New legislation to benefit the spouse of deceased reverse mortgage borrowers will allow them to stay in their home without the threat of foreclosure if they continue to pay taxes, insurance and association fees, The Boston Globe reports.
Until now the full repayment of the reverse mortgage is due after the death of the borrower, leaving a surviving spouse whose name is not on the mortgage stuck with debt or forced to sell the home.
The change defers that payment until after the spouse’s death.
As baby boomers become eligible for reverse mortgages, experts believe more seniors will take advantage of the being able to convert home equity into cash in the years to come.
In 2011 the Consumer Financial Protection Bureau (CFPB) counted 740,000 reverse mortgages nationwide to date.
The changes follow a 2012 CFPB report that found some borrowers were confused about reverse mortgages, The Boston Globe reports. The same CFPB report found that deceptive marketing campaigns added to the confusion.
“The new rules also allow a reverse mortgage to be written even if one spouse is younger than 62,” The Boston Globe says, adding that the “payout amount will be based on the younger spouse’s age.”
The new legislation goes into effect Aug. 4.
The Boston Globe story follows changes outlined by The Department of Housing and Urban Development (HUD) issued in April.
Read the full article here.
Written by Cassandra Dowell