Reverse mortgage subordinations clarified

While rare, some lenders do allow them

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A few months ago, we addressed the topic of encouraging borrowers to ask their lenders "what's possible" in recasting their home loans. Some consumers who have owed more than their home was worth have been able to get their prepayment penalties waived when attempting to refinance to more affordable rates and terms. We also supported seniors who approached their lenders about "subordinating" their loans to allow a senior to obtain a reverse mortgage. By doing so, the senior is able remain in the home when they otherwise would have been forced to move. We offered an example that drew questions, comments and concerns from reverse mortgage lenders. Federal Housing Commissioner David H. Stevens issued a mortgagee letter to all reverse mortgage lenders attempting to clarify the subordination rules for Home Equity Conversion Mortgages (HECMs), which is the nation's most popular reverse mortgage program. While the letter appeared to clarify the issue, some lende...