Now What? Reverse Mortgage Financial Assessment

Now we have reverse mortgage financial assesment rules that have changed the ease of qualifying for this loan program.

Reverse mortgage financial assessment was just put in place April 27, 2015.  The reason for it is a sound idea.  It’s to make sure that once a homeowner takes a reverse mortgage, they will be able to financially handle the obligations of home ownership for the long term.

The rule changes came into being when a number of reverse mortgage borrowers became delinquent on their property taxes or could not maintain their homeowner insurance.  This created a technical default and that leads to foreclosure proceedings.

Will the new rules for qualifying mean some folks will not be able to qualify for a reverse mortgage?  The signs point to yes (reminds me of the magic 8 ball).  Is the industry ready for the new underwriting scheme?  The magic 8 ball says, “future unclear, try asking again later”.

Here is what is known.  An applicant for a reverse mortgage will now have to supply their financial income and asset information  – just like qualifying for a conventional mortgage.  Credit history will be analyzed to see a positive history of making housing related payments (mortgage, taxes, insurance utilities) as well as consumer credit.

It may require some folks to re-establish their credit history and straighten out their finances before they will be able to get a reverse mortgage.  Pre-qualifying for a reverse mortgage may become a normal business practice – especially if using the reverse mortgage for purchase.

Before our company started doing reverse mortgages in 2000, we did pre-qualifications as a regular business practice to qualify people for refinances and purchases.  We led seminars to teach people what they needed to do so they could prepare for home ownership.

Looks like history will be repeating itself and we will be doing prequals to get people ready for a reverse mortgage – as Yogi Bera once said, “It’s like Deja Vu all over again”.

I’m interested in your comments, let me know what you think.