September 2017

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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