1. If I took out a loan in the past 12 months but drew less than $500 at closing or through draws after closing, can the lien be paid off through closing?

Yes.

2. If I took out a HELOC over 12 months ago, but have taken a draw of more than $500 in the last 12 months, can that lien be paid off through closing?

Yes, HELOCs that have been taken out over 12 months ago are not subject to the $500 draw restriction.

3. If a lien was taken out in the past 12 months and the I received $500 in proceeds, does that make me ineligible?

No, the borrower may pay the lien outside of closing but prior to the final approval being issued. Any funds used to pay the lien outside of closing must be documented using normal funds to close required documentation.

4. What if I cannot locate a HUD-1 Settlement Statement for a lien that was taken out in the last 12 months?

If you cannot locate the HUD-1 from the recent closing, you should be able to obtain a copy from the title company who closed the loan, or from the lender or the servicer.

Under the current requirements, if the HUD-1 cannot be located, the lien cannot be paid through the HECM loan. The borrower would need to satisfy the lien through other methods and document the payoff of the loan prior to closing. However, we believe that FHA will clarify this point with additional options in future guidance as the lien date will show on the preliminary title report as well as the credit report.

5. If a lien has been in place for more than 12 months, is a HUD-1 Settlement Statement required?

No, if the title commitment clearly documents the lien as recorded against the property for more than 12 months, the HUD-1 is not required.

6. If the lien is ineligible to be paid through closing, but the existing lender will subordinate the lien to 3rd position behind the HECM, is that an acceptable alternative?

Yes, if the lien is not a first mortgage lien and meets all subordination requirements, the lien may be subordinated instead of being paid through closing.

7. Do these new requirements include closed ended/non-HELOC liens?

Yes, this requirement includes all existing liens tied to the subject property, except existing HECM loans that will be paid off through the new HECM.

8. When does the 12 month time frame begin?

The time frame begins from the date of the closing shown on the HUD-1.

9. If I have a mechanic’s lien for repairs to the property within the past 12 months, what are the requirements?

Under the current requirements, all liens taken out in the past 12 months require the HUD-1 Settlement Statement and a payoff statement. We understand that most mechanic’s liens will not have a HUD-1 Settlement Statement; however, that is the current requirement. We believe that FHA will clarify this point in future guidance.

The post Lien Seasoning FAQ appeared first on MLS Reverse Mortgage.

Effective for case numbers assigned on or after December 15, 2014, the payoff of existing non-HECM mortgage liens using HECM proceeds is only permitted if the liens have been in place for more than 12 months or resulted in less than $500 cash to the borrower, whether at closing or through cumulative draws (e.g.., as with a Home Equity Line of Credit (HELOC)) prior to the date of the initial HECM loan application.

Those considering a reverse mortgage who have taken out a home mortgage or HELOC in the past 12 months should pay close attention to this rule.

If you have done a refinance within the past 12 months and took more than $500 out at closing, then you will need to wait the full 12 month period in order to be able to be eligible for a reverse mortgage, if you need the proceeds of the reverse mortgage to pay off that loan. If you did a refinance and didn’t take any money out, then you will not have any seasoning requirements.

We see several homeowners who have been living off their HELOC and as such have taken much more than $500 cumulative over 12 months. The draws of greater that $500 only apply to HELOCs that are less than 1 year old. If the HELOC was taken out more than 12 months prior to application, then the cumulative draw doesn’t apply.

Those with no draws on their line of credit will not have the 12 month seasoning requirement.

We are nearing the December 15, 2014 deadline very quickly. If you have been considering a reverse mortgage and are in the category of having a HELOC that is less than 12 months old that you’ve taken more than $500 cumilative cash out or have a refinance in the past 12 months in which you took out more than $500, then you should give serious consideration about starting the process now or be prepared to wait the 12 month seasoning period.

You can avoid the seasoning period if the lien is paid off using funds that are not from the reverse mortgage.

Read our Lien Seasoning FAQ for more info.

For any questions or concerns, please don’t hesitate to call us toll free at 1-888-888-4834 or request information online and note in the comment box that “reverse mortgage seasoning pertains to you.”

Below is the clip from ML 2014-21:

The post Reverse Mortgage Seasoning Requirements (for Existing Non-HECM Mortgage Liens) appeared first on MLS Reverse Mortgage.

After much anticipation, HUD has released guidance for reverse mortgage financial assessment. This new change will affect all borrowers whose case numbers are assigned on or after March 2, 2015. HUD states “the purpose of financial assessment is to evaluate a mortgagor’s willingness and ability to meet his/her financial obligations and to comply with the mortgage requirements.” In other words, which we will refer to frequently; willingness and capacity.

“The financial assessment will be used to determine whether, and under what conditions, the mortgagor meets FHA eligibility criteria and whether an allocation of HECM proceeds will be required for payment of property charges.”

Financial assessment was outlined in Mortgagee Letters ML 2014-21 and ML 2014-22 and references the HECM Financial Assessment and Property Charge Guide, which is the official guide lenders will use when underwriting reverse mortgages post March 2, 2015.

What does all this mean and how will it impact you?

Although, we have only just begun to analyze the new financial assessment guidelines, there are a few possibilities that we foresee. One, you have sufficient income and assets to qualify and the loan goes through without a hiccup. Two, you do not have sufficient income to qualify, but you have compensating factors, which prove your willingness. Because of this, a lifetime set aside for taxes and insurance will be created or the borrower may authorize the lender to pay property charges from the HECM monthly payments or Line of Credit as they come due (as we get closer to the implementation date, we should have a better feel for how our wholesale lenders will handle the lifetime tax and insurance set aside). The third option is that a borrower may not qualify and will be unable to obtain a reverse mortgage.

The bottom line is that the days of of borrowers obtaining a reverse mortgage without having to income or credit qualify are soon to be a fading memory.

Our advise is that if you have been a fence sitter, waiting for the right opportunity to take advantage of a reverse mortgage, perhaps now is the time to move forward. Our company prefers educating clients and not fear selling, but we do feel that this change will have a major impact on many borrowers ability to obtain a reverse mortgage. As with all major program changes, as we near the implementation date, we will see a slowdown in services, such as counseling, which is required to have completed prior to obtaining a case number.

So, if you’ve been waiting for the right time, now may be that time. Feel free to call us toll free at 1-888-888-4834 to learn more about a reverse mortgage or request a free quote. Again, we love to educate borrowers first and should a reverse mortgage be the right fit for their situation, we will work extremely hard to offer a competitive rate that goes along with our amazing service.

The post Reverse Mortgage Financial Assessment Begins March 2, 2015 appeared first on MLS Reverse Mortgage.