FHA lowers principal limit for reverse mortgages

Shared by Savior70 on Wed Oct 07, 2009 6:53 am
Homeowners, 62 years or older, would now find it difficult to pay off their current mortgage debt obligations and turn their home equity into cash resource with the help of a reverse mortgage. FHA has now decided to limit the maximum amounts seniors can receive on FHA-insured reverse mortgages, known as Home Equity Conversion Mortgage or HECM. Homeowners, applying for reverse mortgages from Oct. 1 onwards, will now face a reduction of 10% in the principal loan amount. What this means is, those who could earlier have qualified for a reverse mortgage amount of $80k will now have to settle for an amount lesser by $8k. Declining home prices and a projected deficit of $798 million in the HECM program by Oct. 1 are said to be the primary two causes for this reduction in reverse mortgage principal amount. Source: http://www.washingtonpost.com/wp-dyn/content/article/2009/10/01/AR2009100105444.html

Community Members Opinion

smithsussane
smith.sussane

Joined: 18 Sep 2008

Posts: 3709
Location: Alaska

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Posted: Wed Oct 07, 2009 9:02 pm Post subject:

Hi Savior, Not an encouraging news for the senior homeowners who were planning to take reverse mortgage in future. This may have a negative impact on the real estate market as there are chances that lots of properties would go into foreclosure due to this new rule. However, it was noted that the concerned authorities would be taking various steps to make reverse mortgage remain a feasible option for the seniors. The concerned authorities are thinking of allowing the current lenders of the seniors to agree to recognize less than a full payoff due to the diminished reverse mortgage proceeds available. However, the lenders will not lose the unpaid balance. It would be changed into a junior lien which would be secured by the property. This junior lien would be repayable as per a new payment plan over a term of years. Or else, the homeowners can pay it off in a lump sum with interest when the property is sold off. Sussane

Samantha

Joined: 16 Sep 2005

Community Mentor
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Location: MASSACHUSETTS

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Posted: Thu Oct 08, 2009 6:33 am Post subject:

So, the decline in home price seems to be affecting the reverse mortgage industry as well. The credit crunch and its after-effects are having their toll in every sphere of the US financial market. There are rising concerns that the Social Security funds would experience a shortfall in a few years time. Social Security is what retirees consider as their primary source of income. Reverse mortgage is another source of funds which seniors and retirees make use of in order to renovate their home, pay off medical bills and supplement their income during retirement years. So, things look pretty dismal, considering the fact that the HUD reverse mortgage limit are likely to be decreased and the Social Security benefits may be cut down. Samantha _________________ Know how to compare lenders with mortgage booklet

sunnyca2009

Joined: 04 Aug 2009

Posts: 1737

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Posted: Thu Oct 08, 2009 9:45 am Post subject:

This is nto really a surprise This was suppose to happen, is it the right time, that a different question


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