Archive for the ‘reverse mortgage’ Category

Get Ready for Tighter Reverse Mortgage Standards

Friday, July 12th, 2013

If you’ve been planning to get a , be prepared to meet higher loan requirements in the near future. At least that’s what officials at the Federal Housing Administration (FHA) are saying.

At this point basically any homeowner over the age of 62 can qualify for a reverse mortgage, but after many during the housing market crash, the FHA is looking to tighten up the rules on these loans.

A reverse mortgage is a way for retirement-age homeowners to tap into their home’s equity. Instead of making payments to the bank, the bank now pays borrowers a monthly sum or gives them a line of credit. How big the loan is depends on how much equity a homeowner has in his home, and it does not have to be repaid until the homeowner vacates the property. Then the home is sold and the bank takes its share of the profits, or if an heir wants to keep it, she has to repay the loan herself.

The FHA has been running into problems with borrowers not keeping up with their property taxes and homeowners insurance, which has led to a default rate of roughly 10 percent of all reverse mortgages. Because of this the agency, pending Congressional support, wants to make a financial assessment and possibly a credit check part of the loan approval process. The said the FHA will, “look at how much cash a borrower had left over after paying typical living expenses, in addition to property taxes, homeowners insurance, any homeowner association dues, utilities, taxes and other debts. Credit scores would be considered, though the agency said they would not be a predominant factor.”

And borrowers would have to

set up an escrow account for taxes and insurance. Risky borrowers might be required to deposit an amount that would cover those expenses for the life of the loan, while those with better financial situations might only have to have two years worth of payments.

The FHA has also proposed making the cap much lower on how much borrowers can receive. All of the changes are in an effort to reduce defaults and the resulting financial stress on the agency.

The House has already approved the FHA changes and the measures are now being passed through the Senate.

Sind vor allem bauwerke des jugendstils und des tschechischen kubismus bemerkenswert

New Regulator Cautions Seniors About Reverse Mortgages

Friday, July 6th, 2012

The U.S. mortgage market’s new regulator has found cause to worry about reverse mortgages in a recent report, a sign that tighter rules may be on the way.

The Consumer Financial Protection Bureau (CFPB), assigned oversight of all mortgages as a result of the Frank-Dodd act, issued a warning in its report about the hazards that could befall seniors taking on reverse mortgages.

The study, commissioned by Congress, found that borrowers are obtaining reverse mortgages at much younger ages, taking out riskier lump sum payments, and falling into default at higher rates.

A reverse mortgages allows homeowners age 62 and older to get a mortgage loan based on the equity in their homes. The borrower receives cash and in return, the bank gets repaid (usually from the proceed of selling the house) when the homeowner vacates the property or dies.

The problems come in when borrowers do not fully understand the rules and limitations of the loan, which can be confusing.

“Many aspects of a reverse mortgage do seem counter-intuitive, says Peter Bell, president of the National Reverse Mortgage Lenders Association as quoted in a . “They are not fully understood.”

The CFPB’s report found that about half of all reverse mortgage borrowers were younger than age 70, with plenty of potential time to stay in their homes. Yet with 70 percent of homeowners taking out their loan in large lump sums at the beginning of the loan, if emergencies or crises hit, these borrowers often have no funds left to tap.

“The lump sum loan leaves you with no flexibility or cushion,” says Megan Thibos, a policy analyst in CFPB’s mortgage markets group and principal author of the CFPB report. “If you take an adjustable rate line of credit and fail to pay your taxes or insurance, the lender can process a payment from your line of credit. But that’s not possible if you’ve taken it all upfront.”

And that has resulted in higher default rates, with 9.4 percent currently delinquent on their payments, according to the Department of Housing and Urban Development. Based on those findings, it is likely that the CFPB will institute stricter regulation soon, in an effort to protect seniors from the pitfalls of reverse mortgages.

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