Direct Finance Corp. Reports Changes to Reverse Mortgage Rules Will Impact Senior Borrowers

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Major changes to reverse mortgage rules will affect how seniors can access the equity in their homes, and tightens rules for financial institutions.

Processing a reverse mortgage is going to become almost as demanding as processing a new home mortgage.

The U.S. Department of Housing and Urban Development (HUD) has announced sweeping changes to the Federal Housing Administration’s (FHA) Home Equity Conversion Mortgage (HECM) program, more commonly known as reverse mortgages. According to Alain Valles, CRMP, president of Direct Finance Corp. (, one of the largest reverse mortgage brokers in Massachusetts, the changes will be rolled out beginning September 30, 2013 and take full effect on January 13, 2014, and will significantly affect how reverse mortgages are processed, approved, and how much money a senior will be able to borrow.

In late August, President Obama signed into law the Reverse Mortgage Stabilization Act of 2013 (HR 2167), which gives the FHA the authority to make changes to the HECM program. The changes are designed to reduce the default rate and ensure funds received through a reverse mortgage will be “a sustainable solution for seniors.”

“The FHA is concerned about the default rate among reverse mortgage borrowers,” said Direct Finance’s Alain Valles. “Many seniors are finding they are unable to meet their obligation to pay real estate taxes, insurance and home maintenance costs, which puts their loans at risk.” Valles says the major changes affecting borrowers will be a limit to the amount of money that can be drawn at closing and during the first 12 months, and a “set aside” similar to escrows for payment of property taxes and insurance. In addition, a more thorough application process will include a financial assessment of the borrower before the loan approval.

“As the reverse mortgage application process becomes more complex and requires additional documentation, processing a reverse mortgage is going to become almost as demanding as processing a new home mortgage,” said Valles. “There are many small mortgage companies currently offering reverse mortgage who simply do not have the ability to handle the paperwork avalanche that is coming, and will more than likely be forced out of the reverse mortgage business.”

Alain Valles is a Certified Reverse Mortgage Professional (CRMP), a designation granted by the National Reverse Mortgage Lenders Association. He is widely regarded as an expert on reverse mortgages, and is a widely published author on the subject. His company has more CRMPs than any other company in the country.

Direct Finance Corp. is a licensed mortgage broker and reverse mortgage broker in Massachusetts, Rhode Island, New Hampshire, and Maine. Alain Valles founded Direct Finance Corp. in 1997 with the mission of improving the quality of life through responsible financing. The company is headquartered in Norwell, MA. For additional information visit or call (781) 878-5626.

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Bill Mcdonough
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