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FHA Reverse Mortgage Changes Article

Here is an article from Reverse Mortgage Daily


Phil Goss
Certified Reverse Mortgage Professional

Reverse Mortgage Changes are a Mixed Bag, Lenders Say

By Elizabeth Ecker

In its announcement of long-anticipated changes to the Home Equity Conversion Mortgage program, the Department of Housing and Urban Development has stated its initiative to shore up its insurance fund and make reverse mortgages safer for borrowers.

Short term, estimates that reduce the amount borrowers can access by around 15% as well as a financial assessment overlay that will restrict access to some senior homeowners have raised serious concerns among lenders with respect to the future of the program and the “new” future borrower.

Anecdotally, originators say two in 10 past borrowers won’t qualify under the new restrictions.

But others are opting to look for the bright side of the changes, namely strengthening the program, eliminating headline risk and accomplishing what the Federal Housing Administration set out to achieve—making the program safer for borrowers as well as the FHA’s insurance fund.

The good news

With FHA having long talked about the program changes, the potential for paving a new path for the loans both within the industry and among members of the press is seen as one upside to the changes.

“These changes mitigate a lot of potential headline risk issues market participants have been concerned about,” says Darren Stumberger, managing director of mortgage trading for Stifel & Co. “These changes lay the groundwork for a healthier, more sustainable program.”

The industry has struggled long with negative headlines having to do with non-borrowing spouse issues as well as more recently, headlines surrounding a near billion-dollar shortfall to FHA’s insurance fund that would require a first-ever bailout of the agency to cover the projected losses.

“Particularly as they relate to non-borrowing spouses and originator steering, the changes will help to combat misunderstandings,” Stumberger says.

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