Reverse Mortgage Stabilization Act – Loan Love’s New Guide To Understanding The Reverse Mortgage Reform

A Loan Love guideline shows the changes made to reverse mortgage handling from a newly passed law.

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San Diego, CA (PRWEB) August 24, 2013

LoanLove.com is a borrower advice website that provides detailed insights into the mortgage industry in a fun and entertaining way. The team at LoanLove.com is devoted to help empower both first time and experienced homeowners with valuable resources, first-class knowledge and connections to top-rated industry professionals and has the mission of helping consumers and borrowers to obtain the latest information on mortgage lending trends, the real estate market and the U.S. financial landscape in order to help them obtain a home loan that they will love. A recent bipartisan agreement from both Republicans and Democrats has paved way for a new reverse mortgage law called the “Reverse Mortgage Stabilization Act.” To help senior owners grasp the changes of the reverse mortgage reform, Loan Love sheds light on the current state of reverse mortgages in a newly released article.

As the article “Reverse Mortgage Reform 2013 (Updated HECM Guidelines)” clarifies, the Reverse Mortgage Stabilization Act is designed with the intention of making the reverse mortgage process smoother and more accommodating to future senior homeowners. To the uninformed, homeowners over the age of 62 may be applicable for a Home Equity Conversion Mortgage, or HECM for short, which is the formal name for a reverse mortgage. With a HECM, homeowners can tap into their home’s equity by taking out money directly from their homes instead of making monthly payments on a loan.

So why the push for a reverse mortgage reform? Reverse mortgages can often be very tricky to work with; Reverse mortgages tend to be complex enough that loan borrowers may often find themselves in questioning the nature of the loan. To complicate things further, borrowers can experience the immoral lending practice of promoting inappropriate HECM loan over more beneficial products. To help protect loan lenders and loan borrowers, the Reverse Mortgage Stabilization Act now implements reverse mortgage requirements before loan approval. The Loan Love article illustrates the four main changes to the reverse mortgage loan process with the following:

  •     “First, the law requires borrowers have a financial assessment before being approved for a loan to determine which HECM products – if any – are most appropriate for their needs so homeowners don’t end up taking on a loan that’s not right for them. This protects consumers from unscrupulous or unknowledgeable lenders who may promote loans that don’t meet the homeowner’s needs, and it also protects lenders by making sure the loans they write satisfy their lending requirements.
  •     Second, when necessary, the law requires an escrow account be established to prevent defaults that can occur when a homeowner falls behind in paying homeowner’s insurance or property tax bills. This step protects lenders from losing their investment in homes when homeowners can’t pay these bills or simply refuse to.
  •     Third, the law limits the amount homeowners can draw when the loan is initially approved, only allowing the amount needed to pay “mandatory obligations” such as closing costs and mortgage liens. The goal here is to protect the fund that oversees reverse mortgages from losses that can occur when the entire amount of the loan is drawn out immediately after signing the loan agreement.
  •     And finally, the new law requires that changes to the rules regarding reverse mortgages can only be made if those changes are designed to improve the financial safety and reliability of the program.”

Using these guidelines, senior homeowners can be assured when applying for a Home Equity Conversion Mortgage. To learn more on the Reverse Mortgage Stabilization Act, please visit LoanLove.com.


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