As the reverse mortgage industry adjusts to the substantial changes that HUD recently rolled out, skeptics like me are seeing the light. Restricting the amounts and limiting the first year distributions of proceeds does indeed make fiscal sense. Certainly some seniors will not be able to participate, but the overall health of the program and promoting responsible use of proceeds for our borrowers are both served by the overhaul.
Last April the Standard Fixed loan was eliminated. It required that the maximum allowable proceeds be given the borrower at settlement. This method stood in the face of sound financial planning for many borrowers who chose it. On October 1 of this year the amounts available to borrowers were lowered across the spectrum of remaining products by about 15%. Furthermore, the first year distributions were limited and a higher insurance premium was required for those needing funds over the limit. Over the limit funds are only available for mandatory obligations like mortgages or other liens that must be cleared on title.
Here is an article that does a good job of summarizing today’s new HECM loans: