How has reverse mortgage changed?

How has reverse mortgage changed? Topic: How has reverse mortgage changed?
June 25, 2019 / By Ashling
Question: I have heard that reverse mortgages have changed in the last year or so and that more changes are coming. How does this affect someone applying for a reverse mortgage?
Best Answer

Best Answers: How has reverse mortgage changed?

Zibeon Zibeon | 4 days ago
Although there is no guarantee, typically new changes to the FHA HECM reverse mortgage are not retroactive and anyone already in the process (i.e. counseling has been done, an application taken and an FHA Case number issued) is not affected by any new laws and is grandfathered in. So if you are seriously considering doing one, and have done all your research and feel this is the best solution to whatever you are trying to resolve, it would probably be a good idea to move ahead now. One of the proposed changes in the works is requiring a financial assessment to ensure that seniors will still be able to meet all their financial obligations (e.g. pay property taxes, pay homeowners insurance, etc.) even with a reverse mortgage. Since a reverse mortgage is a very conservative program and you can only access a limited portion of your equity, some times it only provides enough to pay off an existing mortgage, but you still do not have enough money to pay your other obligations on a monthly basis. In situations like this, sometimes it is better to sell or downsize, etc. You have to look at the whole picture for each senior, and long term, on a case-to-case basis. A good reverse mortgage loan officer should already be doing this. Know that counseling certificates are good for 6 months. An application and FHA Case number can take at least a couple of days to obtain, barring unexpected problems or an overloaded system with last minute submissions. Also know that you can cancel at any time during the process (you may be responsible for the cost of any appraisal or inspections already completed) and you will have a 3-business day mandatory rescission period to change your mind after you sign final closing papers.
👍 96 | 👎 4
Did you like the answer? How has reverse mortgage changed? Share with your friends
Zibeon Originally Answered: In a reverse mortgage, how long afterwards do they take over the house?
Sorry to hear about your mom. Once she passes away, the heirs have 6 months to pay off the reverse mortgage. Unlike a regular "forward" loan, that is one of the features of a reverse mortgage. Assuming you are the heir, you need to be speaking with the lender from the beginning, however. They need to know what you plan to do -- sell, refinance or walk away. If you plan to either sell or refinance, they need to see that during those 6 months you are doing a good-faith effort to do either. If you are communicating with the lender, and are making a good-faith effort to either sell or refinance, it is even possible to get up to two 3-month extensions, for a total of one year (lender's discretion). The lender does not want the house back; they are not in the real estate business; they just want to get paid back finally, after all those years since your mom tapped into her home equity and did not make a single mortgage payment. If you don't communicate or make any efforts, the lender will begin foreclosure proceedings right away because that process itself takes about 6 months, so by the time your 6 months is up, the foreclosure is about to be finalized and the Marshalls are ready to knock on your door for the eviction. If you can't qualify for a refinance, and there is no equity to make it worthwhile to sell, you can sign a Deed in Lieu of Foreclosure which in effect gives title of the property to the lender and allows them to handle the sale of the property. If you choose to sell the house, the lender will only collect either 1) exactly what monies it gave your mother, plus the interest that the loan accrued over the years, and if there are any monthly fees, OR 2) the sales price less the real estate commission, whichever is less.
Zibeon Originally Answered: In a reverse mortgage, how long afterwards do they take over the house?
MRA is right, you'll have six months to come up with the funds yourself. If possible, and you desire the house, I'd use any other inheritance (car, assets) to pay off that reverse mortgage.

Sloan Sloan
Due to so many people no understanding these, many were calling them scams. Now mortgage companies have to include property taxes and home insurance payments. Before people were not able to make these payments and the bank would take their home. That's just one of the changes. Reverse mortgages are a horrendous financial mistake no matter how many rules you add to it.
👍 30 | 👎 -3

Orrell Orrell
I think they are lending less of your equity now. They will still be a really bad idea for most people.
👍 27 | 👎 -10

Orrell Originally Answered: Can someone explain to me the Pros's and Con's of a "Reverse Mortgage? I am 74 years old and considering i?
I'm a Reverse Mortgage Specialist! A reverse mortgage is a home equity loan for people aged 62 and over. (I don't like being called a Senior Citizen or even worse, a "Senior", so I never use it.) We're able to lend you a percentage of the value of your home. Out of that amount, we need to pay off your mortgages, lines of credit, home equity loans, tax liens...anything creating a lien on the property. There are substantial closing costs on a reverse mortgage because there's an origination fee and mortgage insurance (which actually benefits the borrower, unlike regular mtg ins). You wouldn't have to make a payment to the lender as long as you live in the house. You would pay your real property taxes, if you have any, and your home owners insurance, but you wouldn't be required to make a mtg payment. You can make a payment if you want, no prepayment penalty, so if you want to make any amount of payment at any time, you can. You are still the owner of the home, and you can sell it anytime you want. You also decide who will inherit your home. Your heirs have the same options they do when inheriting a home with any kind of mortgage: they can pay it off with whatever money they have; they can sell the house and pay from proceeds, any additional proceeds are theirs; or if someone wants they house they may be able to refinance into their own names, but their income and credit and assets and debt ratios will be considered. On the reverse mortgage, those factors will not affect your eligibility. We do have to pull credit reports to comply with the Patriot Act, but we consider 3 other things to get started on this. 1. All owners must be at least 62 years old and the house must be their primary residence. You "can" remove a younger owner's name, but we strongly advise you to consider what will happen if the mortgagor dies...the loan will be due, and the other person is now an heir, not an owner. Be sure you plan for that contingency, or your younger spouse could end up looking for a place to live. 2. The type of structure must fit the guidelines: 1 to 4 family homes, most condos, and manufactured homes that meet the rigid FHA guidelines. We specifically can do some coops in the NYC area with our proprietary product, but the percentage you get is miniscule. 3. The amount available to you must be enough to cover your mortgages and closing costs. You can pay the difference if it's not, but you have to decide if it's worth it. This is a wonderful loan for people who need it. If it comes to getting a reverse mortgage or losing your house, no doubt this is the better option. If your children are worried about not getting any inheritance, forget about them. They should worried about how you're enjoying your retired years. The AARP has a list of lenders. I'd tell you to call me, and I'd send you an information package, but this forum is NOT a place to solicit business, although you see it all the time. I thought I had a phone number for AARP on my desk, but I can't find it, and it's almost time to go home.

If you have your own answer to the question How has reverse mortgage changed?, then you can write your own version, using the form below for an extended answer.