New York Times writer Bob Tedeschi wrote about the HECM for purchase program which enables older borrowers to use a reverse mortgage to buy a principal residence. While the guidelines for the program were released early in 2009, the program is just starting to catch on.
“The problem had been that lenders needed more information from the government about acceptable underwriting procedures,” said Peter Bell, the executive director of the National Reverse Mortgage Lenders Association.
AARP’s recently retired national program coordinator of its reverse mortgage education product said the guidelines changes would help borrowers improve their living circumstances without forcing them to relinquish all their savings for a new home.
Bronwyn Belling, who recently retired as the national program coordinator of the AARP’s reverse mortgage education project, said the recent guideline changes would help borrowers improve their living circumstances without forcing them to relinquish all their savings for a new home. She noted, though, that the loans can be complicated.
Here’s how a typical transaction might work: Let’s say a 75-year-old woman lives in a home valued at $700,000, with an outstanding mortgage of about $100,000. She sells the home for $700,000 and finds another — closer to the grandchildren, with no staircases and minimal upkeep — for $625,000.
Instead of securing a traditional “forward mortgage” for the new property, she could obtain a reverse mortgage.
The woman would qualify to receive $439,000 from the bank for that new home, based on lending guidelines, according to Cheryl Chapin MacNally, the national reverse mortgage sales manager for Wells Fargo Home Mortgage.