Home Helpers

Reverse Mortgage Changes Coming This Spring

The Department of Housing and Urban Development (HUD) announced changes to the Reverse Mortgage program beginning in the spring of 2015 that will likely improve the program by helping to ensure that seniors who obtain a reverse mortgage will be able to pay for their property taxes and homeowner's insurance.

So what is a reverse mortgage?
A reverse mortgage is a government insured loan which allows homeowners to access the equity they have built up in their homes. It was originally designed to help seniors stay in their homes while increasing their personal cash flow to help pay for retirement expenses. The homeowner retains title to the home. What makes a reverse mortgage unique is that unlike a regular mortgage, a reverse mortgage requires no monthly mortgage payments (homeowners must still pay taxes and homeowner's insurance.) Tiffany Shutta, Vice President of AFC Reverse Mortgage in Allentown, explains "This can greatly increase personal cash flow, especially if a reverse mortgage is used to pay off an existing mortgage and to eliminate monthly mortgage payments." The reverse mortgage is paid back when the homeowner or the estate sells the home or when the last homeowner permanently moves out of the home.

How will the HUD changes affect the reverse mortgage program?
HUD will soon require that lenders analyze a borrower's income, assets, and expenses to calculate a borrower's residual income and obtain a credit history to verify that the borrower will be able to keep up with their property taxes and homeowner's insurance. Previously, residual income, the amount of income left after all monthly bills are paid, was not verified in order to obtain a reverse mortgage. If a borrower's income is insufficient, the borrower can still qualify for a reverse mortgage, but the lender will be required to "set aside" funds from the reverse mortgage to pay these future expenses.

Where do I find more information?
Speak with AFC Reverse Mortgage. AFC Reverse is local, family-owned, and part of the Krajsa family legacy of lending to area homeowners since 1947. They can provide you with a quote and more information about the program in just a few minutes over the phone. The staff at AFC can meet with you, your family, friends, and trusted advisers in your home or at their office on Hamilton Blvd to further discuss the program.

Website: PAreversemortgage.com. Phone: 610-437-7230.