Reverse Mortgage Guide

One of the most common questions from senior borrowers and their children alike is how the property value is determined on a reverse mortgage. This is a topic that requires a bit of discussion so I’ll try to unravel this great mystery here.

For most reverse mortgages (based on volume, over 90% of the reverse mortgages done are the FHA-insured HECMs) the appraisal will be done by an FHA-approved appraiser. The purpose of the appraisal is two-fold: first to determine the property value for purposes of the loan (remember, on a reverse mortgage, the property is the sole collateral — no other assets of the borrower are used), second, to be sure that the property meets FHA property standards.

The appraiser will be comparing the subject property (yours) to recent comparable SALES in the area. The appraiser must adhere to FHA guidelines when completing the report. For instance, comparable properties should be as close in proximity and style to the subject property as possible. In addition, the “comparable” should be a recent sale. So a home down the street from you that sold 1-1/2 years ago is probably not a good choice in today’s market. In addition, if you have a rancher style home on a half-acre lot, a condominium is not considered a good comparable.

As mentioned earlier, the property must meet FHA minimum property standards in order to obtain a reverse mortgage. But if you have been reading these posting with any frequency, you know that many seniors use reverse mortgage funds to make needed improvements to the property. There are provisions that make this possible.

The appraiser can note any “deficiencies” on the report and under certain circumstances; these deficiencies can be corrected with the use of reverse mortgage funds after settlement. The funds needed for repairs can be escrowed and then the repairs can be made within a designated amount of time (6 months is typical). For example, items such as exterior painting, roofing repair, and some plumbing issues may cost more than the borrower can pay out of pocket prior to settlement. In that case, the lender can arrange for an escrow and hold back the required repair funds at closing. Then, the borrower can close on the reverse mortgage, and do the repairs later. This is indeed an appropriate use of the reverse mortgage proceeds. This overview is very basic and your reverse mortgage consultant can guide you on the specifics of these provisions.

Contributor Sue Haviland — based in Baltimore, MD — has been a reverse mortgage specialist for more than five years.

J. R. Stevens writes and says that “I have applied and have approval for an HECM, but am most anxious for Congress to raise the loan lending limits for Reverse Mortgages. A possible national limit of $417,000 would enable me to obtain more from a RM.
“Bill S2338, the FHA Modernization Act of 2007 has been […] read more

While the financial world looks more-shaky than anyone would prefer, HUD says the HECM program continues to boom.
For the last half of February, the 16th through the 29th, HUD says it insured 5,703 reverse mortgages. This is a very good number in general and an especially good number considering that the month was short […] read more

You undoubtedly have read the thousands of print articles that have been circulated throughout the Internet along with disparate thoughts and ideas that are reflected in the thousands of blogs. Accordingly, I have come to realize that what people believe about reverse mortgages can be split into just a few categories.
Category #1 It is just […] read more

How do the ongoing ups-and-downs on Wall Street impact reverse mortgages?
Some 90 percent of all reverse mortgages are insured under the FHA HECM program, there have been few claims against a system which has collected enormous insurance fees, so reverse mortgages ought to be attractive to lenders and investors.
As reported in January, the program […] read more

One of the most common questions from senior borrowers and their children alike is how the property value is determined for a reverse mortgage. This is a topic that requires a bit of discussion so I’ll try to unravel this great mystery here.
For most reverse mortgages (based on volume, over 90% of the reverse mortgages […] read more

FINRA — the Financial Industry Regulatory Authority — has issued an Investor Alert warning folks that “if they are approached by a financial professional to do a reverse mortgage in order to fund a particular investment, they should keep in mind that all investments carry risk and costs - and the higher the promised return, […] read more

Fallout from the recent New York Times article (”Golden Opportunities,” March 2nd) concerning reverse mortgages continues.
In a letter to the editor, published by the Times on Sunday, Kevin R. Keller — Chief Executive with the Certified Financial Planner Board of Standards — wrote the following:
“When an unscrupulous salesman combines a reverse mortgage with a […] read more

One of the quickest ways to increase your closing ratio is to place yourself in front of the media. When I was first interviewed on the subject of reverse mortgages, I went through a rigorous testing procedure. I was taped. When we finished many hours later, the difference was remarkable. I sounded like the consummate […] read more

I’m tired of seeing articles in print and segments on TV that assail reverse mortgages by distorting the facts. The program is not perfect. It is not a panacea. I do not know of any mortgage or financial program that is. And yes, there are miscreants selling this program that should not be. Recently, NBC […] read more

If you’re considering a reverse mortgages should you worry about your credit score.
Fuggedaboutit!
Let’s take a look at a topic that is often confusing: The dreaded credit score.
I remember when my parents sold their home in Baltimore a few years ago, my father was astounded at the process the new owners had to go […] read more

Tapping Into Homes Can Be A Pitfall for the Elderly was an article in The New York Times which had such potential to educate. Sadly it receives a failing grade for the reasons noted below.
Too often reverse mortgage stories that appear in the media give the reader misguided information. This major piece, also paints an […] read more

It is generally estimated that 90 percent of all reverse mortgages are insured by HUD, meaning that the size of suchreverse mortgages is determined by federal guidelines.
TEMPORARY CONFORMING LOAN LIMITS RELEASED FOR HIGH COST AREAS
Washington, DC– The Office of Federal Housing Enterprise Oversight (OFHEO) today released the maximum conforming loan limits that will be […] read more

I was greatly interesting in an article I saw in the South Florida Times.
The author, Robert Henderson, was discussing the case of “Mrs. Ruby,” age 78, a woman with five children, 15 grandchildren and 30 great grandchildren –”all of whom,” says Henderson, a Certified Financial Planner and author of The New Underground Railroad, “visit her […] read more

Many reverse mortgage “experts” will tell you that the number of people obtaining reverse mortgages will continue to grow at an extraordinary pace. Conflating the industry’s claim of 100 per cent growth in prior years, with the fact that the oldest baby boomers will reach their 62nd birthday at a rate of 10,000 per […] read more

(Editor’s Note: On Sunday, the New York Times ran a front-page story regarding reverse mortgages. Entitled Tapping Into Homes Can Be Pitfall for the Elderly, the story described a homeowner who took out a $200,000 reverse mortgage. She also purchased $100,000 in deferred annuities at the same time, annuities which the paper says “are likely […] read more

Let’s answer this question once and for all because it is a common one. I know that it seems contrary to what you have always known about obtaining a mortgage but here
goes:
There are no income requirements for a reverse mortgage. This happens because there are no payment requirements for the reverse borrowers, income is not an […] read more

HUD is reporting that for the month of February it endorsed 10,913 reverse mortgages, bringing the total for the fiscal year to 45,556. (The “fiscal year” is the government accounting period that starts each October 1st.)
These are strong numbers, certainly numbers which suggest that HUD is likely to top the record 108,287 reverse mortgages – or HECMs as HUD […] read more

While must attention has been paid to the efforts of the Federal Reserve to lower short-term rates, mortgage rates have soared in the past two weeks.
Freddie Mac reported yesterday for the week ending Feb. 28th that 30-year fixed-rate mortgage averaged 6.24% with an average 0.5 point
That’s up 20 basis points from the week before, an […] read more

The Los Angeles Times has published an interesting article entitled Reverse mortgages provide more seniors with a safety net.
“With traditional home equity credit lines increasingly difficult to get in a time of declining home values and tight underwriting standards, eligible seniors older than 62 are finding that one benefit of reverse mortgages — other than […] read more