With Bank of America and Wells Fargo exiting the reverse mortgage industry along with the picture the media paints, I’m reminded of the story of Chicken Little thinking the sky is falling, looking at the doom and gloom. Or jumping to the conclusion that because they have left the industry the reverse mortgage option is going away.
However, the sky is not falling in the reverse mortgage world! Reverse mortgages are still available and a viable option for senior home owners.
There are still lenders lending, some new ones even entering the industry. FHA is still insuring the Home Equity Conversion Mortgage (HECM), covering the risks for the lenders when the home values drop. Investors are still investing in reverse mortgages. Servicers are still servicing reverse mortgages.
HUD still guarantees the funds are available for borrowers. Monthly payments are still not required. The loans are still non-recourse which means no personal liability to the borrower or the estate if the loan balance is higher than what the home can be sold for at the time the loan is due and payable; the FHA Mortgage Insurance Premium covers the difference. Reverse mortgage borrowers still have protections including the required counseling by a third-party HUD trained and approved counselor. The HECM Standard, HECM Saver and HECM Home Purchase programs are all still available.
Seniors still own their home. The majority of people want to remain in their home. Staying in one’s home can be less costly than moving and renting in senior housing. The reverse mortgage remains a viable option to help seniors remain in their home.
Reverse mortgage interest rates are still low. The funds can still be received in monthly payments, line of credit, a lump sum or a combination of these. The line of credit still has a growth rate. The monthly payments to the borrowers can still be received as tenure/for life or structured as one needs. Reverse mortgage funds are still generally considered tax free. Social Security and Medicare are still not affected by a reverse mortgage. Medicaid (Medical Assistance in Minnesota) can still be received with a reverse mortgage.
The funds can still be used for: Paying off current mortgages and helping one out of foreclosure. Paying for home repairs and home modifications, medical expenses, home care and long term care. Paying taxes and protecting other assets. Fulfilling dreams or whatever one needs or wants.
In the world of Reverse Mortgages SIDAC, we are NOT Chicken Littles, the sky is NOT falling. We ARE STILL offering reverse mortgages through lenders who are committed to helping seniors stay in their home and have security, independence, dignity and control.
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