Federal Housing Administration

Social Security is Increasing for 2018

But don’t get excited about this awesome news, because it’s only increasing 2% which on the average, will boost up benefits 20 to 25 bucks a month.

Just imagine how you could spend that extra money you will be receiving beginning in January of next year.  Ummm, let’s see?  I can think of a number of thrilling possibilities.

New tennis balls in lots of different colors for your Walker.  Or extra money to blow at the Dollar Tree Store where one can find so many awesome deals, especially the junk from China.

Or maybe a couple cocktails at a Denny’s restaurant where you can get a Senior Discount when you order some of their nutritious food.

“Yes”, I am being sarcastic I know.   But really only 2% increase?

I may look very youthful in my picture on this website, but I’m a senior too and if I wasn’t working I would be standing on a street corner begging for money and food.

I’m lucky however, because I enjoy being a Reverse Loan Consultant and meeting many wonderful and amazing people who are considering using the funds from a Reverse loan to pay for medical expenses   ( I just had a partial knee replacement in August.), home improvement, care giving or maybe simply taking that long “talked about, one day we will go to Maui” and finally doing it.

The number one concern of everyone, but especially seniors is out-living their retirement funds ( If they have any) and not being able to afford to remain in their home for the rest of their lives.

But there is an option, a wonderful option and no one should be “scared” to look into the FHA  government insured loan program just for seniors affectionately referred as the HECM.

Its smart to find out if you would benefit from it or not, plus it’s better than being reduced to groveling each month for enough money to pay on going expenses and staying awake at night in a state of fear.

Oh and by the way.   I have a Reverse loan on my home that I used to pay off two mortgages I had at the time during the height of the Recession and Financial “crash”.  So unlike the majority of any of my competitors,  I’m qualified about the advantages of using the loan because of my own experience.

And I’m glad I did.  It was a great decision at the time and I don’t regret it.

If I hadn’t taken advantage of using a Reverse mortgage for my own situation, I would have lost my home in a foreclosure as I was quickly running out of money.



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New Reverse Loan Lending Limits

FHA increased their Lending Limits effective as of January 2nd. 2017 for all of the loan programs that they offer.  This includes Reverse Loans otherwise referred to sometimes as HECM/Home Equity Conversion Mortgage.

The increase wasn’t huge but it certainly could make a difference for some seniors who wish to pay off an existing loan that has a high balance and take advantage of more of their property’s value to achieve this, because the new limits will bump them up for the Principal Limit ( the amount of money they are entitled to receive).

The new Lending Limit is $636,150 over the previous one of $625,500.

What this means to a potential borrower is the possibility of a bit more funds at the close of escrow, especially if they were short to pay off an existing large mortgage.

The other area of change, is how seniors are using the funds from a Reverse loan.

I have found that more of my clients are putting a Reverse Loan Line of Credit in place to avoid drawing down on any investment portfolio that they may have and by doing so, extend the longevity of their investments and avoid any tax consequences.

And many seniors are quite concerned about the possibility of out living their money and how to pay unforeseen medical expenses as they age.  By having a Line of Credit in place, it gives them another option to be used for unplanned expenses such as “care-giving” and other expenses associated with aging.

And it’s important to understand the following:

  • The property remains in the estate and transfers to the heirs when the last borrower passes away
  • The Title remains in the name of the borrowers or their Trust
  • There are no mortgage payments, but property taxes and Homeowners insurance must continued to be paid by the borrower(s)
  • There are “No Costs” Reverse Mortgages available
  • Sell current property and buy down to a smaller property using a Purchase Reverse loan.


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Seniors with Mortgage Payments

In my previous post I discussed the serious issue of the number of seniors in the United States who still have a mortgage on their home and may have difficulties paying for it.

If they are still employed, the may not be able to afford to retire because of their mortgage payment that they are obligated to pay each month.

Certainly a Reverse loan is the better option, since the homeowner is not required to make any payments and it will allow them to manage their retirement savings to last longer if they are  not drawing down on their funds.

Here is the second part of the article that summarizes a report that was published recently by HUD’s Office of Policy Development and Research.

Written by Jason Oliva

“The implications of carrying housing debt into retirement years are severe. Not only may these homeowners have to postpone retirement or make difficult decisions regarding lifestyle spending on food, medical care and other expenses, but carrying debt also weakens their ability to draw on home equity to supplement their income as they age.

Refinancing options and reverse mortgages, HUD writes, may be appropriate for some older homeowners with mortgage debt, and financial counseling and assistance programs can provide help to those facing financial hardship.

“Older homeowners might draw on their home’s equity to fund modifications that allow them to age in place, help pay for their children’s or grandchildren’s education, or pay medical expenses—and as long as they have the resources to make loan payments, they can reasonably carry mortgage debt,” HUD writes.”

I will share the reminder of the article in my next Post.

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“Financial Assessments” for Reverse Loans

Okay, the dreaded FA went into effect on April 27, 2015 for all Reverse loans originated as of that date and thereafter.   Ummm, so what does this mean to a possible borrower?

Do they have to qualify for the Reverse loan using FICO scores and income ratios?  Is is going to be much more difficult to qualify for the FHA loan?

“NO”.   It won’t.   Anyone over age 62 and occupying their home will still be approved.   However, more documentation will have to be collected by the Loan Officer when a potential borrower is applying for the loan.

Yes, I know.  It’s a hassle and everyone hates paperwork.

Essentially, the borrowers’s cash flow VS housing obligations, credit card debt and any installment loans and monthly utilities will be subtracted from the borrower’s income.

And when the “dust settles”, if a couple living on the West Coast nets $998.00 after all expenses have been deducted from their income, then they won’t have to have an escrow account set up to pay future property taxes and homeowners insurance.

However, if they fall under that   (what I consider a small number), and they have cash reserves such as a Savings or retirement funds and have never been late paying their property taxes or Home Owners’ insurance,  then they will not be obligated to have funds set aside from the money they would receive from their Reverse loan.

So, going forward, all of this means that the borrower has to provide income documentation and any bank, investment or retirement statements to show their cash reserves.

In the end, it’s just going to take a bit longer to copy everything and then have an Underwriter “doodle” around with the calculations,  before giving final approval to the transaction.

In the 14 years that I have been helping people apply for the Reverse loan, I frankly can’t think of anyone that would have not qualified for it under these new guidelines.   My personal opinion, is that my future clients will be just fine and sail through the process.

I will give them a list of the necessary documentation they will need when I first meet with them for their consultation.  Then when I return with their loan application, I will simply pick everything up at that time.

Due to the fact that I have been in Lending over 30 years and I have a great deal of experience documenting income and reserves for traditional mortgages,  this is a “no brainer” for me.  And I will always make every effort to make it easy and comfortable for my clients, too.

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Reverse Loan Applicants and Financial Assessment

If you read the previous part of the article in an earlier post, then you are aware of the pending changes that will take place on March 2, 2015 for anyone applying for the FHA Reverse mortgage.   The point of the assessments is to determine whether or not the potential applicant will have the capacity to continue to pay their property taxes and keep their home insured.

At this time, it is not clear what type of documentation will be required from the applicant to verify income and residual cash flow, but more than likely it will be bank statements, copes of Social Security and or pension income.

Reverse mortgages are beginning to sound like a traditional loan, as the documentation will be very similar.

HUD Releases Reverse Mortgage Financial Assessment to Take Effect March 2015

Posted By Elizabeth Ecker On November 10, 2014 @ 1:39 pm In News,Reverse Mortgage

The mortgagee letter also specifies documents [3] that must be collected and submitted for all borrowers. The documentation has been updated to include “Financial Assessment Documentation” that includes, but is not limited to, credit history documentation, income verification, asset verification, property charge verification, residual income analysis, documentation of extenuating circumstances or compensating factors, and calculations for life expectancy set asides and residual income shortfall set asides.

According to HUD, the lender must evaluate the borrower’s “willingness and capacity to timely meet his or her financial obligations and to comply with the mortgage requirements.

“Where the mortgagor has not demonstrated the willingness to meet his or her financial obligations as stated above and no extenuating circumstances can be documented, the mortgagee must require a fully funded Life Expectancy Set-Aside.”

The assessment refers to previous mortgagee letters that drafted the financial assessment but takes the place of those mortgagee letters with some changes.

The changes are likely to present tailwinds, rather than headwinds, one executive told attendees of the National Reverse Mortgage Lenders Association national conference in Miami on Monday.

Written by Elizabeth Ecker

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