Financial assessments coming soon

When HUD announced changes to the Reverse Mortgage program in the fall of 2013, that included an unspecified financial assessment for new borrowers. Originally slated to be released in January of 2014, the date was pushed back to April. The guidelines are still to be announced, but here are some reasons for the change:

Previously, HECM (Reverse Mortgage) borrowers were not required to undergo any income verification or financial assessment during the loan process. After all, most seniors are retired and may only have Social Security and/or a pension to support themselves. That's one of the many reasons why a Reverse Mortgage line of credit or monthly "income" can be so helpful to seniors.

When a senior has a Reverse Mortgage, their responsibilities include continuing to pay property taxes, homeowners insurance, and maintaining the home in a safe and liveable condition. Because they may already be strapped for cash, some borrowers use the proceeds from their loan to help pay for these expenses. But when a borrower does not fulfill these requirements, they may face the dreaded prospect of losing their home.

To prevent seniors from facing that problem, HUD is planning to do financial assessments of all prospective borrowers. Though the exact guidelines have yet to be released, the goal is to ensure that seniors are able to pay for the required taxes, insurance, and maintenance. If it's determined that it will be too difficult for the borrower to do so, a portion of the Reverse Mortgage loan may be "set aside" specifically for this purpose.

Though a financial assessment may sound daunting to borrowers on limited income, keep in mind that it is for the protection of your home and your own well-being. When the rules are published by HUD, I'll update you on what they are, when they go into effect, and how you may use them to your advantage in applying for a Reverse Mortgage.