Reverse Mortgages are a great ﬁnancial resource that has enabled seniors to use their home equity to sustain long-term retirement while maintaining residence in their home. The program began in 1988 as part of the Housing and Community Development Act. Since this time the program has undergone many changes. Most of these changes are designed to protect the consumer and the overall health of the Mortgage Insurance Fund from FHA. Here are a few of these recent changes that bring increased safety and security to the HECM program:
- Non-borrowing spouse: As of today, if you’re married, both individuals need to be accounted for in the underwriting decision of a reverse. That was not the case prior to 2015-02.
- Income and Credit Underwrite: This was not the case until 4/2015. This will now minimize tax and insurance defaults and help to ensure the desired loan is a positive beneﬁt for the borrower.
- Limitations on cash out in the ﬁrst year, help provide long-term sustainability for the HECM borrower by providing access to future funds while slowing the depreciation of the equity position in the home.
- The new view of an FHA HECM reverse mortgage for wealth management ﬁrms is that the “Highest and Best” use of the HECM is to improve a client’s retirement plan, not rescue it.