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Reverse mortgages 2015

November 23rd, 2014 10:24 AM by Sam Kader MLO# 130505

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 MLO# 130505 on November 23rd, 2014 10:24 AM



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