The Home Equity Conversion Mortgage program has changed a lot in two years, and the Federal Deposit Insurance Corporation (FDIC) pointed to some of those changes in its most recent newsletter.
Not having written about reverse mortgages since 2013, the FDIC pointed specifically to new reverse mortgage protections that are available for non-borrowing spouses as a result of changes implemented this year.
“The concern regarding non-borrowing spouses has been the source of many reverse mortgage issues,” the FDIC writes. “Here’s why: The amount of money a reverse mortgage borrower can draw is based in part on the age of the youngest borrower — and unless all borrowers are 62 or over, they would not qualify for a reverse mortgage.”
But given the recent changes, non-borrowing spouses are receiving new protections, the FDIC says.
“Many borrowers who opted to exclude the younger spouse from the loan in order to qualify for a HECM did so with the hope that when the younger occupant became 62 they could refinance and add the spouse,” Andrea Riche, an FDIC program manager who oversees reverse mortgage issues, says in the article. “But when home prices nationwide dropped in 2007 and 2008, the possibility of refinancing into another HECM was eliminated. And if the borrowing spouse passed away, HUD or the private lender became entitled to take possession of the home and the surviving spouse was almost always evicted. But now, HUD provides a mechanism for an eligible non-borrowing spouse to stay in the home.”
Additionally, the FDIC mentions a recent CFPB warning about misleading reverse mortgage advertising, and advises consumers as to where they can find more reverse mortgage information via a Department of Housing and Urban Development-Approved reverse mortgage counseling agency.
Written by Elizabeth Ecker