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14 LIVE IT UP! FRIDAY, JANUARY 30, 2015 SANTA CRUZ SENTINEL L ooking back at the changes to the reverse mortgage program of last year, some plusses and minuses were written in. The new lower loan limits implemented at the very end of 2013 lowered the cash available for all those loans funded in 2014 but the new protections built in for the non- borrowing spouse solved a major flaw in the old program. The industry has been waiting for the next announcement rumored to have another big impact and the "Financial Assessment" guidelines have arrived. These will truly change everything. In the past, it was relatively easy for a senior to get a reverse mortgage. Basically a borrower needed to be over 62, have sufficient equity in their homes and be willing to attend a counseling session. That was it. The program was seen mostly as the loan of last resort for seniors that owned their homes but had little or no retirement funds, small social security income and no real plan for their financial future. They understood from counseling that they still had a responsibility to pay their property tax and home insurance but without a plan to sustainably meet these expenses, they often ran out of money and defaulted on their taxes triggering a foreclosure. This happened to about 10% of those borrowers who took out a fixed rate loan and received all the funds in one lump sum; an unacceptable outcome. In the future, starting March 2, 2015, reverse mortgage processing will include credit history, income verification, residual income analysis, documentation of extenuating circumstances or compensating factors and calculation for life expectancy set asides and residual income shortfall set-asides, among others. This sounds like a whole different offering. These changes are made to stabilize the program for long term success and protection for those who "qualify". What this means is there will be two types of seniors who will successfully use a reverse mortgage; those who have a very well-funded retirement plan and will use the reverse to protect their holdings so that they will not be forced to "Sell low" in a down market when they are relying on the stream of income provided by their investments and those that do have some retirement income in addition to social security and who have used their home as a piggy bank to store their wealth in the form of home equity ( usually a dangerous decision as home equity is not safe from catastrophic loss as we all saw in 2007-8). This calls for a serious look at financial planning for the future for most seniors and a conversation with someone who can give insight and guidance about options available. Looking Back and Looking Forward in Reverse By Donald Dimitruk Donald Dimitruk is a Regis- tered Financial Consultant® and a Registered Mortgage Advisor and is available for a free consultation about how a reverse mortgage may bennifit you at 831-464-6464.