What You Need To Know When A Reverse Mortgage is Due and Payable – Respond Quickly

Reverse Mortgages provide benefits for homeowners 62 and older

A reverse mortgage can be very beneficial to homeowners who are 62 or older, giving them the opportunity to live in their home with improved cash flow and with no monthly payment (they are still responsible for property taxes, hazard insurance, maintenance, as well as flood insurance and HOA dues if applicable).  During the term of the loan borrowers use their proceeds for everyday living expenses, retirement planning, long term care, purchasing a new home, fulfilling dreams and wishes and needs of retirement.

Unlike a traditional mortgage, the loan is not due until the borrower is no longer in their home as their primary residence.  The due date on the mortgage is actually the 150th birthday of the youngest borrower.  Of course this all depends on the terms of the loan being followed.  As a non-recourse loan there is no personal liability, the loan is only repaid from the property, not from other assets.  If the home is sold for more than the loan balance the borrower or estate keeps the difference.

The reverse mortgage does not automatically become property of the lender or bank nor do they automatically start foreclosure.  Foreclosure is the last resort HUD and the loan servicers want to take.

One of the more common questions we as loan originators get is, “How long do I or my children have to pay off the reverse mortgage?”  So what happens when the borrowers are no longer in their home?

Obviously it is nearly impossible to repay the loan the day it becomes due (the date of death or moving out of the home or not abiding by the terms).  But there are some important details that need to be addressed right away.  HUD has some pretty tight requirements the lender’s servicers must follow when it comes to satisfying the reverse mortgage repayment.  (Not always the same as the lender, servicers are companies lenders contract with to handle the servicing of the loan.  These are the companies who have mailed the monthly statements, release the line of credit funds or monthly payments, etc. during the term of the loan.)

Communication, communication, communication and more communication with the servicer is of the utmost important when a reverse mortgage borrower is no longer in their home.   The borrower or their estate must move quickly in contacting the servicer so they can make use of the maximum time that can be allowed by HUD for satisfying the loan. And it must happen quickly after one is no longer in their home.

Following is an outline of the steps that must be taken when the reverse mortgage becomes due and payable.

  • Call Servicer right awayThe servicer must be notified within the 1st 30 days of the borrower being out of the home by death or moving, etc.  Note it is based on the actual date of death or move out date, it is not based on the date the servicer is notified.  This can be done over the phone followed up with written documentation.
  • Condolence/demand letter mailed from the servicer.  This letter may seem harsh and insensitive but the wording is required to stress the importance of the loan being due and the time frames required to satisfy the loan.
  • Options are provided to satisfy the loan:
    • Paying it off via sale of the home to a third party.
    • A family member finding financing if they choose to keep the home.
    • If it looks like the home value is less than the loan balance, contact the servicer to make arrangements to pay the loan at 95% of the appraised value.  The servicer will order an FHA appraisal within 30 days.
      • The borrower or estate must be prepared for this and allow this by providing a contact to allow an appraiser access to the home.  With the full appraisal, it can be used for a short-sale.  If a full appraisal is not completed and they only do a “drive-by” one, another appraisal will have to be obtained for the short-sale.
    • The borrower or the estate has the option to do a Deed In Lieu of Foreclosure.  This is taking all personal property and “broom sweeping,” cleaning out debris and trash from the property then turn the marketable title over to the servicer.
    • Walking away and allowing the lender to foreclose.
  • Within 30 days of receipt of the demand letter borrowers or their estate must respond to the letter and return a written “intent to satisfy the loan” document.
  • Within 60 days the servicer must receive copies of death certificate; copies of probate proceedings, appointment of executor, administrator or personal representative of the borrower’s estate; copies of the trust, Life Estate or Transfer on Death Deed if applicable.
  • Within 60 days the home has to be on the market documenting the intention of satisfying the loan.  This documentation must be sent to the servicer immediately.
  • If intention is to not sell the home, documentation of financing to pay off the loan must be provided within 60 days.

IT IS IMPORTANT TO PROVIDE AND DOCUMENT THE INTENTION OF SATISFYING THE LOAN QUICKLY!

If the communication with the servicer is happening and necessary documentation is provided to the servicer in their time lines then the borrower or their estate are provided 6 months to satisfy the loan.  It may be possible to receive up to two 3-month extensions.  But this is where the communication is important.  One must NOT assume they have this time.  If the servicer does not receive the communication and documentation according to their time lines, they will start the foreclosure proceedings according to HUD’s requirements.

And what happens if one doesn’t notify the servicer or follow these time lines?  

If one doesn’t notify the servicer or follow these times lines then a letter of demand will be resent.  If no response to the demand letter is received the servicer will refer to an attorney to start foreclosure to collect the debt.  The 1st action to start the foreclosure will begin within 180 days by the foreclosure attorney.

If the last surviving borrower passes and the servicer is not notified within 30 days of the death, a notice of foreclosure is sent and attorney contacted.  The more time that passes the less time the estate has to satisfy the loan and avoid foreclosure.

Foreclosure of the reverse mortgage follows the laws of each state.  There may be time to satisfy the loan even after the foreclosure has started however extra fees will be added to the loan balance.

Borrowers’ Responsibilities

Paying taxes, keeping hazard insurance on the property and if applicable, flood insurance, maintaining the property and not changing title are all borrower’s responsibilities under the terms of the loan.

Borrowers are responsible for providing the following information to servicers:

  • Complete required repairs according to timeline outlined at closing.
    Responding to and returning the letters of occupancy that are mailed to borrowers on the anniversary of their reverse mortgage closing.
  • Providing proof that property taxes have been currently paid on an annual basis.
  • Changes to any of your insurances with the updated information, i.e. if you change from one insurance company to another letting them know who the new provider is.
  • If you are out of the home for extended period of times, i.e. for hospital or rehab stays or long term travel.

Open your Mail from reverse mortgage lender/servicerBe sure to timely open and review mail from lenders and servicers to ensure you are taking care of your responsibilities and responding to their communications.

If the servicer does not receive this information they will make attempts to obtain it.  If they are unsuccessful in obtaining it they are required to notify HUD who will likely require the foreclosure process begin to meet their deadlines.

Default for Not Paying Property Taxes, Insurance, Abiding by Terms of Loan

If the loan has become due and payable due to lack of payment of taxes and/or insurance or not occupying the property according to the terms of the loan, HUD has the right to foreclose on the property.  And this may happen!  When this does happen, the borrowers are not losing their home due to the reverse mortgage but because they didn’t abide by the terms of the loan.  If one doesn’t pay property taxes the county can, and does, foreclose whether there is a traditional mortgage, reverse mortgage or no mortgage.

When one is in default due to one of the terms of the loan not being adhered to the demand letter for repayment is sent.  There may be options to cure the default so one should reach out to their servicer to see if they can qualify for one of these.

If an arrangement cannot be made to cure the default, the foreclosure process may begin and an attorney contacted.

Servicers Check Public Records

The servicers are regularly checking public records and will send the demand letter for repayment if they learn the last surviving borrower is no longer in the home or a borrower hasn’t paid property taxes, kept insurance on the home or maintained the property.

Funds Frozen

Once a loan payoff is requested the funds from one’s line of credit and/or monthly payments will be frozen.  If you, the borrower, are thinking funds will be needed for the move, fixing the home for sale, etc. make sure funds are requested prior to the move and payoff request.  The heirs, because they are not borrowers, cannot request funds.

Responsibilities continue

Until the loan is actually paid off, the borrowers or the estate are responsible for maintaining the property, paying property taxes, utilities, maintaining hazard insurance, flood insurance if applicable, on the property, etc.  Interest and the FHA Mortgage Insurance Premium will accrue as well as a servicing fee if one was on the loan.

Keep reverse mortgage information with other important documents

I strongly encourage you to have your reverse mortgage information, lender, servicer contact information with your other important documentation so your estate can notify the servicer timely.  Remember if the servicer is not notified timely and communication not continued, they are missing opportunities to have the time to satisfy the loan.

Some borrowers choose not to tell their children they are doing or have done a reverse mortgage.  This is their right.  Doing a reverse mortgage is their own personal financial decision.  If this is your choice it is even more important to have your reverse mortgage information with your other important documents so they have the opportunity to respond timely.

Non-borrowing Spouse

This article does not address non-borrowing spouse situation.  If you are a non-borrowing spouse and the borrowing spouse has passed, contact the servicer immediately.  HUD has made provisions for non-borrowing spouses to possibly remain in the home but the servicer must be contacted immediately and additional documentation must be provided to determine one will qualify for this option.

I’m here to assist my borrowers

I, as a broker and loan originator, do not have access to the servicing information, however I am available even after the loan has closed to answer borrower’s questions and guide them through the process.  I welcome the opportunity to guide and advise my borrowers on the steps they need to take and referring them to the servicer timely.  Other reverse mortgage brokers also welcome the calls so while you ultimately need to talk with the servicer, don’t hesitate to reach out to your broker loan originator for some guidance.

© 2016 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

Thanks to Ryan LaRose from Celink for assistance by providing information.

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-1kJ

Related Articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Reverse Mortgage Assists to Cover Expenses and Protect Assets

Reverse Mortgage provides funds for retirementHome owners sometimes find themselves tapping their retirement funds or assets to cover their monthly expenses. And when “life happens” such as medical expenses or other emergencies they find themselves drawing even more money from their accounts. A reverse mortgage is an option to protect their retirement funds yet have the funds for their everyday living, maintaining their lifestyle or emergencies.

Ron, a recent borrower stated, “Initially we did the reverse mortgage to buy hearing aids and for the longer-run to have funds for ‘emergencies’ without having to use investment funds.”

After the passing of his wife, Darrel found he was drawing funds regularly from his retirement funds for his living expenses and other needs. He chose to do the reverse mortgage so he wouldn’t have to keep drawing from those accounts and paying the penalties that came with it. The addition of $300 tenure payment and $15,000 in his line of credit means he can leave the retirement funds to grow.

Dorothy joined me for a presentation to other seniors, sharing why she did the reverse mortgage. “I have lived in my home for many years.  I ‘knew’ Social Security was going to take care of me… my mother had gotten by on it and I figured I would too.

Reverse Mortgage Works Wonders for MN womanI retired at 65.  I had no hospitalization or a pension when I retired.  I didn’t face those facts right away.  I had invested and purchased stocks over the years in modest amounts.  I figured that would be my answer to any and everything.  When I wanted to travel I just cashed in part of a stock and I took off and did some great fun things.

“However we know the stock market took a plunge a couple of times and what I had was back down to half or less than what I had built up.  Also I was having to use this in addition to my Social Security income.  Fortunately I was able to have paid off my mortgage by the time I retired so I didn’t have those payments.  I thought it would be easy street.

“I had a house paid for and was able to get a line of credit from the bank.  Anything I wanted to do I would I just borrow the money on the line of credit.  After that climbed I would cash some stock in to pay the line of credit.

“Pretty soon I needed a car.  I took out a loan on the car. Pretty soon I’m paying the line of credit and the car payment.  And I was using up my stock portfolio.  I was owing more to the bank than I had stock to pay off all this line of credit.  The stock broker I was talking with said, you have your house paid for, the best thing I could do would be to get a reverse mortgage.

“I have my reverse mortgage.  I decided that as long as I was getting my Social Security and didn’t have to touch my stock, I wanted a reverse mortgage line of credit. My reverse mortgage line of credit would grow at nice increments – it was growing faster than my stock portfolio was growing.  I also decided to take a minimal monthly payment.

“The reverse mortgage has given me a great feeling of security.  I don’t have to touch my stock.  My line of credit is going up every month as long as there are funds there.  It’s much better than CDs.

“I’ve done home repairs, replaced my car and taken some funds to get my driveway repaired.  My yard needed some attention that I had overlooked because I didn’t want to spend the money.  So I’ve taken some funds for that too.  I still have a nice sum in my line of credit and I haven’t had to use my stock.

“I watch the market go up and down and it’s not life and death like it had been before when I knew I just had that stock and when it was gone then what would I do.

“It’s worked wonders for me.  I’ve been able to take trips with the money, repair my house, re-roof it, and do this and that.  It’s given me ease of mind and it’s certainly helped my kids because at one point I think they thought they would have to help me financially and they weren’t looking forward to that.  Now that worry is off their mind.  So as long as I can, I will stay in my home, and that’s what I plan to do.”

Nine years after her closing she’s still in her home benefiting from her reverse mortgage.

© 2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-1f3

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

“Because The Customer” We Give Thanks

Giving Thanks Because of Our Reverse Mortgage Borrowers (c) 2008 Beth PatersonMy reverse mortgage borrowers often call to say “Thank you!” for helping them obtain their reverse mortgage.  They proceed to tell me what a difference it has made in their lives as well as for their families.  I always appreciate hearing from them as well as hearing their stories.

I also receive comments and notes of appreciation from others who work with seniors, my referral sources, the vendors who we need to do a reverse mortgage and operate our business, and those in my networks.

For me it goes beyond receiving the thank you’s from others.  I too have to say “Thank you!”  Thank you to my reverse mortgage borrowers and all I work with for the opportunity I have to serve.  I am rewarded to be able to assist in making a difference in the lives of seniors.  I  recognize that it is because of you I have this opportunity to serve and I feel blessed to be able to do so.

Many years ago I found the following poem on a restaurant place mat.  I don’t know who wrote it but I did copy it down and have it hanging on my office wall… a wonderful reminder.

Because the Customer

Because the customer has a need,
we have a job to do.

Because the customer has a choice,
we must be the better choice.

Because the customer has sensibilities,
we must be considerate.

Because the customer has urgency,
we must be quick.

Because the customer is unique,
we must be flexible

Because the customer has high expectations,
we must excel.

Because the customer has influence,
we have the hope of more customers.

Because of the customer,
we exist!

Thank you to my reverse mortgage borrowers, my referral sources, my vendors, my networks and all who help make a difference in the lives of seniors.  It is because of YOU I exist and am so rewarded.

May you find reasons to give thanks for the blessings in your lives this Thanksgiving day and every day.

© 2011-2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-1fE

Related Articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Seniors Find Independence With Reverse Mortgages

Reverse Mortgage Borrower Has IndependenceAs we look to celebrating the independence of our county let’s also look at how our seniors can celebrate their own independence.  Defined as “sufficient income for comfortable self-support; a competence” at dictionary.com, independence is important to seniors.

When we talk with our clients we hear they want to be able to enjoy their retirement and maintain their lifestyle which includes having their independence.  So how can they do this if they are living off their Social Security and if they have retirement investments but they have dropped in value?

Even though as one ages some help may be needed, they can still maintain their independence.  A reverse mortgage can help provide this independence.  After Edna did her reverse mortgage she said, “Now I have my dignity back and my independence.”

Some instances where the reverse mortgage can help one remain independent include having funds for home repairs, going out to lunch with friends, traveling, visiting family across the country, purchasing a new car, paying medical bills or for medications; paying for help with housework, meal preparation, yard work or transportation, whatever they desire.  The HECM for Purchase also helps seniors have independence.  Having funds for the future and retirement and long term care planning is another way the reverse mortgage provides independence.

Or if one needs more help to remain in their home they would have the funds to pay for the assistance from a home care agency to do so. While some additional assistance may be needed seniors can still have a sense of independence if they have the funds to get the additional help and choose the agency they wish.

Seniors have sometimes used their credit cards to fund their lifestyle or pay their bills, others have used a conventional home equity mortgage or a line of credit.  And others look for additional cash by applying for a conventional home equity mortgage but don’t qualify.

The reverse mortgage can benefit here too.  Interest rates on credit cards are high.  Having the reverse mortgage can reduce their dependence on their credit cards.  They usually don’t qualify for a conventional mortgage with today’s lending requirements especially since their only income is Social Security.  Even if they do qualify or currently have a home equity mortgage or line of credit, they have to make payments which can be difficult on a fixed income or when “life happens.”

Another Minnesota reverse mortgage borrower said, “With a reverse mortgage you begin to have independence anew and you begin to feel more secure.  Being free from monetary anxiety, you have better control over spending your equity.”

A reverse mortgage is a mortgage with special terms for senior home owners 62 and older to allow them to remain in their home.  The loan amount is determined by the appraised home value (or FHA lending limit), the age of the borrower, and an Expected Interest Rate.  Let’s review the facts of reverse mortgages:

  • The title stays in the borrower’s name same as with any mortgage.  The borrower owns the home, no one else does.
  • Income and credit scores are not used to determine the interest rate for the HUD insured Home Equity Conversion Mortgage or HECM, the most common reverse mortgage.  Interest rate is determined by the margin and the program chosen.
  • The borrower may be able to stay in their home as long as it’s their primary residence or until their 150th birthday.
  • Lower interest rates than other loans – historically the reverse mortgage interest rates have been lower than conventional loans, lines of credit and credit cards.
  • A borrower won’t lose their home because they can’t make a mortgage payment – they don’t have to make monthly payments.  They are however, as with any loan, responsible for taxes, insurance and maintaining the property and abiding by the terms of the loan agreement.
  • The reverse mortgage funds are generally considered tax-free (although if proceeds are used for certain purposes taxes may apply – consult with a tax advisor).
  • The proceeds are not considered income so Social Security and Medicare are not impacted and one may still be able to receive Medicaid.
  • The HECM is government insured and funds are guaranteed to be available for borrowers if something happens to the lender.
  • Allows access to more funds without paying additional closing costs – there is a growth rate with the line of credit and monthly payment options with the adjustable interest rate program.
  • There are no out of pocket costs other than the cost of the appraisal.
  • There are no prepayment penalties.
  • Borrowers or their heirs get to keep any remaining equity after the loan is paid off.
  • The loan is non-recourse which means there is no personal liability to the borrower or their estate.  The repayment amount is determined by the fair market value at the time the loan becomes due.

Paying off a mortgage on her home, Judy stated, “I truly believe in reverse mortgages, especially for someone like me with a limited income.  I received enough from the reverse mortgage to pay off some other bills and still had a little to put into a “line of credit” account.  Some of the bills I am paying are credit card debts which have a very high interest rate.  It’s a good feeling to be able to do that.  It makes bill paying each month less stressful.”  Now this is senior independence!Happy Independence Day!

Have a wonderful time celebrating the independence we have in this wonderful country of ours.  And keep in mind that a reverse mortgage equals independence for seniors.

© 2010-2015 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-1dq

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Savvy Senior Sources…Talking With Experts TV Show Released

I’m excited to announce the release the new TV show, Savvy Senior Sources…Talking With Experts that I host and produce.  The series of TV shows talk with experts for guiding your way through resources A to V in areas that seniors, their families, caregivers, and trusted advisors will find helpful for planning, aging in place with the ability to stay in their homes and remain independent or where to turn if and when going through the transition. The shows give viewers the opportunity to “meet” the trusted providers of senior services before making a phone call to them.

Brought to you from Savvy Senior Sources, LLC, Reverse Mortgages SIDAC and GWG Life, LLC are proud sponsors of the shows.

Please tune in and subscribe to the YouTube Channel Savvy Senior Sources to be notified when the new shows are broadcast. https://www.youtube.com/channel/UCmgVGVbfY6-RcHkeBc7WmPQ/feed

Enjoy the shows!

© 2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Our Experiences with Getting Our Reverse Mortgage

Happy With Reverse MortgageActual reverse mortgage borrowers have good things to say about their reverse mortgage experiences.  Let me share what some of our Minnesota reverse mortgage borrowers have said.

Dave shared, “Having had an accident that eliminated my of my teeth, total dental implants was required.  Without a reverse mortgage I could not have raised the money to have the implants done.  It was a great relief to be able to smile again and eat sweet corn again.”

To increase his cash flow Bernie did a reverse mortgage and had this to say, “After talking with 2 other reverse mortgage representatives, receiving apologies for non-functioning DVDs, and talking to an attorney, I chose Reverse Mortgages SIDAC.  It is so helpful to deal with local persons.  Both Beth and Steve followed up with everything.  They were very helpful in personal visits and phone calls.  Beth has also been helpful with other senior issues.”

Larry and Karen* did the reverse mortgage to stabilize their finances.  They found Reverse Mortgages SIDAC to be friendly, courteous and respectful of them.  Additionally they shared they found that all pertinent information was discussed regarding reverse mortgage options and costs and the details were explained so they understood them.  They also felt that they were informed of what to expect during the processing and kept informed of the status through the process.  In addition they said they received explanations of the forms that were signed at closing.  Overall they shared their experience was positive.

Mike shared, “Without the help and knowledge of Beth Paterson who first told me about the reverse mortgage to buy I would never have been able to get our beautiful new townhome, which my wife needs because of her mobility to navigate a lot of stairs.  I owe Beth a big debt of gratitude.  She is the best!  She is knowledgeable and she cares and worked tirelessly for us.”

Wayne recommends us stating, “Reverse Mortgages SIDAC is very customer focused and will settle for no less than what the applicant request’s objectives are.  They knew the “system” very well and lead the borrower though it step by step.  Above all, Reverse Mortgages SIDAC is respectful and honest.”

Helping them out of foreclosure, Gary and Cathy* said, “Thanks so much! Beth and Steve you guys are the best!”

Satisfied Reverse Mortgage BorrowerYvonne wrote, “My experience with Beth and Steve was very enjoyable.  I was always able to reach one of them.  I paid off my mortgage, so eliminated the monthly mortgage payment!  It has made a big difference in my quality of life to have that additional income every month.”

To supplement her income, Marilyn did the reverse mortgage, sharing, “I didn’t really want to have to do this reverse mortgage because I’m too proud.  But thank goodness it was there for me.  Steve was so very helpful as was Beth.  At closing all documents were in order perfectly.  I’m very glad I reached out to this company.  Everything went so well.”

Bonnie did the reverse mortgage to “secure my retirement” allowing her to retire.  Of her experience she said, “Beth and Steve were wonderful!  Caring, efficient, thoughtful. All are words that describe them and their service – I had contacted a nationally advertised company but did not feel at all comfortable with them.  I went with Reverse Mortgages SIDAC because they are local and knowledgeable about Minnesota and my needs here.”

“Having Beth and Steve to guide me through every step of the process was the blessing that made a reverse mortgage possible.  We were able to complete the process in time to obtain the maximum possible funds under the old system, making my dream of remodeling possible,” Matthew stated.

These are just a few of the experiences reverse mortgage borrowers have had.  Keep them in mind as you hear about reverse mortgages and are considering one.  Work with a reverse mortgage originator who is local, specializes and has experience in reverse mortgages, is ethical adhering to the NRMLA pledge and takes their time to give you the details so you understand the reverse mortgage and will have a positive experience and find the benefits.  If you’re in Minnesota, give us a call.

*Some names changed to protect privacy.

© 2015 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-1bu

We Were Able To Use A Reverse Mortgage To Purchase Our Beautiful New Home

HECM for Purchase allows one to buy a new home with a reverse mortgage“Without the help and knowledge of Beth Paterson who first told me about the reverse mortgage to buy I would never have been able to get our beautiful new townhome, which my wife needs because of her mobility to navigate a lot of stairs.”

This was comment I received from Mike after they closed on their HECM for Purchase (H4P) and moved into their new home.

Mike and I had originally talked about 6 years ago when he and Carol were considering a reverse mortgage on the home they had lived for many years.  For various reasons they decided to wait.  We did talk periodically and I kept them informed of product changes.  When Carol was having some issues navigating the stairs they had in their home they decided that it would be better to find a home without all the stairs.  This is when I introduced them to option of using use the reverse mortgage to purchase the new home.

Their search ensued until they found a beautiful townhome not too far from their current home in Minnesota but easier for Carol to navigate now and into the future.  Still interested in the idea of not having a mortgage payment, we met and discussed the H4P so they would have an understanding of the program.  We also met with their real estate agent and the builder to educate them on how this unique option worked.

Like it did for Mike and Carol, the HECM Home Purchase Program provides financing to those who desire to re-size, move closer to children or purchase a new home without having mortgage payments.

The advantages of using a reverse mortgage to purchase a home:

  • There are no monthly mortgage payments required (borrowers are responsible for paying property taxes, insurance and maintain the property).
  • Preserves cash savings and investments rather than liquidating savings and investments to pay all cash for the home purchase.
  • It is a way to leverage funds to make it possible to purchase a higher valued home.
  • Provides financing so one can re-size to a lower maintenance home, one-level home, a home more suitable for aging in place, move to be closer to children or even purchase one’s “dream home.”

Keep in mind, a reverse mortgage is a mortgage but has special terms for those 62 and older.  It offers the most flexibility on how the funds are received and when the loan needs to be repaid.

The steps to do purchase a home with the reverse mortgage are the same as with the regular reverse mortgage.  However there are some unique points for this beneficial home purchase option that one needs to be aware.

Eligibility requirements:

  • All borrowers going on title must be 62 years old or older.
  • The properties that qualify must be residential and include:
    • single family
    • 1 to 4 family dwelling units if the borrower/owner resides in one unit
    • FHA approved condos or manufactured homes that meet HUD’s standards
  • To determine how much is available from the reverse mortgage for the purchase, we run our calculations on the lessor of the final appraised value, sales price, or FHA mortgage limit for a one-family residence (currently $625,500).

For example, if the purchase price is $250,000 and the appraised value is $275,000, we would use the $250,000.  Or if the purchase price is $285,000 and the appraised value is $275,000, we use the $275,000.

  • The proceeds available to the borrower are calculated the same way as with any reverse mortgage, having all the closing costs (origination and FHA MIP, reports, title and escrow/settlement fees) included in the loan so there are no out of pocket expenses other than the appraisal and potentially any inspections.  The “Net Principal Limit” is the amount available to the borrower after costs.

Note: When I’m working with those exploring homes, I run several calculations at various possible home values so when the borrower and their real estate agent are looking for a home, they will have an idea of the home value and the cash the borrower will need at close.

  • The borrower will need to have the difference between the Net Principal Limit and the purchase price available.  For example:

If the purchase price and the appraised value is $275,000 and the Net Principal Limit is $165,000, the borrower will need $110,000* to purchase the $275,000 home.

Rather than using all reverse mortgage funds, more personal funds can be used for the purchase so the reverse mortgage can be set up with a line of credit option. (HECM LIBOR option only; the fixed rate requires you to pull all available funds at close and does not offer the line of credit option.)

 For example, if a borrower has $150,000 in funds they want to use to purchase the same $275,000 home, they could combine their $100,000 with the $165,000 from the reverse mortgage proceeds to purchase the home and then have $40,000 in their reverse mortgage line of credit.

  • The funds the borrowers use must be from cash on hand, cash from the sale, liquidation of assets or Gift funds (must meet HUD’s approved funding sources and source of funds needs to be documented).   

The additional funds cannot come from Builder incentives, Seller financing, Seller contributions or concessions, any person or entity that financially benefits from the transaction or third party that is directly or indirectly reimbursed by any of the parties benefitting in the transaction or Credit Card advances, sweat equity, trade equity, rent credit.  Purchasers cannot use loan discount points, interest rate buy downs, closing cost down payment assistance, gifts or personal property given by the seller or any other party involved in the transaction.  Seller can pay their share of taxes and Home Owner Association fees if applicable.           

  • The borrower may choose any of the options/interest rate options:
    • HECM Adjustable
    • HECM Fixed

For calculation purposes our rates change every week.  The rate cannot be confirmed until the week of closing.  However, on the adjustable rate LIBOR we have a Principal Limit Rate Lock which means we can use the rate at the time of application or closing, whichever is the most favorable to the borrower.  For the process of planning how much will be available to the borrower, I initially use the rate and amount of the program chosen at the time of application.

  • Seller has to be the owner of record for 90 days prior to the date of the sales contract (based on when recorded). (This is to protect against property flipping.)
  • Prior to completing an application HUD requires the Certification of Occupancy.
  • The Original Purchase Contract or Certified Copy of the Purchase Contract is needed for underwriting.
  • Counseling must be completed by a HUD approved HECM counseling agency that has been approved to provide reverse mortgage counseling. Minnesota requires that the counselor be located in Minnesota. We will provide a you a list of HUD approved counselors.
  • The property must be livable at the time of closing. Any required repairs must be completed prior to closing by the seller – no repairs or repair set asides are allowed.
  • Funds are provided at closing, as there is no rescission period.
  • The new property has to be the primary residence and occupancy must happen within 60 days of closing.
  • One’s existing home may be retained as rental property or if purchasing current home prior to the sale of existing home, income verification will be required to document the ability to maintain both properties. (This is prevent the practice of “buy and bail.”)

Using the reverse mortgage to finance the purchase of your new home may be your solution to meeting your goals without having a monthly mortgage payment.**

Like Mike and Carole, if you or someone you know are 62 or older and want to…

Happy HECM for Purchase Reverse Mortgage Borrowers…downsize
…move to a townhome so they don’t have to do the yard work

…move to a one-level home
…move closer to their children
…move to a larger home to have space for when their family comes to visit

The HECM for Purchase program may be your financing option!

*You may also need funds for property taxes, initial hazard insurance premium, home owner association dues, etc.
**Borrowers are still responsible for paying property taxes, hazard insurance, maintaining the home and abiding by the terms of the loan.

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:

– See more at: http://rmsidac.com/beths-reverse-mortgage-blog/#sthash.3C3ljz4F.dpuf

© 2014 Beth Paterson http://rmsidac.com/beths-reverse-mortgage-blog/ 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:

– See more at: http://rmsidac.com/beths-reverse-mortgage-blog/#sthash.3C3ljz4F.dpuf

© 2014 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-18l

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

This site or information provided is not from, or approved by, HUD or FHA or any US Government Agency or Department. – See more at: http://rmsidac.com/#sthash.vv8MiYI8.dpuf
This site or information provided is not from, or approved by, HUD or FHA or any US Government Agency or Department. – See more at: http://rmsidac.com/#sthash.7ZcOk1EU.dpuf

© 2014 Beth Paterson http://rmsidac.com/beths-reverse-mortgage-blog/ 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:

– See more at: http://rmsidac.com/beths-reverse-mortgage-blog/#sthash.3C3ljz4F.dpuf

Using A Reverse Mortgage for Freedom, Life, Liberty and the Pursuit of Happiness

Using A Reverse Mortgage for Freedom, Life, Liberty and the Pursuit of HappinessAs we celebrate our country’s Independence this 4th of July we think of the freedom’s we have in addition to having the rights to life, liberty and the pursuit of happiness.  Personally we may look at having the freedom to make choices and not rely on others as well being able to pursue the things that make us happy to live life with independence.

Freedom to seniors may mean choosing to remain in their home, not rely on their children or the government financially.  Happiness likely means having the finances to enjoy retirement, maintain their lifestyle, go out to lunch with friends, to take their children or grandchildren out to eat or for a fun activity, maybe to the zoo or a play, or to be able to travel for family reunions or weddings.

Use a reverse mortgage to  feel more free, have choices, or pursue a better retirement lifeI’m guessing you know someone 62 and older who would be like to be able to feel more free, have choices, or want to pursue their retirement life with the following.  I’m also guessing they would feel happier being able to pursue any the things on this list during their retirement.

  • Stay in their home where they may have raised their family, are familiar with the neighborhood and their neighbors and where they usually want to remain.
  • Pay off a current mortgage to eliminate the monthly mortgage payments.
  • Have improved cash flow with no monthly mortgage payments.
  • Protect some of their other retirement funds or investments where there might be taxes or penalties on withdrawals.
  • Purchase a new home to downsize and/or  move closer to family
  • Have funds for emergencies.
  • Have funds for making home improvements or home modifications.
  • Retire and not feeling like they have to work just to have money to pay the bills.
  • Save their home when faced with foreclosure or tax forfeiture.
  • Have cash flow to be able to pay taxes.
  • Have funds to pay for home health care.
  • Have funds for some assistance with home care or companion services.
  • Have funds for adult day services.
  • Have funds for medical expenses and prescriptions.
  • Afford going to the dentist.
  • Afford new eye glasses.
  • Have funds for the needed hearing aid.
  • Have funds to cover long term care expenses.
  • Cover everyday living expenses.
  • Not rely on credit cards.
  • Not rely on children.
  • Have funds for the little extras in life, like:American Flag represents freedom and independence; a reverse mortgage provides financing for freedom and independence in retirement
    • getting one’s hair done,
    • having cable TV,
    • buying groceries,
    • going to lunch with friends,
    • treating their children to dinner,
    • Going to community plays or the theater or a concert,
  • Taking their grandchildren to the zoo or a movie,
  • Being able to do hobbies.
  • Purchase a more dependable car
  • Afford transportation when they can no longer drive.
  • Afford the travel for the family wedding or reunion.
  • Take the vacation they have dreamed of all their life.
  • Reduce financial stress.
  • Have funds to fulfill needs and goals.
  • To live with security, independence, dignity and control.

The equity in your home can provide security, independence, dignity and control through a reverse mortgageA reverse mortgage, a loan with special terms for homeowners 62 and older, may be the financial tool to provide the freedom, life, liberty and pursuit of happiness.

Offering many advantages for senior homeowners, a Home Equity Conversion Mortgage (HECM), the most common reverse mortgage, and only reverse mortgage currently available in Minnesota, has no monthly mortgage payments (borrowers are still responsible for paying property taxes, hazard insurance, maintaining the property), no income or credit score qualifications for determining the interest rate.*  This unique loan allows access to cash from the equity of the home to use through monthly payments, a line of credit with a growth rate, lump sum or a combination of these and pay it back when the home is no longer the primary residence of borrower(s).  When the home is sold any remaining equity goes to the borrower or their heirs.  With the reverse mortgage, if the loan balance is higher than the home can be sold for there is no personal liability to borrowers or their heirs.

While watching fireworks, consider how a reverse mortgage may provide freedom, life, liberty and the pursuit of happiness during retirement years.As you hang your flags, watch parades, gather for picnics, and watch fireworks celebrating the independence of the US, and the freedom, life, liberty and pursuit of happiness we have, ponder and discuss what this means to you and your senior loved ones.  Consider how a reverse mortgage may provide freedom, life, liberty and the pursuit of happiness during retirement years.

Happy Independence Day!

*As of April 27, 2015 income and credit are used for the Financial Assessment to determine borrower’s ability and willingness to pay property taxes and insurance into the future.

© 2014-2015 Beth Paterson http://rmsidac.com/beths-reverse-mortgage-blog/ 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-17Y

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

© 2014 Beth Paterson http://rmsidac.com/beths-reverse-mortgage-blog/ 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://rmsidac.com/?p=4308

Related articles:

– See more at: http://rmsidac.com/beths-reverse-mortgage-blog/#sthash.X7efyTdj.dpuf

© 2014 Beth Paterson http://rmsidac.com/beths-reverse-mortgage-blog/ 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://rmsidac.com/?p=4308

Related articles:

– See more at: http://rmsidac.com/reverse-mortgages-offer-new-products-for-better-options-for-borrowers/#sthash.4OxwRx6J.dpuf

© 2014 Beth Paterson http://rmsidac.com/beths-reverse-mortgage-blog/ 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://rmsidac.com/?p=4308

Related articles:

– See more at: http://rmsidac.com/beths-reverse-mortgage-blog/#sthash.X7efyTdj.dpuf

Reverse Mortgages Offer New Products for Better Options for Borrowers

Reverse Mortgage OptionsChange doesn’t always have a positive image but change can be a good thing as it is with the recent reverse mortgage product changes that are insured by HUD.  Here is information on the reverse mortgage products available.

First let’s look at understanding the FHA/HUD Home Equity Conversion Mortgage (HECM), which is currently the most common reverse mortgage, and the only option currently available in Minnesota.  It is federally insured and regulated. Lending limits are set by the Federal Housing Administration (FHA). The maximum disbursement allowed at closing cannot exceed the greater of 60% of the Principal Limit/Maximum Loan Amount or the sum of mandatory obligations (closing costs, loan and judgment payoffs, set asides, etc.) plus 10% of the Principal Limit/Maximum Loan Amount.

The up-front FHA Mortgage Insurance Premium (MIP) is .5% for initial draws of 60% or less in the 1st 12 months.  If one draws more than 60% at closing or in the 1st 12 months due to mandatory obligations, the up-front MIP is 2.5%. The maximum distribution of funds allowed at closing and in the 1st 12 months is the greater of 60% of the Principal Limit or the total of mandatory obligations plus 10% of the Principal Limit; the amount drawn cannot exceed the Principal Limit.

*Mandatory Obligations include closing costs, loan and judgment payoffs, set asides, etc.

Features on all reverse mortgage programs include:

  • No monthly mortgage payments however borrowers are still responsible for property taxes, hazard insurance, maintaining the home and abiding by the terms of the loan
  • No income or credit qualifications for the interest rate*
  • No personal liability, they are all non-recourse
  • No equity sharing or appreciation sharing
  • Loan is due and payable when the home is no longer the primary residence of the borrower(s)
  • Independent Counseling is required

Now let’s look at the various program options including the adjustable rate options and the fixed rate options as well as the HECM For Purchase.

The Adjustable Rate Program, offering the most choices on how the funds are received makes it the most versatile reverse mortgage program.

  • Funds available in a line of credit, monthly tenure or term payments, lump sum or a combination of these subject to HUD program limits, i.e. cannot exceed 60% in the 1st 12 months.
  • The available funds in the unused line of credit grow so more funds become available over time.
  • With the Adjustable Program, after the 1st 12 months the remaining loan proceeds become available.
  • One can make repayments which reduce the loan balance and then have the option to re-borrow those funds again via monthly payments or the line of credit.
  • The interest rate is based on the LIBOR (London Inter-Bank Offered Rate) plus a margin.

One of the features of the Adjustable Rate program is the Principal Limit Protection feature, implemented in 2006, this allows the lock of the Expected Rate index – however it does not lock the margin. Click here to learn about the Principal Limit Protection feature.

Reverse Mortgage Adjustable Rate MortgageWith the HECM Monthly Adjustable Rate program the rate can change monthly with the first rate change occurring on the 1st day of the second full month and can occur every month thereafter.  There are no limits on the amount of the rate change each month. With the monthly adjustable rate there is a lifetime cap of 5 percentage points or 10 percentage points above the interest at the time of closing depending on the lender.

The HECM Annual Rate program has the same features as the Monthly Adjustable Rate although the rate adjusts annually with the first rate change occurring between 12 and 18 months from the date of closing.  The rate changes thereafter must occur every 12 months.  The rate cannot change more than 2 percentage points at each rate change with a lifetime cap of 5 percentage points above the initial rate at closing.

With some of the same features as the HECM Adjustable Rate program, the HECM Fixed Rate offers a fixed rate option. There is one interest rate, fixed for the term of the loan, for borrowers who are drawing 100% of their available funds up-front. With this option funds are NOT available in a line of credit or for monthly payments.

One may choose to make a payment on the fixed rate option which will reduce the loan balance however these funds are not available to re-borrower again in the future.

NOTE:  While a fixed rate reverse mortgage sounds enticing, once it is understood, it may not be the best choice for a reverse mortgage unless you need all the proceeds for the mandatory obligations at time of closing.

With the Fixed Rate the interest is being accrued on all funds drawn up front when it may not be necessary to take all the funds initially. Additionally, the growth rate is not available on the funds in the line of credit on all the Fixed Rate programs.  If you are doing the fixed rate, ask for the fixed program that offers the line of credit and monthly payment options for the most flexibility.

Using a reverse mortgage to purchase a homeAnother program of the reverse mortgage is the HECM Home Purchase Program which provides financing to those who desire to downsize, move closer to children or purchase a new home without having mortgage payments.

The steps to do so are the same as with the regular reverse mortgage.  However there are some unique points for this beneficial home purchase option.  If you are over 62 and purchasing a new home in Minnesota contact us to learn more about the HECM for Purchase.

While Proprietary or private Reverse Mortgage Programs are not available in Minnesota at this time there is currently one offered.  These reverse mortgages are generally for seniors with higher home values and are considered jumbo loans.  With much higher or unlimited lending limits, the amount of funds available to a borrower may be much greater for those with home values over $1million than other reverse mortgage programs.

One must always look at their situation, consider how the funds will be received and utilized, to determine which reverse mortgage program will work best for their circumstances.  If you are located in Minnesota, contact Reverse Mortgages SIDAC for a review of all the options of reverse mortgages in Minnesota to see which option will be the best for your situation.

*As of April 27, 2015 income and credit are used for the Financial Assessment to determine borrower’s ability and willingness to pay property taxes and insurance into the future.

© 2014-2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://rmsidac.com/?p=4308

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Reverse Mortgage Borrowers Remain in Control

 

Reverse Mortgage borrowers remain in control of their homeWhen sitting down with a new prospect the other day I asked what they had heard or thought about reverse mortgages.  Bob responded that reverse mortgage borrowers lost control of their home and their money.  Have you heard this too?  I want to correct this misconception for you.

Reverse mortgage borrowers remain in control of their home.  They own the home, title remains in their name, just like with any mortgage.

They have the option to paint the home the color of their choice, plant trees or landscape as they choose, and to decorate the inside as they desire (or not make changes).

I had one borrower ask if they could paint their house purple.  With a chuckle I responded  they could although the neighbors may not like the color purple.  The point is, as the homeowner they have the option to choose what color they want to paint their house.

Borrowers are, however, responsible for maintaining the home.  This is to the homeowners best interest anyway, and whether they have a reverse mortgage, a conventional mortgage or no mortgage at all.  Maintaining means things like no bare wood or chipped paint, roof replaced when needed, foundation and structure is sound, electrical and plumbing in working order.

In their will or trust the reverse mortgage borrowers still choose who will inherit the home or equity of the home.

While the reverse mortgage borrowers will be using the proceeds for their needs or wants during the term of the loan, when the home is no longer their primary residence, the loan is due and payable.  The loan is generally paid back from the sale of the home with no personal liability to the borrower or their heirs.  If the home is sold for more than the loan balance the borrower or the heirs receive the difference.

If an heir wants to keep the home, they have this option – they would just need to pay off the reverse mortgage balance.  This can be done through a conventional mortgage, their own funds or if they were the beneficiary on an insurance policy.

Note that if the loan balance is higher than the fair market value, the borrower or their heirs only need to pay 95% of the fair market value of the home, they do not need to come up with the difference.  With the FHA HUD insured Home Equity Conversion Mortgage (HECM) the FHA Mortgage Insurance will cover the difference for the lenders.

They have the option to sell when they want and choose the real estate agent.  If they have passed away then their estate chooses the real estate agent.

The way one wants to receive their reverse mortgage proceeds is also their choice.  They can receive the funds in a line of credit, monthly payments, lump sum or a combination of these.

And how they use these funds is in their control – lenders cannot dictate how one spends the proceeds from their reverse mortgage.  Borrowers can and have used their reverse mortgage funds to pay for home repairs, purchasing a new car, traveling, home care or whatever one needs or wants… it’s their choice.

Reverse Mortgage borrowers remain in control of their homeThe reverse mortgage provides control for borrowers to have funds so they can make their own choices.  For example, where they want to live (in their own home vs government subsidized housing), who they want to care for them (vs the government deciding which home care agency they can use).

Reverse mortgage borrowers do remain responsible for paying their property taxes, having home owners insurance, maintaining the property and paying home owner association dues if applicable, just as they do with or without a conventional mortgage.

Losing control of your home or money with a reverse mortgage is a misconception.  In reality reverse mortgage borrowers have control and in some cases even more control than without doing a reverse mortgage; having funds available gives them more choices and options.

Originally Posted in 2011; Re-posted in 2014
© 2011-2014 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-Zd

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.