Counseling

According to FHA Mortgagee Letter 2006-25 all borrowers are required to receive counseling from a HUD approved third party counseling agency. Processing begins only after the borrower submits to you a signed and dated counseling certificate. Preliminary title commitment and an AVM may be ordered prior to counseling, as outlined in
Mortgagee Letter ML #2006-25. If the borrower does not proceed with closing on the reverse mortgage, the borrower may not be charged for the above pre-ordered services.

Mortgagee Letter 2008-28 says that Lenders can no longer pay HUD-approved counseling agencies, directly or indirectly, for counseling services through either a lump-sum payment or on a case-by-case basis. An example of prohibited indirect funding is Lenders funneling payment for HECM counseling through a nonprofit foundation, association or any other entity or organization that is a branch of, affiliated with or associated with a lending institution.

It is our policy to require non-borrowing spouses to attend counseling as well as sign the Non-Borrowing Spouse/Resident disclosure for all products. If this presents a hardship to the borrower, please submit a letter of explanation with the file.

At the present time we urge all counseling to be face to face, but it is only mandated in North Carolina. Sources of counseling are:
AARP - 1-800-209-8085
NFCC - 1-866-698-6322
MMI - 1-877-908-2227
and the websites listed below:
http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm
http://www.hecmresources.org/states/reque_state_index.cfm

If the property is in Massachusetts you must use one of the counselors on the list found on this website: http://www.mass.gov/Eelders/docs/list_rev_mort_couns.pdf

If the property is in NC the counseling must be face to face.

Principal Limit

The Principal Limit is calculated on the age of the youngest borrower, the appraised value of the subject property or the FHA limit (whichever is less) and the current expected interest rate. The current limit for FHA HECM loans is $417,00 nation wide.

For the adjustable rate, the principal limit can be locked in at time of application. The principal limit lock is valid for 120 days from the date the FHA Case Number is assigned. It allows the borrower to receive the principal limit at the time of application or the principal limit at closing, whichever is greater. Fixed rate loans are not locked in until closing.

Eligible Vesting

All properties must be vested in one of the following ways:
 Fee Simple
 Life Estate
 Leasehold
 Trust
 Land Trust

Non-Eligible Properties

The following property types are not eligible for a reverse mortgage:
 Investment properties
 Vacation homes
 Second homes
 Properties with illegal accessories units or mixed use properties where more than 25% is used for non-residential purposes
 Manufactured homes which are legally recorded as a condominium (this will change in 2009) or if property is not taxed as real estate
 Two parcels on one deed (if home sits on both)

Eligible Property

The following property types are eligible for a HECM reverse mortgage:
 Single family
 2-4 units, as long as one unit is the borrower’s primary residence
 Condominiums
 Planned Unit Developments (PUD)
 Manufactured Homes

Residence Eligibility

The subject property must be the borrower’s principal residence. A person can have only one principal residence at any one time. The property cannot be considered the principal residence if the borrower does not occupied the property for a period exceeding 180 days. In the case of co-borrowers, at least one borrower must occupy and use the property as their primary residence after the closing of the reverse mortgage and until the loan is due and payable. If a borrower fails to maintain the subject property as their principal residence it is considered a maturity event under the terms of the security instrument and may result in a demand for repayment of the reverse mortgage loan.

Borrower Eligibility

All borrowers on loan must be 62 years of age or older. If a deeded owner of the property is not eligible due to age, they would need to be removed from the title. This is a very serious decision and it may involve serious consequences for the younger borrower. It should first be discussed with their legal or financial advisor. Removing them from the deed could result in them having to vacate the home when the older borrower dies or has to vacate the premises, perhaps to go to a nursing home. Never advise someone to do this as it is unfair to the removed occupant unless they fully understand the consequences.

Just as it is true for all FHA mortgages, U.S citizenship is not required for eligibility. For those borrowers with lawful permanent resident alien status, the mortgage is available under the same terms and conditions as U.S. citizens. Evidence of permanent residency in the form of documentation issued by the Bureau of Citizenship and Immigration Services must be provided.

Reverse mortgages may also be available to non-permanent resident aliens provided they have a valid social security number. Non-U.S. citizens with no lawful residency status in the U.S. are not eligible. The rules are the same as for forward FHA mortgages.