The well-known changes coming in March 2015 are going to be the financial assessment. The financial assessment is something we’ve been waiting for, for a long time in the reverse mortgage industry. The financial assessment to the borrower basically means that there’s going to be stricter underwriting guidelines. Much like a regular mortgage, they are going to start looking at things like income, assets and what they call a “willingness to pay”. If they do see that a client has a history of not paying their bills, for example, 90-day lates, several 30-day lates, they’re going to force a set-aside in an escrow account which we use to pay taxes and insurance. There will be several other caveats to these guidelines.
Another guideline though that will be put into place that not a lot of people are talking about, is that on December 15, 2014, HUD has released a new mortgage e-letter that is going to make it so that there will be new seasoning requirements for reverse mortgages. This will be in regards to payoffs. Payoffs on 1st trust deeds or HELOCs that will be paid off with a reverse mortgage must be in place for 12 months or they will not be able to qualify for a reverse mortgage.
The only way to get around these is that if the borrower is basically not getting any cash out. If they’re going to be getting less than $500 in their pocket, as a benefit for the loan on top of paying off their other mortgages, then they will be able to circumvent the 12 month seasoning rules. So basically anyone out there who’s got a loan that is less than 12 months old (first trust deed or a HELOC), that needs or wants a reverse mortgage – maybe they got a HELOC and they just decided, ‘you know what, now I don’t want to make my mortgage payment’) – you need to get your application in before the 15th of December, this year (2014). Or, we will not be able to get around those rules – we will have new seasoning rules in place.
So everyone right now is talking about the financial assessment and that will be a deep dive into borrower’s financials to qualify for a reverse mortgage. This is much like qualifying for a 1st trust deed.
But something not many people are talking about is that December 15 change. Now I don’t expect that to affect a lot of people but that is important to some who, like I said, may have gotten a HELOC, 1st trust deed or another loan of the sort and decided “I want a reverse mortgage now”. You have to have that loan for 1 year under these new requirements on December 15.
Check back later for more information on our website. I hope this was informative and you enjoyed it.
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