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FHA updated its guidelines recently - the following individuals and entities are defined as acceptable donors or non-occupant co-borrowers:

  1. The borrower's family member
  2. The borrower's employer or labor union
  3. A close friend with a clearly defined and documented interest in the borrower
  4. A charitable organization
  5. A government agency or public entity that has a program providing homeownership assistance to low or moderate income families or first-time homebuyers.
  6. Only family members may provide a gift of equity on a property being sold to other family members.

Family members are defined as any of the following individuals:

  1. Child including stepchild, parent or grandparent.
  2. A parent or grandparent includes a stepparent/grandparent or foster parent/grandparent.
  3. Spouse or domestic partner
  4. Legally adopted son or daughter.
  5. Foster child
  6. Brother or stepbrother
  7. Sister or stepsister
  8. Uncle
  9. Aunt
  10. Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law.

Posted by Sam Kader on February 8th, 2016 1:20 PM

The program is intended for homeowners who are 62 or better. They allow borrowers to tap into their home equity for cash without monthly payments required and the amounts need not be repaid until the seniors die, move our or sell their houses. However, amid the recession of 2012 with home equity disappearing - one out of ten borrowers are in default resulting in the Treasury bail-out of at least $1 billion cash infusion. As a result - things are going to get tougher to obtain reverse mortgage staring March 2, 2015. FHA will require applicants:

  1. Credit report using tri-merged data from three credit bureaus.
  2. Income from regular or part-time employment, social security, pension funds, regular draws on IRAs and 401(k) accounts and any other investment earnings.
  3. Recurring household debt obligations will be reviewed to calculate residual income analysis.

If applicants look weak or marginal, lenders will be allowed to take into account any extenuating circumstances such as unexpected hospitalization or illness that temporarily cut off income that led to late payments. If applicants appear unlikely to make regular on-time payments for property taxes and hazard insurance premiums, lenders can reject or set aside potentially large-chunks of their loan amount for later payments by the servicing company handling the loan. These impounds will reduce the effective cash many borrowers will be able to obtain from their reverse mortgage.

In conclusion - perhaps tighter guidelines are better to avoid similar mistakes as in subprime lending pre 2007 crisis.

Posted by Sam Kader on November 23rd, 2014 10:24 AM

HUD recently accounced with the mortgagee letter 2013-04 that starting April 1, FHA's annual mortgage-insurance premiums for most new loans will jump by one-tenth of a percentage point or 10 basis points. See schedule below.

Effective June 3 - FHA announced that it will no longer allow mortgage-insurance cancellation once the loan-to-value declines to 78% of the original loan amount. Borrowers with below 620 credit scores and 43 percent debt-to-income ratio will receive a downgrade to "manual" underwriting - which means that the file will gets closer scrutiny by the underwriter. 

Term >15 Years
Base Loan Amount LTV Previous MIP New MIP
= $625,500 < 95.00% 120 bps 130 bps
= $625,500 > 95.00% 125 bps 135 bps
> $625,500 < 95.00% 145 bps 150 bps
> $625,500 > 95.00% 150 bps 155 bps




Term =15 Years
= $625,500 78.01 - 90.00% 35 bps 45 bps
= $625,500 > 90.00% 60 bps 70 bps
> $625,500 78.01 - 90.00% 60 bps 70 bps
> $625,500 > 90.00% 85bps 95 bps

Posted by Sam Kader on February 12th, 2013 9:48 AM

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