Nasdaq: Reverse Mortgage Attracts Greater Pool of Borrowers

While recent rule changes have made reverse mortgages more difficult to get, they have also made them more attractive, writes Investor’s Business Daily in a recent article published by Nasdaq.

“Seniors may want to tap their home’s equity for retirement cash flow,” Investor’s Business Daily says. “But selling the home might not be desirable or practical. One solution: a reverse mortgage.”

Investor’s Business Daily explains reverse mortgage eligibility requirements, as well as recent changes that have offered borrowers more safeguards and flexibility.


On such change requires lenders to perform a financial assessment on all home equity conversion mortgage (HECM) applicants.

“Applicants with questionable finances may be denied an HECM,” the publication says. “Or they may be required to set some of the loan proceeds aside to cover costs. So HECMs can be difficult to get.”

Recent changes may also encourage more married couples to seek HECMs.

Because older borrowers can get more cash than younger ones, some married couples borrow only in the name of the older spouse in order to increase the amount they’ll receive. Previously this strategy posed problems. When the older spouse died, the surviving spouse — not named on the mortgage — could face foreclosure if unable to repay the loan.

“Under pressure, the federal government changed the rules in 2014,” explains Investor’s Business Daily. “Now a nonborrowing surviving spouse can remain in the home if certain conditions are met.”

Read the article here.

Written by Cassandra Dowell

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  • This NASDAQ author still does not understand HECMs nor its basic non-borrowing spouse rules.

    The author got it right that folks used to take an otherwise eligible spouse off of title so that the oldest spouse could be the sole borrower and get more proceeds. Without mentioning that after August 3rd, 2014, the new non-borrowing spouse rules require that in the situation just described the age of the youngest spouse (borrowing or not) must be used in computing the amount of proceeds, the article states: “Now a nonborrowing surviving spouse can remain in the home if certain conditions are met.” Assuming the only reason for taking the younger spouse off of title in the past was to get the higher proceeds available to the older spouse, what is the incentive to do that now, if the principal limit is based on the age of the younger spouse no matter what? It would seem that such removal now would do no more than put the younger spouse at risk on ownership and occupancy.

    The article, while encouraging seniors to do their own investigating, does not advise prospects to seek the help of an independent and competent financial advisor in the evaluation process. It is interesting that this advice was not given since few of the “I was confused” lawsuits ever describe a financial adviser the borrower used in evaluating the suitability of the loan to their cash flow needs.

    (The opinions expressed in this comment are not necessarily those of RMS or its affiliates.)

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