New Reverse Mortgage Laws in Effect

Q. What changes have been made to laws on reverse mortgages?

A. First, a reverse mortgage is a loan that lets homeowners (age 62 or older) convert the equity in their homes into cash. The equity can be paid to the homeowners in a lump sum, a stream of payments, or as a supplement to Social Security or other retirement funds. No repayment is required until the borrower no longer uses the home as their principal residence.

Here are the key changes to the laws involving reverse mortgages according to the Housing and Economic Recovery Act of 2010:

• The loan limit has been increased from $362,790 (depending on home values in the region) to a nationwide limit of $417,000, and that can increase to as much as $625,500 in high-cost areas.
• Fees are now capped at 2 percent of the first $200,000 borrowed and 1 percent on the balance, with a maximum of $6,000. To protect seniors from aggressive marketing tactics, the law prevents lenders from requiring borrowers to purchase insurance, annuities or other products as a condition for getting the mortgage.

While these changes have made the mortgages more attractive, they aren’t for everyone. You should do your homework and talk with a loan counselor.

If you have any questions, or need capable and trustworthy representation, please call me at 206-226-0565.