Upcoming changes to the federal reverse mortgage program that will result in a smaller, costlier loan are aimed at redirecting the product’s usage, says a Reuters columnist.
On October 1, the home equity conversion mortgage (HECM) programs will be consolidated into one type of loan, with new limits on how much can be drawn down within the first year. Then, in January, a financial assessment will be introduced, disqualifying some prospective borrowers and requiring others to set aside loan proceeds in escrow accounts for future obligations.
“The changes are aimed at making HECMs safer for seniors, and to discourage their use as a Hail Mary pass,” says the Reuters article.
Overhauling the program is part of the government’s efforts to move reverse mortgages away from being a “loan of last resort.”
“It really presents a shift toward utilizing the HECM as a long-term financial planning tool, rather than something for crisis management,” Amy Ford, director of the National Council on Aging’s reverse mortgage counseling services network, told Reuters.
Written by Alyssa Gerace