The United States Department of Housing and Urban Development (HUD) has announced a new set of guidelines for reverse mortgages that will go into effect once approved. Experts anticipate that these new guidelines will reduce the total volume of reverse mortgages by almost $2 billion annually while also reducing the number of reverse mortgage users who are evicted or foreclosed upon every year.
One way the guidelines will do this is by making borrowers more aware of exactly what a reverse mortgage is and what they are expected to do. Lenders will have to provide details of a reverse mortgage in clear language to all borrowers, plus borrowers will have to attend a credit counseling session before their reverse mortgage is approved.
Another part of the new regulations will create what HUD is calling a "Cash for Keys" program. This program creates an exit strategy for borrowers or their heirs who wish to sell the home. This method makes use of deed arrangement to return the home to the lender. It will help end foreclosure and prevent evictions.
When approved, these new regulations will be added to other HUD rules, announced several months ago. Once these proposals are in place, HUD anticipates the annual reverse mortgage volume will drop by almost 12 percent. At the end of 2015, the total reverse mortgage value stood at $16.1 billion. That may drop to as low as $14 billion.
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