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Articles in Category: Reverse Mortgage or HECM

FHA Loan Rules, Reverse Mortgages and Seasoning Periods

A reader asks, “I had a foreclosure in 9/12/2012. I have applied for a reverse mortgage several months ago. The loan officer told me that I would have to wail until sept 2015 to re-apply. Is there any way I can overcome this dead line.” There are some vagaries with this reader question that require addressing, but we’ll answer the basic query first. FHA loan rules state that exceptions are possible to the minimum “seasoning period” or mandatory waiting time to apply for an FHA loan, but this requires the borrower to meet certain criteria. It would also require the willingness of the lender, which in the case of this particular reader question, does not sound possible with that particular financial institution based on what was shared above. In order | more...

 

FHA HECM Loans: Basic Details You Should Know

If you are a qualified borrower aged 62 years or older and either own your home or are very close to doing so, you may be eligible for an FHA Home Equity Conversion Mortgage (also known as a HECM loan). HECM loans, also known as reverse mortgages, feature money back to the borrower and no mortgage payments. The HECM loan normally comes due and payable when the borrower dies or sells the home. According to the FHA official site, the type of homes eligible are strictly residential in nature with an occupancy requirement for the borrower: “To be eligible for the FHA HECM, your home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet | more...

 

Recent Changes to FHA HECM Due And Payable Rules

Recently the FHA and HUD announced further changes to the FHA Home Equity Conversion Mortgage or HECM loan program. There have been a number of alterations and adjustments to the FHA HECM loan program in the last year or so, and the new changes further clarify the rules for certain aspects of the HECM program. In this case many of the rule changes have to do with the procedures for declaring a HECM loan due and payable. According to FHA Mortgagee Letter 2015-10, “For HECMs that are due and payable, the Due Date is the date when: –the mortgagee notifies the Secretary that the mortgage became due and payable without HUDs approval; or –the Secretary approves the mortgagees request to call the mortgage due and payable. For HECMs with a | more...

 
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FHA Updates HECM Loan Due And Payable Policies

The FHA and HUD have announced more changes to the FHA Home Equity Conversion Mortgage (HECM) loan program. A recent FHA Mortgagee Letter, “Home Equity Conversion Mortgage (HECM) Due and Payable Policies”, and affects all FHA HECM loans that become due and payable on or after July 1, 2015. The updates affect a variety of areas including: –a requirement for mortgagees to provide HUD notice of a HECMs Due and Payable status; –a requirement for mortgagees to provide HUD notice of the initiation of foreclosure; –obtaining required appraisals; –sales of properties securing defaulted or performing HECM loans; –extensions available when marketing a HECM for sale and/or participating in Hardest Hit Funds programs; –curtailment of debenture interest for missed deadlines This mortgagee letter announces FHA’s position on when HECM loans (with | more...

 
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FHA Clarifies Rules For FHA HECM Loans

The FHA and HUD have clarified rules that govern how FHA Home Equity Conversion Mortgage Loans are handled with regard to “life expectancy set-asides” and calculation of property taxes as part of a borrower’s debt-to-income ratio. FHA Mortgagee Letter 2015-09, “establishes a monthly growth rate for Life Expectancy Set-Asides and clarifies a discrepancy between the HECM Financial Assessment and Property Charge Guide and the model HECM Financial Assessment Worksheet transmitted with Mortgagee Letter 2014-22.” What is a “life expectancy set-aside” and how does the new clarification affect it? According to the FHA, “The Life Expectancy Set-Aside (LESA) is used for the payment of property taxes, and hazard and flood insurance premiums, and will increase each month at a rate equal to one-twelfth of the sum of the mortgage interest rate | more...

 

FHA HECM Loans and Appraisals: A Reader Question

A reader asks, “I am in the process of getting a reverse mortgage loan based on the approximate value of my home. If the Appraised value is considerably less than initially expected and/or extensive repairs are required to comply, do I have the option to back out of the loan process?” Without more information, this question is difficult to answer. How far along is the HECM loan process? Has the reader signed any legally binding paperwork that commits him or her to closing the deal? These are important questions to ask and borrowers in these cases should approach the lender directly for assistance. If the borrower feels that he or she has not signed a contract or other legally binding document that commits the HECM loan to close, yet feels | more...

 
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FHA Updates HECM Loan Rules

The FHA has issued a new Mortgagee Letter updating the rules of the FHA Home Equity Conversion Mortgage (HECM) loan program. Mortgagee Letter 2014-07 announces rule changes for HECM loans that feature a non-borrowing spouse. “This Mortgagee Letter uses the authority granted HUD in the Reverse Mortgage Stabilization Act of 2013 to amend the Federal Housing Administration’s (FHA) HECM program regulations and requirements concerning due and payable status where there is a Non-Borrowing Spouse at the time of loan closing.” What are the rule changes? We’ll cover them in depth in another blog post, but essentially the HECM loan program has been modified to further protect the interests of a non-borrowing spouse in cases where the HECM loan borrower dies. “For many years, Non- Borrowing Spouses were able to refinance | more...

 

FHA HECM Loans

  FHA Reverse Mortgages, also known as Home Equity Conversion Mortgages or HECM loans, are designed for qualified borrowers aged 62 or older who own their home or have very few payments left on the home. There are three basic types of FHA HECM loans: Traditional (Equity in current property used to obtain a new HECM loan) Purchase (HECM loan proceeds used to purchase a principal residence) Refinance (Refinance of an existing HECM loan with a new HECM loan) The FHA loan rulebook, HUD 4155.1, says of HECM loans that the following properties can be used to secure the reverse mortgage/HECM: 1 Unit (Single Family Residence) 2-4 Unit with one unit occupied by the borrower HUD-approved Condominium Project Manufactured home built after June 15, 1976 Borrowers who are age-eligible to | more...

 

FHA Reverse Mortgage (HECM) Guidelines: Credit Issues

Recently the FHA issued new rules and instructions to the lender that affect how FHA Reverse Mortgages or Home Equity Conversion Mortgages are processed. According to FHA Mortgagee Letter 2013-28, effective for all HECM case numbers assigned on or after January 13, 2014, the lender, “must perform a financial assessment of all prospective mortgagors on all HECM transaction types, i.e., traditional, refinance, and purchase.” What does that mean for the HECM loan applicant? For starters, when you apply for an FHA reverse mortgage or HECM, the lender is charged with doing the following things with your application data according to Mortgagee Letter 2013-28:   performing the credit history analysis.   performing the cash flow/residual income analysis;   documenting and verifying credit, income, assets and property charges   evaluating extenuating circumstances | more...

 

FHA HECM Program Changes: Mandatory Obligations

Recently the FHA and HUD announced changes to the FHA Home Equity Conversion Mortgage, also known as HECM. Those changes include new guidelines for the maximum amount of HECM loan funds that can be transferred to the borrower at the time the HECM loan closes or within the first 12 months of the HECM loan, as well as “what fees and charges are considered Mandatory Obligations” according to the new rules. According to FHA mortgagee letter 2013-27, a new “Single Disbursement” lump sum payment may be possible for borrowers applying for both adjustable and fixed interest rate HECM loans applicable for all FHA HECM loan case numbers assigned on or after September 30, 2013. “This payment option will be limited to a single disbursement at loan closing which cannot exceed | more...