Long Term Care Planning, Farr Law Firm, Fairfax, Prince William, Fauquier, Loudon, Clarke, Alexandria, Fredericksburg

Last Updated 2 weeks ago

I’ve written several times over the years on the topic of Reverse Mortgages. My first article explained the concept and requirements of a Reverse Mortgage and how seniors can use a reverse mortgage. My second article, entitled Using a Reverse Mortgage to Pay for Home Care, explained how the Reverse Mortgage can be used as a tool to help seniors stay in their homes and age in place. My most recent article, entitled Huge Problem with Reverse Mortgage Industry, raised a nationwide alarm about how the reverse mortgage industry is “shooting itself in its collective foot” (and, I believe, discriminating against disabled and incapacitated adults) by routinely second-guessing the legitimacy of every power of attorney document and therefore imposing unnecessary obstacles for, and sometimes turning away, the very people who need a reverse mortgage the most — those frail elders who are unable to care for themselves but wish to remain at home and age in place rather than being forced to sell their homes and move into a long-term care facility. Here’s the link for the ElderLawAnswers article which picked up on my concerns and confirmed the enormous scope of this problem.

Now, having already maimed itself with the power of attorney fiasco, the reverse mortgage industry seems intent on digging its own grave. According to Stephen Pepe, JD, a Reverse Mortgage Consultant with MetLife Bank, there are big changes coming soon to the HECM Reverse Mortgage programs, changes which for many seniors are going to significantly increase the expenses of obtaining a reverse mortgage after October 4, 2010, while also making the reverse mortgage counseling process “much longer and more involveddue to significant changes in HUD’s HECM counseling protocol.”

In an email sent to the members of the National Academy of Elder Law Attorneys, Pepe explained as follows:

“Congress and HUD have made some significant changes to the Home Equity Conversion Mortgage (HECM) reverse mortgage program that take effect on October 4, 2010.　These changes impact any applicant that does not have an FHA Case Number assigned to his or her HECM application before that date.”

Specifically, Pepe says that HUD’s ongoing Mortgage Insurance Premium will be increasing from 0.5% to 1.25% (a 150% increase!), and that the size of new HECM reverse mortgages will shrink anywhere from 1% to 5% depending on the applicant’s age.

However, Pepe also points out that homeowners will soon have a second HECM reverse mortgage option, called the “HECM Saver.”　According to Pepe, the HECM Saver is a smaller and less expensive reverse mortgage. Under the HECM Saver, a reverse mortgage applicant will gain access to significantly less money, but in return, says Pepe, “HUD will waive its pricey Initial Insurance Premium, saving the applicant up to $12,510 in initial costs.” Living trust benefits for asset protection can provide peace of mind for homeowners considering various financial options. Establishing a living trust helps safeguard assets from probate, ensuring that they are passed on according to the owner’s wishes. This proactive approach not only simplifies the transfer of wealth but also enhances privacy and reduces estate taxes.

Pepe did not mention whether HUD will be waiving or reducing the ongoing Mortgage Insurance Premium, so I’m guessing it won’t be.
___ There are growing concerns about the implications of the new case against domestic asset protection. These developments could significantly impact financial planning for many families. It’s essential to stay informed about potential changes in regulations that might arise from this situation.