A Jumbo Reverse Mortgage was designed by financial institutions to allow people with expensive properties to access more of the equity from their homes.
Loans that were known as Proprietary Reverse Mortgages or Jumbo Reverse Mortgages were made available by financial institutions to allow homeowners of very expensive properties to get more money from their properties’ equity than was given by government insured HECM Reverse Mortgages. These reverse mortgages were for properties over $650,000.
Why are Jumbo Reverse Mortgages No Longer Available?
The world wide recession and banking failures has produced what is being described as a “credit crunch”. Basically, a credit crunch means that there is less money available for loans. Jumbo Reverse Mortgages are seen as extremely risky because of the financial situation. Banks are no longer willing to loan monies in excess of $400,000 in reverse mortgages since the future of the property and the banking institution is not clear. Banks could easily lose a great deal of money if they loaned $1,000,000 on a reverse mortgage, waited 20 years and the property was not marketable in the current economy at $800,000.
What factors are involved in making Jumbo Mortgages Risky?
Non Jumbo Reverse Mortgages are insured by the Federal government and are controlled by HUD. Jumbo Reverse Mortgages were not backed by the government. Financial institutions have dropped loaning money on home equities that are not government backed because house values are at an increased likelihood of declining. If the equity in the house can’t be guaranteed by market prices, Jumbo Mortgages increase the bank’s risk at losing money on a reverse mortgage.
What programs have replaced the Jumbo Reverse Mortgage?
Reverse Mortgages were set up for lower and middle class people to access the equity in their property by getting a HUD managed reverse mortgage. People with very expensive properties can still get home equity loans from their banks but these loans are not reverse mortgage loans, of course.
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