While keeping up with the obligations of a reverse mortgage is paramount, a borrower financial assessment should not be so restrictive that it rules out the people who need the loan most, said a National Council on Aging representative before members of Congress during a May hearing.
“The HECM program is an important financing option for lower- to middle-income older homeowners,” said Barb Stucki, of the National Council on Aging. “It is important that borrowers have the ability to meet the obligations of HECM loans, including paying ongoing property taxes and homeowner’s insurance,” she said. “However, we are concerned that that these financial assessments may become overly restrictive.”
A financial assessment for borrowers was attempted in late 2011 by MetLife Bank, but was later suspended by the company. Department of Housing and Urban Development officials have stated publicly that they are in the development process for an industry assessment, expected later this year.
The industry shared NCOA’s concerns when MetLife implemented its assessment, which quickly led to a shift in broker business away from the stringent guidelines. Many said it was too restrictive and limited borrowers who needed the loans most.
Stucki reiterated the importance of not making the rule too restrictive in her testimony before the House Financial Services Subcommittee.
“Ensure that HUD regulations, such as the financial assessments lenders may conduct at origination, are not allowed to become overly restrictive to ensure that the HECM program remains a viable option for “cash poor” seniors,” she said. “Reverse mortgages can bring new risks to people who may have limited experience dealing with large sums of money. However, seniors with modest incomes who do not qualify for conventional home loans may have few alternatives besides a HECM to tap home equity.”
Written by Elizabeth Ecker