The demand for a reverse mortgage program among senior citizens in the U.S. will continue to be stable, despite the Department of Housing and Urban Development’s (HUD) new rules, according to the National Reverse Mortgage Lenders Association (NRMLA).
Officials from the HUD hinted that the new rules would lead to higher insurance costs on reverse mortgages, as well as a likely decline in volume due to lower borrowing limits. However, NRMLA President and CEO Peter Bell said that only the upfront premiums would increase, as annual premiums are on a downward trend.
On the other hand, the HUD has a volatile procedure for gauging the performance of insurance funds, according to Bell. For this reason, he has sought to Federal Housing Administration and Congress members to create a separate fund for home equity conversion mortgages (HCEM). This would allow them to do a more accurate measurement of an HCEM fund.
Bell also addressed the Consumer Financial Protection Bureau’s (CFPB) warning against using a reverse mortgage for delaying claims for Social Security benefits. The bureau adopted a “narrow approach” to the issue, by assuming the delay would lead to “a direct dollar-for-dollar replacement” of Social Security payments with proceeds from reverse mortgages.
On the contrary, senior citizens who take out a reverse mortgage only do so when they think they can survive without receiving Social Security support, yet may require more money. More than one million senior citizens have used the federal reverse mortgage program, so the reverse mortgage industry may not likely be affected by the CFPB’s advisory, according to Bell.
Reverse mortgages are good for senior citizens only if they understand the associated risks. It is best to consult a financial advisor to know if your situation would let you borrow against your home.