B. Donovan

Very recently HUD released a statement authorizing individual lenders to establish underwriting guidelines regarding income and debt ratios as well as credit history requirements.  MetLife is the first to release theirs and all new applicants will have to comply starting November 14th.

The purpose of these new financial and credit guidelines are to reduce the amount of future tax foreclosures on reverse mortgage  borrowers that have not paid their property taxes.

Not unlike applying for a forward conventional mortgage loan, each borrower will have demonstrate they have the income, credit history and assets to maintain thier property taxes, homeowners insurance and upkeep on the property.

Currently thier is no standard and each lender can establish thier own guidelines. It could be possible that you may get turned down with one lender and approved by another

Eventually it is expected that HUD will release a standard set of of guidelines for the the financial assessment but until then it’s up to each lender to set their own.

If you live in or are looking to buy a condominium and would like to use FHA as your financing source for a purchase, refinance or reverse mortgage you need to be aware that FHA recently changed their approval process.

The new rule requires the entire development must be approved. This is accomplished by your lender working with the Condo association or property management company. There is a detailed questionnaire that must be filled out along with several specific documents that must be provided including the developments financials. This can be a lengthy task and some associations may be resistant to cooperating.

Below is an excerts of a article that was recently published in the LA Times. It highlights the issue of getting the association to cooperate and your rights as an individual unit owner.

Question: I own one of 64 units in my development and the board president refuses to cooperate with my bank in completing my reverse-mortgage paperwork.

She wrote to owners that we are a condominium development, “which means the entire development would have to be approved in order for any individual unit owner to obtain an FHA loan…. We believe that because some people may get in because of the low interest rates (3%), and with little or no down payment required, we could be exposing ourselves to liability if these owners cannot make their mortgage payments and are ultimately foreclosed.

“At this time we believe it’s not in the association’s best interest to apply for the approval. We realize that this affects people who wish to obtain an FHA loan for either refinancing or obtaining a reverse-mortgage loan. We have to do what’s right for the majority of all homeowners.”

The bank was willing to absorb the cost of obtaining Federal Housing Administration approval, but it’s been more than 30 days since my application. Isn’t this discrimination?

Answer: The president’s interpretation and reasoning are wrong. She cannot predict who will or will not make mortgage payments or know what’s “right” for the association.

Actions such as these deprive all titleholders of their individual property rights and also prevent owners requiring refinancing or reverse mortgages from keeping their property. Those decisions also deprive titleholders from making the best possible estate planning choices. That failure by the board is negligent, subjecting the president and the association to a possible lawsuit for damages should an owner lose title to his or her property but for the approval of a reverse mortgage.

By Stephen Glassman and Donie Vanitzian

In the last few weeks certain bond pricing has been on the rise having an adverse effect on the HECM fixed rate product. Lenders have had to adjust rates upwards to compensate.

This is bad news for borrowers because as the rates rise it will reduce the available proceeds on the loan. With decreased home values in some case this could make the difference if a borrower can get enough proceeds or not.

There are still some great rates and programs out there so if you are in the market for a reverse mortgage now is good time to move on one.

Currently the FHA insurance fund is short. The House has approved a 150 million subsidy that we are now waiting for the Senate to approve.

Even with approval from the Senate the Principle Limit (what the borrower qualifies for) will most likely be reduced 1-10% to help further reduce the risk to the insurance fund.

Here is an article from the Reverse Review Magazine….

Seniors should be informed that the budget proposals working their way through both the House and Senate, as currently drafted, bring a 150 percent increase in annual FHA (Federal Housing Authority) insurance premiums, as well as reductions in available proceeds on FHA-insured HECM (Home Equity Conversion Mortgage) reverse mortgage loans.

“Now is a good time for seniors to take advantage of low rates on reverse mortgages and get the maximum return on the product before the new fiscal year starts this fall,” said Jeff Lewis, Chairman of Generation Mortgage Company.

According to Lewis, starting October 1st, both bills will change the HECM value proposition if approved in their current form. “With the upcoming Senate vote, seniors have limited time to take advantage of the current pricing on reverse mortgages,” commented Lewis. “Reverse mortgages provide financial independence to thousands of seniors struggling to sustain their retirement. A majority of our borrowers use reverse mortgages to pay off existing traditional mortgages, and free up much-needed income.”

In early July, the Transportation Housing and Urban Development, and Related Agencies Appropriations Subcommittee met and provided $150 million in funding for the Federal Housing Administration’s reverse mortgage program. The bill passed the full House Appropriations Committee late last month and went to the House of Representatives two weeks ago. In the house, the appropriation was lowered to $140 million, and later passed by a vote of 251 to 167. It is not yet clear when the bill is headed to the Senate.

Starting next week there will be a new twist rolled out by one lender on the FHA HECM Fixed rate reverse mortgage program. They will be offering a zero origination fee and zero service fee program. This is one of the most significant changes to this loan program in its history. What this means to a borrower is lower closing costs and more net proceeds. An example of this would be a 70 year old borrower with a $300,000 valued home would currently see about $175,000 in available net proceeds after costs. Under the new program the borrower would see closer to $186,000 net proceeds an $11,000 improvement.

This will be a great benefit for all borrowers, especially ones that have existing mortgages that need to be payed off, it could make the differnce of qualifying or not.

If you would like more information please call 1-877-307-6454 or visit our web site www.reversemortgagesupport.net and fill out a request more information form.