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Recent Policy Changes Push the HECM Toward Traditional Mortgage Underwriting
It may seem like an odd question: Is the federally-insured reverse mortgages a social program or a mortgage loan? The question should be addressed as it goes to the heart of recent program changes, restrictions and requirements. While few argue the HECM program is a social program many often lament that the loan no longer serves the needy, cash-poor or typical borrowers or the past due to principal limit reductions and further loan restrictions. When created in 1989, the Home Equity Conversion Mortgage Program was designed specifically for senior homeowners 62 or older. With few qualifications beyond age and sufficient equity the bar of entry was low. Also couple a government-insured and supervised loan designed specifically for a protected class such as seniors and one could easily begin to see the HECM as a social program.
Recently two developments have brought the question if the HECM is a mortgage loan or social program to the forefront: the financial assessment and non-borrowing spouse policy. Many fear the financial assessment will discriminate against borrowers who have little financial means or meager cash flow. The financial assessment signals the realignment of the reverse mortgage to more closely…
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