AARP: Reverse Mortgage Changes Will Bar Access, But Improve Program

Changes announced this week by the Department of Housing and Urban Development to its reverse mortgage program will likely cut out many borrowers, but the changes are well intentioned, says a representative from AARP.

AARP, which has previously stated its disappointment in the process by which HUD is implementing change—namely bypassing the public comment period that takes place during the rule making process—says while it still does not support the path toward the changes, it does support the change itself. 

“The changes announced yesterday will result in lower borrowing amounts and higher upfront mortgage insurance premiums for all borrowers, and will bar access to reverse mortgages for many,” said Cristina Martin-Firvida, Director Financial Security & Consumer Affairs, for AARP’s State and National Group. “These are significant changes. Ideally, such significant changes should be made with the benefit of public comment which we believe would contribute to positive reforms.”

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Given the intention of the changes, which cap the amount borrowers can access upfront, reduce the amount they can borrow overall, and will ultimately include a financial assessment and tax and insurance set-aside, however, AARP says it supports the initiative. 

“But, we also recognize that these changes have been made to improve the viability of the HECM program, which we support,” Martin-Firvida said in a statement. “The future of the HECM program depends on striking a balance between responsible lending and access to credit. We will closely monitor the implementation and impact of these changes and will continue to advocate for changes that promote the fundamental goals of the HECM program for future borrowers.”

Overall, AARP says it supports the program and a sustainable future for a tool with which seniors can access the equity they have built up in their homes. 

“Reverse mortgages were initially developed as a tool to assist individuals to remain in their homes and communities as they grow older, by allowing homeowners to tap their equity without selling their homes,” Martin-Firvida said. “This goal remains an important one, and a healthy HECM program is vital to its advancement. Unfortunately, the challenges facing the HECM program have increased dramatically in recent years, and changes are needed to ensure the program’s long-term sustainability.”

Written by Elizabeth Ecker

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  • I’m sorry but no matter how you slice and dice it, number (1) and number (2) boil down to aging in place. Neither mentions assistance in an assisted living facility or an apartment or a child’s home. If I can reduce the effect of meeting my ever increasing financial obligations needed to subsist and therefore having been made available to me through mortgagees and participants in the mortgage industry then I can now “age in place”.

    • wealthone,

      I guess you do not see the difference between the purpose of a program and how it was developed. Read again what the quotation states: “Reverse mortgages were initially developed as a tool to assist individuals to remain in their homes and communities as they grow older….” Yet the quotation has absolutely nothing to do with what Congress voted on and the President signed into law except its development was a mutation of its purpose.

      Read carefully your last sentence. You clearly demonstrate why aging in place is a major byproduct of the purpose clause found in the law. Yet seniors may be able to age in place without a HECM and yet desire one to help manage cash flow in retirement as in the Standby Reverse Mortgage situation. Neither situation is supported or opposed under the law but both are permitted. It is too bad that so many in the industry fail to consider the purpose clause in the law itself.

      The aging in place dogma led the industry to the place where we were putting seniors who had so little positive cash flow after their HECM went into effect that a significant percentage went into default within a short period of time after getting it. While I fully support the concept of aging in place, I do not support the dogma surrounding it nor how that dogma subverted the very nature of the HECM program, damaging it for future generations.

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