reverse loans Woodland hills
HECM or Jumbo Reverse Loans
Due to some recent changes in the last year, the FHA reverse loan has lost some “traction”, due to the return of the historical MIP calculation, a reduction in the amount of funds available to the borrower, and most recently a collateral review of each applicant’s appraisal.
And if there are any concerns that the first appraisal may have been inflated, a second one will be required at a cost to the borrower and no one would like being told that they might have to pay for an additional appraisal.
This latest policy change will cause the loan processing period to possibly extend out an additional two weeks, but this will be another post for a later date.
But like the Calvery coming to the rescue, Jumbo reverse loans might very well be an ideal solution for some senior homeowners as there are more options to consider then there were in the past.
Jumbo reverse loans are less expensive than the FHA option and ideal for those properties that would be considered “high value”, such as 1MM or more and for California, that could apply to many seniors who own a home which might exceed the current HUD Lending Limit of $679,650.00.
Another name for this option is a proprietary reverse loan, meaning it’s not a government program as the FHA loan is, but is offered though investors and they work exactly like the traditional reverse mortgage.
And what are the new proprietary loans like and how similar are they to the FHA reverse loan?
I will share those details in the next post very shortly.
Power of Attorney for Reverse Loans
There are some occasions when it is necessary for a POA or Power of Attorney to be used when the borrower for the reverse mortgage is no longer physically or mentally competent and unable to manage their personal affairs and they need someone else who can legally represent them when it’s needed.
Generally speaking, if the borrower has a Trust in place, a Durable Power of Attorney is included in the Trust documents for each Trustee and can be used to manage the financial affairs of the named individual on the document.
For the sake of simplicity, I will not discuss all of the details in regards to Underwriting a reverse loan when a POA is being used for the loan application. But I am going to quote directly from a Reverse Loan lender guidelines about what a family needs to know if they intend to use one for their family member if they are unable to represent themselves in the loan process.
- If the borrower is mentally incompetent with a condition such as dementia or Alzheimer’s, he or she must meet the HUD face-to-face requirement at application, the HUD counseling or at the signing of the loan documents.
- A doctor’s letter certifying that the borrower is no longer capable of handling his or her own financial affairs and it must include the date the borrower became incapable of handling financial affairs.
- The date on the doctor’s letter must be AFTER the date the borrower originally signed a Notarized POA.
The above would also apply in those situations where the borrower(s) is competent but physically incapable of signing documents and representing themselves. This could be due to extreme arthritis, blindness or other disabling physical conditions.
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I hope that this information makes it a bit easier to understand what the HUD guidelines are to use a POA and also to reassure families that it does not affect their opportunity to be approved for a reverse mortgage. It’s important to know what are the steps that need to be satisfied to be and quickly complete the loan process.
Reverse Loan Choices
Most of the reverse loans that are originated are the FHA HECM program and over the years has been the “workhorse” for allowing seniors to utilize their home’s equity without having to qualify for a mortgage payment.
And as of this post, that continues to be the most commonly used reverse mortgage, however, in the last few years, another option has become available to seniors, especially those who have expensive properties at one million dollars or more.
The FHA HECM loan has a cap on the value of the subject property ( As of 2018) of $679,650 and the new loan will use that as the maximum appraised value, a percentage of “that” and the youngest borrower’s age to determine the amount of money the senior will receive at the close of escrow.
But what if you want more money than it will provide or you have a large mortgage you want to be paid off, but the funds in the HECM are insufficient to achieve this goal?
A Jumbo proprietary reverse mortgage might be the solution because the loan will consider properties valued as much as 6MM and as low as $700,000 and the interest rates are “fixed”. An additional benefit would be if someone lives in a Condo that is not on the approved FHA Condo list (That means they cannot do a HECM), a proprietary Jumbo reverse loan is the answer to this common problem.
An additional benefit to using this loan is that the Closing Costs are less than the FHA HECM because the borrower is not being charged the MIP insurance premium that all FHA loans require. And some are not charging an Origination fee, making the loan much more inexpensive to the borrower in comparison to the HECM.
As more lenders are offering Jumbo reverse loans and the industry evolves to meet the demand for them, I am sure that there will be new programs and opportunities for seniors to access the equity in their homes into the future making their retirement years more affordable and comfortable.
Decision Making and Fears
I think it tends to be human nature in that for some people, they hesitate to make a decision for just about everything that requires one. Whether it is getting married or maybe divorced, having children, taking a leap at a new career or choosing a paint color for their house.
And it’s prudent not to blindly rush into anything, you should be well informed before making decisions that are especially crucial to your life.
Most of the time these decisions are minor, but what about the ones that are not and could potentially have a huge impact on your life and future?
Sometimes this hesitation comes from looking for the best price for something if you are considering doing a large purchase, but other times it comes from a place of being worried about the possibility of making a “wrong” decision.
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Or not being educated enough about whatever it is you are considering. So, you put off making any decision about it indefinitely.
A good question to ask yourself is, “what is the worst thing that could happen if I make a decision and it turns out to be awful?” Asking yourself that question can potentially take away your fear and help you to move forward.
However, hesitating or waiting can continue for a very long time and it can be costly. And what is the “cost’ of waiting?
If you are hesitating in learning about reverse loans because you have heard “bad things” about them, why are you allowing yourself to be influenced by other’s opinions that generally are incorrect instead of doing some research with a professional?
What is this inertia costing you every month that you wait to find out how much money you could possibly receive from the HECM loan?