Nightly Business Report says good news for older homeowners is coming in October, in the form of the HECM Saver.
With the Federal Housing Administration releasing a new low cost reverse mortgage program on Oct. 4, NBR’s Benno Schmidt looks at one elderly mans experience with the loan in its “Money Profiles” segment.
Louis Gouveia, used a reverse mortgage after he found himself alone and in debt, badly needing cash. However, after a bad fall, Gouveia was sent to the hospital and then a nursing home to go through painful rehab. When he returned, the home had been vandalized and he was forced to move to a motel.
Bank of America, the lender, says there was insurance included in his loan that could cover the needed repairs. According to the bank, as long as the home is repaired and he moves back into the property and obtains his own insurance policy, the bank will consider his reverse mortgage to be in good standing.
“Reverse mortgages are supposed to be for people living in the home and there has to be a cutoff at which point someone is considered no longer living in the home,” said Susanna Montezemolo of the Center for Responsible Lending.
However, Montezemolo believes many people get into trouble by thinking reverse mortgages are essentially free money and forgetting they still have responsibilities to meet.
“They have an emergency, they draw down the cash and then a year later their property taxes are due and they have already drawn out all the cash for the loan.”
Surprisingly, the segment did not discuss the costs of the loan. Whether the HECM Saver product is the reason is unclear, but with the costs lower than before, expect to see future obligations being addressed by organizations like the CRL in the future.