Pattie Bigford

I have written about Reverse Mortgages in the past, a refresher is always a welcome read. At last evenings workshop on Short Sales an elderly woman was sitting a few seats away from me. Not knowing her situation I managed to pass one of my business cards to her. She appeared lost and needing help. I can only hope that she picks up her phone and calls me to see if I could help her. I did not have the opportunity to talk with her.

With our aging population, loss of stock, 401ks..etc etc. The one asset they might still have is equity in their home. Seniors are getting inundated with mailers on everyone wanting to do reverse mortgages, I for one will not send out mailers. There is so much fraud out there I wonder how anyone would trust those mailers. I prefer to meet with them in person. I enjoy meeting them learning their stories of life and at times I become part of their family. For me it is giving back to those in need with care for their lives. I could write endless pages of stories of those that I have done reverse mortgages for and I doubt you would become bored by the stories as they would warm your heart!

If someone has at least 50% equity in their home they more than likely could do a reverse mortgage. If all the loan did for them was to pay off their current mortgage, they would never have a mortgage payment again in their lives. If they have more equity they could either take a monthly dollar amount, or choose a line of credit. I prefer the line of credit as they have access to however much money they would need at any given point. The unused portion of the credit line is paid interest which increases the credit line.

There is also a purchase program for reverse mortgages to where they can close on the home and never have to make a payment.

In my web page you will find an entire section on Reverse Mortgages to understand them better.

www.loansbypattie.com Check it out, educate yourself and then ask all the questions you need answers to.

Helping others is where we all need to be, Pattie

FHA remains the hottest product in our market. With the high loan to values on purchases and refinances the mortgage insurance company's, commonly known as PMI are not approving many conventional loans with a 5% down-payment. That is when FHA comes in and is continuing to be the winner.

I have a portfolio FHA lender that is approving and closing loans. The big difference is the FICO score. On the portfolio product the acceptable FICO scores are: 560 minimum for a rate and term refinance, and 580 minimum for a purchase. Maximum debt to income ratios are: 40/45 with no reserves, 40/47 with 3 months reserves, 40/49 with 6 months reserves. They must have a perfect mortgage or rent history for the previous 12 months. We can use a verification of rent in lieu of canceled checks.

Downside is no gifts allowed for down-payment. Interest rates are a bit higher. Today's rate on this product is 5%, 30 year fixed.

Standard FHA Loans gives us the better rate if the FICO score is 620 or higher. Todays rates are 4.50% The portfolio loan is a half point higher.

I hope this will give you a better opportunity in selling homes. One more tool!!!!!!

AS of today I now can offer stated income loans. It was just released this morning. We can do loans up to $750,000, stated income. The Maximum loan to value will be 80%. Purchase or refinance. Rates are showing as low as 4.875 30 year fixed. This is the first positive change I have seen in long time. Now, if we can get non-owner loans back, it will show that we could be returning to a more stable market place.

Turn times in getting your loans done, have been more than difficult to close in a timely manner. We are currently offering a 24-48 hour turn time for underwriting and the same for getting the docs out the door.

USDA housing is a great loan for folks that do not have a down payment. Please call for details on these.

HECM for Purchase

Frequently Asked Questions

What is HECM for Purchase?

HECM for Purchase allows seniors, age 62 or older, to purchase a new principal residence using loan proceeds from the reverse mortgage.

What is the purpose of the program?

The program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction by eliminating the need for a second closing. The program was also designed to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs, i.e., handrails, one level properties, ramps, wider doorways, etc.

What property types are eligible?

Existing SFR, Condo, PUD, Manufactured Homes that meet HUD guidelines, one-to-four unit properties. All construction must be completed and the property must be habitable. See ML 2007-06

What property types are ineligible?

• Cooperative units;

• Newly constructed residence where a Certificate of Occupancy or its equivalent has not been issued by the appropriate local authority;

• Boarding houses;

• Bed and breakfast establishments;

• Existing manufactured homes built before June 15, 1976; and

• Existing manufactured homes built after June 15, 1976 that fail to conform to the Manufactured Home Construction Safety Standards, as evidenced by affixed certification labels (e.g., data plate and HUD certification label) and/or lack a permanent foundation as required in HUD's Permanent Foundations for Manufactured Housing Guide.

What activities can be performed prior to January 1, 2009?

Lenders may take an application ONLY. The Lender may NOT process or perform services that would result in a charge to a prospective mortgagor.

Can a lender lock-in the "expected average mortgage interest rate" on applications that are taken prior to January 1, 2009?

Yes. Lenders choosing to lock-in at initial application will do so at their own risk of knowing that the 120-day clock begins on the day the FHA case number is issued January 1st or later.

Can lenders refer clients, who are interested in a HECM for purchase transaction, to a HUD-approved housing counseling agency before January 1, 2009?

No. Counseling on HECM for purchase transactions will become available January 1, 2009. Counselors need time to adjust to the new provisions

Can a lender take an application on a property that is under construction and not habitable?

No. The lender may only take application once the Certificate of Occupancy or its equivalent has been issued.

Can a HECM for purchase be used to satisfy outstanding payment obligations associated with a land contract?

Yes, if the property will be used as collateral for the HECM and the mortgage will be held in fee simple, or on a leasehold under a lease for not less than 99 years which is renewable, or under a lease having the remaining period of not less than 50 years beyond the date of the 100th birthday of the youngest mortgagor.

Are the mortgage proceeds paid to the seller through escrow?

The title company (settlement agent) is responsible for disbursing funds in accordance with State law.

Are set asides for property charges (i.e., tax and insurance) allowed?

Yes.

If the lender suspects the senior has become involved in a property flipping scam, who should be contacted?

If a lender suspects a senior has become a victim to a property flipping scam, the Processing and Underwriting Division of the local HOC should be contacted. Report complaints to HUD's Inspector General Hotline at:

HUD Office of Inspector General Hotline, GFI
451 7th Street, SW, Washington, DC 20410

Toll free: 1-800-347-3735 / TDD: (202) 708-2451

What would be an "allowable FHA funding source" for gap financing of the equity portion?

A withdrawal from the mortgagor's savings or retirement account would be an acceptable funding source.

Are gifts an acceptable source of funding?

No. Prospective mortgagors may only use their own money, or money obtained from the sale of assets. FHA prohibits the use of loan discount points, interest rate buy downs, closing cost assistance, builder incentives, gifts or personal property given by the seller or any other party.

Can prospective mortgagors apply credit card cash advances towards the required monetary investment or closing costs?

No. This would be a violation of 24 Code of Federal Regulations 206.32(a), which requires all outstanding obligations connected to the HECM transaction, purchase or otherwise, to be satisfied prior to or on the date of closing.

When purchasing a new principal residence, if the HECM proceeds do not cover the sales price, can part or all of the property's indebtedness be subordinated behind the first and second HECM liens if the existing lien holder is willing to execute a subordinate agreement?

No. All existing liens must be satisfied at the HECM closing.

Is seller financing permitted?

Are seller concessions allowed?

No. Seller concessions are applicable to forward mortgages only.

Is the Real Estate Certification required?

Yes.

Can prospective mortgagors obtain a secured or non-secured loan from another asset (i.e., car, home equity line of credit, or investment property or second home) to satisfy the monetary investment or closing costs?

No. Consistent with existing policy, bridge loans and other interim financing methods associated with HECM transactions are prohibited, unless the unpaid or outstanding obligation can be satisfied prior to or on the day of closing.

Should the lender obtain a credit report for non-borrowing spouses?

Yes. Although one spouse will become the HECM mortgagor, the lender must obtain the credit report for a review of financial obligations, monetary judgments and liens that could jeopardize the HECM lien status/clear and marketable title.

Under what conditions may a senior cancel the purchase transaction?

The senior may decide to cancel the purchase transaction at any time prior to the date of closing. If the senior decides to cancel the transaction, he/she must notify all parties in writing. Where earnest money has been provided, the senior should review the sales contract to determine if the earnest money is refundable. The Federal Reserve Board of Governors should be contacted for right of rescission and Truth in Lending Act guidance.

Can the HECM mortgage participate in a rent back/leaseback agreement with the seller?

No. When purchasing a new principal residence, the HECM mortgagor has 60 days to occupy the home. Unlike a forward mortgage, there is an increased risk to FHA when the home is not occupied by the HECM mortgagor. Prior to closing, the HECM mortgagor and seller should agree to a date for physical occupancy of the property and the lender should confirm occupancy prior to their submission of the case binder to the local HOC for endorsement.

Are there special procedures for foreclosure homes that will serve as collateral for a purchase transaction?

No. FHA has sufficient valuation guidelines related to comparable sales and declining markets to address the resale of foreclosed properties. HUD has imposed a standard of accountability to which lenders, sponsor lenders, and loan correspondents will be held is the same as the standard used to impose civil money penalties for program violations, and that standard is one of knowing (actual knowledge) or had reason to know.

Does FHA have special eligibility requirements for first-time homebuyers?

No. FHA encourages all first-time homebuyers to meet with a reverse mortgage counselor that offers pre-purchase counseling to educate themselves on the responsibilities of becoming a homeowner. Prior to signing a sales contract, FHA encourages a home inspection of all properties that will serve as collateral for HECM for purchase transactions. The inspection serves two purposes, to determine the magnitude, if any, of repairs and/or rehabilitation the home as well as helps the buyer to negotiate the purchase price in situation where a home requires repair or rehabilitation.

Effective Jan. 1, 2009

Not only can a Senior, age 62 or older, do a reverse mortgage on their own home, they now have the option to purchase a home using a reverse mortgage. This is a great product to help seniors that want to stay in a home, but cannot manipulate stairs , current home is to large, to much maintenance or the location is not desirable for them. For what ever reason, they now have the option to purchase the retirement home that suites their needs.

There is no qualifying for a reverse mortgage. Which means, all they have to have is the proper amount of equity in the home. They can close of the reverse mortgage purchase and never have a mortgage payment. The purchase products are the same as if they were doing one on their existing home.

For example, if the purchase price was $450,000, the down payment required to do a reverse purchase would be approximately $189.000.