Reverse Mortgage Financial Assessment Begins March 2, 2015

Changes-Ahead-Newspaper

After much anticipation, HUD has released guidance for reverse mortgage financial assessment. This new change will affect all borrowers whose case numbers are assigned on or after March 2, 2015. HUD states “the purpose of financial assessment is to evaluate a mortgagor’s willingness and ability to meet his/her financial obligations and to comply with the mortgage requirements.” In other words, which we will refer to frequently; willingness and capacity.

“The financial assessment will be used to determine whether, and under what conditions, the mortgagor meets FHA eligibility criteria and whether an allocation of HECM proceeds will be required for payment of property charges.”

Financial assessment was outlined in Mortgagee Letters ML 2014-21 and ML 2014-22 and references the HECM Financial Assessment and Property Charge Guide, which is the official guide lenders will use when underwriting reverse mortgages post March 2, 2015.

What does all this mean and how will it impact you?

Although, we have only just begun to analyze the new financial assessment guidelines, there are a few possibilities that we foresee. One, you have sufficient income and assets to qualify and the loan goes through without a hiccup. Two, you do not have sufficient income to qualify, but you have compensating factors, which prove your willingness. Because of this, a lifetime set aside for taxes and insurance will be created or the borrower may authorize the lender to pay property charges from the HECM monthly payments or Line of Credit as they come due (as we get closer to the implementation date, we should have a better feel for how our wholesale lenders will handle the lifetime tax and insurance set aside). The third option is that a borrower may not qualify and will be unable to obtain a reverse mortgage.

The bottom line is that the days of of borrowers obtaining a reverse mortgage without having to income or credit qualify are soon to be a fading memory.

Our advise is that if you have been a fence sitter, waiting for the right opportunity to take advantage of a reverse mortgage, perhaps now is the time to move forward. Our company prefers educating clients and not fear selling, but we do feel that this change will have a major impact on many borrowers ability to obtain a reverse mortgage. As with all major program changes, as we near the implementation date, we will see a slowdown in services, such as counseling, which is required to have completed prior to obtaining a case number.

So, if you’ve been waiting for the right time, now may be that time. Feel free to call us toll free at 1-888-888-4834 to learn more about a reverse mortgage or request a free quote. Again, we love to educate borrowers first and should a reverse mortgage be the right fit for their situation, we will work extremely hard to offer a competitive rate that goes along with our amazing service.