Big Changes for HECM Reverse Mortgages October 2nd: Higher UpFront Cost – Lower Limits – Lower Insurance Premiums

Seniors on the fence considering a HECM reverse mortgage line of credit with a zero or low upfront draw may want to act quickly to get their reverse mortgage started before big changes go into effect October 2, 2017.

Three changes will impact the HECM Reverse Mortgage Program for FHA case numbers assigned beginning October 2nd. Upfront Mortgage Insurance Premium paid to FHA will now be 2.0% across-the-board. Previously borrowers accessing less than 60% of the principal limit only had a 0.5% upfront mortgage insurance premium and those with mandatory obligations over the 60% were charged 2.5% for the upfront mortgage insurance. Annual Mortgage Insurance Premium accrued on an outstanding balance is reduced from 1.25% to 0.50% which will be a benefit to those borrowers that carry a balance on the reverse mortgage but negatively impact the growth factor used when borrowers obtained a line of credit reverse mortgage. Principal Limit Factors were adjusted to be more conservative reducing the amount of funds available to an average borrower by about 5%. I will be spending some time looking at the impact by age group and share that a bit later. The net impact seems intended to discourage the use of a line of credit reverse mortgage. When taken out early on the growth in the credit line if left unused was dramatic and can be an important part of a overall financial plan providing flexibility and security with access to funds well into the future. Increasing the upfront cost; decreasing the growth rate by reducing the mortgage insurance premium; and lowering the principal limit factors all reduce the benefits of a line of credit reverse mortgage. Seniors on the fence may want to consider acting sooner rather than later. An application and counseling must be completed prior to securing an FHA case number so if this makes sense it would be best to act quickly and get a case number well before September 29, 2017. To learn more about tips and strategies when applying for a reverse mortgage, I’m available to answer all of your questions.  Let’s talk about your goals and perhaps ways that you can take advantage before these changes take place, please give me a call or send me an email: clay@104.238.124.149. I’d be happy to help!   Learn more about mortgage at mortgagebrokernearme.co.uk

Reverse Mortgage Loan Limits to Increase in 2017

The Federal Housing Administration (FHA) announced Reverse Mortgage Loan Limits will increase in 2017. This is significant news, since lending limits have remained stagnant for several years.

The maximum claim amount will now rise to $636,150, up from $625,500, for Home Equity Conversion Mortgages (homeequitylineof.credit). This amount is 150 percent of the national conforming limit of $424,100. On the other hand, credit unions in houston is offering a full suite of financial services, with a track record of satisfied members dating back to 1934.

Also increasing in some areas are loan limits for forward mortgages. In high-cost areas, the FHA national loan limit ceiling will increase to $636,150 from $625,500, and FHA will increase its floor to $275,665 from $271,050.

The Maximum Claim Amount is then offset by the reserve set aside for future interest and mortgage insurance amounts accrued to arrive at a Principal Limit which would be the maximum amount a homeowner can borrow. The reserve amount is based on Age and interest rates and loan amount.

The loan limit changes and the maximum claim amount change for reverse mortgages to take effect after January 1, 2017 and stay in effect through December 31, 2017.

This change was made as of the result of rising home prices, with 2,948 counties across the nation benefiting from these changes. Lots of good news for Reverse Mortgage recently.

This increase is a positive for a program that provides seniors more choices and flexibility as they consider a reverse mortgage that can help senior homeowners in many ways.  The most important would be to be able to live in their homes as long as they want or provide strategic options for taking social security and withdrawing investment funds. You can always invest in bonds or marijuana penny stocks.

To learn more about tips and strategies when applying for a reverse mortgage, I’m available to answer all of your questions.  Let’s talk about your goals and perhaps ways that you can take advantage of these loan limit increases, please give me a call or send me an email: clay@104.238.124.149. I’d be happy to help!

“Trump Thump” – Mortgage Rates Jump 0.500% or More Post Election

The election is now over and the dust has settled. As painful as it might be to accept, a trend described by others as the “Trump Thump” means we may now have to get used to 30-year fixed conforming loan rates at or above 4.0%.    

 

Prior to the election, pundits had clearly agreed on the idea that the markets “built in” the prospect of a Clinton victory, and – in the unlikely event that Trump won – this surprise victory would mean an improvement in the bond market because of the uncertainty Trump would bring to the table. Well, so much for that idea. 

 

Economic experts maintain that Trump’s economic policies will boost spending and business, as well as bring inflation (all of which leads to lower bond prices and higher mortgage rates). Interesting to me how quickly everything turned in the direction. Was there not enough time spent analyzing the impact of a Trump victory? Did this catch the markets unprepared?  

  According to a recent article by Money writer, Taylor Tepper, markets indicate there’s a 75% chance that the Fed raises short-term rates modestly when policy makers meet in mid-December. Here’s a more in-depth analysis on what President-elect Trump means for interest rates in Tepper’s article:  President Trump Interest Rates Federal Reserve. CNBC’s Diana Olick weighs in on the mortgage rate crisis: watch video. 10-year treasury yields have also spiked in the days since Trump’s election, and something to keep in mind with that is: Don’t panic. This sudden rise isn’t likely to continue, at least, not because of the Trump presidency. “Rates tend to move very sharply in short periods of time and very little in prolonged periods of time,” said Greg McBride, chief financial analyst for Bankrate. “It’s not something that I think continues.” So, my advice to those who are anxious about mortgage rates, know that this is a cycle… and as far as rates are concerned, nothing is on the horizon that would suggest waiting for an improvement in rates. Either way, expect volatility and a continuing upward trend in rates.  

Condo buyers will benefit from three changes in FHA Mortgage Insurance for Condominiums (HR 3700) passed by Congress July 12th, 2016 and awaiting President Obama’s signature. Transfer Fees – which limited FHA approval for condos such as Rossmoor in Walnut Creek, CA will now be consistent with the standards set by Fannie Mae and Freddie Mac. Once implemented will open up these communities for FHA loans including the HECM – Reverse Mortgage.   Owner Occupancy Requirement – could be reduced from 50% to 35% which would open up Heating and cooling for more condominium projects to more buyers.   Project Recertification Requirements – will be “substantially less burdensome” than the original certification.  It may be that the length of time between certifications will be lengthened.   Each of these changes will help the market for condominiums by making more projects available to more home buyers, everyone knows that buying a home for the first time may be hard, this is why there is a first time home buyers program for all of those people.  Condo’s can be a less expensive option for home buyers. Implementation of these changes are expected within 90 days of the President’s signature. Call us today to find out if an FHA loan will work for you! Clay Selland, President Signet Mortgage Corporation 925-807-1500 x303 Clay@SignetMortgage.com NMLS#183492  

Rates are headed up now that the FED has announced they will begin to taper off their support of the treasury and mortgage backed securities market.  Positive economic data has been steady enough recently to cause the change.    This along with the increase in “G-Fees” that will hit rate sheets in January … will negatively impact rates going forward. The FED has used the purchase of mortgage-backed securities and treasuries to keep interest rates low. This has artificially propped up on prices and thus keeping Mortgage rates low for the last several years. While their taper of purchases is not huge, the signal it sends to the market is the FED support of the bond market will go away and rates will increase. Some good news is the non-Fannie/Freddie loan programs including jumbo loan programs and rates are becoming more significant and pricing is not all that different than the conventional lending ($417k – $625k) so that is a healthy trend looking forward. Overall rates up 1.0% – 1.25% from the historical lows and are right about where we were in September.   The chart below reflects the pricing of mortgage backed bonds over the last year  … lower bond pricing = higher yield, thus higher rates. Generally 30 year fixed conforming loan to $417,000 will be 4.625% (rate and APR) today with no origination or other charges.  Up to $625,500 will be 4.750% (rate and APR) … Please give me a call about your situation and then I can be more specific.

HUD announced last week the new Federal Housing Administration single-family loan limits effective Jan. 1^st 2014. The standard loan limit for areas with relatively low housing costs will stay at its current level, $271,050. However, the limit for California and other high cost areas will be reduced by more than $100,000, from $729,000 to $625,500. Loan limits for FHA-insured reverse mortgages will remain the same at a maximum amount of $625,500, with actual loan limits based on the value of the property, current interest rates and the borrower’s age. The limits were lowered under the Housing and Economic Recovery Act of 2008 (HERA) as an emergency measure to keep mortgage credit available during the housing crisis, according to HUD. Not much of an impact with the FHA loan limits being lowered – the increase in up front and monthly mortgage insurance implemented earlier in the year has made FHA loans less attractive than conventional alternatives anyhow. Welcome news that there were no changes to the HECM reverse mortgage limits.  With the recent changes to the HECM program in October – the amounts available to borrowers are conservative but still viable for California homes values.

A significant economic event, such as the loss of employment, beyond the borrowers control may explain away a prior short sale or bankruptcy and allow for the purchase of a home

  The economic crisis since 2008 has impacted many people, not the least of which who lost employment and therefore lost their home, either through bankruptcy or foreclosure or short sale. FHA has announced they will now consider extenuating circumstances when evaluating eligibility for a new home loan. Document hardship and document your Recovery Borrower must document the hardship was due to loss of employment or household income beyond their control, that they have demonstrated full recovery from the event, and has completed HUD counseling. Effective August 15, 2013 this sell my house now campaign is an opening for many families innocently impacted by the lousy economy over the past five years but have been able to reestablish themselves as a potential homeowner. Borrowers that would otherwise be ineligible for and FHA insured mortgage due to FHA’s mandatory waiting period for bankruptcies, foreclosures, deed in lieu of foreclosure, and short sales including derogatory credit may be eligible for and FHA insured mortgage.  They must have established satisfactory credit for a minimum of 12 months and attend counseling from a HUD approved counseling agency related to home ownership and residential mortgage.   Reestablish credit To reestablish credit means to have a credit history clear of late housing or installment debt payments and no late payments on any mortgage over the last 12 months.  The requirements are very detailed and documenting that the borrower had solid credit and income prior to the economic event and then has been able to reestablish solid footing for at least 12 months after the event. It is a good thing we have institutions like nationaldebtreliefprograms.com debt relief programs to help you out. As always we will have to wait and see if there is sufficient investor support for this change. It is not enough for FHA to say it is so as FHA only insures a mortgage in the event it is not repaid and does not actually provide the funds – those must come from an investor.  Quite often investors are slow to jump on new programs until a performance history can be established.   A significant benefit to responsible families Add to that the relative high cost of an FHA insured mortgage these days, it will be important to balance acting now versus waiting for a time where a conventional loan would be available. If you want to read the details check out mortgagee letter ML 2013-26 I do think this will be a significant help to many families who lost their home only because of a dramatic reduction in income or job loss and not because they became irresponsible overnight.  Many families have worked hard to reestablish credit and simply are blocked because of somewhat arbitrary guidelines.  These changes will allow the most deserving of these folks get back in a home. Click here for a chart indicating how long you would need to wait before purchasing a home under normal conditions for Bankruptcy, Foreclosure, Short Sale and Loan Modifications. If you would like to talk with a mortgage advisor who thinks long-term and strategically about your financial investments including your liabilities – please give me a call.

Given the state of our economy one of the most common questions I’m asked is when a family that has gone through a short sale, or foreclosure or bankruptcy, would be eligible to purchase a home. The following gives you a general idea of what the requirements are. There are some exceptions when there are extenuating circumstances, including loss of job. There are new guidelines that might very well help in that circumstance if investors can be found to support the Fannie Mae and Freddie Mac policy changes.

Financial assessment will become an integral part of the requirements for reverse mortgages in the future, according to a NY Times report Friday. This follows a change in April that suspended the standard fixed Home Equity Conversion Mortgage (HECM). Both of these changes were made to ensure the long-term viability of the program. Homeowners 62 years and older can use the HECM reverse mortgage to access their home equity for retirement or other needs, or even purchase a home.  The program is a priority for HUD and FHA and carries significant benefits for baby boomers wanting to include the equity in their home as part of their retirement plan. Financial assessment will require specific documentation that the homeowner is able to make future property tax, insurance, and HOA payments. Given these are basic requirements of any mortgage loan, the change should not have much impact. These will simply formalize the kind of considerations and due diligence a professional advisor would make before recommending a reverse mortgage.

See the full article here.

HUD has dramatically changed the costs associated with obtaining and retaining an FHA loan. Starting with FHA case numbers assigned April 1st, 2013, the cost of annual mortgage insurance will increase significantly. On top of that – starting June 1st, 2013, the monthly mortgage insurance may stay with your loan as long as 30 years! The upshot is FHA wants out of the lending business.  Citing underfunding issues with the reserve fund – FHA has bumped the cost of an FHA loan truly to discourage the use.  It will only be viable for situations where borrower only has the minimum 3.5% down payment, or has low credit scores or high DTI (debt to income ) ratio. FHA Mortgagee letter 2013-04 has more detail. FHA has gone up and down with the mortgage insurance (up front and monthly) over the past few years in response to calculations for the reserve fund that look out 30 years projecting housing prices.  As you can imagine that is very difficult to do and easy to be pessimistic. Fortunately the market for conventional mortgage insurance has strengthened and is very competitive. There are options for private mortgage insurance (PMI) up to 95% loan to value.  It is VERY important to pay attention to credit score because that is a significant factor in determining mortgage insurance cost. If FHA is the best option – get a property identified and a case number assigned prior to April 1^st 2013 … Otherwise lets run a credit report and make sure steps are taken to preserve a good credit score to get the best PMI options.  Don’t let this drastic change risk derailing your deal!