Federal Housing Administration (FHA) reverse mortgages are available to homeowners age 62 and older, and allow the homeowner to use the equity in his or her home without repaying the principal balance and interest until the homeowner moves, sells the home or dies.
The FHA recently set forth steps to limit the maximum amounts that a homeowner can draw from his or her home’s equity and make it more difficult for the homeowner to qualify for a reverse mortgage.
Beginning September, 2013, the amount a borrower may draw from his or her home’s equity will be reduced by approximately 15% of the prior available amount and he or she may pay higher premium rates depending on the amount he or she borrows. Also, beginning in January, 2014, applicants for FHA reverse mortgages must qualify under very strict “financial assessments” to ensure that the applicant is able to meet the financial obligations under the terms of the loan. The “financial assessments” include verifying the applicant’s credit history, income, assets and living expenses. Certain other changes will also be made, and can be found in Mortgagee Letter 13-27.
Further information on FHA reverse mortgages can be found here.
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