Why You Pay FHA Mortgage Insurance Premiums on Reverse Mortgages

Posted on October 10, 2016 by Beth Paterson, CRMP

Puzzled by FHA Mortgage Insurance Premium This is a question I recently received:

Hello Beth.
I notice that the monthly costs for my reverse mortgage loan include very costly mortgage insurance. From my experience as a homeowner, mortgage insurance was to cover the mortgage payment in the event the mortgagee could not make payments for one reason or the other. Since there are no mortgage payments in a reverse mortgage loan, why do I have to pay mortgage insurance?
Thank you.

This is a very good question!

With conventional mortgages many people look at mortgage insurance premiums as protection of risk if they, the borrowers, can’t make their monthly mortgage payments. The reverse mortgage doesn’t have monthly mortgage payments required for this product. Although with the reverse mortgage there is a repayment required, it is one payment when the loan becomes due and payable, generally when the borrower(s) is(are) no longer in the home as their primary residence.

Mortgage insurance on a reverse mortgage does not protect the consumer or borrowers obligation to pay the loan balance when the home is no longer the primary residence of the borrower or if they haven’t abided by the terms of the loan.

However, with a Federal Housing Administration (FHA) insured Home Equity Conversion Mortgage or better known as a HECM reverse mortgage, there is a required mortgage insurance premium by FHA. The FHA Mortgage Insurance Premiums (MIP) offer significant benefits for reverse mortgage lenders, investors, as well as the borrowers.

The FHA required MIP are in place even though one is not making mortgage payments for several reasons:

The insurance protects the investors against risk and loss.

There are also advantages and increased borrowing power for the borrowers with FHA insuring the reverse mortgage. These include:

Guaranteeing the funds are available for you, the borrower, during the term of the loan. With HELOCs the bank/lender can call the loan due and payable if there are changes with the bank, for example they merge with another bank/lender or they close their doors.
Guaranteeing the reverse mortgage lender against default or shortfalls means the interest rates are lower compared to other mortgages for the benefits one receives with the reverse mortgage. i.e.,
- With conventional loans the interest is impacted by one’s credit score. With the reverse mortgage one’s credit, even if it’s poor, does not impact the interest rate.
- The FHA insurance on the HECM loans keep the interest rate low and allows more dollars to be loaned than with proprietary programs. Proprietary reverse mortgage programs have a higher interest rate to cover the lender’s and investor’s risks and loss.
Providing a line of credit growth rate (available only with reverse mortgages). The tenure monthly payment option also has a growth rate factored in when the tenure payment is calculated.
As a reverse mortgage it is a non-recourse (no personal liability) loan. What this means is if the loan balance on the reverse mortgage is higher than what the fair market value is on the home when the loan is due and payable, the FHA MIP will cover the difference to the lender rather than the borrowers or their heirs having to come up with the difference.

If you are considering a reverse mortgage, look at the benefits of the reverse mortgage which include:

No monthly mortgage payments, therefore increase your cash flow.
With no monthly mortgage payments required the risk of default due to not being able to make monthly mortgage payments is reduced. (Borrowers are still required to pay property taxes, keep hazard insurance on and maintain the property and pay home owners association dues if applicable.)
A line of credit option which has a growth rate making more funds available to you in the future, no other mortgage offers this. Or you can use the funds to receive monthly payments either as tenure (life of the loan) or an amount set by you.
Non-recourse, no personal liability to you or your heirs.

While there have been different structures for calculating the MIP with past programs, currently, the up-front FHA MIP is .5% of the property value or mortgage lending limit, whichever is less if borrowing 60% or less of the Principal Limit within the 1st 12 months; 2.5% if borrowing more than 60% of the Principal Limit within the 1st 12 months. The on-going MIP is 1.25% of the loan balance.

To summarize, while one is not making payments on their reverse mortgage, the FHA Mortgage Insurance Premium with the reverse mortgage provides benefits over conventional and HELOCs where mortgage payments are required, which cannot be received with any other mortgage.

For further details on the reverse mortgage contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible. For other states, contact your local reverse mortgage specialist who is a broker, one who works with several lenders, has their Broker License/NMLS and preferably holds the Certified Reverse Mortgage Professional (CRMP) designation.

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

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.

Basics of Reverse Mortgages You Need to Know

Posted on September 13, 2016 by Beth Paterson, CRMP

The Home Equity Conversion Mortgage, or HECM, is the most common reverse mortgage and only one available in Minnesota. The HECM was first insured by FHA in 1989 for the purpose of providing a valuable financing alternative for senior homeowners to help them remain in their home and have access to funds by withdrawing a portion of their home equity.

A mortgage like any other mortgage where borrowers retain title and borrow against their home equity, the reverse mortgage offers special terms for seniors home owners 62 and older. One advantage for seniors is with the reverse mortgage there are no monthly payment requirements although borrowers are responsible for paying property taxes and insurance. While monthly payments aren’t required, one can make a payment or payments when and how much they choose.

The Principal Limit or maximum loan amount is determined by the home value or FHA Lending Limit, currently $636,150, the age of the youngest borrower (the older one is the more they can receive), the Expected Interest Rate, and the program chosen. Doing the reverse mortgage at a younger age may still be more beneficial than waiting until one is older.

To qualify borrowers must meet a Financial Assessment requirements demonstrating their ability and willingness to pay property taxes and insurance into the future. In some circumstances a Life Expectancy Set Aside (LESA) may be required to cover the property taxes and insurance.

Reverse Mortgage Basics With the Adjustable Rate option, the funds available can be received in a lump sum, monthly payments, a line of credit or a combination of these. The monthly payments can be structured as one needs or for life as long as the home is the primary residence. Funds in the line of credit grow so more funds can be available in the future. The line of credit growth rate is a feature that makes the reverse mortgage a tool for financial and long term care planning.

A fixed rate option is available however only the lump sum draw is available and the draw amount is limited to the 60% of the Principal Limit (an additional 10% is available in some circumstances).

With a reverse mortgage you hold the keys and title The borrowers keep the title to the home and are responsible for property taxes, insurance, and maintaining the home. Unlike a conventional loan the interest accrues, increasing the balance with no mortgage payments due until the home is no longer the primary residence of the borrower(s) or if one has broken the terms of the loan, i.e. didn’t pay property taxes.

Because the closing costs are up-front, they are often perceived as high and often scare people away. However, the fees are comparable to the traditional closing costs of a conventional loan including an origination fee, appraisal, title fees, title insurance and recording fees. As a FHA insured loan, with the HECM borrowers also pay the FHA Mortgage Insurance Premium (MIP).

The repayment amount is the lesser of the loan balance or fair market value of the home. If there is remaining equity, it goes to the borrowers or their heirs. As a non-recourse loan there is no personal liability to the borrowers or their estate for repayment.

Generally the funds are tax-free but one should consult with their tax advisor for their specific situation.

One can have a trust, life estate, or receive Medicaid (Medical Assistance in Minnesota), Elderly Waiver or other public benefits.* In the case of a couple even if one of the borrowers goes into the nursing home or passes away, the other one can stay in the home and the loan isn’t due until both borrowers are no longer in the home as their primary residence. Not considered income, Social Security and Medicare are not affected. *Check with legal advisor for your situation.

Eligible non-borrowing spouses may be able to remain in the home if they meet certain qualifying attributes. Talk with your local originator and/or HUD approved reverse mortgage counselor for details.

With no limitations on how the funds can be used, through the years hundreds of thousands of seniors have benefitted from the reverse mortgage allowing them to stay in their home and have security, independence, dignity and control.

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 Misconceptions Continue; You need to get the facts!

Posted on August 26, 2016 by Beth Paterson, CRMP

Confused about Reverse Mortgages Facts I’m amazed at how much misinformation continues about the reverse mortgage in the media as well as those who comment on these pieces. Let me clarify the more common misconceptions.

Borrower’s do still own the home, not the lender or bank! The reverse mortgage is a loan allowing homeowners 62 or older to use the equity while they still live in and own the home. It is a valuable option to consider whether one has no mortgage or a conventional mortgage. If they use the reverse mortgage to pay off their current mortgage the borrower’s cash flow will increase because they no longer have to make the monthly mortgage payment.

Everyone’s situation is different and one should consider their situation looking at ALL options including a reverse mortgage. Get the facts, review information on HUD’s website, meet with a local originator to explore the details and how it will possibly work for your circumstances. As I told someone the other day, one can’t make a good decision unless they have explored all the options.

Closing costs are comparable to any conventional mortgage…I’ve done side-by-side comparisons.

Selling and moving may not be the best option, especially if one wants to remain in their home. The reverse mortgage can be less expensive than selling and moving.

Options for receiving the reverse mortgage proceeds include:

A Line of Credit (which as a growth rate so more funds become available based on the LOC balance).
Monthly Payment option – payments made to the borrower as tenure (for the life of the loan), term (an amount determined by the borrower for a specific period of time)
Lump Sum – funds drawn at closing
A combination of these.

A lump sum is a little risky but HUD has implemented some restrictions including limiting the amount one can access in the first 12 months to 60%, unless there are mandatory charges such as a current mortgage or judgements that are required to be paid from the reverse mortgage.

Better and more common options include: The line of credit with the growth rate can be a useful retirement planning tool and help pay long term care costs in the future.

The monthly payment options whether tenure or term can provide extra cash needed each month. Maybe one could use an extra $100 or $200 a month so they don’t have to use credit cards to cover living expenses.

Some borrowers do a combination of these, taking some as a lump sum, a line of credit and monthly payments.

It is a loan that does need to be repaid. The loan does need to be repaid when the home is no longer the primary residence of the borrower(s) with some provisions for non-borrowing spouses. If one does not pay property taxes, keep insurance on the property or does not abide by the terms of the loan, the lender may call the loan due and payable. The actual due date on the mortgage is the 150^th birthday of the youngest borrower.

The reverse mortgage uses all the equity. While the interest is being added to the loan balance, this allows the senior homeowner the use of these extra funds during the term of the loan. And the advantage of the reverse mortgage is it is a non-recourse loan, which means there is no personal liability to the borrower or their heirs, it is repaid from the value of the home only. If the loan balance is higher than what the home can be sold for when the loan is due, the FHA Mortgage Insurance covers the difference to the lender; the borrower or their heirs or tax dollars don’t cover this difference.

Reverse Mortgages Are Complex. What financial product or even other products aren’t complex if you don’t understand them? Do you understand all the details of a conventional mortgage? Your car loan? Do you understand and use all the features of your smart phone? Yes, there are many details with the reverse mortgage, that’s why it’s important to take the time to understand them and work with a reverse mortgage originator will will take the time educate you and not pressure you.

Get the facts! As with any financial product, or any purchase for that matter, one should get the facts and understand the terms. With the reverse mortgage there are many protections in place including they are required to obtain 3rd party counseling where the counselor explains the product and the terms. The loan officer they are working with should also be explaining the features and terms of the reverse mortgage. Don’t jump to conclusions! Understanding them, they might find the reverse mortgage is a viable option for their situation.

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.

Want Independence? Explore A Reverse Mortgage.

Posted on July 1, 2016 by Beth Paterson, CRMP

Celebrating Our Independence - Finding Independence With A Reverse Mortgage What gives you a sense of independence? When I think of independence I think of having freedom of choices and not relying on others. We all want our independence including seniors. How can seniors maintain that independence, have freedom of choices and not rely on others, the government or their children? A reverse mortgage provides independence for home owners 62 and older.

Having one’s own 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 is desired can give that feeling of independence. Being able to pay off a mortgage to improve cash flow to to save one’s home from foreclosure gives one relief and freedoms. Being able to plan and have funds for the future and long-term care needs as well as protecting other assets and/or delaying taking out Social Security are other ways to have independence.

While some assistance may be needed for seniors to remain in their home, not relying on children or the government for help and being able to choose a home care agency of their choice will give them the sense of independence. Using the equity in one’s one with a reverse mortgage can provide seniors the funds for their independence.

“Now I have my dignity back and my independence” was what Edna exclaimed after her reverse mortgage was closed.

Another Minnesota reverse mortgage borrower, Bea, 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.” The reverse mortgage allowed Bea to pay off a mortgage, then to travel to family weddings and reunions. Several years after she initially did her reverse mortgage more recently Bea is using her reverse mortgage funds to pay for home care that is needed to keep her independent and at home.

Ted, age 91 and Anna age 87, Minnesota homeowners, were proud and didn’t want to discuss their financial situation. However, their son-in-law finally talked to them about doing a reverse mortgage. When I met them and we started the reverse mortgage process, the children and I were told they were doing the reverse mortgage so they could put new linoleum on their kitchen floor. Once the loan was closed I was informed by their children that they had indeed put in the new linoleum along with new windows and they bought some new furniture. The kids were going to Ted and Anna’s and were told, “Don’t pull in the drive way, we just had it blacktopped.” When Ted and Anna went out to eat with their kids, they could pay for their kid’s meals too making them feel good that they could treat their children to a meal.

Then one day Anna and her daughter were sitting at the kitchen table and Anna shared that before their reverse mortgage they used to go 3 days at the end of month without food or even milk because they would run out of money from their Social Security. As they were sitting there and looking at the paper, Anna exclaimed, “Look, Depends are on sale, I can now stock up.”

While Ted and Anna were too proud to let their children know their financial situation initially and they didn’t want to depend on them to assist with their living expenses, once they signed the reverse mortgage documents they kept their independence and had funds for their needs and desires. This also improved their dignity.

A reverse mortgage insured by FHA, an agency within HUD, is known as a Home Equity Conversion Mortgage or HECM. As one of the most protected financial options available for seniors, it allows them to use the equity in their home for whatever they need or want. With no monthly mortgage payments, cash flow can be improved by receiving money in monthly payments, a line of credit, lump sum or a combination of these. (Borrowers are still responsible for paying their property taxes and hazard insurance and maintaining the home.)

The title remains in the borrower’s name and the loan is not due until the home is no longer the primary residence, when they die, sell or move or on their 150th birthday. Repaid from the sale of the property, as a non-recourse loan if the loan balance is higher than what the home can be sold at fair market value the borrower or their heirs are not responsible for the difference. If the home is sold for more than the amount due then the borrower or their heirs keep the difference.

As you bring out the red, white and blue, hang your flags and gather with family to celebrate the independence of this great country of ours, ask what independence means to your loved ones. What is needed to help them remain independent and in their home, not relying on the government or on you, their children. Then explore a reverse mortgage, get the facts about them, and see if it might be an option for their situation to maintain their independence. Happy Independence Day!

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

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.

Hearing these statements are reasons to do a reverse mortgage

Posted on May 16, 2016 by Beth Paterson, CRMP

Have you heard any of these statements from a homeowner 62 and older? They may find their solution is a reverse mortgage and they should be encouraged to get the facts to see if the FHA insured Home Equity Mortgage (HECM) is right for their situation.

“I want to stay in my home.”
“My only option is to move.”
“I’m planning for retirement.”
“I’m not sure how I’m going to afford any potential long-term care costs.”
“I can’t afford home health care.”
“We can’t afford a mortgage payment.”
“We can’t afford to make home repairs or modifications.”
“I need money but drawing from my retirement plans have penalties.”
“Not enough money at the end of the Social Security check.”
“I need help with keeping up my home with housekeeping or yard work.”
“I’m downsizing and moving.” or “I’m moving closer to my children.”
They can’t afford the little extras that would help them maintain and enjoy their life.
They want Security, Independence, Dignity, and Control which they are missing in some way now.

There statements fit into the 5 general reasons to do a reverse mortgage:

Needs based: need funds immediately for covering living expenses
Maintaining lifestyle: having funds for travel, buying a car, purchasing vacation home
Protecting or delaying draws from other investments: Using the reverse mortgage to tap home equity rather than accessing other investments or retirement funds that may have penalties or are taxable; let the investments or retirement funds grow so more retirement funds are available later in one’s life; use the home equity so other investments can be left as the inheritance
Planning for long-term care needs (Standby reverse mortgage): Taking the reverse mortgage at a younger age then leaving in the line of credit which grows to have funds to draw from in the future when “life happens”
Purchasing a new home: Whether downsizing, moving closer to family or buying a dream home, the reverse mortgage can be used for financing.

A reverse mortgage is a mortgage with special terms for seniors 62 and older. Some of the differences from a traditional mortgage include income and credit scores are not considered to qualify for the interest rate and monthly mortgage payments are not required. Borrowers are responsible for paying property taxes, insurance, maintaining the home and abiding by the terms of the loan. Borrowers must meet HUD’s financial assessment qualifications to demonstrate ability and willingness to pay property taxes and insurance into the future.

Rather than a 15 or 30 year term, the loan is due and payable when the home is no longer the primary residence of the borrowers or on the 150th birthday of the youngest borrower. In addition, the reverse mortgage is non-recourse, which means if the loan balance is higher than what the home can be sold for there is no personal liability to the borrower or their heirs. If the home is sold for more than the loan balance, the borrower or their heirs receive the difference. The most common and only reverse mortgage available in Minnesota is the FHA HUD insured Home Equity Conversion Mortgage or HECM.

Options are available! When you hear any of the above statements remember a reverse mortgage may be the option that is the most beneficial to their situation.

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-1m5

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.

Senior Homeowners’ Foreclosures Should NOT Be Blamed On Reverse Mortgages

Posted on May 3, 2016 by Beth Paterson, CRMP

Homeownership We are seeing articles in the media about seniors with reverse mortgages who are losing their homes to foreclosure. Is this unfortunate? Yes! But let’s look at the reason rather than blaming the product, the reverse mortgage.

All homeowners regardless of age are responsible for paying their property taxes and keeping insurance on their home or risk losing it to foreclosure or not having funds to rebuild after damage to the home from a storm. This is true whether one has a reverse mortgage, a traditional loan, a Home Equity Line of Credit (HELOC), or no mortgage. Blaming the reverse mortgage for one’s lack of taking responsibility of general homeownership duties is misplaced by the media and the homeowners.

Several years ago I talked with a woman who was behind on her property taxes and the county was foreclosing on her. She could have qualified for a reverse mortgage, paid the back taxes, improved her cash flow with funds in a line of credit (or for others paying off a current mortgage and eliminating the monthly mortgage payment) and have funds to pay future property taxes and keep insurance on her home. Instead she listened to her brother who said reverse mortgages are bad, even though he had no basis for the statement and wouldn’t get the facts before making a decision. By listening to her brother and not doing the reverse mortgage, the county foreclosed on her property. She lost $280,000 in equity because she didn’t do the reverse mortgage and pay off the back taxes.

Stories about the county foreclosing on properties because one has not paid back taxes do not make the news…why?

Reverse mortgage maintains lifestyle The reverse mortgage can, and has, helped those 62 and older have the funds to pay their property taxes and insurance along with other homeowner responsibilities. More times than not we hear the stories on how the reverse mortgage has made a difference in the lives of seniors. How it has given them funds to cover their needs, maintain or improve their lifestyle, plan for their future long-term care needs or purchase a new home so they can downsize, move closer to their children or buy their dream home. See below links to articles on these uses.

The reverse mortgage lenders have reached out and worked with many borrowers who were delinquent in their property taxes and insurance to find a solution to help them get caught up on their late payments. Some used reverse mortgage proceeds, others worked out a payment plan. Because they have worked out a plan, these reverse mortgage borrowers are not facing the foreclosures. Only those who did not respond to lenders’ and/or work out a repayment plan are facing the foreclosures.

As of April 2015 a Financial Assessment is required to determine reverse mortgage borrowers’ ability and willingness to pay property taxes and insurance into the future. This consumer protection for borrowers helps make reverse mortgages more sustainable for seniors who want to remain in their homes. This assessment does take into consideration the occasional life circumstance where one may have been late on a payment.

Be educated about reverse mortgages Borrowers should take time to be educated and understand the reverse mortgage, as they should with any mortgage or financial product. With the reverse mortgage they are required to obtain 3rd party counseling where the counselor explains the product. The loan officer they are working with should also be explaining the features and terms of the reverse mortgage. Borrowers then get to decide whether they choose to proceed. It’s their decision and they should not blame a product they chose for their circumstances that likely benefited them over time.

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

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

Posted on January 11, 2016 by Beth Paterson, CRMP

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.

The 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.

Be 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.

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

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

Posted on December 3, 2015 by Beth Paterson, CRMP

Reverse Mortgage provides funds for retirement Home 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 woman I 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.

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

Posted on November 25, 2015 by Beth Paterson, CRMP

My 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.

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.

TV Show Discusses Facts & Uses of Reverse Mortgages

Posted on September 15, 2015 by Beth Paterson, CRMP

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.

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“Because The Customer” We Give Thanks

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!

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!

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!