Texas Reverse Mortgage Purchase not Approved

There is not a true HECM for Purchase program in Texas. The Texas Constitution contains technicalities that prevent this in Texas. Though legislative changes and Constitutional amendments may make the HECM Purchase possible in the future, for now, seniors will have to seek alternative loans to purchase a new home.

The Home Equity Conversion Mortgage (HECM) for Purchase is a program that allows seniors over the age of 62 to purchase a new primary residence using the proceeds from a reverse mortgage. The program has been around since 1989, but it is only recently that the FHA, a division of the U.S. Department of Housing and Urban Development (HUD), approved the HECM for its purchase program. This means that seniors have a government insured option for buying their home.

The reverse mortgage is a great asset to seniors who need help to pay their rising medical costs and general living expenses throughout their retirement years. The HECM for Purchase takes the reverse mortgage a step further and puts that money directly toward the purchase of a new home that is more suited to their needs, such as closer to family or more manageable in size.

The Texas constitution prevents the purchase program by stipulating that the homeowner must already be on the title of the property prior to taking out a reverse mortgage. An alternative solution would be for them to purchase the home and then pay themselves using the proceeds from a standard Reverse Mortgage. With this solution, though, they risk encountering other conflicts, such as the seasoning requirements of 3-12 months that some lenders have.

There are still other options for seniors in Texas, beyond the HECM for Purchase. They can still obtain a reverse mortgage as homeowners in other states can. The reverse mortgage can help seniors who are struggling to manage their rising medical bills and other expenses during their retirement on top of mortgage payments. The program allows these homeowners to convert equity in their homes to a tax-free income, without mortgage payments, and without the risk or reality of having to sell their home or sign over the title.

In fact, the U.S. Department of Housing and Urban Development (HUD) recently raised the reverse mortgage limits to $625,500 to help stimulate the economy and provide immediate relief to senior homeowners facing unaffordable payments. The implementation of this limit has increased financial options for senior homeowners and significantly eases the burden of retirement during the economic downturn.

Even though the HECM for Purchase is currently not allowed in Texas, seniors should not be deterred from seeking alternate solutions to buying a new home. And if they can wait a couple of years, the options for reverse mortgages will increase. As of now, there is a lack of verbiage in the State Constitution to allow HECM for Purchase. Because we have to amend our State Constitution to be able to offer HECM for purchase, the earliest an HECM for purchase in Texas would be allowed is 2012. The Texas Legislator only meets approximately once every 14 months, so the quickest this can be brought to a vote is in 2010 for a 2011 ballot.