New FHA reverse mortgage rules


The Department of Housing and Urban Development has tightened the requirements on reverse mortgage loans backed the Federal Housing Administration to help to strengthen the financial stability of the program. The FHA will reduce the amount of equity that homeowners can access when they get a reverse mortgage and limit the amount of money they can take out during the first year.

Reverse mortgages allow homeowners 62 years or older to get a loan backed the equity in their home without having to make monthly payments on the loan. With a reverse mortgage, the lender doesn't get paid back until the house is sold.

The main changes

The amount of money you can borrow with a reverse mortgage depends on your age, how much equity you have and the interest rate on the loan. With the new rules, seniors will be able to cash out about 10 percent to 15 percent less of their equity than HUD currently allows.

"Most of the rules basically help protect the borrowers from themselves, " says Robert Stammers, director of investor education at the CFA Institute.

Once the changes go into effect, a 62-year-old getting a loan with a 5 percent interest will be able to borrow up to 52.6 percent of the home's appraised value, including loan fees, the Federal Housing Administration says. That's down from the current 61.9 percent the same homeowner is currently allowed to withdraw.

A 90-year-old homeowner with that same interest can get up to 66 percent of the home's value. A higher interest rate results in a lower cap.

Limits on how much you can borrow during the first year

Under the new rules, homeowners won't be able to cash out all of their allowable equity as soon as they get the mortgage. The FHA will limit the disbursements in the first year to no more than 60 percent of whatever the homeowner is allowed to borrow. There are exceptions for certain homeowners, including those with delinquent federal debt.

Starting next year, homeowners will also have to show they have sufficient income to cover expenses such as property taxes and homeowners insurance.

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FHA backing away from Reverse Mortgages....

2009-09-22 15:05:48 by Apprsr

FHA Looking to Decrease Its Exposure to Reverse Mortgages
Reverse mortgage lenders are learning that the Federal Housing Administration is moving quickly to implement a reduction in the loan proceeds that seniors can receive from a FHA-insured Home Equity Conversion Mortgage.

Declining home values squeeze reverse mortgages

2009-10-04 22:05:18 by Apprsr

Kenneth Harney
Sunday, October 4, 2009
(10-04) 04:00 PDT Washington - --
Declining home values have put a serious squeeze on one of the mortgage market's most popular and fastest-growing financing concepts: the Federal Housing Administration's reverse mortgage program for seniors 62 and older.
In a letter to reverse mortgage lenders Sept. 23, FHA Commissioner David Stevens said his agency must reduce the maximum amounts seniors can receive on reverse mortgages because of a $798 million estimated deficit in the program in the coming fiscal year

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SENIOR SIGNALS: Pros and cons of reverse mortgages  — Bristol Press
30, 2013, the Federal Housing Administration placed strict limits on loan sizes and raised mortgage insurance premiums designed to encourage slow, steady home equity withdrawals. So don't automatically rule out reverse mortgage. It may fit your needs.

Predictions: Can You Wait For Lower Mortgage Rates In 2014?  — The Mortgage Reports
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Waterstone Mortgage Corporation. The views and opinions ..

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  • Avatar Roger Given the state of the economy,why does it take so long to get a home owners loan?
    Nov 03, 2011 by Roger | Posted in Renting & Real Estate

    Most FHA or Rural Development loans take a very log time for approval,although the persons applying for the loan can obviously afford it. One was told,you ll have to elsewhere you make to much money? If they can afford it why not have the loans processed faster to accomadate those who need housing?

    • Because no one can afford to back a loan that will fail, so lenders are extra careful.