April, 2018 | Reverse Loan Consultant

April 2018

April 30, 2018 Repaying a Reverse Mortgage No Comments

When Does a Reverse Loan Need to be Paid?

This is a question that many ask about since there are no mortgage payments made on a reverse loan as are required on a traditional loan.

Plus there is no loan term but when does the loan become due and what are those circumstances?

They are referred to as a “maturity” event and include the following situations.

Sells the home Conveys title of the property to someone else
Passes away
Resides outside of the principal residence for a period exceeding 12 consecutive months due to physical or mental illness
Fails to pay property taxes, insurance premiums, condo fees, and other “mandatory obligations,” and all options to bring the loan current have been exhausted
Fails to maintain the home and allows it to fall into disrepair.

The most common reason for the loan becoming due and payable is that the borrower(s) has passed away and the property and or the estate has been received by the heirs.

As soon as is possible, the heirs must contact the Loan Servicer letting them know that the borrower(s) have passed away. The Loan Servicer will send them by mail a “Due and Payable” letter within 30 days and the heirs must respond as soon as possible to the Lender.

See what my clients are saying!

The Loan Servicer will explain the options the heirs have to repay the loan and it’s very important that the heirs contact the Lender by calling or emailing them to avoid the possibility of a foreclosure being activated by the Lender.

The Lender does not want to foreclose on the property and the heirs have the option of refinancing it and putting the Title in their name or simply selling the home and thereby paying off the reverse mortgage.

But it is crucial that the heirs respond to the Lender letting them know how they plan to repay the loan. The Lender will work with the heirs and help them through the steps to satisfy repayment, but communication is very important in the process.

My next post will go into additional details about how to satisfy the repayment and other details about the entire process.

April 19, 2018 Bankruptcy No Comments

Reverse Loans and Bad Credit

In general having derogatory credit is less of an issue for being approved on a reverse loan than it would be on traditional financing.

The reverse loan applicant does undergo some “light” credit Underwriting to determine their residual income after all housing obligations are paid and this would also include any revolving or installment debts as well.

The underwriting process is referred to in the industry as the Financial Assessment and was put into place within the last few years, providing an overview of the borrowers financial capacity and willingness to continue making any on going payment obligations after the reverse loan has funded and closed.

FICO scores are not used to determine an individual eligibility for the loan, but if there are any late payments on an existing mortgage and other obligations, a letter of explanation must be provided along with the necessary documentation to support it.

But what if one had had a bankruptcy? Can they still be approved for the loan or not? The short answer is “yes”.

Chapter 7 Bankruptcies must be dismissed or discharged prior to closing the new loan. If it was dismissed over one year ago, no additional documentation is required.

But if it was less than one year, the borrower must provide a court order signed by the judge as proof of the discharge or dismissal along with the discharge schedule.

Chapter 13 Bankruptcies have a couple of options.

The borrower pays the bankruptcy in full at the close of Escrow. And obtain a payoff letter from the trustee.

The borrower must pay off any liens against the property and any federal debt.

See what my clients are saying!

The court must provide written permission signed by the judge indicating that the borrower does not need to pay off the bankruptcy to proceed with the reverse mortgage. This permission must specify that the mortgage may be an adjustable rate mortgage, if applicable.

Chapter 11 Bankruptcies are most prominently used by businesses and have similar guidelines as a Chapter 13 Bankruptcy.

This is a brief description about what the lending process is and what must take place in order to approve a reverse loan for a borrower who has had credit problems in the past. But do contact me if you have any questions.

April 12, 2018 Foreclosures No Comments

Stopping a Foreclosure

Can a reverse loan be used to stop a foreclosure on a seniors property? Yes, it can but it must meet the other loan requirements per the lender.

Sadly, some senior homeowners have found themselves unable to keep up with their mortgage payments or property taxes because of unexpected events such as a health crisis or a major repair to their home and they end up falling behind on their payments, triggering a foreclosure.

If they are not too deep into the process and apply for a reverse loan, there is a good possibility that it can be stopped and they won’t lose their home.

Here is what a reverse mortgage lender will need in regards to the foreclosure from the potential borrower.

Proof of foreclosure and the dates associated with it.
A letter from the attorney handling the foreclosure confirming that the payoff is not a short pay.
Confirmation that the borrower is still occupying the property
Confirmation that the borrower is still the legal, vested owner of the property.
Confirmation that the Sheriff’s sale has not taken place, OR that the borrower is still within the redemption period AND vested in title.
The borrower must provide a letter of explanation describing what happened to them and what steps they took to avoid having a foreclosure.

Documentation must be provided by the borrower for the reason they fell into foreclosure, which could have been due to income loss, large and unexpected medical expenses or other viable reasons.

This is a very simple overview about using a reverse loan to stop a foreclosure that is in process, however there are additional qualifications regarding “residual” income , the amount that is “owed” and if there is enough remaining equity in the property to complete the transaction.

Please contact me for more details and/or a quote and I will answer any questions about the process and what you need to know.