1. If I took out a loan in the past 12 months but drew less than $500 at closing or through draws after closing, can the lien be paid off through closing?

Yes.

2. If I took out a HELOC over 12 months ago, but have taken a draw of more than $500 in the last 12 months, can that lien be paid off through closing?

Yes, HELOCs that have been taken out over 12 months ago are not subject to the $500 draw restriction.

3. If a lien was taken out in the past 12 months and the I received $500 in proceeds, does that make me ineligible?

No, the borrower may pay the lien outside of closing but prior to the final approval being issued. Any funds used to pay the lien outside of closing must be documented using normal funds to close required documentation.

4. What if I cannot locate a HUD-1 Settlement Statement for a lien that was taken out in the last 12 months?

If you cannot locate the HUD-1 from the recent closing, you should be able to obtain a copy from the title company who closed the loan, or from the lender or the servicer.

Under the current requirements, if the HUD-1 cannot be located, the lien cannot be paid through the HECM loan. The borrower would need to satisfy the lien through other methods and document the payoff of the loan prior to closing. However, we believe that FHA will clarify this point with additional options in future guidance as the lien date will show on the preliminary title report as well as the credit report.

5. If a lien has been in place for more than 12 months, is a HUD-1 Settlement Statement required?

No, if the title commitment clearly documents the lien as recorded against the property for more than 12 months, the HUD-1 is not required.

6. If the lien is ineligible to be paid through closing, but the existing lender will subordinate the lien to 3rd position behind the HECM, is that an acceptable alternative?

Yes, if the lien is not a first mortgage lien and meets all subordination requirements, the lien may be subordinated instead of being paid through closing.

7. Do these new requirements include closed ended/non-HELOC liens?

Yes, this requirement includes all existing liens tied to the subject property, except existing HECM loans that will be paid off through the new HECM.

8. When does the 12 month time frame begin?

The time frame begins from the date of the closing shown on the HUD-1.

9. If I have a mechanic’s lien for repairs to the property within the past 12 months, what are the requirements?

Under the current requirements, all liens taken out in the past 12 months require the HUD-1 Settlement Statement and a payoff statement. We understand that most mechanic’s liens will not have a HUD-1 Settlement Statement; however, that is the current requirement. We believe that FHA will clarify this point in future guidance.

The post Lien Seasoning FAQ appeared first on MLS Reverse Mortgage powered by Zyng Mortgage.

Effective for case numbers assigned on or after December 15, 2014, the payoff of existing non-HECM mortgage liens using HECM proceeds is only permitted if the liens have been in place for more than 12 months or resulted in less than $500 cash to the borrower, whether at closing or through cumulative draws (e.g.., as with a Home Equity Line of Credit (HELOC)) prior to the date of the initial HECM loan application.

Those considering a reverse mortgage who have taken out a home mortgage or HELOC in the past 12 months should pay close attention to this rule.

If you have done a refinance within the past 12 months and took more than $500 out at closing, then you will need to wait the full 12 month period in order to be able to be eligible for a reverse mortgage, if you need the proceeds of the reverse mortgage to pay off that loan. If you did a refinance and didn’t take any money out, then you will not have any seasoning requirements.

We see several homeowners who have been living off their HELOC and as such have taken much more than $500 cumulative over 12 months. The draws of greater that $500 only apply to HELOCs that are less than 1 year old. If the HELOC was taken out more than 12 months prior to application, then the cumulative draw doesn’t apply.

Those with no draws on their line of credit will not have the 12 month seasoning requirement.

We are nearing the December 15, 2014 deadline very quickly. If you have been considering a reverse mortgage and are in the category of having a HELOC that is less than 12 months old that you’ve taken more than $500 cumilative cash out or have a refinance in the past 12 months in which you took out more than $500, then you should give serious consideration about starting the process now or be prepared to wait the 12 month seasoning period.

You can avoid the seasoning period if the lien is paid off using funds that are not from the reverse mortgage.

Read our Lien Seasoning FAQ for more info.

For any questions or concerns, please don’t hesitate to call us toll free at 1-888-888-4834 or request information online and note in the comment box that “reverse mortgage seasoning pertains to you.”

Below is the clip from ML 2014-21:

The post Reverse Mortgage Seasoning Requirements (for Existing Non-HECM Mortgage Liens) appeared first on MLS Reverse Mortgage powered by Zyng Mortgage.