Reverse Mortgage Information: Deborah Nance - Corona Reverse Mortgage Professional - Riverside County (Corona Temecula Riverside Moreno Valley Reverse Mortgages)

Summary:
The Home Equity Conversion Mortgage (HECM) program enables older homeowners to withdraw some of the equity in their home in the form of monthly payments for life or a fixed term, or in a lump sum, or through a line of credit.

In addition, the HECM mortgage can be used to purchase a primary home when the borrower is 62 years of age or older and is able to use cash in hand to pay the difference between the reverse mortgage and the sales price plus closing costs for the property.

Purpose:
To be eligible for a HECM mortgage, current homeowners must be 62 years of age or older, own their home outright or have a low mortgage balance that can be paid off at closing with proceeds from the reverse mortgage. The home must be their principal residence. In addition, the HECM can be used to purchase a primary home if the borrower is able to use cash in hand to pay the difference between the HECM and the sales price and closing costs for the property.

The program requires that borrowers either receive free or low cost reverse mortgage housing counseling from a HUD approved reverse mortgage counseling agency before applying for a reverse mortgage. FHA insures HECM loans to protect lenders against loss if amounts withdrawn exceed equity when the property is sold.

Type of Assistance:
HECM can be used by homeowners who are 62 years of age and older. The total income that an owner can receive through HECM is the maximum claim amount, which is calculated with a formula including the age of the owner(s), the interest rate, and the value of the home.

Borrowers may choose one of five payment options: (1) tenure, which gives the borrower a monthly payment from the lender for as long as the borrower lives and continues to occupy the home as a principal residence; (2) term, which gives the borrower monthly payments for a fixed period selected by the borrower; (3) line of credit, which allows the borrower to make withdrawals up to a maximum amount, at times and in amounts of the borrower's choosing; (4) modified tenure, which combines the tenure option with a line of credit; and (5) modified term, which combines the term option with a line of credit.

The borrower remains the owner of the home and may sell it and move at any time, keeping the sales proceeds that exceed the mortgage balance. A borrower cannot be forced to sell the home to pay off the mortgage, even if the mortgage balance grows to exceed the value of the property. A HECM loan need not be repaid until the borrower moves, sells, or dies. When the loan must be paid, if it exceeds the value of the property, the borrower (or the heirs) will owe no more than the value of the property, if they sell the property to repay the loan.

Two mortgage insurance premiums are collected to pay for HECM: an upfront premium (2 percent of the home's value), and a monthly premium (which equals 0.5 percent per year of the mortgage balance).

A lender can charge an origination fee up to $2,500 if the home's appraised value is less than $125,000. If the home is valued at more than $125,000, lenders can charge 2% of the first $200,000 of the home's value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000.

All HECM borrowers are required to complete reverse mortgage counseling through a HUD approved housing counseling agency.

Eligible Customers:
To be eligible for HECM, a homeowner must (1) be 62 years of age or older, (2) have a low outstanding mortgage balance or own their home free and clear, and (3) have received HUD approved reverse mortgage counseling to learn about the program.

An eligible property must be a principal residence, but it can be a single family residence, a one to four -unit building with one unit occupied by the borrower, a manufactured home, a unit in an FHA approved condominium, or a unit in a planned unit development. The property must meet FHA standards, but the owner can pay for repairs using the reverse mortgage. 

Application:
Borrowers who meet the eligibility criteria above can apply through an FHA HECM approved lending institution. Borrowers can locate FHA approved lenders through HUD's searchable listing.

Technical Guidance:
This program is authorized by the Housing and Community Development Act of 1987, Section 417, Public Law 100-242 (12 U.S.C. 1715z-20). Program regulations are in 24 CFR 200 and 206.

For More Information:
Homeowners who want to learn more about this program should call HUD's toll-free housing counseling information line, (800) 569-4287 or see the searchable list of HUD approved reverse mortgage housing counseling agencies.

Additional information is available from AARP's Home Equity Conversion Information Center (202) 434-6044.

Top Ten Things to Know if You're Interested in a Reverse Mortgage

From Untitled Album

Reverse mortgages are becoming popular in America. HUD's Federal Housing Administration (FHA) created one of the first. The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program which enables you to withdraw some of the equity in your home. The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements and more. You can receive additional free information about reverse mortgages in general by contacting the National Council on Aging at (800) 510-0301 or downloading a free booklet, "Use Your Home to Stay at Home," a guide for older homeowners who need help now. Since your home is probably your largest single investment, it's smart to know more about reverse mortgages, and decide if one is right for you!

1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. FHA's HECM provides these benefits. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

2. Can I qualify for FHA's HECM reverse mortgage?

To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, and you must live in the home. You are also required to receive consumer information free or at very low cost from a HECM counselor prior to obtaining the loan. You can find a HECM counselor online or by phoning (800) 569-4287.

3. Can I apply if I didn't buy my present house with FHA mortgage insurance?

Yes. It doesn't matter if you didn't buy it with an FHA-insured mortgage. Your new FHA HECM will be FHA-insured.

4. What types of homes are eligible?

To be eligible for the FHA HECM, your home must be a single family home or a 1-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

  5.  What's the difference between a reverse mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities. With an FHA HECM you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment." 6. Can the lender take my home away if I outlive the loan? No. You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current and maintains the property. 7. Will I still have an estate that I can leave to my heirs? When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. 8. How much money can I get from my home? The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You can use an online calculatorlike the one on the AARP website to get an idea of what you may be able to borrow. 9. Should I use an estate planning service to find a reverse mortgage? FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. FHA provides this information free, and HECM housing counselors are available for free or at very low cost, to provide information, counseling, and a free referral to a list of FHA-approved lenders. Search online or call (800) 569-4287 toll-free, for the name and location of a HUD-approved housing counseling agency near you. 10. How do I receive my payments? •·         Fixed Rate Reverse - One option - All funds must be advanced at closing         •·         Adjustable Rate Reverse has Five Options Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence. Term - equal monthly payments for a fixed period of months selected by the borrower. Line of Credit - unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted. Modified Tenure - combination of line of credit with monthly payments for as long as you remain in the home. Lump Sum - You take all funds at closing.  As always your comments, thoughts and suggestions are welcome.  Please "Like" my blog!

Working exclusively with senior homeowners is such a rewarding and varied experience!

I took a reverse mortgage loan application from a young senior couple (only in their 70's) who are raising their 9 year old grandchild.   Parenting a 3^rd grader on a fixed income of just Social Security isn't easy!  But they wouldn't have it any other way.  "It keeps us young!"

 Today, another "unexpected" expense!  The car broke down and had to be taken to the mechanic.  They told me that just knowing their reverse mortgage is in process, made dealing with the car repairs easy.   They are so excited to have the "breathing room" that this FHA loan will provide.   They are looking forward to the flexibility it will provide them as they raise another child.   I swear they look younger!

From Untitled Album My newlywed clients (70 something), married just 3 years, closed their reverse mortgage yesterday.  They have put on a new 30 year roof, paid off a mortgage that had a balloon payment coming due in a couple of years (they were losing sleep over that one!)   What are their big plans?   The financial relief of no balloon, combined with monthly reverse payments coming in for the rest of their lives (as long as they live in the home) mean they can afford to travel twice a year on trips they only talked about. Mr. and Mrs. W immigrated to the United States many years ago and raised their family.  Their children are successful, hardworking and all own their own homes.  After putting all the kids through school, helping with grandkids and saving, saving, saving.  They are now ready to buy their first home.  With a reverse mortgage for purchase of $270,000 and their savings of $180,000.00 as a down payment, they are purchasing their first home right here in Riverside County.  No monthly mortgage payments and bye bye tiny apartment. Another fun, fulfilling week in the reverse mortgage business!

Here's a customer story about one womans reason for a reverse mortgage. I met with a young senior last week, (only 65) who completed her reverse mortgage counseling and will be able to utilize the reverse mortgage to quit her part-time job, payoff her mortgage AND spend more time with her 80+ year old mother while she still has her.

Divorced, with no children, she will use the adjustable rate reverse mortgage and access a little over $2200.00 in cash to do some home repairs.   She will also payoff her existing mortgage, saving over $500 per month in cash flow, establish a line of credit of over $52,000 AND receive $500.00 per month in tax free reverse mortgage tenure payments for the rest of her life as long as she lives in the home.  This will increase her cash flow by $1,000 per month, establish a growing line of credit for any emergencies, and along with her two pensions and social security, allow her to leave her part time job, spend more time with her mother and siblings, time she may never have been able to take were it not for the reverse mortgage.

With the current pricing of zero origination fee and zero servicing fee, her costs are reduced by $6,000 up front and she is able to access about $10,000 more in her line of credit than she would have in February!

I love it when a plan comes together!!

 

 

 

 

I've been pleased for my clients that most of the big lenders, my employer included, have reduced or eliminated the lender fees for clients in obtaining reverse mortgages.  With interest rates low, now may be the best time.  Skip Frenzel (www.AgapeLongTermCare.com) from Agape Long Term Care, forwarded this to me, Please take a look at this article from the WSJ

Article Link:  http://bit.ly/9qjVC2

Two of my clients this week saved over $10,000 in upfront costs and life of loan expenses!  And one client who is purchasing with a reverse will be able to buy for less cash up front. 

Nice!

Before you start talking to lenders, consider consulting a HUD-certified reverse-mortgage counselor to learn more about the options and mechanics. Until the end of April, the National Council on Aging and other nonprofit groups are offering free counseling to homeowners regardless of their income.

You can find a directory of reverse-mortgage counselors at www.hud.gov.

Click on "Talk to a Housing Counselor," link & then "Search online for a housing counseling agency near you."  The counseling is essential in preparing a senior homeowner or homebuyer in making an informed decision. 

There are links to great free information sources here on my blog page too. Help yourself - knowledge is power.

 

Hi All,

Another story about a great couple using a reverse mortgage to improve their golden years.

Although they were high school sweethearts, this couple has only been married just a few years.  The home they live in is 30 years old and in great shape.  A single story it is a perfect place to stay for the long haul.  And that is just what they want to do.

With a very small mortgage on the property now, and the blessing of all the adult children, they will use the reverse mortgae will payoff the existing loan. That will increase their monthly cash flow by $500.  But the best part is the emergency funds that will be available for them in the line of credit.  They plan to use the line of credit in the event that either one of them requires in home care for the future, or to replace lost retirement income in the event of one of them preceding the other in "graduation".

For the next few years, while they continue to work, they will be making mortgage payments on the reverse mortgage, (yes you can do that) write off the interest they will pay, AND increase the available line of credit. 

They are especially excited because, with the cushion provided by the reverse they can leave their other assets invested where they can grow with the economic recovery.  People are so smart!

I was tickled to call them right after our meeting to let them know that the company I work for is at this time waiving the origination fee!  Nice.

Hi All, I found this video to be very good and recommend it to seniors considering a reverse mortgage. The video clearly explains what homeowners can expect from the required reverse mortgage counseling. The video is only 4 minutes long so will even inform those of who like to surf with the remote. Check it out!

Hi all,  

Just wanted to tell you a quick story about a client I met with today that we will be helping with a reverse mortgage very soon. She was referred to me by a friend of mine.  

• She is 83 years old and lives alone.  She is active, healthy and vibrant!
• Her home is worth $400,000. 
• She has a small mortgage for $36,000 with a $367 monthly payment.
• Her social security is $600 per month.

With her reverse mortgage she is planning on:  

• The reverse mortgage will payoff her existing loan, saving her $367 per month in payments!
• She will take $20,000 cash to upgrade her master bath and install a safe, walk in tub & shower system!
• She will leave $135,000 in a line of credit to have for emergencies and in home care should something happen in the future. (Smart woman!)
• She will receive $500 per month tenure payment from us to her for the rest of her life as long as she lives in the home.  

Now she will be able to age in place, with an increase in income, a safer home, and money to pay for care when she may need it.  

Now you know why I love my job!  It is so heartwarming to be able to help a senior be safe and secure in their home.

 

Housing Counseling Frequently Asked Questions - HECM Counseling

A. Yes. HECM counselors may not simply present information about reverse mortgages to a client. They must also conduct a budget analysis to determine the unique financial situation of the client and tailor the options presented in the counseling session to that situation.

Q. Can a HECM counselor fax a client's counseling certificate to a lender if the counseling session was conducted over the phone and has been signed only by the counselor, not the client?

A. Yes. If the counseling session is conducted over the phone, a counselor may fax a copy of the certificate, signed by the counselor only, to the lender as an acknowledgement that the counseling has been completed. However, to be insured by HUD, the lender must have an original, signed copy of a certificate signed by both the client and the counselor, or, in the case of telephone counseling, separate certificates signed by the client and counselor.

Q. Will HUD insure a loan if the lender has a faxed, rather than original, copy of the counseling certificate?

A. No. If a lender has a faxed copy of a counseling certificate bearing the signature of the borrower and counselor, or, in the case of phone counseling, a copy of two different certificates, one signed by the borrower and one by the counselor, then the lender may begin to process the loan application by obtaining a case number, ordering the appraisal and title work, etc. However, for insuring purposes, the lender must have in their possession an original certificate bearing the wet signatures of both the counselor and borrower, or, in the case of telephone counseling, separate certificates with the wet signatures of the client and counselor, so they can submit certified true copies in the case binder. (See Submission of Case Binder Documents Section of ML 2004-39 for more information). (http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/04-39ml.doc)

Q. Can the borrower be assessed fees before the lender has the original counseling certificate (with wet signatures)?

A. Yes. The borrower may be assessed fees once the lender has a copy (faxed or otherwise) of the certificate signed by the both the borrower and the counselor, or, in the case of telephone counseling, copies of separate certificates with the signatures of the client and counselor.

Q. Can a borrower's wet signature on the counseling certificate be obtained at closing?

A. No. A borrower cannot sign the certificate at closing. If the borrower is found to have done so during a Post Technical Review, the lender could be required to refund all fees paid prior to obtaining the borrower's signature.

1

Q. Can a lender ask a borrower to sign a blank counseling certificate prior to receiving counseling, so that they can have that signature on file and begin processing the loan application more quickly?

A. No. A HECM borrower cannot sign the counseling certificate until he or she has received HECM counseling.

Q. Is it all right for a HECM counselor to ask a reverse mortgage client if he or she wants a copy of the counseling certificate faxed to a third party?

A. Yes. A counselor can inform a client that a copy of their counseling certificate can be faxed to a third party. However, the counselor cannot steer or appear to steer the client toward faxing a copy of the certificate to any particular lender.

Q. Can a housing counseling agency that provides counseling services to prospective HECM borrowers also originate HECM loans?

A. No. Section 255 (f) of the National Housing Act requires that the counseling associated with a HECM loan be provided by a party other than the lender responsible for originating that loan. A housing counseling agency may not both originate HECM loans and offer HECM counseling services.

Q. Can a HECM counselor contact a lender for a copy of a client's lender illustrations?

A. No. Mortgagee Letter 2004-25 (http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/04-25ml.doc) prohibits housing counseling agencies from promoting, representing, recommending or speaking for any specific lender. Contacting a lender for illustrations violates this prohibition. If a client wishes to review a particular lender's illustrations with a counselor, he or she must contact the lender and request the illustrations.

Q. Can a lender provide the name and toll free number for a housing counseling agency not based in the client's home state, but which provides phone counseling nationally?

A. No. HUD requires the provision of 5 counseling agencies within the client's state, with one of those agencies being within reasonable driving distance. In addition, the lender is required to provide the telephone numbers for the 3 national networks approved by HUD to provide telephone counseling nationally: AARP, NFCC, and MMI. These requirements, and the use of these networks, are designed to prevent steering. The inclusion of an additional out-of-state phone counseling entity creates the appearance of steering. Counselors from this entity can provide telephone counseling nationally for clients referred through one of the three national networks listed above, but may not be included on the list of counseling agencies provided by the lender.

Who can I contact if I have complaints regarding a HECM lender or HECM counselor?

If a consumer, lender, counselor, or representative from the housing industry has a concern or complaint about the services provided by a particular HECM lender or HECM counselor; they should immediately contact the homeownership center in their

2

jurisdiction. To find HOC locations and phone numbers go to: http://www.hud.gov/offices/hsg/sfh/hoc/hsghocs.cfm

Q. Is a HECM counselor obligated to review a client's unique financial situation during a HECM counseling session?

There are many places to go to find out the facts on Reverse Mortgages. Websites sponsored by  HUD, NRMLA and AARP all give plenty of information.  I provide links to all of them on my blog. 

Facts:

1. The most popular reverse mortgage loan is the FHA HECM (Home Equity Conversion Mortgage).  The HECM comes in two flavors, fixed and adjustable.
2. Reverse mortgages may now be used to purchase a home.
3. All borrowers must be at least 62 years old and on title to the home.
4. The home must be the borrower's primary residence.
5. There are no required monthly payments on a reverse mortgage.
6. It is a negatively amortizing loan.
7. The loan to value (LTV) amounts are based upon a combination of age, home value and expected interest rates.
8. There are no prepayment penalties.
9. MIP is financed both as an upfront cost and at .5% per annum accrued monthly.  (Just like traditional forward FHA loans).

FAQ's: (Taken from HUD's website)

1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. FHA's HECM provides these benefits. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

2. Can I qualify for FHA's HECM reverse mortgage?

To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, and you must live in the home. You are further required to receive consumer information from an approved HECM counselor prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on (800) 569-4287 for the name and telephone number of a HUD-approved counseling agency and a list of FHA-approved lenders within your area.

3. Can I apply if I didn't buy my present house with FHA mortgage insurance?

Yes. It doesn't matter if you didn't buy it with an FHA-insured mortgage. Your new FHA HECM will be FHA-insured.

4. What types of homes are eligible?

To be eligible for the FHA HECM, your home must be a single family home or a 1-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

5. What's the difference between a reverse mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities. With an FHA HECM you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."

6. Can the lender take my home away if I outlive the loan?

No. You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than the value of your home at the time you or your heirs sell the home.

7. Will I still have an estate that I can leave to my heirs?

When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.

8. How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. 

9. Should I use an estate planning service to find a reverse mortgage?

FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. FHA provides this information free, and HUD-approved housing counseling agencies are available for free or at very low cost, to provide information, counseling, and a free referral to a list of FHA-approved lenders. Search online or call (800) 569-4287 toll-free, for the name and location of a HUD-approved housing counseling agency near you.

10. How do I receive my payments?

You have five options:

• Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
• Term - equal monthly payments for a fixed period of months selected.
• Line of Credit - unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted.
• Modified Tenure - combination of line of credit with monthly payments for as long as you remain in the home.
• Modified Term - combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

FAX - For a free 27 page Reverse Mortgage Guide please email me your Fax Number and I will send it to you!