Despite reverse mortgage changes announced last week that will mean a different origination process for lenders and new requirements for borrowers, the financial assessment implementation has largely not been covered by mainstream media.
But the Washington Post covered the financial assessment introduction this week, calling the assessment “stiffer underwriting standards,” that borrowers will face.
“Are reverse mortgages headed in reverse?” the Washington Post asks. “…. as a taxpayer, you might say, bravo.”
The Post points to the new eligibility standards, broken down into four categories: credit reports; payment histories; income; and recurring debt obligations. It also discusses the extenuating circumstances offered in the Department of Housing and Urban Development’s guidance for lenders;
“If applicants look weak or marginal on these tests, lenders will be allowed to take into account any “extenuating circumstances,” such as an unexpected hospitalization or illness that temporarily cut off income and led to late payments,” the article explains. “But if applicants appear unlikely to make regular on-time payments for property taxes or hazard insurance premiums, lenders can reject them or “set aside” potentially large chunks of their loan amount for later payments by the servicing company handling the loan. These impounds, in turn, will reduce the effective cash many borrowers will be able to obtain from their reverse mortgage.”
Written by Elizabeth Ecker