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