News by Subject
Complete list of specialty news sections.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Mortgage Industry News
Subscription-based news for people who work in real estate finance.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from

Mortgage News Reprints
Put entire stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed stories for your web site or for your RSS reader.

News Archives
Archive of news entries.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Graphs
Directory of lenders, branch operators and mortgage service providers.
home advertise email RSS about us
HOT Topics Rates Glossary LO License Search
Consumer Mortgage News
Free mortgage news for current and prospective borrowers from a leading online mortgage industry news publication.

Reverse Mortgage Rush as Costs Set to Rise

Program changes take effect on Oct. 2

Sept. 26, 2017

By JEFF COLLINS The Orange County Register (Tribune News Service)

A rules change that will raise fees and reduce loan amounts for reverse mortgages apparently has created a nationwide rush to get new loans completed before the reforms take effect Monday, Oct. 2.

Agencies providing financial counseling needed for such loans have been swamped, and a leading industry group has appealed for waivers and extensions so more borrowers will qualify under the old rules.

"Our industry is currently inundated," said Julie Martinez, a reverse mortgage housing counselor at the nonprofit HomeStrong USA housing agency in Rancho Cucamonga, California. "We have an enormous influx of calls and requests for appointments that's unprecedented."

Another agency, NeighborWorks Orange County, reported that calls requesting counseling jumped to 100 or more from 20 calls a day since rule changes were announced Aug. 29.

"It was just an all-of-a-sudden rush," said Helen O'Sullivan, NeighborWorks-OC chief executive. "It's possible most of them looked at the (new) terms and said, 'I don't want to pay more and get less.'"

The Department of Housing and Urban Development sent emails last week to its network of counseling agencies to see if any of them has "capacity to take up additional clients for (reverse mortgage) counseling" before Friday, Sept. 29.

"We had to say no. We're filled up," O'Sullivan said.

Reverse mortgages are available to homeowners age 62 or older, allowing them to convert equity in their homes into cash to cover gaps in their retirement income or savings. Under a reverse mortgage, borrowers are freed from making monthly mortgage payments and can stay in their homes as long as they want under most circumstances. The accumulating debt is repaid when the borrower moves, sells or dies or falls behind on paying such housing costs as maintenance, property taxes or homeowners insurance.

Recent reforms require borrowers to undergo housing counseling, either in person or by phone, before they can get a reverse mortgage.

But the program has been a big money-loser for the Federal Housing Administration, which insures the loans. HUD, which oversees FHA, said the insurance fund has lost $11.7 billion since 2009, adding the fund would need a cash infusion from Congress in the coming year without an increase in insurance fees paid by borrowers.

"The (reverse mortgage) program is losing money and can no longer remain viable in its present form," the HUD announcement said. "Today, younger, lower-income homeowners with traditional FHA-insured 'forward mortgages' are routinely bailing out the (reverse mortgage) program through the mortgage insurance premiums they pay."

Among the changes taking effect next Monday:
  • Upfront insurance premiums paid when the loan is originated will increase for most borrowers, rising to 2 percent from 0.5 percent of the home's appraised value. That's an increase of $7,500 for a $500,000 home. (Borrowers who draw more than 60 percent of their total loan their first year will see upfront fees drop slightly, but they're in the minority).

  • The interest rate for monthly mortgage insurance premiums will drop to 0.5 percent from 1.25 percent.

  • Maximum loan amounts for most borrowers will be reduced, decreasing the FHA's risk by preserving more home equity. That means borrowers get less cash. For example, a 62-year-old borrower paying a 4 percent interest rate can now get a loan of $52,400 against $100,000 in home equity. Under the new rules, the maximum loan amount will be reduced to $47,000 for that borrower.

"Everybody's afraid of the upcoming changes," said Julie Colangelo, reverse mortgage development and training manager for Essex Mortgage in Orange, California. "It's causing an upsurge [in applications] because the loan amounts are going to be lower."

For some borrowers, a smaller loan won't provide enough cash to pay off their existing home loan, which is required under a reverse mortgage, Colangelo said. Meanwhile, clients who thought there was no hurry to get their loans down are suddenly in a rush.

"Now, I'm getting a lot of calls from those people," Colangelo said. "They say, 'I should have acted sooner.'"

Meanwhile, time may already have run out for reverse mortgage borrowers in California.

The state requires California borrowers have a seven-day "cooling off" period after seeing a counselor before they can start the loan process. That means they must have gotten their counseling certificate by Friday to qualify under the old rules.

The National Reverse Mortgage Lenders Association appealed to California regulators Friday for a temporary waiver of that requirement.

"There is and has been a severe backlog of available counselors and counseling sessions in California," the NRMLA letter to the state Department of Business Oversight said. Each senior who fails to get counseling on time "stands to lose tens of thousands of dollars or more in available (reverse mortgage) proceeds."

The problems stem from giving too little advance notice of the Oct. 2 changes, said NRMLA CEO Peter Bell.

"Every counseling agency that we talked to has no slots available," Bell said.

Bell said the changes also are creating potential problems for borrowers using reverse mortgages to purchase a newly built home, done by making much larger down payments than required for traditional home loans. When buying a new home, borrowers must sign contracts and put down deposits, but can't apply for a reverse mortgage until the new home is complete.

That means that perhaps several hundred home buyers still waiting for their homes to be built will end up getting smaller loans and have to put up more cash out of pocket to complete their purchase.

"In some cases, they may not be able to come up with the extra cash, which means they won't be able to close the deal and might have to forfeit their deposit," Bell said.

NRMLA has appealed to HUD to allow borrowers who signed purchase contracts before the Aug. 29 announcement to get reverse mortgages under the old terms, Bell said.

"The HUD change is just creating a whole bunch of issues and anxieties for people looking to get (a reverse mortgage)," Bell said.

next story

back to home page

To see more of The Orange County Register or to subscribe to the newspaper, go to

Copyright (c) 2017, The Orange County Register

Distributed by Tribune News Service.

This story was distributed by TNS - Tribune News Service
Refinance News
News about refinance programs, pricing and production.
H A R P 2.0 News
News stories about the H o m e Affordable Refinance Program including expanded program guidelines.

Copyright © 2016 Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

pricing engine directory

wholesale lender directory

More Mortgage News Resources ( full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

free mortgage news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter


mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

refinance news

reverse mortgage news

sales blog

secondary marketing

servicing news

subprime news

wholesale lenders

wireless mortgage news