Reverse Mortgages and the Under-Age 62 Spouse


New Rule on Reverse Mortgages

A new rule has been issued which allows that a reverse mortgage (HECM) shall protect borrowers even when one spouse is younger than 62. Both the  purchase or traditional reverse mortgage amount will be based on the younger spouse’s age. Given the number of variables, and the complexity with how these new factors work please contact your trusted reverse mortgage loan originator.

For all FHA case numbers issued on or after August 4, 2014 this revolutionary new rule becomes effective. This rule will allow younger spouses of borrowers that no longer live in their home to stay in their home without the threat of foreclosure. In a nutshell, the requirements are this:

  • They must have been married when the mortgage was taken,
  • Have remained married,
  • The surviving spouse shall continue to pay taxes, insurance, and HOA fees (if applicable).

Prior to August 4, 2014, the full repayment of the reverse mortgage was due and payable following the death of the borrower, leaving the surviving spouse whose name was not on the mortgage in the lurch for the debt or forced to sell the home. This change defers that settlement until after the surviving spouse’s death.

This new rule comes at a cost. Lenders factor in the age of the younger spouse when calculating the reverse mortgage payout; in a nutshell, the younger the spouse the longer the loan will be outstanding resulting in the lesser payout.

Reference: FHA Mortgagee Letter: ML 2014-07

Readers of this blog may also wish to read: What Is A Purchase Reverse Mortgage? as well as The New Reverse Mortgage.

Image attribution

Notice: The information provided 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.
DISCLAIMER – This post does not represent that any of the information provided herein is approved by HUD or FHA or any US Government Agency or Department.
Financially Speaking™  James Spray, MLO, CNE, FICO Pro 
CO LMO 100008715 / NMLS 257365 | August 2, 2014

 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. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

Eliminating Mortgage Insurance

  Confused Yet

Is it Necessary to Refinance to Eliminate Private Mortgage Insurance?

In short, the value of the property must exceed the loan balance by 20% due to additional payments made such that the principal balance has been reduced to 80% and the request has been made in writing to eliminate the Private Mortgage Insurance (PMI).

The answer depends on a few factors. If the loan type is a conventional mortgage and had a greater than 80% loan to value and was closed on or after, July 29, 1999 the following applies per the Homeowner Protection Act as discussed by the Consumer Finance Protection Bureau (CFPB):

“The Homeowners Protection Act gives you the right to request that your lender cancel PMI when you have reached the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. This date should have been given to you in writing on a PMI disclosure form when you received your mortgage. If you can’t find the disclosure form, contact your lender.   You can also make this request earlier if you have made additional payments to reduce the principal balance of your mortgage to 80 percent of the original value of your home.”

  • The payment history must be good and the payments current.
  • Your request must be in writing to the proper address in an acceptable format such as the RESPA letter.
  • The lender/servicer may require you to provide an appraisal to prove the value of the property has not declined below value when the loan was funded. Note: This is not to prove that your home value has appreciated.
  • The lender/servicer may require you certify that there are no junior liens (second mortgage, HELOC, judgment or tax liens).
  • Send a QRM your servicer if you are unable to locate the PMI disclosure form you received at closing.
  • If you do not contact your servicer to eliminate the PMI, the PMI is to automatically drop off once the loan has been paid down to 78% of the funded loan.

Click here for the CFPB link on eliminating PMI.

Click here for the August 4, 2015 CFPB update for mortgage servicers.

If you have Lender Paid Mortgage Insurance (LPMI) the only way to eliminate LMPI without selling the property is to refinance. As always, this is a business decision. How much will you save in what period of time by eliminating the LPMI. It’s worth noting that LPMI may be tax deductible (check with your tax advisor to make sure).

Is it Necessary to Refinance to Eliminate FHA Mortgage Insurance Premium?

If the loan is an FHA Insured mortgage it has Mortgage Insurance Premium (MIP). For mortgages with an FHA case number assignment date on or after June 3, 2013, the FHA monthly mortgage insurance can only be terminated by the servicer or holder if the mortgage is paid in full before the maturity date. The exception to this rule is the FHA Streamline Refinance.

Again generally speaking, providing accelerated payments were made such that the unpaid principal balance is 78% or less of the original loan balance, the MIP can be eliminated prior to the originally scheduled cancellation date. For several years prior to the change implemented on June 3, 2013 the mandatory time for the MIP was 84 months.

In short, if you wish to eliminate the MIP prior to the termination date of the MIP, as explained by the CFPB, you’ll find it necessary to refinance.

Can You Refinance to Eliminate Mortgage Insurance?

Providing the property has sufficient equity to eliminate PMI or MIP (20% equity) and there are no junior liens (above discussed), the mortgage loan may be refinanced into a conventional loan eliminating the PMI or MIP. As always, this is a business decision. How much will you save over what period of time by eliminating the PMI or MIP. Next calculate your costs in purchasing another first mortgage. Remember, there is no such thing as a free lunch.

If You Are Being Solicited to Refinance Here’s a Suggestion:

Before investing the time and expense of applying for a refinance, make sure the solicitor is in fact both an NMLS Registered Loan Originator as well as Licensed by the CO Division of Real Estate or, the state in which you reside; if they are, obtain their NMLS Number and their CO License Number as well as their contact information. If they are neither, they are merely a lead generator and get paid only by the number of leads they generate. This doesn’t mean that which they are selling can’t be done; it just means you may wish to be extra vigilant as they may not have your best interests at heart.

A licensed mortgage loan originator has a much higher level of interest in helping to protect your interests. Therefore, you may wish to avoid the lead generator altogether. Discuss your refinance possibility with your State Licensed, NMLS registered loan originator.

The Bottom Line: Before You Pay For an Appraisal

Make sure you are dealing with someone licensed and make sure it makes business sense prior to shelling out several hundred dollars for an appraisal. With the refinance there will also be many more hundreds or perhaps several thousand dollars in new costs to purchase a new mortgage. Not insignificant is how many more months or years the refinance will add to your total cost. Consider as well how long you really will keep the house on which you are contemplating the refinance.

Image credit: Google Images

Financially Speaking™  James Spray, RMLO, CNE, FICO Pro |CO LMO 100008715 / NMLS 257365 | August 8, 2015

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. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

QWR: The RESPA Letter


Federal Reserve Board Building

Federal Reserve Board Building

QWR: The RESPA Letter

Most reading this post are reading it for a particular reason which is to learn about writing a letter to a mortgage lender and/or servicer regarding a specific problem or situation such as requesting the mortgage servicer report your payments to the credit bureau(s). For some, it may be that your mortgage servicer or bank is reporting incorrect information or you may need specific documentation. For others, perhaps this is being read for informational purposes. In any event, we trust the reader finds this information helpful.

 Step 1. Contact your mortgage servicer for the correct address for legal correspondence. You must use the legal (registered) address of the servicer. Some servicers actually have a specific address for a Qualified Written Request (QWR). This is  a different address than where you mail the payment or from where you get the periodic statements or notices. This procedure was established per the Real Estate Settlement Procedures Act (RESPA).

 Step 2. You may utilize the following template provided by HUD for your QWR. Or you may click here to open and read the information or you may copy and paste the pertinent paragraphs (opening and closing) as show below. Focus your thoughts and keep your letter brief and specific to the topic. less-is-more -

“Attention Customer Service:

Subject: [Your loan number]

[Names on loan documents]

[Property and/or mailing address]

This is a “qualified written request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I am writing because:

  • Describe the issue or the question you have and/or what action you believe the lender should take.
  • Attach copies of any related written materials (as applicable).
  • Describe any conversations with customer service regarding the issue and to whom you spoke.
  • Describe any previous steps you have taken or attempts to resolve the issue.
  • List a daytime telephone number in case a customer service representative from the legal department  wishes to contact you.

Sincerely, [Your name – Printed and Signed]

I understand that under Section 6 if RESPA you are required to acknowledge my request within 20 business days and must try and resolve the issue within 30 business days.”

If you are satisfied with the resolution to your situation, you may wish to compliment the servicer by sending a note to the Consumer Financial Protection Bureau (CFPB or Bureau) via their Comment Form.

Step 3. Send your QWR via Certified Mail Return Receipt. Keep copies of your letter and any enclosures as well as your Certified Mail Receipt from the post office and the Return Receipt from your mortgage servicer proving they have received your QRM

Finally, if you are still unable to resolve the situation, there is a complaint process that may get action. We suggest this be your last and not first step as you will then have evidence which will indicate to the Bureau that the servicer is either unwilling or unable to address your situation. Mortgage Complaint Form

There’s a New Sheriff in Town?????????????????????????????????????????

The following is excerpted from the prepared remarks of Steven Antonakes, Deputy Director of the CFPB which he presented to the Mortgage Bankers Association National Mortgage Servicing Conference in Orlando, Florida on February 19, 2014.

“…My message to you today is a tough one. I don’t expect a standing ovation when I leave. But I do want you to understand our perspective. I would be remiss if I did not share it with you … if you choose to operate in this space (mortgage servicing), the fundamental rules have changed forever. It’s not just about collecting payments. It’s about recognizing that you must treat Americans who are struggling to pay their mortgages fairly before exercising your right to foreclose. We have raised the bar in favor of American consumers and we are ready, willing and able to vigorously enforce that bar.

Ultimately, these profound changes will be good for all Americans, including industry. But please understand, business as usual has ended in mortgage servicing. Groundhog Day is over. Thank you.”

Sheriff – Update

In a June 22, 2016, Press Release, the CFPB said, in part: “In 2013, the CFPB established mortgage servicing rules designed to protect consumers against many of the practices that plagued the mortgage servicing industry during and after the housing crisis.

According to the CFPB, the rules require servicers to maintain accurate records, give troubled borrowers direct and ongoing access to servicing personnel, promptly credit payments, and correct errors on request.”

In addition to sending your RESPA letter, do not hesitate to file a complaint, with the CFPB. Click here for the particular complaint link.

The Bureau’s Enforcement Power – One Example

As an example of the Bureau’s enforcement authority, RealtySouth™, a Berkshire Hathaway Affiliate, was recently fined $500,000.00 for a RESPA violation which amounted to failure to disclose their affiliated business relationship(s) to consumers. This is a typical example of the enforcement action undertaken by the Bureau as one may readily determine with an Internet search. For those who don’t recognize the name Berkshire Hathaway, it is largely owned by one of the world’s wealthiest persons. Clearly, wealth does not buy immunity from the CFPB.

Exceptions to QWR: Those transactions excluded from the QWR are limited to “(1) subordinate lien loans or (2) open-end lines of credit subject to TILA, whether secured by a first or subordinate lien.”* Further, “(a) request does not constitute a QWR if it is delivered to a servicer more than one year after either the date of transfer of servicing or the date that the mortgage servicing loan was paid in full, as applicable.”*

NOTICE: I am not an attorney nor am I providing legal advise. This post is for educational purposes only. The images are for illustration only and not meant to imply in any way an endorsement or authorization by any government agency or authority of this blog or this post.

* Jonathan Foxx, President & Managing Director Lenders Compliance Group

Image Attribution: and  CFPB

Financially Speaking™  James Spray, RMLO, CNE, FICO Pro | CO LMO 100008715 / NMLS 257365 | Rev. June 16, 2016

 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. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

Secured Credit Cards While In A Chapter 13 Bankruptcy

Good Credit Just Ahead Sign

Rebuilding credit is not an overnight process, but it can be done sooner than many think possible. And yes, this can be done while one is making monthly payments in a Chapter 13 Bankruptcy Plan. Done properly, the credit rebuilding process requires a little less than a year to establish good credit. So take a breath, be patient and do it right.

Always keep in mind that just because you can begin rebuilding your credit while in Chapter 13, this does not mean you are outside the jurisdiction of the bankruptcy court. You will need to get authorization to incur new debt, such as for the purchase of a vehicle or a home or the refinance of a home mortgage. Providing you reside in a Bankruptcy Court District, for example the District of Colorado which allows for revesting in the Chapter 13 Plan, it is less of a hassle with the smaller stuff which is really key to rebuilding your credit. More on this below and in other of my blogs.

Before you can begin rebuilding credit, your Chapter 13 Plan must be confirmed by the Court. Discuss the confirmation process with your bankruptcy attorney. You do not have a confirmed Plan just for having filed a Chapter 13 bankruptcy.

The Basics of Building Good Credit Scores

2013 FICO Pie Chart

Given that you want to rebuild your credit, it is essential that the basics of credit scoring be understood. Key to this is the balance of your available credit against revolving credit (credit cards). As discussed in this blog, it is perfect to not have more than 10% of your available credit in use in any given month. It is ok to have up to 20% of your available credit in use, but advisable to pay the balance down to 10%. For example, if one has available credit of $1,000, for best results, one would have no more than $100 (10%) charged during any given month. One would never have more than $200 (20%) charged against the $1,000 available credit limit.

The Chapter 13 Payment

More often than not, I see a late payment made to the Chapter 13 Trustee. This is a deal killer at worst or a delay at best. To learn more of the importance of this payment, you will wish to understand the facts which are discussed in my blog titled: The Chapter 13 Payment.

You Must Use Credit

Rebuilding and maintaining good credit require that you use credit. Yes, to have good credit you must show that you can use it wisely. On this, you will do very well in rebuilding your credit by maintaining a small balance on your credit card(s) and paying minimal payments. You are, in a sense, buying your credit back. Keep in mind, you need to keep a small balance on your credit cards and not pay off the entire amount monthly. Pay on time or pay early, never late. Once you have scores above 740, it is fine to pay off the balance monthly.

Rather than spending your money when you charge something, take a cash advance and put it into your credit union savings account. Read on for more about how and why to use a credit union to help you rebuild your credit and raise your credit scores.

Beware of Ignorance and Prejudice

Unfortunately, there are many folks who have a prejudice against those who have had to file for bankruptcy protection. This includes the folks working in credit unions today. Most credit unions allow one who is in a Chapter 13 bankruptcy repayment plan to obtain a secured credit card. Many, but not all, credit union employees understand this. For example, I called a nearby credit union today and was told by the person responsible for establishing a secured credit card that my client must have been Discharged from Chapter 13 for two years before she could be eligible for a secured credit card. Next I called a nearby branch of this same credit union and spoke with the person responsible for establishing a secured card. He stated that all my client must do is to become a member and make the appropriate deposit. He further explained that since this was to be a secured credit card, that a credit report would not be needed. The fact is whether you think you can or can’t you’re right.

Patience is Key and Being Polite has Rewards

Your success in setting up the secured card with the credit union depends upon which clerk, which location, and what mood they are in. Patience is an integral key to accomplishing your goal. First, open your savings account. In a credit union this is called a Shares Account. Be smart, take time and build a new ‘banking’ relationship while you are building your Shares account. Save at least $1,000 before asking to open a secured credit card. I strongly encourage that you read this blog titled Credit Union Power to learn how these “non-bank’ banks can be superior to traditional banks for those wishing to rebuild credit. Among the ways they are are different from banks in that as a member you become an owner. This is different from just being a customer. On this blog, you may also search for nearby credit unions which you can join. This information is good throughout the U.S.

There are also other secured credit cards available as referenced in this blog. However, very few have zero fee cards with minimal interest such as credit unions. Several of the dry goods stores such as Kohl’s and Victoria’s Secret also offer credit cards to those wishing to rebuild their credit. These, too, have the same rules regarding the usage of credit against the credit limit (10% best – 30% max).

Credit Utilization

Anyone who uses credit cards could have high utilization, particularly those which pay off their balances in full each month. This is because balances are often reported to the credit bureaus mid-billing cycle. So if you have a $5,000 limit and you charge $4,000 in a month, you could be reportedly utilizing 80% of your available credit. The result is most often dramatically reduced FICO™ Scores. The higher the limit the better!

Home Loan Refinance While in Chapter 13

Providing you have only a first mortgage, you can, in many circumstances, refinance your mortgage to a lower rate and payment while in Chapter 13. For information on how to do this, start with this blog on the subject. One of the conditions is that a second mortgage is not being stripped in the Chapter 13 Plan. In this case, the Plan must be completed prior to a refinance. Once the Chapter 13 Plan has been completed and discharged, it is necessary – in the vast majority of cases – to wait two years to purchase a home or refinance a mortgage. It is much easier to refinance while still in Chapter 13.

Good Credit: Image attribution
Pie Chart: Image attribution
Financially Speaking™ James Spray, MLO, CNE, FICO Pro
CO LMO 100008715 | NMLS 257365 | April 15, 2012 | Rev. July 16, 2015

 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 interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.