Tag Archives: national reverse mortgage lenders

From the Wall Street Journal this Sunday

28 Aug

Tighter Rules for Reverse Mortgages

Fewer borrowers will qualify and borrowing limits will drop.




The rules governing reverse mortgages are about to change, which could mean less money for borrowers. But it also may help reduce the program’s high default rate.

Congress recently gave the Federal Housing Administration, which insures virtually all reverse mortgages, the authority to make sweeping changes to the federal program for older homeowners. Once the new rules go into effect—some perhaps as soon as Oct. 1—fewer homeowners will qualify for these loans, and the maximum amount they will be able to borrow will decline.

Those who submit an application, complete a reverse-mortgage counseling program, and receive a case number by Oct. 1 will be able to qualify for the higher maximum amounts under the current rules.

Reverse mortgages allow people ages 62 and older to convert home equity into cash. The bank then pays the homeowner, who can elect to receive a lump sum, a line of credit or monthly payments. The loan is due, with interest, when the borrower dies, moves or sells the house.

Regulators plan to merge the two types of reverse mortgages on the market today: the “standard” loan, which currently allows borrowers to tap from 56% to 75% of a home’s appraised value, depending on their age, and the “saver” loan, which currently pays from 4 to 16 percentage points less. The agency has yet to announce the new limit.

Going forward, most homeowners will be able to borrow less than they currently can with a “standard,” but more than they can with a “saver,” says Peter Bell, president of the National Reverse Mortgage Lenders Association. Regulators also plan to cap the amount many borrowers can tap during a loan’s first year.

Consider a homeowner with a $300,000 property who is eligible to borrow $175,000. Assuming FHA enacts a 60% first-year cap, the borrower will be able to take an upfront payment of up to 60% of the $175,000 loan, or $105,000. Because fixed-rate reverse mortgages currently require borrowers to take everything at once, only those opting for variable-rate loans will have access in later years to the balance (of $70,000 in the above example).

Those who need more than 60% of the loan upfront to pay off a regular mortgage—a requirement—can immediately take the amount they need, up to the entire proceeds ($175,000 in the above example). But such borrowers will have to pay a higher upfront fee for the loan, says Mr. Bell. (FHA has yet to determine the exact amount.)

The changes are designed to curtail the popularity of reverse mortgages that issue large lump-sum payments, a breed that has helped fuel a rise in defaults to nearly 10% of loans outstanding. Defaults occur when homeowners fail to pay property taxes and homeowners insurance.

Regulators also plan to require lenders for the first time to assess borrowers’ ability to cover property tax and homeowners insurance bills, says Mr. Bell. Lenders may require some borrowers to set aside money to cover future property taxes and insurance.

From the NRMLA Weekly Report

14 May

CRMP Courses Being Taught by NY Title Company

Tradition Title Agency is teaching three courses at its offices on May 22 at 9 a.m. that have been approved for CRMP credits. Company president Karen Keating is currently the only title insurance executive to be awarded the CRMP designation.
To receive the credits, you must originate reverse mortgages in New York state, because the topics being discussed apply specifically to that state’s laws.
The courses are:

  • Power of Attorney and Life Estate Basics for the Reverse Mortgage Transaction  (1 credit)
  • Trust Basics for the Reverse Mortgage Transaction (1 credit)
  • Understanding a Title Report (1 credit)

To get more information, please contact Kim Kaich, at 631-328-4410 or email at kkaich@traditionta.com.

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