Filling a Void

Senior homeowners were swept up in the recent changes in Federal lending rules by both HUD and the CFPB. House rich seniors living on fixed non-W-2 income have been precluded from qualifying for most conventional lending products. NatEquity is positioned to serve this market while filling the void created in both the recently revised HECM government reverse mortgages, and tightened traditional bank lending standards. The unique climate that makes a NatEquity shared appreciation home equity access contract appealing have been compounding over time:

  • Survivor social security or defined benefit pension for these homeowners are about $1,300 per month.
    California’s Proposition 13 which froze property taxes at 1978 levels has allowed these seniors to age in place with annual property tax bills in the $3,000 range rather than $30,000 based upon current home value.
  • Seniors who easily qualified for interest only home equity lines of credit (HELOCs) from banks in the early 2000s now see those loans “reset” as high current principle repayment credit card type loans. These new monthly payments can equal or exceed their monthly income.
  • Recent changes by the CFPB to consumer lending rules deem anyone without W-2 earned income unable to meet the “ability to repay” (ATR) borrower requirements imposed upon conventional lenders.
  • Seniors with high home values are discouraged by HUD Housing Counselors from applying for a federal home equity conversion (HECM) reverse mortgage because of the potential of losing their high value home in a HUD foreclosure when the combined principle advances and compound accrued interest equal the HUD upper home value limits of between $412,000 and $636,500.

In a difficult mortgage environment, a NatEquity Contract provides both income certainty and inheritance certainty. On balance, it is a better solution for unlocking senior home equity to pay for living and care expenses so that senior homeowners can age in place, even as it protects a significant portion of future home value for heirs. Given the new underwriting guidelines, it also may be the only way for many seniors to access their home equity.