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HECM Reverse Mortgage Program Changes Now in Effect

The HECM Reverse Mortgage Program changes are now in place effective October 1, 2013. Changes to the program are clearly geared toward keeping the financial risk to the government insurance fund in check. As expected, the equity principle limit eligibility across the spectrum has been curtailed by fifteen percent. In addition, restrictions on discretionary equity access have been implemented for all potential borrowers for the first year. With these changes, some costs have been reigned in while others have been significantly increased. More intrusive changes to the program will be forthcoming effective January 13, 2014.

What do these changes mean and how do they affect the practical application of the HECM Reverse Mortgage Program for our seniors? Big Brother has clearly assumed the role of babysitter for our seniors. The push from Wall Street through the mortgage providers has clearly demonstrated that seniors cannot be trusted with the decision making process as it relates to maximum equity access. This has been proven by the $2.8 billion devastating loss suffered by FHA in the fourth quarter that was solely related to the Reverse Mortgage Program. The statistics demonstrate evidence that the majority of the losses attributed to the program were from borrowers maximizing their equity access beyond the mandatory requirements, such as a mortgage and closing costs, at closing. Wall Street was paying big dollars for this. Going forward restrictions will place limits on this activity in an effort to limit losses and maintain program solvency and availability for future seniors.

The revised HECM Reverse Mortgage Program still has very attractive applications for seniors looking to supplement retirement and live mortgage payment free. Advisors are beginning to take notice as seniors call and request funds from their managed accounts where they earn a fee to help with income and preservation. If we don’t help our seniors establish equilibrium and get a handle on their income and expenses, it will not be long before all of their liquid assets are dissipated and the problem remains unsolved. Create that equilibrium by removing mandatory expenses and supplementing income with a HECM Reverse Mortgage. It may very well be your path to a happy customer throughout the life cycle.

If you would like to learn more about a Reverse Mortgage that can help a client, friend or loved one, I would like to hear from you.


Blogging from the front line.

George H. Omilan

NMLS# 873983


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