Reverse mortgage rules have changed


By Alain Valles

The rules covering reverse mortgages changed Nov. 10, 2014. But there is still time to be grandfathered and get a reverse mortgage under the old, more favorable rules.

A_VALLESFor the past 25 years, reverse mortgages have allowed hundreds of thousands of homeowners 62 years old or older to convert the equity they have in their home into tax-free cash. Since 1988, borrowers have been able to obtain a reverse mortgage with no:

•income verification or documentation;

•requirement to give tax returns or bank statements;

•minimum credit score qualification;

•mandatory hold back for real estate taxes or homeowners insurance;

•restriction on how much cash can be borrowed at closing.

But this ability to access needed tax-free cash will soon become a more complex process. The Department of Housing and Urban Development (HUD) has issued Financial Assessment Requirements that will be implemented on March 2.

What will this mean to senior homeowners?

Once the Financial Assessment guidelines go into effect all reverse mortgage applicants will be required to provide copies of income documentation, bank account information and have their credit history reviewed.

Some seniors will no longer qualify and risk being unable to receive needed cash to pay off their mortgage and other bills.

For others, obtaining cash for home repairs, healthcare, credit card debt and other needs will no longer be possible. Their only options may be selling their home or asking family members for financial help. The goal of remaining financially independent will become a greater challenge.

What should you do?

There is no worse feeling than finding out you acted “too late” to take advantage of a favorable situation. While a reverse mortgage is not for everyone, it is in the best interest of senior homeowners to seek information from a trustworthy and experienced mortgage professional to learn if the pending changes will limit the ability to access tax-free cash.

What not to worry about?

The good news is there are no pending changes to the many benefits of a reverse mortgage. These advantages include no requirement to make a monthly mortgage payment, ability to receive a monthly check for life, or obtaining a line of credit guaranteed to grow for as long as one lives in the home. The other good news is the changes will not impact everyone and should make the reverse mortgage program even stronger.

The best move is to take immediate action and learn the facts, before the options for getting equity out of your home through a reverse mortgage are limited by the new rules.

Alain Valles, CRMP and president of Direct Finance Corp., was the first designated Certified Reverse Mortgage Professional in New England. He can be reached at 781-724-6221 or by email at Read additional articles archived on