Take action before the reverse mortgage rules change in March


By Alain Valles

Over the past 25 years hundreds of thousands of homeowners age 62 years or older have converted the equity in their home into tax-free cash through a reverse mortgage. However, on March 2, new rules go into effect for reverse mortgages. The most significant impact will be that all borrowers will be required to undergo a Financial Assessment review, which is a more detailed look at personal finances.

But there is still a short window of opportunity before the rules go into effect. Here’s how you may be grandfathered under the earlier rules before the changes go into effect:

In order to qualify before the rules change, you must complete a reverse mortgage counseling session and be assigned your FHA case number. The case number is obtained from your reverse mortgage company and does not obligate you to do anything. Getting a case number affords you up to six months of extra time to decide if you want to get a reverse mortgage without being subject to the new rules.

An independent, government approved third party counselor conducts the counseling session. Their mission is to explain the pros and cons of a reverse mortgage and to help you determine whether a reverse mortgage makes sense in your situation. The counseling session is strictly informational, and the counselor does not benefit if you get a reverse mortgage.

The challenge is that counseling appointments are rapidly filling up. In Massachusetts the sessions must be conducted in person, which is creating travel issues for people. If you have any interest in learning more about reverse mortgages you should not delay in reaching out to a trusted reverse mortgage professional.

What happens if you miss the deadline?

Starting March 2, reverse mortgage applicants will need to provide income and credit documentation for a Financial Assessment review. For those who do not meet the guidelines there will be a tremendous impact. They will be required to “set aside” a large portion of available loan proceeds for real estate taxes and homeowner’s insurance. In some cases this could amount to more than $50,000. In other cases, the person may be denied a reverse mortgage altogether.

What should you do today?

Even if you are not considering an immediate reverse mortgage, now is the time to take action and learn the facts, before your options for accessing your hard earned 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 av@dfcmortgage.com You can read additional articles archived on www.fiftyplusadvocate.com