Reverse Mortgage Information

Riverside Reverse Mortgage Question?  Why is HUD taking over my reverse mortgage?

Over time, the loan balance on a reverse mortgage increases.  This is due to accrued interest and may also be due to line of credit withdrawals, or payments (loan advances) made to the borrower.  A part of the security built into the product for the benefit of the lender is that when the principal balance of the loan reaches 98% of the maximum claim amount.  The lender can assign* the loan servicing to HUD.  This does not change any of the benefits to the borrower.  If they are receiving monthly payments, they continue to receive them.  If the have a line of credit, those funds are still available to them.  It's just that now they are dealing with HUD and not the bank.

I received a phone call today from an elderly woman who has had a reverse mortgage for years.  She got a letter from the lender saying that they were transferring the servicing of her loan to HUD.  Then she received another letter from the servicing company that due to the fact that her loan balance had grown to over 98% of the maximum claim amount on her loan they were now servicing her loan.  They reminded her that she had to keep the taxes and insurance current.

She was worried that the government was going to take her house away from her. I'm was able to calm her and explain that nothing changes as far as she, the borrower, is concerned, and we set an appointment to meet face to face next week with her daughter to explain it to her.

I wish that when lenders with reverse loans that are going to be assigned to HUD would have their customer service departments give a phone call to the clients along with the letter and explain what is happening.  It would save some sleepless nights.

My explanation above is very simplistic, but I hope it provides peace of mind if you or a loved one has the same question.

*Here is some verbiage from HUD's Handbook on HECM, regarding this subject. 

"8-1 PURPOSE.  This chapter explains the procedures for the lender to follow in assigning a mortgage to HUD.  Procedures for processing demand assignments by the local HUD Office are also included.  Refer to HUD Handbook 4330.1 for standard assignment procedures.  This chapter supersedes that handbook only as noted below.

8-2 ASSIGNMENT INSURANCE OPTION.  If the lender has chosen the assignment insurance option at closing,

         A.The mortgage may be assigned to HUD if:

                 1)The outstanding balance, including all payments made to or on behalf of the borrower, MIP and accrued interest, is equal to or greater than 98% of the maximum claim amount as reflected on Form HUD 59100, Mortgage Insurance Certificate,...."

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!