Reverse Mortgage Changes effect Ocean Hills Seniors

The changes to reverse mortages are as follows:

• Fixed Rate Interest options will be eliminated (post Feb 2013) and all future mortgages will be variable interest rate only. The specifics of the variable rate options (indexes, margins and rate caps) will be priced according to each lender. The HECM fixed rate program is the primary reason the program is showing an estimated economic value of negative $2.8 billion.
• Creation of “set asides” for payments of taxes, insurance and HOA dues. As with all groups there is a percentage of individuals who exploit “loopholes” in any given program. In this case, a small minority number of seniors took a “lump sum disbursement” of equity (cashed out) and later (as housing values plunged) simply quit making their property tax, insurance and HOA payments. Or in many cases seniors became (increasingly) debilitated , many simply lost the ability to keep up with the paperwork demands of paying the bills.  This led to massive losses as homes reverted back to investors as seniors passed away or left the home for convalescent care. How exactly the “set-aside” issue is handled will be the most challenging.  The tradeoff of giving access to their full equity ( 50-80% max ltv) while still protecting the investors.
• “Full Equity Disbursement” (aka FED) Currently seniors can receive their equity in one “lump sum” or a series of withdrawals (i.e. HELOC). This option will be scaled back (probablly eliminated) for several reasons. Many HUD housing counselors feel that this mass infusion of cash into a senior’s bank account often leads to poor financial planning for their long term future. Whether it be a crooked care giver, “impatient” future inheritors or just poor purchasing decisions (it is felt by HUD) that a large wad of cash is more easily mismanaged than a series a series of managed withdrawals. Scaling back FEDs will also solve issue number 2 (listed) above.

To get more information about how a reverse mortgage can help you buy in Ocean Hills, contact Gary Harmon today.

Above info supplied by Daniel Dobbs, Capital Mtg. Services.