It is my pleasure to specialize in the origination of Home Equity Conversion Mortgages (HECM) for the benefit of our clients. These are best known as Reverse Mortgages. The type of Reverse Mortgage we offer, and the most utilized product available in Colorado, is the one insured by the Federal Housing Administration (FHA) of the US Department of Housing and Urban Development (HUD) as further discussed by the Federal Deposit Insurance Corporation (FDIC) and as discussed by the Consumer Financial Protection Bureau (CFPB).
- The minimum age for a borrower is 62.
- A non-borrowing spouse under age 62 gets to be on the deed.
- Reverse mortgages are extremely well protected. Guaranteed by HUD; Insured by FHA.
- One of the protections is the requirement that borrowers receive counseling from a third-party HUD Certified Housing Counselor – often at no cost to the prospective borrower.
- No monthly out-of-pocket mortgage payments required.
- The reverse mortgage is due once the home is no longer the primary residence of the borrower(s) or the non-borrowing spouse.
- Out of pocket expenses are limited to property taxes, insurance and HOA fees (when applicable).
- The property is to be kept in good condition.
- The interest rate is not determined by income or credit score.
- The interest rate is based on the program chosen (FRM, Monthly/Annual ARM, and Low-cost Annual).
- Flexibility on how funds are received (traditional):
- In an interest bearing line of credit and/or;
- As monthly payments and/or;
- In a lump sum payment and/or;
- In any combination of the above methods.
- There are no restrictions on how the funds may be used.
- The title remains in the borrower’s name. The bank does not own your home. You may sell at any time.
- There is no equity sharing. Your equity is your equity.
- Credit review – The credit review is minimal providing there have been no serious derogatory credit issues, such as bankruptcy or unpaid credit obligations, in the past two years.
- There is no minimum credit score requirement.
- Financial Assessment (FA) – The financial underwriting is minimal. The lender must be assured the borrower has the income and will to pay real estate taxes and property insurance.
- Under FA, a full or partial set aside account may be required to pay taxes and insurance.
- Closing costs are comparable to other FHA insured home loans.
- There are no mark-up or “junk” fees allowed.
- One may still receive Social Security and Medicare benifits with a reverse mortgage.
- The reverse mortgage is a loan so the proceeds are not treated as income.
- There is no prepayment penalty; the borrower may pay-off the reverse mortgage at any time with no penalty.
- Reverse mortgages are non-recoursable; if more is owed than the value of the property, the lender may not collect the deficient amount from either the borrower or the estate.
- Heirs may sell the property and pay off the mortgage. In the event more is owed on the property than the value of the property, the heirs may purchase the property for 95% of the market value as opposed to paying the full amount of the mortgage.
- Reverses Mortgages are also used for Purchase Money. Click here to learn more.
- Security is provided for the under age 62 spouse. Click here for more information.
DISCLAIMER: This publication does not represent that any of the information provided is approved by HUD or FHA or any US Government Agency.
DISCLOSURE: The information provided herein is not intended to be an indication of loan approval or a commitment to lend. Additional program guidelines may apply. Information is subject to change without notice.
Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.