Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, October 18, 2013

New Limits on Reverse Mortgages


On September 30, the Federal Housing Administration imposed new regulations making it more difficult and expensive to take advantage of federally insured reverse mortgages.  Here are the changes taking effect:

  • First-year limit: During the first year, homeowners may now withdraw only up to 60% of the eligible sum.
  • Smaller loans: Borrowers used to be able to take out up to 61.9% of their home’s value, but now it’s about 15% less than that.
  • Fee changes: The upfront fee for a standard reverse mortgage was 2% of the property’s value and the upfront fee for a saver reverse mortgage was 0.01%.  The upfront fee is now 0.5% across the board and those who take out over 60% of their home’s value will have to pay a 2.5% insurance premium.
  • Financial assessment: Before issuing a reverse mortgage, lenders will now have to analyze the borrower’s ability to meet tax and insurance payments.

The FHA is imposing these restrictions to mitigate insurance losses and make people more careful about how they fund retirement.

See Mike Anderson, Retirement Just Got Harder: The FHA Sets New Limits on Reverse Mortgages, The Motley Fool, Sept. 29, 2013.


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