FHA Loans and Reverse Mortgages
by : Staff Writer
Changes are really shaking things up in the reverse mortgage marketplace, and poor financial news in the reverse mortgage coffers are going to mean more are on the way. Reverse mortgages are still a great option for homeowners over 62 years of age, but take note of some important items.
FHA is reporting nearly a $2 billion shortfall in reserves for this particular product and is seeking some “bailout” money to help absorb the shortfall. Older homeowners are able to borrow against the equity in their home in two different ways, and one of them is taking a toll. The two options have been monthly payments – imagine the bank paying you a mortgage payment instead of the other way around – or, the borrower can take a lump sum for the amount of equity that is agreed upon. The number of lump sum payments increased with the economic downturn, with a lot being paid out. It is likely that falling home values have hurt this product line as well. Some people have questioned whether the lump sum payment will be further limited (see below) or even go away entirely, something to keep an eye on. One thing not to worry about is FHA solvency, FHA has a lot of money with over $37 billion in reserves, it is just this particular program that has hit a bumpy stretch.
Two changes that are about to take place are causing a stir currently, with a lot of interest as people try to take advantage before the changes are effective. As mentioned above, the FHA has reduced the amount the borrower can get by 15%. It would appear payments were made that were deemed to be greater than the home was worth once the recession had its way with the housing market.
In addition, the fees that are charged with reverse mortgages are changing. Next month the fees will rise .5% from 2% to 2.5%, a significant number in any case, but even more when fixed incomes may come into play as they are so frequently with seniors.
FHA reverse mortgages are a great option, in this ever changing world you simply have to be on top of the changes that are taking place, and stay tuned for future changes. Take a look at your credit score and contact us for more information on these valuable loans.