Interested in applying for a reverse mortgage in 2015? A new assessment is coming your way in Spring.
The Department of Housing and Urban Development (HUD) has issued an updated financial assessment requirement for reverse mortgage borrowers. Originally due to take effect on March 2, 2015, HUD has revised the deadline to 30-60 days from that date, with more detailed deadline information forthcoming. That puts the new assessment start date sometime between April 1 and May 1. Update: The new effective date for complying with FHA’s financial assessment guidelines is April 27, the U.S. Department of Housing and Urban Development announced on February 27 (Mortgagee Letter 2015-06).
Despite this delay in the assessment, those interested in applying for a reverse mortgage should be informed of the assessment requirements.
In explaining the purpose of financial assessment, HUD writes: “The mortgagee must evaluate the mortgagor’s willingness and capacity to timely meet his or her financial obligations and to comply with the mortgage requirements.”
Standard reverse mortgage requirements include paying property taxes and homeowner’s insurance and keeping up home maintenance.
HUD states: “In conducting this financial assessment, mortgagees must take into consideration that some mortgagors seek a HECM due to financial difficulties, which may be reflected in the mortgagor’s credit report and/or property charge payment history. The mortgagee must also consider to what extent the proceeds of the HECM could provide a solution to any such financial difficulties.”
For borrowers who do not demonstrate their willingness to meet their loan obligations, life expectancy set-asides will be required. Where necessary, the set-aside would be drawn under the HECM and reserved for payment of property taxes and insurance by the lender, ensuring that those financial obligations are met. The dollar amount, to be calculated using a formula provided by FHA, is viewed as sufficient to assure the required payments can be met though the entire life span of the borrower.
To perform the assessment, HUD has provided a list of documents to be collected and submitted for all borrowers. “Financial Assessment Documentation” includes:
- credit history
- income verification
- asset verification
- property charge verification
- residual income analysis
- documentation of extenuating circumstances or compensating factors, and
- calculations for life expectancy and residual income shortfall set-asides
The purpose of the financial assessment is to create a safer loan product and to ensure that reverse mortgagees continue to meet their mortgage obligations.
If you have a question about qualifying for a reverse mortgage today, or how the financial assessment will impact your situation, call (800) 967-3575, write David Chee, or get started now and request a free quote today.
*This article has been updated to reflect the new effective date for assessment compliance, April 27 2015.