San Diego, CA (PRWEB) August 22, 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 news, 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 article from the website covers the recent news of the reverse mortgage reform law that was passed earlier this month and how this new legislation should help to protect elderly homeowners who would like to make use of the reverse mortgage loan type.
The article says: “For most people, the only way to make use of the equity you’ve built up in your home is by selling or refinancing and pulling equity out at closing. A reverse mortgage (you may know it by its more formal name – Home Equity Conversion Mortgage or HECM) lets people who are at least 62 years old access that equity using an entirely different approach: Homeowners can take money out of their homes without having to make any monthly payments. What’s more, the homeowner keeps the title to their home for the entire time they’re living in it.”
Clearly this type of mortgage has many obvious benefits for older couples or individuals who would like to make use of the equity they have built in their homes. However, prior to the recently passed legislation, these types of mortgages were also seen as quite risky as they are quite complex which leaves the possibility open that the senior applying for the mortgage does not fully understand the terms of the loan. It would also leave many seniors at risk of being taken advantage of by lending institutions. The new laws passed help to ensure that this loan option is now a much safer and attractive option for elderly home owners.
The new law includes reforms designed to protect both consumers and lenders. The first reform, and probably the most important, is explained in the Loan Love article: “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.”
Obviously this will eliminate much of the danger seniors would face either from lack of understanding or, as the quote states “unscrupulous” lenders. The article continues:
“• 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.”
For more information on reverse mortgages and how the new law will affect senior mortgage borrowers, please visit LoanLove.com.