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.
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.
While the lender will take various things into account, the most important is the value of the house as determined by the appraisal.
It was identical when a senior uses the reverse loan for the purpose of buying of a house. The difference to realize is when you get a reverse loan to actually buy a house, it is determined by the least of the cost and the worth.
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.
Wouldn't you know it; HUD has come around to this fact. The rule that was so good, is now gone. HUD reverted back to the conservative policy.
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.
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.
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.
While the lender will take various things into account, the most important is the value of the house as determined by the appraisal.
It was identical when a senior uses the reverse loan for the purpose of buying of a house. The difference to realize is when you get a reverse loan to actually buy a house, it is determined by the least of the cost and the worth.
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.
Wouldn't you know it; HUD has come around to this fact. The rule that was so good, is now gone. HUD reverted back to the conservative policy.
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.
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