If you are currently in process on a HECM reverse mortgage or are looking to apply, please don’t hestiate to reach out to us toll free (1-888-888-4834) with any questions you may have about how a Government shutdown will impact you and your family.

The below chart shows the history of US Government Shutdowns with the length of time from 1976 through 2018.

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The post 2019 HECM Reverse Mortgage Limits Announced appeared first on MLS Reverse Mortgage.

This positive increase represents 150 percent of the Freddie Mac national conforming limit of $453,100.

Comparison of Principal Limit

This is good news for higher home value homes, especially since October 2nd changes have caused a reduction in principal limits. As you can see in the chart above, a 72 year old homeowner with a $680,000 home would receive about $22,142 additional proceeds over the prior limits (assuming a rate of 4.25%).

Brief Look at the HECM Lending Limit History

Prior to 2006, the HECM lending limit or MCA varied from county to county. In 2006, a national lending limit of $417,000 was established. Later, in 2009, Congress increased the HECM loan limit to $625,500. Then in 2017, the lending limit was increased to $636,150. Now, starting 2018, the new limit will be $679,650.

If you have questions on how the new reverse mortgage limit affects you, please don’t hesitate to call us toll free at 1-888-888-4834 or Apply Online!

The post 2018 Reverse Mortgage Limit Increased to $679,650 appeared first on MLS Reverse Mortgage.

The purpose of this bulletin is to summarize the key changes to the HECM program in accordance with HUD’s Final HECM Rule. This bulletin summarizes the key changes affecting the origination of HECM loans. Additional guidance on how to implement and apply the below changes is forthcoming.

Implementation

The changes will take effect on all loans with a case number assignment date on or after September 19, 2017. The changes are not retroactive for loans with case numbers assigned prior to September 19, 2017. Existing loans will continue to operate under the existing regulations.

Summary of Origination Changes

Borrower vs Mortgagor

Borrower

The borrower is a mortgagor who is an original borrower under the HECM Loan Agreement and Note. The borrower must be a mortgagor and must be on title to the property which serves as collateral for the HECM.

Mortgagor

The mortgagor is each original mortgagor under a HECM mortgage and his or her heirs, executors, administrators, and assigns. The mortgagor is not required to be a borrower. A non-borrowing spouse is a mortgagor but is not a borrower. All mortgagors shall hold title to the entire property which is the security for the HECM loan. For purposes of this requirement, mortgagor includes a person with remainder or reversion interest.

All non-borrowing spouses and non-borrowing owners of the property that will continue to hold title to the property which serves as collateral for the HECM must sign the mortgage as mortgagors, evidencing their commitment of the property as security for the mortgage.

Reverse Mortgage Counseling

All borrowers, eligible or ineligible non-borrowing spouses, and any non-borrowing owner must receive counseling.

HECM for Purchase

The following seller contributions are now permissible on a HECM for Purchase loan:

• Fees required to be paid by a seller under state or local law
• Fees customarily paid by a seller in the subject property locality
• The purchase of a Home Warranty policy by the seller

Borrower Disbursements

The lender must ask the borrower about any costs or other obligations that the borrower has incurred to obtain the mortgage.

If the borrower requests that at least 25% of the principal limit amount be disbursed at closing to the borrower, the lender must make sufficient inquiry at closing to confirm that the borrower will not use any part of the amount disbursed for payments to or on behalf of an estate planning service firm.

A new disclosure will be required to accommodate this inquiry.

Interest Rate Locks

Mortgagees, with the agreement of the borrower, may simultaneously lock in the expected average mortgage interest rate and the borrower’s margin prior to the date of loan closing or simultaneously establish the expected average mortgage interest rate and the borrower’s margin on the date of loan closing.

HECM to HECM Refinances

In order to exercise the ability to waive counseling on any HECM to HECM Refinance transaction:

The case number must have been assigned on or after August 4, 2014 and the borrower and non-borrowing spouse, if applicable, must have both received counseling, OR
The case number must have been assigned prior to August 4, 2014 and there is no applicable non-borrowing spouse.

PLEASE NOTE: CA, MA, MN, NC, TN, TX, and VT require counseling on all HECM loans, therefore borrowers looking to refinance an existing HECM do not have the ability to waive the counseling requirement in these states.

Repair Set-asides

All repairs shall be set aside at 150% of the estimated cost of repairs, rather than 150% of a contractor’s bid and 200% of an appraiser’s bid.

Property Tax Amounts

Lenders shall use the actual amount of the current annual property taxes, or 1.04 time the prior year tax amount, if the current tax bill has not been released.

Hazard and Flood Insurance Coverage

The borrower shall insure all improvements on the property that serves as collateral for the HECM whether in existence at the time of origination or subsequently erected, against any hazards, casualties, and contingencies, including but not limited to fire and flood.

Eligibility for Additional HECM loans

Once a borrower has obtained a HECM loan, he/she is eligible to obtain a future insured HECM loan if the existing HECM is satisfied prior to or at closing of the new HECM, or the borrower provides legal documentation evidencing the release of the borrower’s financial obligations to satisfy the existing HECM (such as in cases of divorce, etc.).

Resources

For a redlined version of the HUD Final Rule click here.

The post New Reverse Mortgage Rules Starting September 19, 2017 appeared first on MLS Reverse Mortgage.

2017 HECM Changes

In a move that shocked the entire reverse mortgage industry, HUD released Mortgagee Letter ML 2017-12, which will have a huge impact on the reverse mortgage program. The Mortgagee Letter indicates that in order for FHA to continue to endorse the HECM loan program, changes were needed which would increase the upfront Mortgage Insurance Premium (MIP) for many, lower the annual MIP for all as well as reduce the amount borrowers will be able to receive under the program for all new Case Numbers assigned on or after October 2, 2017.The first change noted is to the initial MIP and the Annual MIP. For some borrowers, this change will be a big savings while for others, it will increase upfront closing costs. Borrowers who utilized more than 60% of their initial proceeds due to paying off existing mortgages or using a reverse mortgage to purchase a home prior to the change had to pay an initial premium of 2.5% of the maximum claim amount, which is the lesser of the property value, HUD lending limit (currently at $636,150) or purchase price (if applicable). The new upfront premium of 2.0% will represent a 0.50% savings to those borrowers. However, borrowers who utilized less than 60% of their initial proceeds prior to the change will see their initial upfront MIP increase from 0.50% to 2.0%. Borrowers who planned on setting up a line of credit or monthly payment will now see a higher upfront cost. The annual MIP will drop to 0.50% of the outstanding balance compared to the current 1.25%.

The second change that will have the largest impact on the HECM reverse mortgage program is a reduction to the amount of cash that borrowers will have access to. This was done by way of two changes. The biggest change was that HUD lowered the 5.0% floor to 3.0%, so any loan above 3.0% will now see a reduction in the amount of proceeds available with each rate increase. Additionally, HUD lowered the Principal Limit Factors for most borrowers, even at the floor.

Bottom line is that borrowers who plan on taking more than 60% of available proceeds will see a reduction in closing costs, but they will also see a reduction in available proceeds. Those taking less than 60% will see their initial upfront costs increase. All borrowers will see their annual MIP drop by 0.75% of the outstanding balance per year.

For those borrowers who wish to achieve the maximum available to them should consider starting their reverse mortgage right way. We always see a rush of applications prior to a major change like this one. As such, counseling agencies may become inundated with calls, so plan ahead and call today. In California, we have a 7 day cooling off period in which the lender cannot order a case number for 7 days after counseling has been completed (the 7 day period doesn’t include the day of counseling, so it is technically 8 days).

Beat the HECM changes. You can protect your current limit by getting a case number assigned prior to October 2nd. In order to obtain a case assignment, we need a fully signed application and counseling certificate returned to our office no later that September 29th.

The chart below shows a comparison of the old Principal Limit Factors (PLFs), the new PLFs, the percentage change in the PLF from the old to the new as well as an example of Principal Limit (PL) assuming a home value of $300,000 and interest rate of 5%. If you wish to manually calculate the difference in your own scenario, find your age, then use the % change and multiply it by your home value. That will represent how much less is available to you under the new program.

The post Oct. 2017 HUD to Lower Limits and Increase Costs appeared first on MLS Reverse Mortgage.

 When you have a reverse mortgage, who owns your house (whose name is on the title/deed)?

 There are several “payment options” or ways to get money from a reverse mortgage. Which payment option do you think will best meet your needs? What other choices do you have (if applicable)? What happens if you change your mind later and want to change your payment plan?

 When you have a reverse mortgage, do you have to make a monthly payment to the bank?

 Does the money you get from a reverse mortgage ever have to be paid back?

Questions about the Implications of a Reverse Mortgage

 When does the reverse mortgage have to be paid back?

 What homeowner responsibilities will you continue to have after you get a reverse mortgage? What may happen if you do not keep up these responsibilities as a borrower?

 What happens if you use up all the money that is available from the reverse mortgage? Offer an example tailored to client’s circumstances, such as, “What if you took all the money from the reverse mortgage in a lump sum and spent every bit of it? What would happen to you? Would you be able to go on living in your house?”

 What happens if the amount you owe under a reverse mortgage gets to be greater than your home is worth at that time? Would you have to move out of your house? Would you have to take out another loan to pay the difference?

 If you get a reverse mortgage, how does that change the amount of money that you will have to leave to your children (or other heirs)? Will your children or other heirs inherit more or less after you die, than they would have without the reverse mortgage?

 How does a reverse mortgage change the amount of money you would have left to take with you if you moved somewhere else like into a retirement community? Will you have more or less left over to spend if you move somewhere else?

Questions for HECM Refinances

 If you refinance your current HECM, will you still have to pay mortgage insurance? How does this work?

 What are some of the additional costs you will incur with a refinance?

Questions for Purchase HECMs

 When you purchase a home with a HECM, will the HECM be held on your existing home or your newly purchased home?

 How will the lender determine how much money you will need at closing? What sources of funds (money) are allowed when you purchase a home with a HECM?

 Why is it important to get a home inspection?

 When you are working with a real estate professional, what are some of the questions you should ask him/her?

Reverse Mortgage Counseling Discussion

We are happy to discuss any reverse mortgage counseling questions or concerns with you.  Please feel free to call us toll free at 1-888-888-4834 or apply online.

Our philosophy is that our clients shouldn’t learn anything new during their counseling session if they’ve spent time with us learning about a HECM reverse mortgage. Our goal is to educate first and should a reverse mortgage be a viable solution we will strive to provide a competitive fee quote and top notch customer service.

The post 10 Questions To Know For Reverse Mortgage Counseling appeared first on MLS Reverse Mortgage.

For 2017, the reverse mortgage limit or maximum claim amount (MCA) for FHA-insured Home Equity Conversion Mortgages (Reverse Mortgage) has increased from the prior limit of $625,500 to the new limit of $636,150, according to Mortgagee Letter 2016-19. The Mortgagee Letter was published December 2, 2016 by the Department of Housing and Urban Development.

The new MCA is equal to 150% of Fannie Mae and Freddie Mac’s national conforming limit of $424,100. It’s important to note that the $636,150 limit is a national limit and is applicable to all HECM loans, including loans in special exception areas such as Alaska, Hawaii, Guam and the Virgin Islands.

For clarification purposes, the maximum claim amount (MCA) is the amount used to determine the principal limit and mortgage insurance for a HECM. So, if a home appraises for $640,000, the reverse mortgage comparison numbers will be based on a value of $636,150 because the MCA would be less than the appraised value. Any home that appraises for less than $636,150 would use the actual appraised value as the MCA or lending limit.

Comparison of Principal Limit

The new limit allows a little more borrowing power than previously. This is important to those senior homeowners who may have attempted to do a reverse mortgage, but possibly had a shortfall due to the $625,500 cap in the lending limit. In our example above, a 72 year old homeowner with a $640,000 home can now get an additional $6,294 in proceeds with the 2017 reverse mortgage limits. That may not sound like a lot, but we come across people nearly every day who have a payoff that is just a little too large for their reverse mortgage and they don’t have the funds available to come up with the shortfall.

A Brief Look at the HECM Lending Limit History

Prior to 2006, the HECM lending limit or MCA varied from county to county. In 2006, a national lending limit of $417,000 was established. Later, in 2009, Congress increased the HECM loan limit to $625,500 and had remained at that level until the most recent change to $636,150, effective January 1, 2017.

If you have questions on how the new reverse mortgage limit affects you, please don’t hesitate to call us toll free at 1-888-888-4834 or Apply Online!

The post 2017 Reverse Mortgage Limit Increased to $636,150 appeared first on MLS Reverse Mortgage.

MLS Reverse Mortgage Commercial from MLS Mortgage on Vimeo.

The post We Mustache You a Question. Do You Know the Best Part of a Reverse Mortgage? appeared first on MLS Reverse Mortgage.

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:

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