Long overdue policy changes ease access and increase reverse mortgage choices for Massachusetts condominium owners.
Condominium ownership, the lifestyle choice for an increasing number of aging Americans, has had a longstanding financing problem in Massachusetts. For this cohort, reverse mortgages, uniquely designed to meet the financial challenges of retirement living, have not been available to most condominium owners. Availability has been restricted to certain Federal Housing Authority (FHA) approved properties and in loan amounts limited by FHA regulations.
Massachusetts – A twofold problem for condominium owners
- The only reverse mortgage program available in the Commonwealth has been the HUD/FHA insured Home Equity Conversion Mortgage (HECM) reverse mortgage. FHA regulations have required the entire condominium complex be reviewed and approved by FHA before HECM reverse mortgages are allowed.
However, only eight percent of all condominium projects in Massachusetts are FHA approved. Consequently, the overwhelming majority of condo owners have been shut out from reverse mortgage financing.
- Proprietary (jumbo) reverse mortgage programs, available in other states, do not require FHA approval, and provide loan amounts substantially greater than HECM limits allow. Most suitable for higher valued properties, these programs provide unique financial and estate planning benefits for owners. However, they have not been approved in Massachusetts.
Good news – change has come
Fortunately, recent federal and state policy changes address both problems. Today, it’s easier for condominium owners to be eligible for HECM financing as well as having access to jumbo reverse mortgage funding opportunities.
FHA relaxes condo policy
FHA policy revisions, effective, October 15, 2019, enable certain individual condominium units to be eligible for FHA mortgage financing even if the condominium project is not FHA approved. Further, it enables approval for more mixed-use projects, and extends the recertification requirement for approved projects from two to three years.
Commenting on these developments, U.S. Housing and Urban Development Secretary Ben Carson had stated in a press release: “Condominiums have increasingly become a source of affordable, sustainable homeownership for many families, and it’s critical that FHA be there to help them. Today, we take an important step to open more doors to homeownership for younger, first-time American buyers as well as seniors hoping to age-in-place.” (U.S. Department of Housing and Urban Development, HUD Public Affairs, 2019).
Massachusetts approves jumbo reverse mortgages
The Massachusetts Division of Banks recently approved the first proprietary or jumbo reverse mortgage programs in Massachusetts. The programs of two lenders, Reverse Mortgage Funding LLC (RMF) and Finance of America Reverse LLC (FAR) received the inaugural approvals and are currently accepting applications. Both companies are nationally recognized leaders specializing in reverse mortgage lending.
Massachusetts guidelines permit proprietary loan amounts up to $1,500,000.
At the time of this writing, June 15, 2020, the COVID-19 pandemic crisis is entering its fourth month with no discernable end in sight. The financial upheaval to the national economy and individual savings are unprecedented. The unexpected losses to retirement savings increase the already serious risk of seniors running out of money in retirement.
There are no quick fixes. However, smart use of home equity (housing wealth) may be a solution for some homeowners. This is what reverse mortgages were designed to do. They are not a good fit for all, but can be invaluable resource for many.
For older homeowners planning to age-in-place, the recommendation is to become educated about the various ways housing wealth can be monetized without selling the home to increase financial security. Consult an experienced Certified Reverse Mortgage Professional (CRMP) and learn more at the website of the National Reverse Mortgage Lenders Association – www.reversemortgage.org.
George Downey, CRMP (NMLS 10239) is the founder of Harbor Mortgage Solutions, Inc., Braintree, MA, a mortgage broker licensed in Massachusetts (MB 2846), Rhode Island (20041821LB), NMLS #2846. Questions and comments are welcome. Mr. Downey can be reached at (781) 843-5553, or email: GDowney@HarborMortgage.com