Florida Elder Law and Estate Planning: Federally insured reverse ...

If you are considering applying for a reverse mortgage, take note: The Federal Housing Authority has made changes to its Home Equity Conversion Mortgage program (HECM)?effective April 1, 2013.?

Private lenders offer reverse mortgages, but almost all reverse mortgages are federally insured by HECM. Seniors must be age 62 or older and own their own homes to qualify for a reverse mortgage. The cash?can help?seniors with living expenses, payment of an existing mortgage or other debts, etc.?Some of my clients have used reverse mortgage money to pay the premiums on long-term care insurance.

Starting April 1, the fixed rate HECM Standard mortgage will be discontinued. The program is being suspended because of the increasing number of borrowers who are unable to keep up with the required property taxes and insurance payments, sending a record percentage of loans into default. According to a Feb 2013 report to the House Financial Services Committee, projected losses for the nation's reverse mortgage program stood at $2.8 billion as of 2012.

Starting April 1, seniors who want to tap their home's equity using a reverse mortgage and who desire the predictability of a fixed rate loan must apply for a HECM Fixed Rate Saver Mortgage. This more conservative program provides a smaller payout from the borrower's home equity, although the up-front costs are lower. The Upfront Mortgage Insurance Premium is .01% of the lesser of the appraised value or current $625,000 lending limit.??

Seniors will see see?more changes in the near future as?the Department of Housing and Urban Development continues stabilizing the HECM program. Among the anticipated modifications:?providing?administrators of estates with incentives to sell the property of a deceased borrower, rather than convey the property to the Federal Housing Authority which must then shoulder the expense of liquidating the property. Another slated change: more?intensive?counseling of prospective borrowers, to ensure that a reverse mortgage is truly suitable for their situation. If you own your own home, are at least age 62 and want to explore how a reverse mortgage may benefit you,? contact us.?We can refer you to a reputable financial professional as well as advise you about how a reverse mortgage can be coordinated with your Florida estate planning. Reverse mortgages can be useful tools, but their complexity requires a thorough analysis before you take the plunge. Read more about the changes to the federal HECM program?here.

Source: http://karplaw.blogspot.com/2013/04/federally-insured-reverse-mortgage.html

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