The PURCHASE Reverse Mortgage (H4P)

What Is A Purchase Reverse Mortgage?

By way of background, a previous blog on reverse mortgages discusses the general facts regarding reverse mortgages. Let’s talk specifically about the purchase reverse mortgage, which is otherwise known as the Home Equity Conversion Mortgage (HECM) for purchase [H4P]. This product was created by the Housing and Economic Recovery Act of 2008 (HERA). The product is insured by the Federal Housing Administration (FHA) and guaranteed by the US Department of Housing and Urban Development (HUD). In short, the purchase reverse is a way to purchase a home with only a down payment. In addition to the down payment, the buyer is responsible for paying the homeowners insurance, property taxes and (if applicable) Home Owner Association (HOA) fees. There are no principal or interest payments required. However, one may make principal and interest payments by choice not necessity. Finally, if the loan balance on the reverse mortgage eventually exceeds the home’s value, the lender is insured against that loss.

Who Is It Good For?

BORROWER: Age 62 and older based on the youngest titleholder. A non-borrowing spouse under the age of 62 may be added to the loan providing the spouse is over the age of 18. There is no credit required, nor a credit score requirement and only minimal income requirements. This is a minimum documentation loan.

PROPERTY: Single family homes as well as 2-4-unit residential properties and all FHA approved condos are eligible. Title may be held as fee simple, a living trust, and leasehold or life estate. The property must meet FHA appraisal requirements. If the property does not meet FHA criteria (health and safety issues), a set aside account will be established for up to six months while the health and safety requirements of the FHA appraisal criteria are met. The property may be either an existing home or a new build home, so long as the property meets FHA standards.

Examples by Age and Purchase Price of a Home Equity Conversion Mortgage

Purchase Price Age Down Payment HECM Funds
$300,000 62 $174,688 $138,300
74 $153,088 $159,900
80 $138,388 $174,600
86 $118,888 $194,100
$679,650 62 $427,230 $274,180
74 $381,427 $319,983
80 $349,620 $351,790
86 $307,634 $393,776

January 1, 2018 – Pricing is subject to change at any time.

To illustrate – let’s look at the example of a $300,000.00 purchase at age 74: To purchase the residence, the HECM borrower would need $153,088 to close on the purchase of a $300,000.00 property. The balance of the proceeds is provided with the HECM as a benefit of the HECM program and include closing costs. In all examples of HECM purchase mortgages, no mortgage payments are required. All that must be paid out-of-pocket on an annual basis are real estate taxes, homeowners insurance and HOA fees (if applicable). There are no required payments of principal, interest, or other mortgage costs (including upfront costs) until termination of the HECM.

Who Likes Reverse Mortgages The Best? The Borrowers Who Have One!

95% Partially to fully meets my financial needs

93% Positive effect on my life

89% Would refer a friend

94% Report peace of mind

89% Report a more comfortable lifestyle

87% Report a better quality of life

Source: AARP December 2007. Survey of 1500 HECM Borrowers

Why The H4P Can Be Good

A reverse mortgage for purchase allows older Americans to buy a house that better suits their needs without dumping all their retirement assets into it, which would be the case in an all-cash transaction. It also lets them avoid dipping into their monthly fixed income, which would occur if they took out a traditional mortgage. It provides more purchasing power  and doesn’t drain all of the assets. It allows a buyer the luxury to get a better lot, to add all the upgrades they want and to still have no mortgage payment.

The home is titled in the owner’s home; as with all mortgages, the lender retains a security interest in the title. There are no monthly mortgage payments. Instead, the loan is repaid when the home is sold or the borrower no longer resides in the home. The repayment to the lender includes the amount borrowed, plus accumulated interest. Any remaining equity belongs to the borrower, heirs or estate. The heirs may purchase the property for the balance due or 95% of the value, whichever is less.

TIPS: There are no concessions allowed by sellers, builders or agents; this includes any personal property. As well, the buyer must pay for the title insurance. There can be no repair set-asides; all repairs, where major property deficiencies, such as

  • No running water
  • Leaking roof
  • No primary heating source
  • Inadequate electrical system (including lighting)
  • Inoperable doors and windows (inhibited ingress and egress)
  • State or local code violations

which threaten the health and safety of the homeowner and/or jeopardize the soundness and security of the property, must be completed by the seller prior to closing. (H4P FAQs per HUD).

NOTICE: (1) Rates are subject to change without notice. For specific and current information contact me or your H4P Specialist. (2) The illustrations in the above chart titled: *Examples by Buyers Age and Purchase Price, are representative examples only. The figures are not intended to be anything other than representative illustrations in order to convey the concept of the purchase reverse mortgage.

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.

DISCLAIMER: This post does not represent that any of the information provided is approved by HUD or FHA or any US Government Agency.

Financially Speaking™ James Spray, RMLO, CNE, FICO Pro

CO LMO 100008715 | NMLS 257365| First Published 01/11/10 | Updated January 1, 2018

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.

Psychometrics and FICO Scores — An Odd Match?

Source: Psychometrics and FICO Scores — An Odd Match?

“…In a previous post, I highlighted how Sovcombank is using the EFL score to bring more students into credit. Since then, we have also begun rolling the EFL Score out to all banks in Russia through our Russian Credit bureau partners at NBKI.

EFL harnesses something that every one of us has – a personality – to assess credit risk and empower lenders to lend where others are forced to say no. And this is not a new start-up – EFL has 10 years of experience, including 4 years of research and development at Harvard, and 6 years of real-world lending data across dozens of markets.

All Your Equifax Breach Questions (and Some Answers) in One Place – The New York Times

This debacle is explained quite well, in the awesome NY Times style. Nonetheless,  I scooped them by weeks, modestly speaking.

https://www.nytimes.com/interactive/2017/09/28/your-money/100000005466895.app.html?nytapp=android&_r=0

Update (2/6/18): Report claims CFPB is backing away from Equifax probe – Sources say the consumer agency shows little interest in the agency’s 2017 data breach

John Oliver – Last Week Tonight – On EQUIFAX

Without Fanfare, Equifax Makes Bankruptcy Change That… — ProPublica

“…While its competitors, TransUnion and Experian, placed a flag on such histories for seven years, Equifax left it on the reports of Chapter 13 filers who failed to complete their bankruptcy plans for 10.

After ProPublica asked about the difference in its policy, the company said it now leaves the flag on for seven years, but refused to say when and why the change was made.

The consequences of Equifax’s harsher policy were likely life-changing for some unlucky people…”

Source: Without Fanfare, Equifax Makes Bankruptcy Change That… — ProPublica

Timeline: Bankruptcy to Mortgage Chart

Experiencing a severe credit event such as foreclosure, short-sale, deed-in-lieu of foreclosure or bankruptcy does not mean you will never be eligible to get a home loan. This chart provides the time-out periods required by event. The assumptions are that you have established acceptable credit scores and meet underwriting guidelines. In certain circumstances, one may qualify for a mortgage upon discharge of a Chapter 7 or during a Chapter 13.

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | Originally published in 2010 and updated regularly | September 19, 2017 Contact me to obtain a pdf copy of this chart.

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.

148,000,000 American ID’s at Risk – 5th UPDATE 05/11/2018

Credit Bureau Breached – 143,000,000 American ID’s at Risk – Use The Below Links

identitytheft (1)

Equifax, one of the major credit reporting agencies in the United States discovered their security systems have been breached.

Social Security, Driver License, Dates of Birth, Addresses and other personal information has been stolen.

This effects about half the population of the USA.

See if your personal information is potentially impacted. Schedule now to see if your ID has been compromised. There is no cost to you. Register now, there is a lag time. Many others are also registering.

https://www.equifaxsecurity2017.com

Although it is a huge pain in the posterior (both to implement and to deal with when you apply for credit) I am now placing a freeze on my credit, too, with each of the four credit bureaus.

Equifax Freeze Link

TransUnion Credit Freeze

Experian Credit Freeze

Innovis

The downside is having to remove the freeze whenever you wish to apply for new credit, open a new account with a financial institution, obtain insurance or in some cases get a new job. Another downside is having to pay to release the freeze for a specific purpose or to have it removed. And there are the new PIN numbers to keep safe. Aaarg.

It is actually rather easy to set up a freeze on your credit files with the three bureaus. I don’t think this can be said for the “free” credit report/free credit score sites. Frankly, I don’t think you can do anything to protect your information once it is provided to the “free” service provider.

Frankly, if Equifax cannot keep my information secure, I am not about to provide my personal information to sites that offer free credit and free scores. I have never forgotten what Robert Heinlein wrote in 1966: TANSTAFFL.

~~~~~~~~~~~~~

UPDATE September 11, 2017

The following information was provided to me this morning by EQUIFAX pursuant to my registration to determine whether my ID had been compromised.

A Progress Update for Consumers

September 11, 2017

We are committed to keeping consumers updated on the steps we are taking to provide them with the support they need and address any issues they are facing in response to this incident. We recognize that some consumers continue to face challenges and in response we have made the following updates:

1) Adjusted our PIN Generation for Security Freezes
We understand and appreciate that consumers have questions about how a PIN is currently generated for a consumer initiating an Equifax security freeze solution. All consumers placing a security freeze will be provided a randomly generated PIN.

2) Call Center Support
When we recognized that Hurricane Irma could impact some of our call center wait times, we arranged to ramp up agents quickly to replace agents impacted by the storm and updated our website to make consumers aware of the situation.

3) Clarification Regarding Automatic Sign-Up to TrustedID Premier
We are not requesting consumers’ credit card information when they sign up for the free credit file monitoring and identity theft protection we are offering to all U.S. consumers. Consumers who sign up for TrustedID Premier will not be automatically enrolled or charged after the conclusion of the complimentary year of TrustedID Premier.

4) Obvious Link from Equifax.com
To make it easier for consumers to find the website dedicated to providing information about this incident, we have reconfigured our website, www.equifax.com, to feature the link more prominently.

5) Adjusted the TrustedID Premier and Clarified Equifax.com
We’ve added an FAQ to our website to confirm that enrolling in the free credit file monitoring and identity theft protection that we are offering as part of this cybersecurity incident does not waive any rights to take legal action. We removed that language from the Terms of Use on the website, http://www.equifaxsecurity2017.com. The Terms of Use on www.equifax.com do not apply to the TrustedID Premier product being offered to consumers as a result of the cybersecurity incident.

We are listening to issues consumers have experienced and their suggestions. These are helping to further inform our actions, and we are now sharing regular updates on this website. Thank you for your continued patience and feedback as we continue to improve this process.

Following are the snips I gathered while enrolling in the EQUIFAX Trusted ID this AM.

Equifax JS ID Compromised

My ID has been impacted

Equifax JS Enrolled in Trusted ID

For better or worse, this is what it is.

UPDATE: Here is an article from Mawlwarebytes, published on September 14, 2017, which offers additional insights into identity protection: Equifax aftermath: How to protect against identity theft 

UPDATE: 10/3/2017: Here is an article from HousingWire updating (increasing) the number of consumer files breached: EQUIFAX reveals data breach bigger than first thought. Fret not, Equifax won the NO BID contract to protect all IRS files from being hacked. Seriously. I can’t make this up. For more info you may read this from NPR.

Never too late to join the party, the FTC weighs in as of December 13, 2017 with this post: Fraud Alert, Freeze or Lock after Equifax? FAQs

UPDATE: February 5, 2018 – “The Trump administration has chosen to protect Equifax while denying Americans justice and accountability.”

February 6, 2018 – U.S. Treasury Secretary Steven Mnuchin on Tuesday said he wants to know how the Consumer Financial Protection Bureau is handling a probe into a hack of credit bureau Equifax Inc (EFX.N) after a report that the agency’s chief has pulled back from investigating the matter. Treasury’s Mnuchin says he wants answers on Equifax breach

February 6, 2018 – Consumer Affairs – Report claims CFPB is backing away from Equifax probe – Sources say the consumer agency shows little interest in the agency’s 2017 data breach

February 8, 2018 – Democratic senators demand answers on CFPB’s stalled Equifax data breach investigation

February 22, 2018 – Specifically, the [House] Democrats want Equifax to provide at least three years of credit protection and identity theft services to the breach victims, rather than the one year Equifax is currently providing.

UPDATE: March 1, 2018 – Oh Joy! <insert sarcasm font> BREAKING NEWSEquifax reveals 2.4 million more people were victims of data breach Equifax revealed Thursday that an additional 2.4 million people are victims of the company’s 2017 data breach. Initially, the company said the personal information of approximately 143 million people was stolen. Now, it turns out that the number of victims is actually closer to 148 million. Click the headline to read more. Sadly,  Trump’s Budget Director, Mick Mulvaney, a/k/ the Dual-Hatted Acting Director of the CFPB will do nothing to help/direct Equifax protect our private information.

March 1, 2018 – Equifax’s bottom line not dented by data breach, profits rose 20% in 2017 – Net income up 40% in fourth quarter

UPDATE: May 11, 2018 – Equifax reveals how much information was really exposed in data breach How Bad Was It? Bad.

The credit agency did not reveal any new, previously unknown victims of the breach, but it did detail the types of identifiable information, and how much of it, that was left exposed because of the breach.

In its letter, Equifax said that the names and dates of birth for approximately 146.6 million people were exposed, as well as 145.5 million Social Security numbers, the address information for 99 million people, the gender data for 27.3 million people, 20.3 million consumers’ phone numbers, 17.6 million driver’s license numbers, 1.8 million email addresses, 209,000 payment card numbers and expiration dates, 97,500 tax ID numbers, and the state information for 27,000 driver’s licenses. See the chart below for a full breakdown.

Image attribution(top)

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | September 8, 2017 | Most recent update: May 11, 2018

Notice: The information on this blog is opinion and information. When a business is named, it is not due to commercial purposes as I do not accept or solicit compensation from any individual or entity which may be mentioned. 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.

 

National Elder Abuse Resources and Colorado Financial Elder Abuse Mandatory Reporting Law

Elderly folks tend to be more trusting and less informed of the latest scams, making them the perfect target. To learn more about elder abuse, on the national level, two great resources are the National Committee for the Prevention of Elder Abuse and the National Center on Elder Abuse.

In Colorado, there is the Colorado Coalition for Elder Rights and Abuse Prevention.

As well, Colorado has a mandatory reporting law (including financial abuse) for certain categories of professionals and other workers.

Sadly, it is all too common where a family member is committing financial abuse of a parent, grandparent or other senior family member.

While it is encouraged that reporters of elder financial abuse contact local law enforcement, we’ve learned many local law enforcement agencies are unaware of the Colorado financial elder abuse law and are not trained on how to deal with it.

To report elder abuse in Colorado, the first option is to contact the Adult Protective Services (APS) intake office within the county department of human services were the at-risk adult lives. Click anywhere in this sentence for a current list of phone numbers to report elder abuse.

If reporting to the county APS office is not a viable option, contact the District Attorney’s office for the county in which the at-risk adult lives.

Image attribution

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 |August 26, 2017

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.
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