Over the weekend NY Times columnist Bob Tedeschi writes about reverse mortgages and why the Housing and Economic Recovery Act matters to New York area residents. The new laws are intended to give older homeowners access to more of their homes’ equity, provide stricter consumer protection, and, most important for New York-area residents, offer co-op owners the chance to apply for these loans.
“As long as the co-op board allows it, it’ll be a big opportunity for people,” said David Peskin, the chief executive of the Senior Lending Network, a reverse mortgage lender in Melville, N.Y. Industry executives expect the regulations on loan limits and closing costs, to be issued by the Department of Housing and Urban Development and go into effect around Nov. 1.
While it’s unclear when the provisions for co-ops will become active, most are expecting we will see something by the end of the year. Until then residents considering a HECM should check with their buildings’ administrators before applying. Mr. Peskin said such borrowers can expect be thwarted “maybe 20 percent of the time.”
Reverse mortgages have been available to co-op owners in the past, but only through proprietary products offered by lenders. Because these lenders must bear more risk, interest rates on such mortgages have been significantly higher compared toia HECM. For instance, borrowers who sought reverse mortgages above the federal loan limits earlier this month faced interest rates of 8 percent, compared with 4 percent for federally insured loans.
There aren’t many co-ops here in Chicago, but do any RMD readers have co-op borrowers waiting for the changes to go into effect?