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New Assessment Addresses Problems of the Past while Future Holds Possible Changes
Today marks the beginning of a new era for the Home Equity Conversion Mortgage: the Financial Assessment. As you watch today’s episode you are faced with an entirely new set of guidelines to qualify prospective reverse mortgage borrowers.
The assessment is one of the last ripple effects resulting from the housing crash. HECM defaults began to swell in 2010 hitting FHA’s Mutual Mortgage Insurance Fund and raising questions about the program’s long-term financial viability.
First a little perspective. One factor contributing to HECM defaults before credit history or financial capacity was measured was the structure of the loans being written. In other words, the fixed rate, full distribution HECM loan. Many borrowers faced with plummeting home values who already spent the proceeds from the loan were reluctant to pay their property taxes and homeowner’s insurance. Even worse there were no funds left to cure the default. Some homeowners may have thought why sink any money into my home when it’s value has dropped while overlooking the risks of default and foreclosure…
Download a transcript of this episode here.
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