Home Purchases with Reverse Mortgage - HUD Revises Deal
I was pleasantly surprised in November to see two things: One was a HUD mortgagee letter stating they would allow home purchases with a reverse mortgage.
Up until now all seniors could do with the reverse mortgage is refinance their current home.
Borrowers are taking much pleasure in this. They can now apply the reverse mortgage in the same way as a typical mortgage, and come out in the end not having to compensate the lender monthly.
The other part of the letter that was amazingly good, so good I had to read it three times to make sure I wasn't seeing things, was that the loan would be based upon value rather than sale price.
Under the current policy for the refinance using a reverse mortgage a lender loans money to the senior based upon multiple factors, but primarily on the appraised value of the home.
When a reverse loan is used to actually buy a home the same would apply, except in this case the lower number between price and appraised worth would be the factor.
For a reverse mortgage purchase to be based upon value only sounded almost too good to be true.
Here's how it could play out. Say a borrower scrounges around and finds an amazing house really cheap. Its on the market for almost half of what it should be. In this circumstance, at closing the senior might not have to front anything out of pocket.
The Dept. of Housing and Urban Development doesn't just give things away. They arent considered strict by any means, but they want to make sure that there is a down payment. The senior must give something in order to get something.
Well guess what? HUD agrees with me. It is too good to be true. They eliminated that clause and have reverted to traditional lending practices.
It's interesting HUD takes seemingly forever to put out their mortgagee letters to us lenders. You'd think they have teams of lawyers working day and night making sure the thing is right the first time.
Not so, this particular letter was out no more than two months before revision.
In summary, the official basis of the reverse loan, when used to buy a new home, will be the lesser of the price or value.
Up until now all seniors could do with the reverse mortgage is refinance their current home.
Borrowers are taking much pleasure in this. They can now apply the reverse mortgage in the same way as a typical mortgage, and come out in the end not having to compensate the lender monthly.
The other part of the letter that was amazingly good, so good I had to read it three times to make sure I wasn't seeing things, was that the loan would be based upon value rather than sale price.
Under the current policy for the refinance using a reverse mortgage a lender loans money to the senior based upon multiple factors, but primarily on the appraised value of the home.
When a reverse loan is used to actually buy a home the same would apply, except in this case the lower number between price and appraised worth would be the factor.
For a reverse mortgage purchase to be based upon value only sounded almost too good to be true.
Here's how it could play out. Say a borrower scrounges around and finds an amazing house really cheap. Its on the market for almost half of what it should be. In this circumstance, at closing the senior might not have to front anything out of pocket.
The Dept. of Housing and Urban Development doesn't just give things away. They arent considered strict by any means, but they want to make sure that there is a down payment. The senior must give something in order to get something.
Well guess what? HUD agrees with me. It is too good to be true. They eliminated that clause and have reverted to traditional lending practices.
It's interesting HUD takes seemingly forever to put out their mortgagee letters to us lenders. You'd think they have teams of lawyers working day and night making sure the thing is right the first time.
Not so, this particular letter was out no more than two months before revision.
In summary, the official basis of the reverse loan, when used to buy a new home, will be the lesser of the price or value.
posted by Credit Counseling at
5:55 PM
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