New Study Examines Measure to Reduce HECM Defaults
Preventative Measures: Curbing Technical Defaults. An old saying reminds us “ An ounce of prevention is worth a pound of cure.” When it comes to technical defaults for HECM borrowers we may be seeking a cure but there are some preventative measure that can be taken today. A recent study released by Ohio State University exposes some telltale traits of borrowers who are more likely to default and prescribes some possible measures to stem the tide of foreclosures due to non payment of property taxes and insurance.
The study partnered with the MacAurthur Foundation and HUD and Credability studying the outcomes of 30,000 reverse mortgage borrowers who received counseling in the years 2006 through 2011. In fact the results will be used to shape HUD’s upcoming Financial Assessment guidelines. Of the 30,000 borrowers counseled, over 17,000 actually ended up closing a HECM loan. What key characteristics can predict a higher likelihood of default? First those who take a larger portion of their proceeds up front are more likely to default. Second: credit history. A prior record of mortgage delinquencies, poor management of credit and tax liens all point to a borrower who may be more prone to default on their reverse mortgage…
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