Articles Tagged With: FHA Reverse Mortgage

March 31, 2015

FHA Clarifies Rules For FHA HECM Loans

The FHA and HUD have clarified rules that govern how FHA Home Equity Conversion Mortgage Loans are handled with regard to “life expectancy set-asides” and calculation of property taxes as part of a borrower’s debt-to-income ratio. FHA Mortgagee Letter 2015-09, “establishes a monthly growth rate for Life Expectancy Set-Asides and clarifies a discrepancy between the HECM Financial Assessment and Property Charge Guide and the model HECM Financial Assessment Worksheet transmitted with Mortgagee Letter 2014-22.” What is a “life expectancy set-aside” and how does the new clarification affect it? According to the FHA, “The Life Expectancy Set-Aside (LESA) is used for the payment of property taxes, and hazard and flood insurance premiums, and will increase each month at a rate equal to one-twelfth of the sum of the mortgage interest rate | more...

February 9, 2015

FHA HECM Loans and Appraisals: A Reader Question

By Joe Wallace

A reader asks, “I am in the process of getting a reverse mortgage loan based on the approximate value of my home. If the Appraised value is considerably less than initially expected and/or extensive repairs are required to comply, do I have the option to back out of the loan process?” Without more information, this question is difficult to answer. How far along is the HECM loan process? Has the reader signed any legally binding paperwork that commits him or her to closing the deal? These are important questions to ask and borrowers in these cases should approach the lender directly for assistance. If the borrower feels that he or she has not signed a contract or other legally binding document that commits the HECM loan to close, yet feels | more...

January 21, 2015

FHA HECM Loan Origination Fee Caps: A Reader Question

By Joe Wallace

A reader asks, “Is there a cap on fees a broker can be compensated for their part on a HECM loan, and if the lender list origination fee that is clearly greater than the $6000 max, which includes the broker compensation paid by the lender. My question is the lender in violation of the origination cap?” Without more information, it would be pure speculation as to whether a particular lender is in violation of FHA loan rules, but regardless, any borrower who suspects there may be illegal or unethical practices in association with an FHA home loan or HECM loan should contact the FHA directly by calling them at 1-800 CALL FHA. Let’s see what the FHA official site (www.FHA.gov) has to say about HECM fee caps on the page | more...

December 4, 2014

FHA HECM Loan Changes: MIP

By Joe Wallace

We have covered a great deal of information regarding the recent changes to the FHA’s Home Equity Conversion Mortgage (HECM) program. One crucial area borrowers should be aware of included in these changes? HECM MIP rules. The mortgage insurance premium rules for FHA HECM loans now reflects an MIP percentage that varies depending on how much the borrower’s initial disbursement amount is. FHA Mortgagee Letter 2014-21 states: “HUD charges an initial MIP of 0.50 percent (0.50%) of the Maximum Claim Amount (MCA) when the mortgagor’s Initial Disbursement Limit or the Borrower’s Advance is 60% or less of the Principal Limit. HUD charges an initial MIP of 2.50 percent (2.50%) of the MCA when a mortgagor’s Initial Disbursement Limit or the Borrower’s Advance is greater than 60% of the available Principal | more...

November 25, 2014

“Mandatory Obligations” For FHA HECM Loans

By Joe Wallace

The FHA made a great many changes to the Home Equity Conversion Mortgage loan (HECM) program in 2014. There have been alterations to the way funds are paid, the rules covering fixed-rate HECMs versus adjustable rate HECM loans and much more. One thing the FHA has also done is to make a list of what it calls “Mandatory Obligations” for HECM loans–basically a list of required fees and expenses that could affect the amount of money that comes to a HECM borrower from the initial disbursement. This list is rather lengthy, but knowing these expenses is very important–borrowers should know that the items on this list are required to be factored in when the lender is trying to determine how much money comes to the borrower on that initial payout | more...

November 20, 2014

FHA HECM Loan Rule Changes: Credit Standing and Financial Assessment

By Joe Wallace

In 2014, the FHA changed many of the rules associated with Home Equity Conversion Mortgages or HECM loans. One of those rule changes involves a new requirement that lenders perform a financial assessment of potential HECM borrowers to insure the applicants are not only qualified for the program on a financial basis, but also to insure they are able and willing to abide by HECM loan requirements. According to the FHA Mortgagee Letter, “Revised Changes To The Home Equity Conversion Mortgages Requirement”, there were major reasons for the policy changes. “An increasing number of tax and hazard insurance defaults by mortgagors led FHA to establish in Mortgagee Letter 2013-27 a requirement for a Financial Assessment of a potential mortgagor’s financial capacity and willingness to comply with mortgage provisions.” As a | more...

November 19, 2014

FHA HECM Loan Changes: Disbursements

By Joe Wallace

Recently we wrote about FHA Home Equity Conversion Mortgage (HECM) loan rule changes that were announced in FHA Mortgagee Letter 2014-21. Those rule changes include alterations and clarification of policy related to a variety of HECM loan policies. One very important affected area of HECM loan regulation the borrower should know about is related to disbursement of HECM loan funds. Mortgagee Letter 2014-21 announces separate policy for fixed-rate HECM loans and for Adjustable Rate HECM loans. Here is the FHA policy for disbursement limits according to ML 2014-21: “Definitions only for Adjustable Interest Rate HECMs  Initial Disbursement Limit: The maximum disbursement to the mortgagor allowed at loan closing and during the First 12-Month Disbursement Period is the greater of 60% of the Principal Limit; or the sum of Mandatory | more...

November 14, 2014

More Revisions to FHA HECM Loan Rules and Guidelines

By Joe Wallace

The FHA has issue another set of revisions, clarifications, and consolidation to its Home Equity Conversion Mortgage Loan rules. An FHA mortgagee letter, 2014-21, adds a large number of changes and clarifications. Many of the new changes have to do with key parts of the HECM loan process including limits on the amount of funds that can be “advanced at loan closing and during the First 12-Month Disbursement Period after loan closing” and also explaining which fees and charges are “Mandatory Obligations” under the FHA HECM program. One change announced in the mortgagee letter affects those who are paying off a non-FHA HECM loan with funds from the HECM loan. According to the FHA, the new rules include the following instructions to the lender: “Mortgagees may only permit the payoff | more...

October 13, 2014

FHA HECM Loan Closing Costs: A Reader Question

By Joe Wallace

A reader asks, “What are the standard closing costs for FHA/HUD/HECM for my property with market value of 510,000.00 with 240,000.00 in debt?” FHA loan closing costs are not standardized–they vary depending on the market, the lender, the nature of the services required to underwrite and close the loan and other factors. State law can and often does affect certain types of loan transactions so there may be factors there that might not apply elsewhere. The Department of Housing and Urban Development publication “Shopping For Your Home Loan: HUD’s Settlement Cost Booklet” breaks down how things can are are charged, but only uses examples and does not come with set, across the board settlement costs–you won’t find a HUD publication that can tell you exactly how much the settlement costs | more...

July 25, 2014

FHA Loan Rules For Refinancing and Reverse Mortgages: A Reader Question

By Joe Wallace

A reader asks, “We were told to get a reverse mortgage, while applying for a reverse mortgage my husband was under the impress that we did not have to make a mortgage payment. He did not make 2 payments. We have never misses a payment including the 28 years we owned our first home. The person who recommend the reverse mortgage did not explain. explain the process to us, once the paper work was competed he told us that we had to pay 85 thousand dollars in order to get a reverse mortgage, which came as a shock to us and since we could not afford it we dropped out of the program.” “Now we need to defiance as our mortgage is $1250. a month and our condo fee is | more...