What do the changes in the world of reverse mortgages—including the exits of Bank of America and Wells Fargo and last October’s introduction of the HECM Saver program—mean for borrowers? asks a recent NY Daily News column.
The article outlines recent developments in the program, including bank exits, the introduction of the HECM Saver program, and requirements for lender-provided information about pre-application reverse mortgage counseling.
The big bank exits indicate that the program “clearly” wasn’t a profit center, says NY Daily, and the institutions cited unpredictable home values and wanting to utilize resources for distressed homeowners as reasons to get out.
The article touts the HECM Saver as a program that can save borrowers thousands of dollars through its reduced initial mortgage insurance premium, although this means a payout that’s decreased by 10% to 18% depending on age, the article quotes Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association, as saying.
This program is a good option for those who want to borrow a smaller amount of money for a short period of time, according to AARP spokeswoman Mary Liz Burns, but borrowers must keep in mind that interest rates and origination fees may be higher for the Saver.
“Consumers considering borrowing against their home should ask themselves if they really need, understand and can afford a reverse mortgage, and whether they have any less costly options,” says Burns in the article.
There are other options, such as a home equity loan, line of credit, downsizing, or even creative moves like renting out a room, says NY Daily.
Lastly, the article emphasizes counseling as an integral part of the reverse mortgage process, saying it’s a great protection for borrowers.
“The lender has to provide a list of five third-party counseling agencies within the state, as well as four national intermediaries that HUD has given authority to provide counseling on a nationwide telephone basis,” Bell says in the article. “This is a good check to see if the lender is doing things right. If they steer you to a specific counselor, that’s a red flag.”
Read the NY Daily News article here.
Written by Alyssa Gerace