A very popular financing option to today's seniors is a reverse mortgage. A reverse mortgage allows seniors to tap into the equity of their home and secure funds previously unavailable to them. These funds are generally being used in a wide variety of ways, but most importantly to retire their existing forward mortgage. In many cases recipients of reverse mortgages enjoy residual income after the transaction to help offset revolving living expenses as well.
Recently FHA Commissioner David H. Stevens said his agency, due to a $789 million dollar estimated budgetary shortfall for the program in the coming fiscal year, had to reduce the maximum amounts seniors can receive on reverse mortgages. These effects will not be experienced by seniors already using a reverse mortgage.
Mortgage Industry sources indicated the amount would be reduced by 10% for all new reverse mortgage applicants starting on Oct. 1st. Add this to the recent decline in value the housing market has experienced and the option with regard to a reverse mortgage for many seniors will be nonexistent and could prevent one out of five applicants from paying off their existing home mortgage debt with the proceeds of a new reverse loan.
This in turn could leave some senior home owners at risk of falling into serious delinquency, default, or foreclosure on their current loans.
The total number of seniors effected by this could be in the tens of thousands. 130,000 new reverse mortgages are projected for 2010.
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