New HUD Regulation Helps Seniors Refinance a Reverse Mortgage

Special to the Business Times from Universal Lending

Two years ago, Atlanta homeowner Dorothy Williams got a reverse mortgage, which she used to pay off doctors’ bills for treatment of a back injury. “The reverse mortgage really helped me out.” says Williams, 78. “I was very grateful for the help it provided me.”

Williams benefited so much from her first reverse mortgage that she decided to refinance her old one this spring with a new one.

            In refinancing, Williams obtained a new reverse mortgage—this time taking it out as a line of credit. In addition to using some of the proceeds to pay off her old loan, she used another $3,000 to replace copper pipes in her home.

            “It was going to cost me more than $3,000, which I didn’t have,” added Williams, noting she still has some money left. Recognizing the benefits that seniors can reap from refinancing a reverse mortgage, the U.S. Department of Housing and Urban Development has implemented a new regulation that makes it less costly for a senior to refinance a reverse mortgage.

            Instead of paying the full upfront mortgage insurance premium (MIP) on a refinanced reverse mortgage, the new regulation would enable a borrower to be credited for the amount of MIP paid on the first loan. For example, the MIP paid by Ms. Williams on her initial loan totaled $1,060; on the refinanced HECM the amount totaled $1,540. Had the rule been in effect at the time Ms. Williams refinanced her loan, the amount of new MIP would have totaled just $480.

            It is wise for people living in areas such as  Western Colorado where home values have sky rocketed in the last few years to revisit their original reverse mortgage to see if their home can help them even further. The new HUD regulation on the mortgage insurance premium (MIP) makes refinancing less expensive. Also, you do not have to use the same mortgage company to refinance your first loan, shop around for the mortgage company that will best serve your needs, and can expedite the process in a timely manner.

Source: National Reverse Mortgage Lenders Association. Valerie Begalle is a Reverse Mortgage Specialist with Universal Lending Corporation.