HUD decision highlights strategic role of reverse mortgages

03/3/2013 | Nerd's Eye View blog

The Department of Housing and Urban Development will no longer allow reverse mortgage borrowers to secure fixed-rate HECM Standard reverse mortgages, starting in April. Instead, writes Michael Kitces, fixed rates will be available only via the HECM Saver loans, which are for smaller amounts. HUD based its decision on studies that found borrowers who secure fixed-rate reverse mortgages often find themselves unable to pay the necessary insurance and property taxes to meet the loan's terms. Consumers might be better positioned if they proactively used a reverse mortgage earlier and coordinated as part of a broader income and spending plan over time, Kitces writes. Other industry research supports this conclusion, he writes.

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