What is the FHA Modernization Act?

The FHA (Federal Housing Authority) Modernization Act is designed to improve the Federal Housing Authority’s ability to help Americans get more affordable home loans.

The FHA Modernization Act affects the HECM (Home Equity Conversion Mortgage) program, currently the most popular type of reverse mortgage, and can potentially benefit you in the following ways:

• More money may be available to you. The lending limit for reverse mortgages has been raised to a single national loan limit of $417,000
• ­You may qualify for lower fees. The calculation for the origination fee on a reverse mortgage loan has changed and may result in you paying less in origination fees than ever before.

What are the basic requirements for a reverse mortgage?

To qualify for a reverse mortgage, you must be age 62 or older and own your home (houses and condos qualify; those with existing mortgages may also qualify). Your home must be your principal residence and meet U.S. Department of Housing and Urban Development (HUD) minimum property standards.

How is a reverse mortgage different from a home equity loan?

Both a reverse mortgage and a home equity loan use the equity you have in your home to generate cash. However, with a home equity loan, you need to make monthly payments on the principal and interest. With a reverse mortgage, you don't need to make monthly mortgage payments for as long as you stay in the home. The loan is repaid only after you permanently leave the home.

How much money can I get?

The amount you can borrow depends on several factors, such as:

• Your age
• Type of reverse mortgage you select
• Current interest rates
• Location of your home
• Appraised value of your home
• Federal Housing Administration (FHA) lending limits for your area

How can I receive the cash from a reverse mortgage?

You have a range of options:

1. Lump sum
2. Monthly payments
3. Line of credit (take funds when you need them)
4. A combination of the above

How can I use the proceeds?

You can use the proceeds for the things you need and want. Common uses include paying monthly bills, fixing up your home, paying for prescriptions and health care, making a major purchase, traveling, helping children or grandchildren, and planning for the unexpected. Please note that MetLife does not recommend or encourage the use of reverse mortgage proceeds to fund new or existing investment or annuity products.

What if I still owe money on a first or second mortgage?

You may still be eligible for a reverse mortgage depending on the amount of your remaining mortgage versus the value of your home. The funds from the reverse mortgage would first be used to pay off whatever existing mortgages you have on the property.

Will my current income affect my eligibility?

No. You don't make monthly repayments with a reverse mortgage, so there are no income qualifications.

How will a reverse mortgage affect my government benefits?

The funds from a reverse mortgage generally do not affect regular Social Security or Medicare benefits. However, needs-based benefits, such as Medicaid and Supplemental Security Income (SSI), may be impacted. A MetLife Home Loans reverse mortgage consultant can provide additional general information, but you should contact a tax professional about your particular situation.

Are interest rates fixed or variable?

Most reverse mortgages have variable rates that are tied to a financial index and will vary according to market conditions and product. MetLife Home Loans offers both variable and fixed-rate reverse mortgages. Note: in a rising interest rate market, the balance on a variable-rate reverse mortgage will grow more quickly than on a fixed-rate reverse mortgage.

Can a reverse mortgage be refinanced?

Yes, refinancing is possible. This option can be advantageous if the home increases in value, making more equity available.

In addition to the interest, are there fees associated with a reverse mortgage?

Most reverse mortgages have an origination fee, closing costs, a mortgage insurance premium, and a monthly servicing fee. These can be paid from the proceeds of the reverse mortgage itself, so there is no immediate burden to you. The costs are added to the principal and paid along with the interest accrued on the total principal balance when the loan becomes due.

What has to be repaid when the loan becomes due?

The loan balance — including any fees that have been added to the principal and the accrued interest on the total principal balance-needs to be repaid. This is usually done through the sale of the house or other assets. Repaying the reverse mortgage through a conventional mortgage is also an option.

Will a reverse mortgage affect the estate I leave to my heirs?

When the loan becomes due, you or your estate must repay the lender for the cash received from the reverse mortgage, plus interest and service fees. You or your estate can choose how to repay the loan — by selling the property, by refinancing, or by using other assets. Any sale proceeds in excess of the loan balance belong to you or your heirs. If you sell your home for a fair market price that is less than the loan balance, then there would be no proceeds to keep, but the bank cannot claim from you or your estate more than the sale amount received.

When will the principal and interest charges become due?

The reverse mortgage loan must be paid in full when one of the following occurs:

• All borrowers permanently move out of the home
• The last surviving borrower passes away, sells the home, or fails to live in the home for 12 consecutive months
• You fail to pay property taxes or insurance
• You let the property deteriorate beyond what is considered reasonable wear and tear, and do not correct the problems

What if one of the co-borrowers passes away?

The surviving borrower can continue to own and live in the home — and enjoy all the benefits of a reverse mortgage.