New Federal Rules for Reverse Mortgages
New rules restricting the amount that homeowners can borrow when getting a reverse mortgage went into effect in September 2013. Homeowners can now borrow about 85% of what they could previously borrow. In addition, the rules limit the amount that homeowners can take out during the first year of the reverse mortgage.
Starting January 13, 2014, even more rules went into effect, aimed at protecting homeowners seeking reverse mortgages. Highlights of those rules include the following:
- lenders must perform a financial assessment of the borrowers to ensure they can afford the taxes and insurance payments that go along with the reverse mortgage, and
- lenders must establish a set-aside account for taxes and insurance if, after the financial assessment, the lender determines that the borrower may be at risk of defaulting on these payments.
To learn more about how reverse mortgages work and these new rules, see Nolo's article New Restrictions on Reverse Mortgages.