Recent and upcoming changes to the federal reverse mortgage program could lead toward increased collaboration between lenders, financial planners, and their clients, says a Financial Advisor article.
The new rules may not have much of an impact on those planning ahead, however. The Home Equity Conversion Mortgage (HECM) overhaul shifts the product to a proactive planning tool rather than a loan of last resort, Michael Kitces, director of research for the Maryland-based Pinnacle Advisory Group, told Financial Advisor.
“Given that financial planners tend to work with somewhat more affluent clients anyway, and engage in a proactive planning process that addresses the client’s ability to fund their retirement goals, it is likely that the new financial assessment rules will have little impact on reverse mortgage eligibility for most financial planning clients,” Kitces says in the article.
HECM changes include consolidating the Standard and Saver programs into one loan product and limiting the amount of money a borrower can access in the first year of the loan, along with a higher mortgage insurance premium depending on how much of the loan principal borrowers take upon closing.
Higher fees are expected to make the loan a less likely option for borrowers seeking it as a last resort, but that’s not what the program was originally intended for anyway, according to Kitces.
“The higher cost may lead some reverse mortgage lenders to focus even more on working with financial planners whose clients can qualify and use the reverse mortgage strategies more proactively,” he says in the article.
Read more at Financial Advisor.
Written by Alyssa Gerace