The Home Equity Conversion Mortgage (HECM) for home purchase has quickly generated new applicants, mature Americans 62 years and older, willing to use the equity in their current home for the purchase of a new home. Unfortunately, mature Texans are unable to participate in this wonderful new opportunity because of Texas Homestead laws.
The Homestead Act was created to protect surviving members of a primary earner from losing their home(stead) due to improper or manufactured claims to debt. The homestead cannot ever be mortgaged unless the mortgage is to obtain money from a reverse mortgage among other reasons. Article 16. Section 50 of the Texas Constitution sets forth the protection provided to the homestead owner. Simply stated, a homeowner is protected from forced sale by his general creditors except for a reverse mortgage made pursuant to the requirements of the Texas Constitution.
The HECM for Purchase program was designed to allow mature Americans the ability to downgrade or purchase a new home which suits their needs. As with the requirements of a standard HECM, the applicant must remain in their new home. The program has other requirements which also must be adhered to in order to stay compliant with the program.
In 2006 the Federal Housing Authority (FHA) permitted borrowers of reverse mortgages in Texas to choose a line of credit payment option. The voters in Texas voted to amend the Constitution to authorize the line of credit advances under the home equity reverse mortgage program. Unfortunately it is not enough to allow mature Americans the ability to purchase a new home by using the equity in their current home as a reverse mortgage.
The Texas legislation meets every 14 months or more. It is at this time where new state issues are discussed and voted on. The earliest a change to the HECM for purchase can be amended in the Constitution is 2011. Mortgage lenders will not be able to offer mature Americans the ability to use the program until 2012. The rest of the 49 states are fully participating in the HECM for purchase program which was implemented in 2008.
Mature Texans are able to still purchase a new home using a conventional loan and are still able to participate in the HECM standard loan program. The requirements of the HECM program are not credit or income based but rather based on the current interest rate, value of the borrower’s current home and the age of the borrower. The borrower must remain in the home used in the reverse mortgage and repayment is only valid once the borrower moves or becomes deceased. The borrower is able to receive a monthly payment, lump sum, line of credit or a combination of all three payment options.
Mortgage companies and private organizations throughout Texas are urging mature Texans to contact their local and state representatives to voice their concerns regarding the inability to use HECM for new home purchase. Until the Constitution is amended the original HECM program is still available and helping many mature Texans.
Comment and add to the story without registration, but keep the comments meaningful please. Links are not accepted.
