Realigro Real Estate

THE federal government issued new guidelines at the start of 2009 that would allow older borrowers to use reverse mortgages to buy a principal residence. But few lenders were ready to offer this option. 

The problem is that lenders needed more information from the government about acceptable underwriting procedures.

These details have since been worked out and  a number of lenders have placed their first loans in the pipeline. New York is not well represented in that mix because the loans cannot be used to buy co-op apartments.

Reverse mortgages, which are offered through the home equity conversion mortgage (HECM) program run by the Federal Housing Administration had previously been available only for refinance transactions. In order to qualify, borrowers must be 62 or older. 

Older borrowers who might be moving out of their homes after two or three years should avoid reverse mortgages for the same reason that it makes little sense to refinance any loan before selling the house: the closing costs of the mortgage would probably outstrip any appreciation in home value, especially in the current real estate market.

Mortgage industry sources have said privately that the quality of the counselors can vary widely, so prospective borrowers will do well to seek reverse-mortgage counselors who have passed an exam designed by the AARP and administered by HUD.

[From The  NY Times]