Reverse Mortgage Changes on the Way!

By
Industry Observer with No Longer Processing Mortgages. MLO #293441 expired

Reverse Mortgage Changes on the Way!

The FHA has just released Mortgagee Letters 13-27 & 13-28 dealing with changes to the way Reverse Mortgages, also known as Home Equity Conversion Mortgages (HECM), will be handled in the future.

The first changes will become effective with HECM loans that have case numbers assigned beginning on September 30,Reverse Arrow 2013.  These changes will effect: Initial Disbursement Limits; Single Disbursement Lump Sum Payment Options; Initial Mortgage Insurance Premiums; Principal Limit Factors; and Initial Mortgage Insurance Premium Calculations on refinance transactions.  

Among the changes, these rules do away with the "HECM Saver" and HECM Standard".  There are also new ways of calculating what the maximum amount that can be borrowed is.  It also limits the amount of the available loan total which can be pulled out of the loan in the first 12 month - generally to about 60% of the possible loan total.

Additionally, there are other changes that take effect for case numbers assigned on or after January 13, 2014.  These changes apply to the Financial Assessment Requirements, and Funding Requirements for the Payment of Property Charges.  In ther past, those who took out HECMs did not have to meet credit or income requirements.  Due to the failure of numbers of these previous loans to go into foreclosure due to failure to make their required tax or insurance payments.   Depending on the findings of the Financial Assessment, there may be requirement that mortgagees mandate the use of mortgage proceeds or establish a life expectancy set-aside to fund property charge payments where the results of the financial assessment required by 24 CFR § 206.37 warrant it.

This is just a quick overview - since ML 13-27 runs to forty pages (40), and the attachment to ML 13-28 is 59 pages long.   Lenders will be thoroughly reviewing all this material in the coming weeks, and we will surely be getting further details, as they become clear.

These changes will change the landscape on Reverse Mortgages, and if someone is thinking of getting one, it might be considerably easier now rather than later.

                                                                                                                Image courtesy of FreeDigitalphotss.net

Posted by

 

Steven CookSteven T Cook
Loan Officer, MLO-293441      

Cascade Pacific Home Loans  NMLS ID 76988
720 S 333rd St  Federal Way  WA  98003
Office 253-874-1111 | Cell 253-677-1064
Toll Free 1-800-874-8760 | fax 253-295-3901
scook@cphloans.com | www.bayeq.com

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Rainmaker
183,229
Trisha Bush-LeFore
Preferred Properties Land & Homes - Walla Walla, WA
Providing Realtor Services in the Walla Walla Area

Steven,

Thanks for the update info on Reverse mortgages. I'll share your post with people who casually ask for information.

Sep 04, 2013 07:45 AM #1
Rainer
284,468
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Trisha -- hopefully they will find it useful as you did.  Hope things are going well for your over there in Walla Walla.

Sep 04, 2013 07:47 AM #2
Rainmaker
1,888,216
Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

And it has not been made clear to these people that they will still have to pay their taxes and insurance premiums?  And qualifying to make these payments has not been a part of qualifying for the reverse mortgage?

Sep 04, 2013 06:02 PM #3
Rainer
284,468
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Jay -- one of the requirements for qualifying for reverse mortgage was that they had to be "counselled" by government approved counsellors, and part of that was to clarify that they would still have to pay their taxes and keep their insurance current.  Up until these new rules go into effect, there has been no income or credit qualification required at all.  That is not to say that some lenders have just written these for anyone who "qualified" - though some of us have been wary of wholesale reverse mortgages for anyone over 62, and have given additional advice to some of the folks who have come to us, explaining how it might not be best program for them in their circumstances.

Sep 04, 2013 10:46 PM #4
Rainmaker
694,727
Clint Mckie
Desert Sun Home, commercial Inspections - Carlsbad, NM
Desert Sun Home, Comm. Inspection 1-575-706-5586

Hi Steven,

That's one way to stop the "Take the money and run" people. Also those who blow all the money and don't have it to pay the taxes and the insurance.

Have a great evening in Federal Way Washington.

Best, Clint McKie

Sep 05, 2013 12:15 PM #5
Rainer
284,468
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Clint -- yes, it will reign in some of those, but it might also hinder some who could really benefit from it, from being able to use it.   The biggest thing is that it adds much more paperwork for the lenders to complete - which can also deter some from wanting to do it.

Sep 05, 2013 12:29 PM #6
Rainmaker
2,560,478
Rebecca Gaujot, Realtor®
Vision Quest Realty - Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

Hi Steve, thanks for the informational changes to reverse mortgages. I do not know anyone who has used this, but will keep this post handy just in case.

Sep 08, 2013 10:06 AM #7
Rainer
284,468
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Rebecca - it will change the dynamics of whom it really makes sense for, so there may be less call for real reason to use it -- though with values and ages climbing, there may be a resurgence as well.  Will have to wait and see.

Sep 08, 2013 04:25 PM #8
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Rainer
284,468

Steven Cook

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