ElderLaw News-The Estate Planning & Elder Law Firm, P.C. — MD, VA, DC
ElderLaw News
ElderLaw News is a weekly e-newsletter that brings you reports of legal developments and other trends of vital interest to seniors and their advocates. This newsletter is brought to you by The Estate Planning & Elder Law Firm, P.C., William S. Fralin, Esq., President., William S. Fralin, Esq., President.

New Reverse Mortgage Requirements

The Department of Housing and Urban Development has finally announced that the financial assessment as a requirement for qualifying for a reverse mortgage.

While the financial assessment was previously announced as an upcoming change last October, it was not implemented then. The financial assessment is poised to be one of the biggest changes in the reverse mortgage industry while adding another safeguard for future borrowers.

The financial assessment came about, largely, because of the reputation of the reverse mortgage. What does the financial assessment mean for future borrowers and the reverse mortgage program? For the first time, credit and income will be taken into consideration when determining a borrowers’ eligibility. If a borrower has less than stellar credit and has had trouble keeping up with his/her payments, then a mandatory life expectancy set-aside will be required to ensure borrowers can make property taxes and homeowners’ insurance payments.

If a borrower has a sparkling payment history, however, then a set-aside will not be enforced. Documentation necessary to determine if a borrower will require life expectancy set-asides includes, but isn’t limited to, credit history documentation, asset verification, property charge verification and income verification.

For the reverse mortgage industry as a whole, this change is just another hurdle to overcome, and one that will strengthen the program in many consumers’ minds as a long-term retirement planning tool and NOT a loan of last resort. This has been the biggest struggle of all, changing public perception so that the reverse mortgage can finally be up considered as a respectable retirement planning strategy.

Borrowers who are not in financial need, make their payments on time, and have all their retirement planned, may benefit more from the program as an alternative option. With the line of credit option, borrowers can use their equity when they want and/or need to in order to supplement their retirement. For borrowers who are considering the reverse mortgage, but may be thinking of waiting for various reasons, now is the best time to act. The financial assessment may make some borrowers ineligible in the future, because there may not be enough equity to cover the required set-asides and other financial obligations such as property liens or credit card debt. In order to protect borrowers, HUD will have to ensure they can meet financial obligations in a timely manner. The financial assessment will do just that.


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The Estate Planning & Elder Law Firm, P.C. is an elder law firm. We represent older persons, disabled persons, their families, and their advocates. The practice of elder law includes estate planning, estate and trust administration, powers of attorney, advance medical directives, titling of assets and designations of beneficiaries, guardianships, conservatorships, and public entitlements such as Medicaid, Medicare, Social Security, and SSI, disability planning, income tax planning and preparation, care management, and fiduciary services. For more information about The Estate Planning & Elder Law Firm, P.C., please visit our website at http://www.chroniccareadvocacy.com.

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