Pennsylvania regulators are worried they will be abused. They’re issuing new guidelines.
As the nation’s housing market improves, Pennsylvania officials are becoming wary of predatory lenders who prey on older homeowners. The state’s Department of Banking is releasing guidelines for lenders offering reverse mortgages.
Under a reverse mortgage seniors to get monthly payments that are borrowed against the equity in their home. But some lenders may not make borrowers aware that their families will not inherit their homes as long as the mortgage debt is outstanding. Only those 62 and older are immune from foreclosure under a reverse mortgage.
Pennsylvania Department of Banking Spokesman Ed Novak says anecdotally, the state is already seeing an uptick in these loans.
“The reverse mortgage market sort of went away for a couple of years as the housing prices went down. As we’re starting to see housing prices stabilize, lenders are starting to look to the future and understanding that prices will eventually go up, and so they’re starting to offer more of these loans.”
According to the guidelines, lenders are encouraged to counsel borrowers to let them know all of the risks associated with reverse mortgages.
Novak is quick to point out that because most reverse mortgages come through the U.S. Department of Housing and Urban Development, the Pennsylvania Department of Banking has limited power to regulate these loans.