New Guidelines Coming for Reverse Mortgages

While a reverse mortgage is not for everyone, it can be an excellent tool  for a senior who wants to remain in her home by allowing her to utilize the equity that she has accumulated to help cover the cost of her care.

Under current FHA guidelines, the determination of the amount of the mortgage is based solely on the equity value of the home.  The income of the applicant is not verified, and her credit score plays no role.

However, according to FHA Mortgage Letter 2014-22, beginning on March 2, 2015, applicants for reverse mortgages will be subject to a Financial Assessment, and they must meet new “property charge set aside requirements,” which have not yet been published.  Since many individuals who consider a reverse mortgage have minimal assets other than their homes, and may have accumulated substantial credit card debt to cover the cost of their care before they become aware of the possibility of the reverse mortgage, this could create a serious hardship, and drive more individuals to look to Medicaid to cover the cost of their long-term care.

Individuals and families who have thought about the possibility of a reverse mortgage may want to consider discussing the pro’s and cons with a reputable mortgage broker, or their elder law attorney, during the first part of February, so that they can avoid the uncertainty around these new rules.




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