For several years now reverse mortgage originators have been anxiously awaiting the "reverse for purchase" program from The Federal Housing Administration. On Jan. 1, 2009, that wait was over as the Housing and Economic Recovery Act of 2008 made this a reality. More accurately called, HECM (Home Equity Conversion Mortgage) for Purchase, it will allow seniors age 62 and over to use a reverse mortgage insured by FHA to purchase a principal residence.
How will seniors use this HECM for purchase? What are the overriding factors to be considered? As with any reverse mortgage, the minimum age is 62. This means all borrowers on the sales contract who will be in title must be at least 62. The property being purchased must be the primary residence for all borrowers (as with any HECM). A senior might use the purchase program to downsize to a home that better meets his needs. Perhaps the current home is a two-story older property that requires a considerable amount of maintenance. The purchase transaction could be used to allow the senior to sell the current home and purchase a property that is on one level, with very little maintenance required. A condo is just one example that might fit the bill.
A couple of important points to note:
1) Funds needed for the transaction must come from the senior's own sources (proceeds from sale of current home or other investments, etc). No seller contributions are permitted.
2) The senior must occupy the home within 60 days of closing.
3) Reverse mortgage counseling is required.
4) The home must be 100% complete at the time the reverse mortgage application is taken.
This new program creates a significant opportunity for us in the reverse mortgage arena, and it's up to us to get the word out. Talk to your local real estate offices. Be a true partner to these real estate professionals who are looking for ways to build business right now. One of the ways I have done this over the years is to teach a reverse mortgage class for continuing education credit at the local real estate boards. Put on seminars at the offices you call on. Show the real estate professional how to include this in a discussion with a senior who is listing a home.
The purchase of another home may be the right choice for the senior rather than going into an apartment or moving in with family. You'll cement that relationship and position yourself as a true expert in your market.
Sue Haviland is a reverse mortgage consultant in Baltimore and the founder of Reverse Mortgage Success, a leader in the training and education for originators around the country in the rapidly growing reverse mortgage arena. Ms. Haviland has worked in the lending industry since 1981. She has been originating reverse mortgages for the last six years and still originates loans every day. She has helped hundreds of families all over the country in the last several years. She also shares her knowledge of this market in presentations before the Women's Council of Realtors, Mortgage Bankers Association, National Association of Professional Mortgage Women, and SRES - Senior Real Estate Specialists, Brian Sacks' Insider Seminars, as well as the public. She is a Certified Senior Advisor and is active in many professional organizations. Sign up for her free seven-part mini-course at
