From its birth in 1961 to the present day, reverse mortgage loans for senior homeowners have evolved significantly and continue to undergo changes. Increased government regulations for lenders and protections for borrowers are the most recent developments. For the real estate industry, here are the major changes and things to consider going into 2017:
1. Increased loan limits:
In 2017, the loan limit for HECM reverse mortgage loans is increasing from $625,500 to $636,150. This is the first time the HECM lending limit has been raised since President Barack Obama signed into law the American Recovery and Reinvestment Act in 2009. Announced by the FHA on December 1, 2016, it went into effect on January 1, 2017 and will continue through December 31, 2017. The increase is 150% of the national conforming limit of $424,100 and is due to rising home prices.
2. Interest Rates Likely To Rise
December 2016 saw the Federal Reserve raise interest rates for the first time since 2009. Reuters reports that policymakers signaled they expect to raise rates three more times in 2017. While this is an indicator of a healthy economy, the downside is that higher rates can significantly decrease the amount seniors can borrow from their reverse mortgages in 2017. Reverse mortgage calculators that require no personal information are available from the NRMLA and AAG.
3. Housing Prices:
Adjusted for inflation, home values in many markets are almost as high as they were prior to the 2006 housing crash. Rising interest rates however may dampen home prices as people cannot borrow as much money for purchasing.
4. Potential Cuts in Social Security and Medicare:
While President-elect Trump has vowed not to change these programs, there are increasing murmurs that they may experience cuts. If either of these programs are modified to the detriment of seniors, expect reverse mortgage to become a more desirable product.
5. The Impact of the Trump Administration:
Neither President Elect Donald Trump, nor Secretary of Housing and Urban Development, Dr. Ben Carson, have addressed reverse mortgages specifically yet so it is unclear what changes, if any, will be implemented in 2017.