It's a whole new ball game when it comes to the HECM reverse mortgage program and how advisors view it and utilize it. The enormity of this change is hard to overestimate. The financial planning community now sees the program as a safer, more effective tool for their older clients. Every major industry publication has emphasized that. Including housing wealth, often the largest asset, is clearly very appropriate in retirement planning.
So why the big turnaround for the financial planning profession? HUD and Congress have steadily and effectively tweaked the program over the past several years to provide more safeguards and consumer advantages, beginning with the Reverse Mortgage Stabilization Act of 2013. The featured aspect of this landmark legislation restricted the amount of cash from loan proceeds that could be distributed and when. In 2015 came the Financial Assessment requirement which constitutes a huge change in qualifying borrowers in terms of credit and income. This was widely acclaimed, and rightfully so! It has led to much more responsible lending. And in October of 2017 HUD made perhaps the biggest changes ever in the HECM program. What a boon for our borrowers! While the amount available based on age and home value was reduced, that means that more equity is retained now and in the future. Speaking of the future, this revolutionary move in October of 2017 substantially dropped the interest accruing on HECM loans. The annual MIP (FHA Mortgage Insurance Premium) is also reduced dramatically. The much slower rise in the reverse mortgage balance today is huge for equity retention! Concerns about equity erosion have been greatly mitigated and HECM loans now match up nicely to traditional forward loans that require tough qualification and a monthly payment.I can go into much more detail about these major changes and how they place the HECM program in a whole new light for professionals who help seniors with financial matters and for those seniors themselves. Keep up to date through our terrific webinar series so you can learn on your own time how to safely improve the lifestyle of your clients and retain assets under management. When home equity exists, it is responsible and wise to include it for your clients’ plans. Not only can they benefit but your practice will retain assets when a client needs cash for things such as a home purchase, income production, medical needs, help for a child or grandchild or any of a number of other circumstances. Let me show you an alternative to withdrawals that will preserve capital and avoid sequence of return risk!
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