Whenever a Reverse mortgage is originated a HUD Case number is assigned to that particular borrower and their loan transaction. This is done after they have completed their HUD required counseling, provided a copy of the certificate to the lender, verifying that they have done so, at which time the case number is ordered.
Once this step is completed the lender may order the appraisal, open escrow or request payoff information on any existing loan that the borrower might have. What’s important for the borrower to know, is that they are assigned only one case number via whatever lender they chose to create their Reverse loan.
If they wish to change lenders, they must request that the original lender release the case number to the lender that they have ultimately chosen to originate their loan. Plus, if any appraisal was ordered and completed under the previous lender’s name and registered with HUD it will be used to determine the amount the amount of money the senior will receive if it is less than the HUD lending limit of $625,500.
I recently had a situation where my clients (unbeknownst to me), applied for their loan through another lender prior to meeting with me and the appraisal was completed by the lender and well under market value (even in our current real estate market). Due to the poor appraisal, they are not able to receive as much money through a Reverse loan that they should be entitled to have.
They were very upset and thought that they would simply apply for their loan through a different lender and get a better appraisal. They were unaware that a HUD case number would be assigned to them and they certainly didn’t know that they would be unable to get another appraisal due to HUD guidelines.
Doing an FHA loan regardless if it’s a Reverse loan or a traditional “Forward” one; the procedures are the same. Few people in the general public would be aware of the need for a case number on an FHA loan and what that would mean to them if they wish to change lenders.
The borrower certainly wouldn’t have any control on how much an appraiser may value their home but it’s important to point out any improvements and possibly have some comparables of other properties in the area for the appraiser’s review. This might prevent a poor appraisal being done but isn’t a guarantee, either.
It pays to know.
These last two weeks have been extremely stressful and hectic for me because I was trying to beat the deadline before FHA reduced the funds on Reverse loans by 10%. This new ruling was to become effective on October 1st. and unless a client had completed their HUD mandated counseling and a loan application prior to that date, they were not going to receive the money that they thought they would be getting.
I think a number of us were taken by surprise by this less than encouraging news and I had to put a lot of pressure on four of my clients to hurry up and complete the counseling so that I could order a HUD case number before the deadline. Amazingly, I managed to do this but I’m sure that there are many seniors who were unable to move fast enough or get a counseling appointment. And now its too late.
The agencies were backed up with the demands and without a counseling certificate, you can’t get a HUD case number, so it was crucial to get the counseling done immediately! The last two weeks have been insane for me, as I pushed and pushed to get these four loans assigned their Case numbers before it was too late.
Those who were still undecided about the loan, will now have to settle for less money and if they currently have a large mortgage that needs to be paid off, they may find themselves unable to do so. This is particularly tragic and especially considering the difficulties seniors are confronting in our current economy.
An interesting note here, is that the Department of Housing and Urban Development ended up issuing 60,000 case numbers within the last few days. Not all of these are necessarily for Reverse loans but in my mind, that’s a huge number and means that 60,000 people are doing an FHA loan of some sort.
I’m going to add here a bit of additional information that is important for a senior to be aware of. Currently the HUD lending limit for Reverse loans is at $625,500 throughout the United States. But there is an ongoing discussion to reduce that figure after the first of the year, to what it was previously, $417,000 which is not good news.
If you have been trying to decide whether or not to do the loan, you had better quit procrastinating, do the free counseling through Money Management and then make a decision. If the lending limit is reduced, you may find yourself in a helpless situation and wishing that you have done a Reverse loan instead of just “thinking about it.”