Reverse Mortgage Rules Changing

August 12, 2007

There is a growing number of senior homeowners applying for a reverse mortgage – a special type of mortgage for persons over age 62 that uses their home equity to generate an added income. The number of reverse mortgage borrowers will soon grow dramatically, that is if the proposed American Homeownership Act of 2007 is passed by Congress. It would allow about two million additional seniors to tap into their home equity to obtain reverse mortgage payments.

Seniors who have lived in their current homes for several years or decades have seen the value of their homes rise substantially in recent years. However, in high cost areas, such as the Northeast and West, home values have far surpassed the mandated cap of $362,790 for obtaining an FHA-backed reverse mortgage. That limit leaves millions of seniors without access to such a mortgage.

The new Act would make reverse mortgages available to additional millions of homeowners by raising the FHA’s Home Equity Conversion Mortgage loan limit equal to the Fannie Mae and Freddie Mac conforming loan limit. By increasing and simplifying the loan amount, this change would help seniors who have homes valued above the current FHA loan limit but less than $600,000 obtain a reverse mortgage through FHA.

Seniors should carefully study and understand the provisions of this mortgage transaction before making a commitment. There are advantages and disadvantages. On the downside are large upfront fees.

Posted in All Things San Diego, Helpful Hints, Lending, Local Business, Real Estate, Taxes, Things of Interest