New Rules for Reverse Mortgages Getting into Effect

The Federal Housing Administration will implement a set of new rules regarding reverse mortgage on April 27th 2015. New credit and income requirements will apply. Applicants will have to undergo several specially designed tests for creditworthiness evaluation.

The FHA has run the largest reverse mortgage program in the Unites States for more than thirty years now. These loans are available to property owners who are over 62 years of age. The borrower can withdraw a portion of the equity in their home in the form of a loan or line of credit. The repayment is deferred to the time when the property is sold or the borrower passes away. When the property is sold either by the owner or their heirs, the principal, interest and fees on the mortgage are paid to the lender and the remaining equity stays with the seller.

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So far, approval for reverse mortgage was determined primarily by the amount of equity which the borrower had in the property. Under the new rules, the borrower’s ability to pay property expenses will be reviewed. Applicants will have to demonstrate that they have paid all property expenses including insurance, taxes and homeowner association fees for the past two years.

Income, assets and expenditure will also be assessed. Applicants will have to present documents a set of documents enabling lenders to evaluate their residual income. This is done based on the monthly income, expenditure and cash flow.

Applicants who do not get satisfactory scores on the tests for property expenses payment and residual income may still qualify for a reverse mortgage. In this case, however, they will have to set aside a life expectancy fund. This is a reverse account which is credited with a portion of the proceeds from the loan. The portion which will go into the account is calculated precisely with the use of a special formula.



Christian Calvin mortgage Christian is a contributing writer for He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.


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