A highly anticipated nod from HUD allowing use of reverse mortgage funds to buy homes (a.k.a. “HECM for purchase”) and co-op apartments would mean more business for players in the sector. “It will really open up opportunities for lenders, specifically in areas such as New York and Chicago where there are so many co-ops,” says Cliff Auerswald, president of Garden Grove, Calif.-based All Reverse Mortgage Corporation. But, it could be a tough row to hoe, he advises. “On top of all the [standing] rules and regulations, co-ops have a long list of their own” restrictions related to ownership,” he points out.
Nelson Locke, CEO, Value Financial, North Miami, is another supporter of HECM for purchase. Locke, who has been in business since 1994 and completed $125 million in reverse mortgages last year, is concerned that the new plan could have “arbitrary sticking points. It looks like a great program,” he concedes, “but it may be difficult to work with. It will be interesting to see how many are actually done because of the tight controls on how seniors fund the full purchase.”
Locke wonders, for example, why a municipality that “wants to give seniors a grant to buy a home with no repayment requirement, is not acceptable” under the HUD guidelines. “I understand government’s fear of [elder] abuse; some of that is justified, but I don’t think you burn down the forest for one bad tree.” The Florida businessman says “it would be wise to let the program work awhile and then see what happens.”
Still, most in the industry are waiting on clarification from HUD on certain aspects of the HECM for purchase. HUD has published some changes to the FAQ section of its website, but until a Mortgagee Letter is issued we won’t see how successful or unsuccessful the program will be…