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
Thursday, November 6, 2008
Tuesday, November 4, 2008
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
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)
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
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)
Monday, November 3, 2008
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 occupy the property or in the case of a purchase, have the intent to occupy, as a primary residence.
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.
All rules that apply to forward mortgages regarding eligibility are the same for reverse mortgages. If you have questions regarding reverse mortgages please send them to info@alliedhomenet.com.
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 occupy the property or in the case of a purchase, have the intent to occupy, as a primary residence.
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.
All rules that apply to forward mortgages regarding eligibility are the same for reverse mortgages. If you have questions regarding reverse mortgages please send them to info@alliedhomenet.com.
Saturday, November 1, 2008
HUD recently announced the approval of a purchase product using the reverse mortgage. It opens up a whole new target for marketing the HECM loan. Realtors can now sell homes and finance them with the HECM product. Many seniors may choose to sell their current home and relocate to downsize or to move closer to family.
The calculation software is the same for purchase as it is for a refinance. Instead of receiving cash at closing or each month, they put down a large down payment that varies according to their ages and then never have to make another payment. Not a bad idea for seniors on fixed income. And because there is no qualifying as far as credit, income or assets, other than the down payment, they are relatively assured they can get the loan if they are over age 62 and have enough ready cash to pay down.
If you are interested in more details, review ML 2008-33 at: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-33ml.doc
If you want to know more about reverse mortgages, email me at info@alliedhomenet.com
The calculation software is the same for purchase as it is for a refinance. Instead of receiving cash at closing or each month, they put down a large down payment that varies according to their ages and then never have to make another payment. Not a bad idea for seniors on fixed income. And because there is no qualifying as far as credit, income or assets, other than the down payment, they are relatively assured they can get the loan if they are over age 62 and have enough ready cash to pay down.
If you are interested in more details, review ML 2008-33 at: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-33ml.doc
If you want to know more about reverse mortgages, email me at info@alliedhomenet.com
Friday, October 31, 2008
An Overview of Reverse Mortgages
A reverse mortgage is a loan product for homeowners over the age of 62. A homeowner can access a portion of the equity they have in their primary residence. Unlike other types of mortgages, there is no income or credit qualifying and no monthly mortgage payments. The reverse mortgage must be in first lien position at closing. The borrower retains full ownership of the property. Repayment is required when the last remaining borrower no longer resides in the home as their principal residence or defaults on the terms of the loan.
Types of Reverse Mortgages
There are only two distinct types of reverse mortgages at this time:
HUD/FHA Home Equity Conversion Mortgage (HECM)
Proprietary Products
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.
A reverse mortgage is a loan product for homeowners over the age of 62. A homeowner can access a portion of the equity they have in their primary residence. Unlike other types of mortgages, there is no income or credit qualifying and no monthly mortgage payments. The reverse mortgage must be in first lien position at closing. The borrower retains full ownership of the property. Repayment is required when the last remaining borrower no longer resides in the home as their principal residence or defaults on the terms of the loan.
Types of Reverse Mortgages
There are only two distinct types of reverse mortgages at this time:
HUD/FHA Home Equity Conversion Mortgage (HECM)
Proprietary Products
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.
Monday, October 27, 2008
Some of the most frequently used websites are listed below.
RESOURCES
This is a list of websites and other helpful information about the reverse mortgage industry.
HUD Links
HUD Keywords (provides short summaries of various HUD policies) http://www.hud.gov/offices/hsg/keywords.cfm
HUD Mortgagee Letters (all Mortgagee Letters issued by year) http://www.hud.gov/offices/hsg/mltrmenu.cfm
HUD Email Notification (to be added to the list) - Jerry Mayer jerrold_h._mayer@hud.gov
FHA Home Equity Conversion Mortgage 4235.1 Manual http://www.hudclips.org/sub_nonhud/cge/hbks.cgi?hbks (search 4235.1 under guidebooks)
CAIVRS FAQ and Assistance (help for a CAIVRS hit) http://www.hud.gov/offices/hsg/sfh/lender/sfhcaive.cfm
HUD HECM Manual http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4235.1/index.cfm
RESOURCES
This is a list of websites and other helpful information about the reverse mortgage industry.
HUD Links
HUD Keywords (provides short summaries of various HUD policies) http://www.hud.gov/offices/hsg/keywords.cfm
HUD Mortgagee Letters (all Mortgagee Letters issued by year) http://www.hud.gov/offices/hsg/mltrmenu.cfm
HUD Email Notification (to be added to the list) - Jerry Mayer jerrold_h._mayer@hud.gov
FHA Home Equity Conversion Mortgage 4235.1 Manual http://www.hudclips.org/sub_nonhud/cge/hbks.cgi?hbks (search 4235.1 under guidebooks)
CAIVRS FAQ and Assistance (help for a CAIVRS hit) http://www.hud.gov/offices/hsg/sfh/lender/sfhcaive.cfm
HUD HECM Manual http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4235.1/index.cfm
Sunday, October 26, 2008
Income Tax and Social Security Impact
The funds received through a reverse mortgage are not considered to be income, and are not subject to income tax. Social Security and Medicare benefits should not be affected, however borrowers are always to be encouraged to seek their own legal advice from advisors, attorneys, or SSI benefits specialists for guidance as it pertains to their own unique situation. Never give advice regarding taxes or welfare benefits.
Repayment
The loan is not due until the last remaining borrower either does not own or occupy the home as their principal residence or they default on the terms of the loan. A reverse mortgage is a non-recourse loan, meaning if the home is sold, the borrower or the estate will not owe more than the fair market value of the home at the time the loan is repaid.
A recent clarification from HUD has reiterated that it is a non recourse loan, but if the estate or borrower chooses to pay off or purchase the home, they will have to pay the full amount of the loan balance to do so. Any sales must be arm’s length transactions.
Borrowers may make repayments during the life of the loan without penalty. All payments go to principal
Partial prepayments are permitted at any time and the borrower will not be able to redraw the money that they prepay.
The funds received through a reverse mortgage are not considered to be income, and are not subject to income tax. Social Security and Medicare benefits should not be affected, however borrowers are always to be encouraged to seek their own legal advice from advisors, attorneys, or SSI benefits specialists for guidance as it pertains to their own unique situation. Never give advice regarding taxes or welfare benefits.
Repayment
The loan is not due until the last remaining borrower either does not own or occupy the home as their principal residence or they default on the terms of the loan. A reverse mortgage is a non-recourse loan, meaning if the home is sold, the borrower or the estate will not owe more than the fair market value of the home at the time the loan is repaid.
A recent clarification from HUD has reiterated that it is a non recourse loan, but if the estate or borrower chooses to pay off or purchase the home, they will have to pay the full amount of the loan balance to do so. Any sales must be arm’s length transactions.
Borrowers may make repayments during the life of the loan without penalty. All payments go to principal
Partial prepayments are permitted at any time and the borrower will not be able to redraw the money that they prepay.
Subscribe to:
Posts (Atom)
Posts
