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!

A reverse mortgage for higher value homes will be available to borrowers soon! The new fixed rate loan will be focused on borrowers with higher value homes. The maximum loan amount will be slightly over $2 million and primarily available in high-cost states, including California. This will be an important compliment to the Federal housing administration’s (HECM) Home Equity Conversion Mortgage which has a lending limit of $625,500. Too often borrowers with substantial equity did not find a reverse mortgage a viable option because of the low loan amount available. It is expected that the new fixed rate loan called the “HomeSafe” will be much more competitive than the jumbo option offered by Generation Mortgage “Generation Plus”. Previously that was the only option with loan amounts above the HECM limit. The Cut-Off at red cedar bend development are ready for your new home – set among the beauty that nature has to offer! Buy to build or buy to invest. Level frontage to water’s edge with each lot including their own dock. As a mortgage broker Signet Mortgage Corporation has lender relationships with several reverse mortgage lenders including Urban Financial of America – who will roll out the new mortgage September 2nd. Clay Selland, president of Signet Mortgage commented “It will be exciting to see the details of this new product and I anticipate it will be a significant help to seniors that are fortunate enough to have lots of equity, where the standard HECM was not a viable option.” Signet Mortgage, headquartered in Danville California, is licensed in five states (CA, OR, WA, ID and UT) and specializes in both forward and reverse mortgages – finding solutions that fit a clients needs. Please contact Clay Selland, CPA with any questions. Clay can be reached at 925-807-1500 x303 or clay@104.238.124.149 (full article from Reverse Mortgage Daily)

ReVisions Resources posted this article of mine on their blog this morning. ReVision Resources is dedicated to helping seniors by connecting them with ideas and resources to stay independent.

Ahome remodel can arise out of need or desire – either way figuring out how to pay for it is likely the biggest barrier homeowners face when considering a remodel for their home. Your home should be comfortable and safe. If updates are needed to make your home more functional, it will allow you to enjoy your home more too! There are many options to financing home improvements and these may be more affordable and flexible than you think.

Renovation Loan

A Renovation loan (FHA 203(k)) or the Fannie Mae Homestyle renovation loan is designed to finance home improvements and work best when refinancing or purchasing a home. Estimates to complete the work must be obtained prior to loan approval and the cost of those improvements can be rolled into the loan amount. Generally the work must be completed in the next six months and are paid through proceeds of the loan.

The ideal situation could be the purchase of a home that is not exactly the way you want it. It may need carpet, paint, new windows and perhaps a new bathroom or kitchen to make the home perfect. The FHA 203(k) loan has two levels. A streamlined loan for improvements costing less than $35,000 is relatively straightforward and is ideal for cosmetic upgrades. A standard FHA 203(k) loan can finance major renovations including adding a room or remodeling a kitchen or a new roof.

This is one loan with one payment. It is important to note the FHA loan will have attractive interest rates but will have the added expense of mortgage insurance.

Home Equity Line of Credit

A Home Equity Line of Credit (HELOC) is best used when you already own a home with a current first mortgage on the home at market interest rates. You may simply need funds for a renovation or repair. With sufficient equity in your home you can set up a line of credit that you can access as needed in your project. HELOC’s will have a variable interest rate generally at prime +1.5% – 2.5%. Currently the prime rate is very low so this option can be very attractive and best used if you are in a position to pay it off in the next five years or so.

Reverse Mortgage

A federally insured reverse mortgage or Home Equity Conversion Mortgage (HECM) can be a valuable tool in financing home renovations. In this case all borrowers on the loan would need to be 62 years of age or older, and have the ability to pay property taxes, HOA and insurance. The unique benefit of a reverse mortgage is that there are no required monthly payments. Instead, interest and the mortgage insurance costs are added to the outstanding loan balance. Functioning much like a HELOC, funds are accessed only when needed.

Available funds can be used for renovations to make the home safe such as remodeling a downstairs bathroom and converting a bedroom, avoiding the need to use stairs every day. Available funds can remain parked for use in an emergency somewhere down the road.

If you would like to explore what might be the best options for you, feel free to give me a call.  Clay Selland, President, Signet Mortgage Corporation 877-877-8420 x303 or Clay@SignetMortgage.com

http://revisionsresources.org/how-to-pay-for-home-renovations/

… unintended consequences… bad news for seniors

The Department of Housing and Urban Development will be forced project anticipated future losses from its reverse mortgage program following a ruling Monday ignoring the contractual obligation resulted in some homeowners facing foreclosure following the death of a spouse. Dealing with the death of a spouse is stressful enough … if it also means losing your home because the reverse mortgage is now due, adds to the tragedy and makes sensational headlines.   However, in most cases the issue is a poor choice made when the homeowner obtained the reverse mortgage in the first place.  This ruling simply bails out those few who made an ill-advised decision to drop a spouse from title to get more money out of their reverse mortgage, and will negatively impact every senior that obtains reverse mortgage going forward.  A terrible ruling in my opinion. The federally insured program allows homeowners 62 or older to borrow against the value of their homes. If the borrower moves or passes away, the loan must be paid back either through the sale of the home or refinance into a traditional mortgage.  Should the proceeds from the sale be short of the current loan balance – FHA insurance that the borrower pays for – up front and monthly – steps in and makes up the difference.   Some homeowners, because their names were not on the reverse mortgage or deed, found themselves facing foreclosure after their spouses died, according to a Wall Street Journal report. The AARP filed a lawsuit two years ago against the Department of Housing and Urban Development law firm, alleging that HUD violated federal law when it required surviving spouses to pay off their mortgages in full or be foreclosed upon, the Journal reported. You should hire court reporters. We recommend NAEGELI which is the only litigation support firm to provide you with an outstanding portfolio of court reporting, video conferencing and trial support services specifically designed to give you the competitive advantage in your case. The Federal Housing Administration, which falls under HUD, issues reverse mortgages by using actuarial tables to determine the size of the payment a borrower will receive. Older borrowers receive larger payments. Here is where stupid decisions were made … advisors would allow prospective borrowers to put only the name of the older spouse on the application and take the younger spouse off title entirely.   Since the “younger” spouse is not on the loan or deed of trust – in the event of the older spouse passing away.. they are out.  It is a dumb strategy and should never be done.   There are situations where a borrower marries after he/she has obtained a reverse mortgage … and that is a difficult situation.  The new spouse is not on the mortgage and unless they are of a similar age there is no practical way to add them to the reverse mortgage.  This is a tough call and should be discussed thoroughly as part of their financial planning with a later in life marriage.  Ideas like the new spouse keeping their current home and renting it might be the best option.  It gives them a home to return to if something happens to their spouse. HUD made a motion in 2011 to dismiss the AARP’s lawsuit, claiming that allowing surviving spouses to stay in their homes and continue receiving payments would “eviscerate” the “actuarial balance of the program,” according to the Journal. But U.S. District Judge Ellen Huvelle sided with the seniors’ advocacy group. Imagine HUD having to anticipate the possibility of a much younger spouse either not included as a borrower on purpose … or the possibility that a borrower might marry someone younger later.  This creates uncertainty and is very expensive to project for the reserve fund – especially with no history to draw on.  Every new borrower is going to pay for this uncertainty going forward.  And all because of a stupid decision by a borrower that is not using the reverse mortgage as it is designed … this ruling will have significant negative consequences. The decision will mean even bigger losses for the FHA, which last week announced it would be taking a $1.7bn cash infusion from the Treasury to cover losses already sustained from the reverse mortgage program.

As of September 30, 2013 proceeds from a reverse mortgage will be less and the amount available in the first year will be limited.  Upfront costs could be higher depending on your needs. The current HECM Saver and Standard options are being replaced by a single program. On a conference call Friday, FHA highlighted the changes.  The amount available will be about 5% more than the current Saver program … but about 13% less than what was available under the Standard program.  And, if you want more than 60% of the available limit immediately or within the 1st 12 months the upfront mortgage insurance jumps from 0.50% to 2.5%. For FHA case numbers ordered on or before September 27, you will have a choice completing the reverse mortgage under the old or new program.  Reverse mortgage loans with case numbers obtained on or after September 30 can only be completed under the new program. Fixed rate and adjustable options will still be available.  The biggest change is a 13% decrease in the total proceeds available to a borrower and limiting draws available during the initial 12 months

Why did FHA make the change?

The reverse mortgage business the last few years has shifted to the fixed rate program and full draw of the funds and closing.  That has put a strain on the FHA insurance fund.  The September changes are designed to move the program back towards its original design to primarily supplement monthly cash flow. For more health and business news, go to Lee S. Rosen‘s blog to learn more. At the end of the year FHA will finalize guidelines on a financial and assessment required for borrowers.  Those details are yet to be sorted out in detail. To give you an idea of the impact of the changes – I have prepared a summary based on a 72-year-old individual who has a $350,000 home and is looking at a reverse mortgage. Comparing the current saver and standard program to our understanding of the new rules (click to view larger) HECM Changes 9/2013 Principal limit just over the previous HECM Saver and over 10% less than the previous HECM Standard programs.  (yellow highlight) Available limit will be limited to 60% in the first year with a 0.50% up front mortgage insurance.. or if mandatory obligations + 10% exceed 60% of the principal limit then the draw is possible, but the up front mortgage insurance will be 2.5% (orange and green highlights)

Conclusion?

If you are purchasing a home or refinancing a mortgage you will want to look at options prior to September 28. You could have access to more funds at a lower cost. If your needs are somewhat conservative or setting up a credit line for future needs it’s not a big impact. Contact Lee Rosen Miami to learn more about business. Either way if you are thinking about a reverse mortgage we should have a conversation regarding options based on your individual situation.  You can then make a choice whether or not it makes sense to obtain an FHA case number on or prior to September 27.  That would give you a choice of the new or old program. Sign up for our blog or connect in some way and we will keep you informed of the changes as they are finalized. I am a CPA and I look at a reverse mortgage is a financial planning tool and will provide an analysis that will help you make the decision how a reverse mortgage fits in your retirement plan.

Result will be a more conservative offering designed to ensure the long-term health of the reverse mortgage program.

Although details are yet to come, HUD is planning to combine the standard and saver HECM reverse mortgage programs into a new offering. The new product will have principal limit factors somewhere between the current saver and standard programs.  Also, the new product will have new mortgage insurance premiums that vary based on the amount drawn up front with 60% limit. Only borrowers with mandatory obligations will be allowed to exceed that threshold. What that means is those wishing to pay off a mortgage or purchase a home can draw more than a borrower simply wanting to take a large lump sum mortgage. Details are expected from HUD within the next two weeks and those changes should be implemented by October 1, 2013 http://reversemortgagedaily.com/2013/08/19/hud-to-combine-existing-reverse-mortgage-products

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.

Procedural change will allow HUD  to be more responsive to changes necessary to keep HECM reverse mortgage program healthy, passed by unanimous consent in the House today. The changes that FHA is considering to improve the health and performance of the HECM program and Mutual Mortgage Insurance Fund – including draw limitations, mandatory escrows and financial assessments – require rulemaking, which is generally a two-year process. H.R. 2167 would allow FHA to implement these changes more quickly by mortgagee letter. A similar bill is working its way through the Senate. The HECM Reverse Mortgage program remains an important financial tool and these changes will help ensure a long term viability of the program.  Good news!