Foreclosures on Reverse Loans
When a senior or seniors wish to apply for a reverse loan, there are many safeguards in place to protect them from financial abuse, typically from a family member and also from making a decision that may not be the best option.
There are many regulations and oversight by HUD to protect seniors from being scammed and losing their homes, but unfortunately, misconceptions continue and some seniors and their families believe that the bank will take their home and the Lender takes advantage of seniors.
None of which is true. Here are the responsibilities of the reverse loan borrower and how they can prevent foreclosure on their home.
- Before they can apply for the reverse loan, they must complete phone counseling with a HUD-approved counseling agency. The purpose of the counseling is to make certain the senior understands how the loan functions, why they want additional money, and is anyone trying to take financial advantage of them. They cannot begin the loan process unless they have done the counseling and have a HUD Counseling Certificate provided to them.
- They must occupy the property. (One borrower can be in assisted living as long as the other continues to live in the home.)
- They must pay the property taxes and not be late on them when they are due.
- They must keep their home insured with Homeowners’ insurance.
- They must keep the home in good condition and repair.
If they are delinquent on taxes or insurance, Loan servicing will contact them and ask if they need help with the payments, or maybe they just forgot to pay them. And the Lender will provide them enough time to pay what is owed on their insurance or their property taxes.
But they might receive a letter stating they are potentially in foreclosure.
This is the responsibility of the homeowner and is clearly stated in the loan application and Loan documents. Plus the HUD Counselor will discuss this with them as well.
The borrower must continue to pay property taxes and Homeowners’ insurance, otherwise, it can trigger foreclosure and it is clearly disclosed to the potential borrower during the loan process.
http://See what my clients are saying about me
When the loan is being processed, the Underwriter will review 24 months of property tax and Homeowner insurance, and if late payments have taken place, the Underwriter might suggest that some of the funds from the reverse loan, be set aside for future payments on these obligations.
Since the borrower is obligated to occupy their home, what happens when they pass away? Technically, they are no longer occupying the property, per the terms of the loan and that would trigger the foreclosure process.
Continued in the following post.
Home Equity
I just read the following stunning statement about how much American seniors have in home equity. It is an enormous figure and seems to be growing upwards every quarter, and is now at $7.54 trillion dollars.
But many seniors still have a mortgage on their property and have to make mortgage payments and its become extensively more difficult in the last few months due to Covid-19 and how it has impacted millions of Americans and their savings and retirement funds.
Many American homeowners who are unemployed due to the Pandemic are extremely concerned about making their mortgage payments and have entered into forbearance plans with their Lenders. Their payments will be deferred for a period of time, but depending upon the terms of the agreement, the homeowner might be faced with a balloon payment.
If they don’t have funds, to begin with, how are they going to pay whatever the amount is when it becomes due in a few months?
But if the homeowner is a senior, they can use a reverse loan, pay off the mortgage they have, and not have any more monthly payments. The Title stays in their name, no prepayment penalties and when they pass away, their home goes to their estate.
This is one of those times when it is seriously advantageous to be a senior in America. A reverse mortgage can help mitigate market risks and provide some financial security to them during this very difficult time in our country.
And it is a very intelligent solution to eliminating money insecurities.
Reverse Loans in the Time of Covid-19
American seniors are looking for sources to provide them with more money because some of them have experienced serious losses in their investments during the pandemic when it exploded in March. The Stock Market went off a cliff and the financial markets have been seeing significant losses in liquidity and continue to be volatile.
Many of us experienced losing money and investments during the Recession, homes were foreclosed on, and it has taken a very long time to recover or regain some of those losses from that terrible time. But for many individuals they have as of yet, to get back to where their investments were when the economy crashed.
Now it’s 12 years later, everyone is just that much older and honestly, seniors don’t have enough lifetime to wait it out until the markets improve. What are some options for money?
Some seniors are attempting to apply for a traditional HELOC at their Bank, only to find out that many Banks are no longer offering them. And it’s important to know they can “freeze” a HELOC from any future withdrawals if they get anxious about the stability of the financial markets.
Although the fees associated with obtaining a HELOC or less than a reverse loan, they don’t provide as much money and the borrower still has to make mortgage payments, whereas a reverse loan does not require payments.
And for these reasons, more seniors are motivated to investigate the possibility of using a reverse loan as a “safety net” of funds and at the same time, eliminate liquidating their investments during a severe and “down” market.
Reverse mortgages offer several choices to receive money for the borrower. The FHA HECM and Jumbo reverse loans up to 6 MM.
Learn how using reverse loans may help and don’t hesitate to find out what they may offer you.
Covid-19 and Seniors at Risk
It has been a while since I have written anything in my blog, because like everyone else, my life was turned upside down with the pandemic and it’s destructive swath across the world, taking lives, ruining economies, creating fear, anxiety, and uncertainty.
Anyone who had a 401-K, some sort of a retirement plan or at the least, a savings account have seen them dashed, drained away and depleted within days and the Stock Market will continue to reel in uncertainty for most likely, a very long time.
Eventually, we will get through this terrible time, but if you are a senior, you may not have the ability to wait it out until the markets recover and are very worried about running out of money. I am here to say, that this is the one time a senior has an advantage over younger people because they have an option that younger people don’t have.
If a senior age 62 or older, lives in their home (even if they have a mortgage on it), they could apply for a reverse loan. However, too many are afraid of them because they think the Lender will end up owning their home (false), they have to still make payments (false), there is “fine print” to trick them (false) and they are “too good to be true”. (False again.)
- The FHA HECM is the most regulated mortgage in the lending industry, to protect seniors from financial abuse.
- Anyone who wants to apply for a reverse loan must complete telephone counseling with a HUD-approved Counseling Agency.
- There are no mortgage payments, however, the borrower must continue to pay property taxes, Homeowner insurance and keep their home in good repair.
- There are no restrictions on how the borrower uses their funds, except they are discouraged from buying annuities or other investment products.
- They can remain in their home for their entire lives and leave it to their estate.
The reverse loan industry is seeing an increase in loan applications at this time because obviously money from a reverse loan will give them the safety and security they need and take away the fear and anxiety about running out of money.
The loan is safe, well-regulated and an ideal solution for all senior home-owners to consider right now. From the time the HUD Counseling is completed, the loan processing time takes about 45 days, however, it might begin to take longer with the increase in applications.
Although I am located in California, anyone who reads this may contact me if you have questions. I can point you in the right direction for a reverse loan consultant in your state.
Don’t hesitate. If you have a home or Condo and you are old enough, you have this opportunity for financial security. Look into a reverse mortgage. Now.