Reverse Mortgages

Paperwork Needed for a Reverse Loan

I actually discussed this in a previous post, but to change it up a bit and make it more interesting, I created a short video with terrific music that makes it pretty simple to understand what kind of documents are needed from a borrower.

Of course, depending on their personal situation other items might be needed, especially if the borrower is still working, then pay check stubs and W2’s would be needed and any phone numbers for management companies if the borrower lives in a Condo.

Which is always a good idea, but for whatever it’s worth here is the video.

And please….do call me if you have any questions.

 

 

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Reverse Loans for Million Dollar Properties

There are actually two totally different reverse mortgages that are available for seniors to use when they are considering using a Reverse Mortgage to pay off an existing mortgage or simply want additional funds.

Not too many consumers know about the optional “Jumbo” reverse loan that will enable them to receive more of their equity than they would if they used the FHA HECM program, plus it’s less expensive as well.

The FHA Home Equity Conversion Mortgage has a ceiling on the appraised value of a property and it is referred to as the HUD Lending Limit.   Originally this Limit was calculated on a national basis per county, so it varied in the amount of allowable appraised value of a property, county by county with the west coast having the highest limits.

Several years ago HUD eliminated these unfair limits and issued one single amount for the entire country which at this time is $636,150 but I can recall when it was only $362,790 and lower.

It’s considerably higher now, but keep in mind that the actual amount of the reverse loan will use a smaller percentage of the appraised value of the property or the HUD Lending Limit,  ( Whichever is less) than a Conventional loan would use and most often ( Depending upon the age of the borrower) they might receive between 40-70% of the appraised value/Hud Lending Limit.

But if their property is worth 1.1 MM plus, the value will be capped at the HUD Lending Limit and they will not have any of the remaining equity in their property accessible for their use.

This is where the Jumbo Reverse Loan becomes another option, unlocking the rest of the equity in the property to the borrower and enabling them to draw out more money from their home then they could receive under the HECM FHA loan.

I will give the details about this loan in my next post.

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Reverse Mortgage Misconceptions

In my previous post, I discussed the negative image of the Reverse loan and where it came from and how we in the industry, are still plagued by this perception that is no longer true.

In spite of the amount of television ads and the many qualified resources for accurate information about the FHA loan program, there are still many people that continue to believe that they are a terrible option for a senior to use to access their equity.

Not true.

And I have to wonder how many seniors chose not to take advantage of the HECM program when it would clearly benefit them, due to their fear and lack of credible information.

I do not work for a BIG Lender, I am employed by a Broker and I work independently from my home office and I always, always meet potential clients personally in-their-homes.

I do not advertise and neither does my Broker and I conduct my business 100% referral based.   From former clients, Bankers, Trust and Elder Law attorneys and Financial Advisors.  I have built relationships with them over the course of many years and they know that they can trust me to take excellent care of their clients.

That is how I transform mistrust and lack of credibility.  And most importantly, I do not pester them to apply for the loan.  It takes time to make a decision and it has to be the best one for the client.  Not me.

However, an excellent resource for information that is accurate and correct is to chose one of the HUD Counseling agencies and request a telephone appointment for Reverse loan counseling.   They generally charge between $125 to $150 for an hour session, but it’s worth it and will give a person a better grasp of the loan and how it may or may not benefit them.

Here is a link to HUD for a list of approved counseling agencies.

https://www.hud.gov/program_offices/housing/sfh/hecm/hecmlist

So “whatever you have heard”, don’t believe your neighbor, friend, hairdresser, financial advisor or anyone that is not qualified or knowledgeable about Reverse mortgages.

Because they simply do not know anything.

Only “what they have heard”.

 

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Procrastination and Reverse Loans

In the last several days I have received quite a few panicky phone calls from people who are disparate to complete the counseling that is required by HUD prior to applying for a Reverse mortgage.  And the counseling agencies are slammed with requests for appointments and will not be able to provide everyone an appointment immediately when they request one.

And the reason for the panic is due to the pending changes to the HECM program offered through FHA that will take effect on October 2nd.

The changes will be a reduction in the amount of funds to a borrower (Referred to as the Principal Limit) and will fall between 20% to 11% depending upon on the age of the youngest borrower.

And the Mortgage Insurance Premium (MIP) that is paid to FHA to insurance the loan will increase from .50% if the client is utilizing 60% or less of the money from the Reverse loan, to 2.00%

The reason behind these changes is to make sure that the Reverse loan HECM will continue to be an viable option for seniors and to be certain that the MIP pool of insurance will be well funded to cover any  loans in the future in the event there is no equity left in the property at the time the loan becomes “due” at the death of the borrower(s).

The Mortgage Insurance Premium Fund will cover the “short” fall and it will not be the responsibility of the Estate to pay the entire balance in full if the property does not have enough equity to do so.  And that is the main benefit of paying the MIP.

As of this writing and if you live in California, the latest you can complete your telephone counseling appointment would be tomorrow September 20th. because California requires a 7 day “cooling off” period before you can start the loan process.

I can take your application during this time, but I cannot start the loan process.   We have to wait and then we would order a HUD Case # for the borrower and hopefully get it into the system no later than September 30th.

The calls that I have been getting are from people who procrastinated about whether or not to do a Reverse loan and they had months to think about it and now it’s frankly too late to start one.

I will have the new calculations for the pending changes, most likely by the end of the month if anyone wants to contact me about how much money they could receive after October 2nd. 2017.

Like “death and taxes” are a certainty and no one can avoid, you can be certain the HUD will always be “tweaking” the Reverse loan program and this will not be the last time that they will do it.

Just don’t procrastinate.

 

 

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Why Do a Reverse Loan?

I have been a Reverse mortgage consultant for almost 20 years and quite often, I am asked why would anyone ever use a reverse loan?

It’s certainly a reasonable question, but most of the time, it’s coming from a  place of lack of correct information about the FHA HECM loan program for seniors and too often the “stories” and myths they have heard about reverse loans.

Initially when I first started in this profession, the most common reason for applying for it, was the need for additional funds to simply pay on going monthly expenses.   Needless to say, the amount of money seniors receive from Social Security are woefully inadequate to pay mortgage payments   ( if they still have a mortgage), food, utilities, medical expenses and the plethora of costs we all have each month.

In my next several posts, I’m going to talk a bit about the loan and how it’s become more affordable and other misconceptions that are still circulating in the public about it.

And I will share some stories about some of my clients   ( Without naming them), as to why they chose to use a Reverse loan in their particular situation.

And…. no one has ever regretted their decision.

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