Recent developments in the Federal Housing Administration's Home Equity Conversion Mortgage program are making it easier for lenders to originate reverse mortgages to borrowers who want to buy a new-construction home.
Homeowners can tap into more home equity than ever before, but deciding between a home equity line of credit and cash out refinance mortgage has gotten more complicated following recently passed tax reforms.
They aren't creating new products, but some lenders are advising cash-strapped customers in high-tax states to tap home equity or other credit lines to prepay property taxes before the new tax law kicks in.
Any decline in home equity balances could be offset by higher demand for other types of consumer loans. The worry is that only borrowers with blemished credit will take out home equity loans, increasing banks’ risk.