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Reverse Mortgages have seen many changes over the years, and 2009 is no exception. The economy has made drastic fluctuations, affecting housing options for good and bad. Some of the prominent changes have included rising lending limits, new purchase options, the elimination of the CMT, margin increases and new counseling requirements.
In February, one of Obama’s first moves was to raise the national lending limit from $417,000 to $625,000, a 150% increase. This opened up great opportunities for seniors with high valued homes.
The new HECM for Purchase allows seniors, age 62 or older, to purchase a new residence using loan proceeds from the reverse mortgage. The program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction by eliminating the need for a second closing as well as to enable seniors to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs.
The FNMA announced this month that they will discontinue the purchase of the constant maturity Treasury (CMT-indexed) Home Equity Conversion Mortgage in order to help standardize Reverse Mortgage rates and simplify the variety of products. The move is also intended to build liquidity for the product, and encourage the market to shift toward securitization. The margins on the Treasury-based CMT have been rising faster over the past year than the LIBOR, thus the CMT recently has not been as popular due to decreased returns and higher fees. The change will not become effective until September 1, 2009.
In the HECM program, the “margin” is the amount added to an interest rate index to determine the initial, current, and expected interest rates of the loan over its lifetime. It seems that margins are going up; however, at the same time, interest rates are going down. The great thing about margins is that though they may go up, they can also fall right back down. Of course, this means that the currently low interest rates may rise, but that too is temporary. The roller coaster economy may be unpredictable, but what goes up must come down and the rapidly rising margins will hopefully fall just as quickly as they rose.
Under new requirements, the Federal Housing Administration requires the prospective borrower to initiate the request for counseling. Further, the FHA has initiated requirements for lenders to provide a list of counseling agencies to prospective HECM borrowers as well as a requirement for counselors to review and document a client’s unique financial situation. Finally, counselors must use the new Certificate of HECM Counseling to document the fulfilled requirements.
If you would like an information packet or would like to set up an appointment with one of our Reverse Mortgage Specialists, Please call (866) 683-3690 or complete our online Reverse Mortgage Information
Tags: hecm changes, reverse mortgage changes limits, reverse mortgage differences, reverse mortgage effects, reverse mortgage history
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