New Reverse Mortgage Law

The Housing and Economic Recovery Act of 2008 made changes to reverse mortgages effective October 1, 2008, including higher borrowing limits and protections from aggressive marketing. A homeowner who is at least 62 years old can use a reverse mortgage hometo access home equity to obtain a loan that does not have to be repaid until the homeowner moves, sells, or dies. The national limit on the amount a homeowner can borrow is increased from $200,160 to $417,000 ($625,000 in areas with high housing costs). The amount that can be borrowed depends on the home’s value and location, interest rates and the borrower’s age. The new lawprotectsseniors from high fees and aggressive marketing. Fees are capped at two percent of the first $200,000 borrowed and one percent on the balance, with a maximum of $6,000. Lenders are prevented from requiring borrowers to purchaseinsurance, annuities, or other products as a condition to obtaining a reverse mortgage. Lenders are prohibited from working with other professionals who attempt to sell financial products to seniors aspart of the lending process.

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