Act quickly if you want a reverse mortgage

 Loan Guidelines, Loan Programs, Residential Mortgage  Comments Off on Act quickly if you want a reverse mortgage
Apr 222015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

FHA-insured reverse mortgages have been a fairly painless way for seniors to tap into their home equity. FHA has not evaluated applicants’ income, credit, and assets under the assumption that because the borrowers are receiving money that their financial situation is unimportant.

But with the housing downturn, FHA took a bath on reverse mortgages, and it ran into problems with seniors failing to pay property taxes and insurance. As a result, FHA has decided that starting Apr 27th it will only offer the program to seniors who can demonstrate an ability to maintain their homes. FHA calls it a financial assessment, and the evaluation criteria mean that applying for a reverse mortgage will be a lot like applying for a standard forward mortgage. Prepare to provide tax returns, account statements, and other documentation of your financial situation. In addition, now the lender will review a credit report.

If the financial assessment indicates you may have difficulty paying your property taxes and insurance, you’ll be required to set aside part of the mortgage proceeds, similar to way borrowers escrow for taxes and insurance with a forward mortgage.

It appears the changes will disqualify weaker borrowers regardless of how much equity they have in their homes. And given the losses FHA incurred on the program, that probably was the plan. To beat the changes you need to apply before Apr 27th.