Two years following the release of a large-scale reverse mortgage report and subsequent reverse mortgage guide for consumers in 2012, the Consumer Financial Protection Bureau today announced that it has updated its guide.
The new guide covers recent reverse mortgage program updates under the Department of Housing and Urban Development including first-year payout limits and new non-borrowing spouse protections.
Still, like the first guide, the CFPB stresses caution and research for any consumers considering the use of a reverse mortgage.
“Don’t sign the loan documents unless you understand how a reverse mortgage works,” the CFPB writes in the forefront of the guide. “Know your options — you may have a better choice,” and “Have a serious talk with a federally approved housing counselor who specializes in reverse mortgages.”
The agency details new updates to the reverse mortgage program, including a limit on upfront draws for fixed rate loans, and new rules for non-borrowing spouses implemented in August.
“This limit encourages borrowers to make their money last longer,” the guide states. “Borrowers can still take out lump-sum single payments – but this is still a risky choice. Borrowers should strongly consider the monthly payment or line of credit options before choosing to get a lump-sum. These options provide more long-term security than lump-sum payments.”
Regarding the changes to non-borrowing spouse rules, the agency notes that borrowing before both spouses are age 62 is still risky.
“For couples considering a reverse mortgage, borrowing together makes more sense,” the CFPB writes. “If both spouses sign the reverse mortgage, then the surviving spouse can continue to receive monthly payments or use an existing line of credit. It also ensures that a surviving spouse may live in the home after his or her spouse (co-borrower) dies.”
View the new reverse mortgage guide here.
Written by Elizabeth Ecker