Thursday, January 31, 2013

Bye Bye Fixed Rate Reverse

Reverse mortgage changes are coming
Yesterday HUD announced when they will be getting rid of the traditional fixed rate reverse mortgage program.  If you are considering a reverse mortgage or know someone who is you have until the end of March 2013 to get started or you will be out of luck. Starting April 1, 2013 all fixed rate loans will be forced to the "saver" program.  The saver program has its benefits, but it has its drawbacks too.  The mandatory 2% government mortgage insurance is gone which will lower the fees, but the trade-off for lower fees is a much lower loan to value.  If you are close to qualifying for the program now chances are you will not qualify after April 1st!  If you do qualify after April, you will not qualify for near as much money.

This move by the FHA is to try to save money and in the short term it will work, but like always the government doesn't think long term, they just think until the next election.  Now in order to qualify many people will be forced to the traditional adjustable rate loan (which as of now is not going away).  Recently this program has not been used much because most seniors want a fixed rate, but if the need is there and it is the only option they will do the ARM.  In the short term when interest rates are low, this won't matter, but the Fed can't keep rates low forever, so when they start going up, the FHA is going to be on the hook for more underwater reverse mortgages than they bargained for.  As a result, all the short term savings will be wiped out by big time losses!

Enough of the rant...the decision has been made by the powers that be and we just have to deal with it.  So, if you or someone you know is considering a reverse mortgage NOW IS THE TIME!  It's best to get started early because March is going to be crazy with all the procrastinators and you don't want to chance not being able to qualify!  Check out our reverse mortgage calculator and see if you are a reverse mortgage candidate today!

To check out the letter from HUD about these changes click here.

1 comment:

  1. Thank you for the great information.