A recent bill introduced to the house is aimed at eliminating the budget deficit created by reverse mortgages. According to the Federal Housing Association, there is a $5 million loss in reverse mortgages in the United States so far this year. The reserves in the FHA’s budget are depleting faster than ever leading to a possible injection of cash by the Treasury. This bill calls for a cap on the lump sums borrowers can request in-turn creating a more sound, stable model for lenders to follow. Along with lowering the amount a borrower can request in equity, lenders must conduct thorough risk-assessments of borrowers. The only way to create a financially sound program for seniors is to assess the possibility for default, which can be difficult due to the volatility of the housing market. While this bill is months away from implementation, it possesses the ability to curb the trend regarding defaults in the world of reverse mortgages and potentially change the media’s opinion on this type of loan.
Within the past week major changes have come about the reverse mortgage industry within the United States. Legislation in congress has adjusted the “Home Equity Conversion Mortgage Program” otherwise known as the reverse mortgage. This has been in the balance for some time now as a means of changing consumer perception of the type of loan. Over the past few years the perception has been if there is a default on a reverse mortgage, the borrower will be eliminated from the home and dive deeper into financial crisis. The main goal during talks in Washington has been strengthening borrower protection.
In order to increase borrower protection from loan companies, background checks will make it much harder to qualify for reverse mortgage loans and prevent borrowers from being booted from their homes. For these changes to seamlessly occur, a strict financial assessment will take place as a means of protecting lender from defaults. This change will also set limits on on the amount borrowed and withhold capital to cover property taxes and homeowner insurance. Another major change involves surviving spouses of borrowers being protected from eviction. With these changes set to take place as early as October 1st, 2013 the public perception is bound to change the industry and create a possitive outlook for both borrowers and lenders.