Reverse Mortgage Facts
If you are 62 years of age or older and own your home you can borrow against the equity and receive:
• monthly payments or
• a lump sum or
• a credit line
• or a combination of the above
Stay in your home, improve your lifestyle and live comfortably!
About Reverse Mortgages
A reverse mortgage is a government insured loan program that allows senior homeowners to convert a portion of the equity in their home into usable cash. There are no tax consequences, you do not forfeit any of your rights as the homeowner. You or your heirs decide when or if the home is to be sold. Then when the loan is repaid 100% of the remaining equity belongs to you, your heirs or your estate.
The concept is simple. You have spent years building equity in your home by paying off (or paying down) your mortgage and through the appreciation in your home's value. A reverse mortgage simply allows you to withdraw a portion of that equity, use it any way that you like, stay in your home for as long as you like, and when you are ready to sell your home, or you have passed, the loan is repaid.
Traditional mortgages are based on the homeowner's ability to make monthly payments and for this reason things like credit, employment, income, and other assets are considered in the qualification process. A reverse mortgage does not require any form of monthly repayment and therefore none of those factors are considered. There are three basic requirements to qualify for a reverse mortgage:
The youngest homeowner must be 62 years of age or older,
The home must be your primary residence, and
The type of home and condition of the property must meet standard HUD guidelines.
End of Reverse Mortgage Q&A
The process and procedures for the “end of the loan” on the reverse mortgage is administered by the servicing banks in conjunction with FHA guidelines. The Welcome Package does refer to some of the “end of the loan” procedures.
We would like to share a general description of the process.
End of loan event: The last borrower or eligible non-borrowing spouse no longer lives in the home. Our conversation is around the passing away of the last borrower or eligible NBS.
How does the lender know?: The heirs are required to notify the servicing lender at the time the last borrower or eligible NBS passes. However, the servicing lenders have become less and less reliant on a notification from heirs and subscribe to various database services that notify them within days.
What is the initial step by the servicing lender? The servicing lender will send a notice to the estate. It says the estate has 30 days to decide the disposition of the property and also spells out eligible extensions to the time frame, the process to follow, and the contact information of the servicing lender. The intent is to encourage active involvement by the estate to move ahead (since any delays could represent a further loss to the FHA MMI pool and/or reduce equity for the heirs). The servicing lenders will walk through the process with the estate. The servicer wants good faith activity and communication from the estate.
When does the clock start? The date the last borrower or eligible NBS passes way, not the date the servicer becomes aware of it. In general, the estate can have up to 6 months as an initial time period to settle the reverse balance, and up to two, 3 month extensions (12 months total) as long as the estate demonstrates a good faith effort to complete the task.
Is it in the best interest of the heirs to cooperate?: Yes, because interest and MI is accruing on the loan and is reducing their equity, if applicable.
What paperwork is required?: The servicing lender will require a letter from the estate regarding the intent to keep the property or dispose of it, and other documentation that may include a death certificate, a copy of the Will and Probate documents and any other documentation that may be applicable. The time frame required is within 30 days from the date of death.
What are the overall options for the Estate?
a. Keep the property and pay off the Reverse
b. Sell the home (must have authority to do so)
c. Deed-in-lieu of Foreclosure to Mortgage (Servicing Lender)
While these questions do not cover all the possible elements of the process at the end of the reverse mortgage loan, they do give you the overall feel for the process
This material is not from HUD or FHA and the document is not approved by the Department of HUD or any Government Agency. HUD does not approve the material presented.
This material is informational only. This is not an advertisement to extend credit as defined by TILA/Regulation Z nor an application for credit as defined by RESPA/Regulation X. All applications are subject to underwriting guidelines.
Not all applicants are eligible for or qualify for a reverse mortgage. All loan programs, terms and conditions are subject to change without notice.