I was pleasantly surprised in November to see two things: One was a HUD mortgagee letter stating they would allow home purchases with a reverse mortgage.
Up until now all seniors could do with the reverse mortgage is refinance their current home.
But that's all changed. A reverse loan is now as functional as a regular loan, but the borrower does not have to repay the bank periodically. This is obviously a significant distinction to seniors.
Another part of the letter really threw me for a loop, in a very good way. HUD was allowing lenders to loan based upon the appraisal rather than the sale price. This was an amazing thing for me to read.
While the lender will take various things into account, the most important is the value of the house as determined by the appraisal.
When a reverse loan is used to actually buy a home the same would apply, except in this case the lower number between price and appraised worth would be the factor.
For a reverse mortgage purchase to be based upon value only sounded almost too good to be true.
Say the loan was just based on value alone. If that were so, and a senior discovers a steal of a house running at forty percent below and nabs it, at closing time, hypothetically the borrower would owe nothing.
HUD is kind of old fashioned in their ways. Their regular loan programs are flexible and give some slack when it comes to credit, but they still want something from the senior. This something is the down payment.
Well guess what? HUD agrees with me. It is too good to be true. They eliminated that clause and have reverted to traditional lending practices.
As a lender, I find it unusual how long it takes to get these Housing and Urban Development letters. I would expect them to have a myriad of attorneys checking these things up and down.
And yet, I received this just a couple of months before the change took place.
Reverse mortgage loans used for purchases are now based upon the sale price or appraised value, whichever is lower. - 15224
Up until now all seniors could do with the reverse mortgage is refinance their current home.
But that's all changed. A reverse loan is now as functional as a regular loan, but the borrower does not have to repay the bank periodically. This is obviously a significant distinction to seniors.
Another part of the letter really threw me for a loop, in a very good way. HUD was allowing lenders to loan based upon the appraisal rather than the sale price. This was an amazing thing for me to read.
While the lender will take various things into account, the most important is the value of the house as determined by the appraisal.
When a reverse loan is used to actually buy a home the same would apply, except in this case the lower number between price and appraised worth would be the factor.
For a reverse mortgage purchase to be based upon value only sounded almost too good to be true.
Say the loan was just based on value alone. If that were so, and a senior discovers a steal of a house running at forty percent below and nabs it, at closing time, hypothetically the borrower would owe nothing.
HUD is kind of old fashioned in their ways. Their regular loan programs are flexible and give some slack when it comes to credit, but they still want something from the senior. This something is the down payment.
Well guess what? HUD agrees with me. It is too good to be true. They eliminated that clause and have reverted to traditional lending practices.
As a lender, I find it unusual how long it takes to get these Housing and Urban Development letters. I would expect them to have a myriad of attorneys checking these things up and down.
And yet, I received this just a couple of months before the change took place.
Reverse mortgage loans used for purchases are now based upon the sale price or appraised value, whichever is lower. - 15224
