The reverse mortgage program was established to give mature Americans who are over the age of 62, the ability to use some or a majority of the equity in their homes all while receiving cash payments for the duration of the loan or until the borrower moves from their home. The initial program did not have the steady stream of borrowers as it does now and the Federal Housing Administration (FHA) coupled with the U.S. Department of Housing and Urban Development (HUD) moved quickly to update mandates, advisories and other pertinent documents to improve the way you are treated and receive a reverse mortgage. Home Equity Conversion Mortgage and reverse mortgages are some of the names the program is often referred to.
2009 has proven to be a busy year for the Obama Administration as it has made several of the changes to the reverse mortgage program. Other changes occurred during the past two years and have steadily been monitored by the National Reverse Mortgage Lending Association to ensure effectiveness. The various program implementations and changes are as follows:
A New Fixed Interest Rate HECM Option allows you the option of having a fixed interest rate and know exactly what your payments will be at the end of your loan term. This new interest rate options only drawback is you are not able, at this time, to receive the various payment options like with an adjustable interest rate reverse mortgage. You can only take a lump sum cash payment at closing.
However, the adjustable reverse mortgage interest rates have flexible payment options which include a lump sum, monthly payments, a line of credit or a combination of all three payment options. The choice is yours and you are allowed to do what you want with the money from your home. Remember all payment forms, whether in a fixed interest rate or an adjustable interest rate reverse mortgage are due if you move out or upon your death.
If you are in need of a new home then you are now allowed to use the HECM for Purchase program which allows you to purchase a new home whether larger or smaller. Other stipulations are required before participating in this program such as home selection, interest rate selection and other state laws. Also, this program is not yet approved in all states.
The overall industry decided to change the margin index used by mortgage lenders. The industry is now using the Libor Index, a London based mortgage margin index which offers lower margins and gives borrowers more money for loans and reverse mortgages. The former index was the CMT.
The National Reverse Mortgage Lending Association has been monitoring the reverse mortgage industry for several years and paying particular attention to the ethical standards and practices of lenders and brokers. With this they have moved to immediately implement two new ethics advisories the 2009-02 Lead Generation State Licensing Requirements and Ethical Advertising and the 2009-01 Ethical Offers of Other Financial and Insurance Products and Services. These advisories protect the interest of you when seeking information on a reverse mortgage or receiving a reverse mortgage.
Before you ever apply for a reverse mortgage you are now required to attend a counseling session with a HUD approved HECM counselor. The counseling sessions are to ensure you understand the program, the repayment and other pertinent details of the reverse mortgage program.
The Obama Administration increased the lending limit this year only for you to receive more money out of your reverse mortgage. The lending limit increased from $417,000 to $625,500. The increase will end December 31, 2009.
The newest change came in June 2009 regarding the refinancing of a current reverse mortgage. The changes were made to include loans which the borrower was still in their homes and wanted to remain in their homes. The refinance guidelines now require the "Anti-Churning Disclosure" form which benefits you and not the mortgage company. You are still required to go to counseling unless otherwise noted and compliance is met.