HUD Teases Seniors With Reverse Mortgage Home Purchase
A few months ago, HUD announced 2 wonderful things regarding reverse mortgages. The first attention-grabber was that a home can be bought using the reverse mortgage.
Up until now all seniors could do with the reverse mortgage is refinance their current home.
But that's all changed. A reverse loan is now as functional as a regular loan, but the borrower does not have to repay the bank periodically. This is obviously a significant distinction to seniors.
Another part of the letter really threw me for a loop, in a very good way. HUD was allowing lenders to loan based upon the appraisal rather than the sale price. This was an amazing thing for me to read.
As it stands for reverse mortgage refinances, there are several different things the banks look at when determining loan amount, but the value of the home is number one.
The mortgagee letter stated basically the same thing for home purchases. What you should understand is home purchase mortgage loan to values are normally based upon the sale price or the appraised value, whichever is lower.
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 thing about it is HUD is a pretty conservative group. Although their forward mortgage programs are fairly loose as far as credit and down payment is concerned they still require downpayment. They always seem to ask the borrower to anti up in some manner.
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.
As a lender, I find it unusual how long it takes to get these Housing and Urban Development letters. I would expect them to have a myriad of attorneys checking these things up and down.
Believe it or not, this notice was released 60 days prior to the amendment.
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.
But that's all changed. A reverse loan is now as functional as a regular loan, but the borrower does not have to repay the bank periodically. This is obviously a significant distinction to seniors.
Another part of the letter really threw me for a loop, in a very good way. HUD was allowing lenders to loan based upon the appraisal rather than the sale price. This was an amazing thing for me to read.
As it stands for reverse mortgage refinances, there are several different things the banks look at when determining loan amount, but the value of the home is number one.
The mortgagee letter stated basically the same thing for home purchases. What you should understand is home purchase mortgage loan to values are normally based upon the sale price or the appraised value, whichever is lower.
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 thing about it is HUD is a pretty conservative group. Although their forward mortgage programs are fairly loose as far as credit and down payment is concerned they still require downpayment. They always seem to ask the borrower to anti up in some manner.
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.
As a lender, I find it unusual how long it takes to get these Housing and Urban Development letters. I would expect them to have a myriad of attorneys checking these things up and down.
Believe it or not, this notice was released 60 days prior to the amendment.
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
6:16 PM
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