as well as HOA dues if applicable.) No changes are anticipated in this fundamental tenant of the program: the borrower(s) remain on title as the owner(s) of the property when they do a RM loan.

 

The home price maximum recognized has been increased for 2017 from the current $625,500 to $636,100:  This does not mean that homeowners with homes valued above this amount cannot utilize the program; for example: a home valued at a million dollars would be limited to borrowing only as much as the $636,100 limit allows.
A new Harvard University report entitled “Projections & Implications for Housing a Growing Population, Older Households 2015-2035” issued putting forth that a RM can be a financially realistic option to help older homeowners alleviate cost burdens and comfortably age in place.**

The Financial Assessment process of a RM application became more streamlined this year: standardization of proof of income to demonstrate continued ability to pay ability ongoing mandatory obligations such as a car payment property taxes, and homeowners insurance, and HOA dues if applicable has made the process uniform. The good news: the income requirements are NOT as stringent as with a conventional loan.
Long term care insurance: Seniors without long term care insurance are looking towards the RM credit line as a source of funds for future in-home care or home modifications for aging in place: ramps, handrails, or step in showers are a few examples.

Long term care insurance:  Seniors without long term care insurance are looking towards the RM credit line more commonly as a source of funds for future in-home care or home modifications for aging in place: ramps, handrails, or step in showers are a few examples.
**http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/harvard_jchs_housing_growing_population_2016.pdf

2014 NEW Reverse Mortgage Lending Limits, Younger Spouse Protection

South Yuba River Bridge SAVED! Full Funding for a Rebuild

South Yuba River Bridge
SAVED! Full Funding for a Rebuild

 

The long awaited lending tables from HUD for spouses who are younger than 62 years of age go into effect on August 4, 2014 for all new reverse mortgages. Spouses aged 18-61 on new loans will be included in the loan when the other spouse is 62 years of age or older and seeking a reverse mortgage. The loan amounts are more conservative the younger the spouse under 62 years of age is, however there no longer will be allowed a “non-borrowing” spouse situation where the younger spouse has typically not been on title, not been a party to the loan, and therefore not able to remain in the home if the older spouse passes away first unless: they inherited the home and can pay off the existing reverse mortgage with a conventional loan or cash, or are over 62 and have enough equity to take out a reverse mortgage on their own.

There will be certain requirements of the remaining spouse under 62 years of age when they become the sole surviving homeowner, such as continuing to keep paid property taxes and property insurance, as well as verifying periodically that the surviving spouse is indeed living in the home as his/her principle residence. The exact requirements to remain in the home once the older spouse as passed will be clearly spelled out in any loan application that issues after August 4, 2014 and all information on this new policy will be fully incorporated in the required HUD certified counseling session discussion and material.

HUD did not announce any changes for “non-borrowing” spouses on existing reverse mortgage loans, but it is an issue the industry continues to wrestle with. Any changes on this front I will immediately write about.

A surprise announcement that also issued along with this news is that HUD will make the lending tables we use to calculate loan proceeds MORE generous for older borrowers in their 70’s, and a bit LESS generous for younger borrowers in their 60’s.

If you are curious how this could affect you please feel free to give me a call.

Shawna McDonald, Loan Officer has completed hundreds of reverse mortgages. She is approved with 8 of the largest reverse mortgage lenders in the nation allowing the consumer 1 stop fee shopping. Her local office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main Street Suite N, Grass Valley, (530) 497-3010. The website is www.SierraFoothillsReverse.com.

NMLS #271335 CA-BRE 00585530 Borba Investments, Auburn, CA NMLS #76801 HUD approved