The most popular reverse mortgage program is the Home Equity Conversion Mortgage (HECM), which is insured by Housing and Urban Development (HUD).
New rules from HUD add protections for certain surviving spouses after the death of a reverse mortgage borrower. Until recently, if the non-borrower spouse was not on the loan, he or she was not entitled to remain in the property following the death of the borrower. But under HUD’s new rules, non-borrowing, surviving spouse can remain in the home if specific conditions are met. These changes apply to reverse mortgage loans in which the borrowing spouse applied for a reverse mortgage before August 2014. In addition, the couple must have resided in the property as their principal residence throughout the duration of the HECM, and taxes, property insurance and any other special assessments that may be required by local or state law must have been paid.
The concern regarding non-borrowing spouses has been a source of many reverse mortgage issues. Here’s why: The amount of money a reverse mortgage borrower can draw is based in part on the age of the youngest borrower—and unless all borrowers are 62 or over, they would not qualify for a reverse mortgage.
For more information:
Reverse Mortgage Information
- Ask students to comment on the statement: “While a reverse mortgage can be used to supplement monthly income, some borrowers may face unintended obstacles and consequences”. What might be those consequences?
- Are the new rules from HUD effective in protecting senior citizens? Why or why not?
- Why should you talk to a qualified professional before deciding to get a reverse mortgage?
- Where can you find HUD-approved HECM Counseling Agencies near you?
Reverse mortgages are a special type of loan that allows homeowners, 62 and older, to borrow against the accrued equity in their homes. Reverse mortgages can help some older homeowners meet financial needs, but they can jeopardize retirement security if not used carefully.
In February 2015, the Consumer Financial Protection Bureau (CFPB) released a report that some homeowners have experienced problems with reverse mortgages. The most common reverse mortgage complaint is about difficulty with changing the loan terms and problems communicating with loan servicers. Some consumers, for example, express frustration about slow, inconsistent communication from their reverse mortgage loan servicer.
If you are having a problem with your reverse mortgage or having problems getting through to your mortgage servicer, you can submit a complaint to CFPB online or by calling (855) 411-2372 or TTY/TDD (855) 729-2372. The CFPB will forward your complaint to the company and work to get you a response within 15 days.
For additional information, click here.
- How can a person access funds from a reverse mortgage?
- Ask students what other alternatives might be available before settling for a reverse mortgage?
- What is the purpose of a reverse mortgage?
- Can people with very low equity in their home qualify for a reverse mortgage?
- How can people protect themselves from dishonest reverse mortgage providers that charge exorbitant fees?
Cheap mortgage rates are a bonanza for home buyers.
Currently, home mortgage rates are trending lower which is good news for home buyers. According to a recent Freddie Mac survey, the 30-year fixed rate is 4.28 percent. The 15-year fixed rate is 3.32 percent.
So how important is a lower home mortgage rate for a home buyer?
- At a rate of 6 percent, the monthly mortgage payment for a $200,000 thirty-year mortgage is $1,000 a month ($200,000 x 6% ÷ 12 = $1,000).
- If the rate drops to 4.28 percent, the monthly payment drops to $713 a month ($200,000 x 4.28% ÷ 12 = $713).
- That’s a difference of $287 each and every month.
- Assuming the home buyer makes monthly payments for the entire 30-year period, that’s a savings of $103,320 ($287 x 12 x 30 = $103,320).
For additional information about mortgage rates and the factors that cause rates to increase or decrease go to http://money.cnn.com/2014/03/06/real_estate/mortgage-rates/index.html.
1. What are the common mistakes people make when they finance a home?
2. Why would you consider a 15-year mortgage instead of a 30-year mortgage?
3. Why would you consider a 30-year mortgage instead of a 15-year mortgage?
You may want to use the information in this blog post and the original article to discuss
- Why a home buyer should compare mortgage rates when financing a home purchase.
- The advantages and disadvantages of a 30-year and a 15-year home mortgage.