Reverse My Mortgage Addresses How New FHA Changes in Utah HECM Loans May Penalize Marriage

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As congress votes to give FHA broader powers regarding its products, FHA is considering changes to the reverse mortgage (HECM) program that may penalize married couples in certain situations.

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FHA is considering the rule change as a result of mounting pressure from consumer groups such as AARP- who have attacked FHA’s current policy regarding who is required to be on a Colorado reverse mortgage loan. While the changes to policy will ultimately be heralded as securing seniors homes by FHA and political opportunists, the truth of the matter is that with rule restrictions come elimination of choice and liberty. Our right to choose what we do with our own homes is once again under attack, and so is marriage.

At the core of this issue is a current rule that allows the reverse mortgage in Utah to be financed in the name of either the husband and wife together or the husband or wife separately as individuals. The choice is currently left to the homeowners as to whom they wish to have named as borrowers on the HECM loan. At first this may seem to be a trivial matter; however the Utah HECM loans product has a unique protection that guarantees that any of the borrowers on the loan will never be displaced from the home as long as they live there and maintain the home, and they will never have to make a monthly payment during this time. That guarantee is only extended to the parties named as borrowers on the loan. That means that if a married couple chooses to do the Colorado reverse mortgage in only one parties name- lets say the husband’s and leave the wife off of the loan for various reasons, once the husband passes away the wife will have 6 months to either refinance or sell the home. In this scenario, had the couple chosen to have both parties listed as borrowers on the HECM loan the wife could remain in the home as long as she wants maintaining the loan protections listed above.

At first glance it may seem obvious that both husband and wife should be named as borrowers on the loan to ensure they both receive this protection- as the AARP argues, however there are times where that has a major negative impact on the loan and other times where that requirement results in a disqualification of the loan all together. An approval for a reverse mortgage in Utah is calculated largely on the age of the borrowers. Basically the older you are, the greater the loan to value you can borrow. If you are under 62 years old you don’t qualify for Utah HECM loans at all. As a result many couples who had one party over age 62 and one under would choose to leave the under aged spouse off the loan in order to qualify for the Colorado reverse mortgage in the first place, or may need to do so to get a loan big enough to take care of their medical needs or other financial obligations. The new rule would disqualify these couples all together. Further, A senior married to a much younger spouse would never qualify for a reverse mortgage in Utah under the new rule- while a senior living with a much younger “partner” would. Hence being married results in new restrictions that does not affect those who just live together- if FHA and the AARP has their way. Look for more from the company with the release of part 2. For more information about qualifying, visit http://www.mortgagereversecalculator.com/.

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Mark Schow
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