CONSUMER SAFEGUARDS - ASSURANCE
Your most carefree years should be your retirement years It is possible to achieve this with a reverse mortgage. To help senior borrowers with a reverse mortgage, reverse mortgage safeguards were built into the loan by HUD. In my opinion, these safeguards make the reverse mortgage the safest mortgage in the industry.
The National Reverse Mortgage Lenders Association (NRMLA), a lobbying group based in Washington D.C., which Advisors Mortgage is a member of, is pleased to explain the numerous reverse mortgage safeguards built into today’s reverse mortgage programs. Broader understanding of these consumer protection features is responsible for wider acceptance of reverse mortgages. Among HECM’s consumer safeguards are several important features
Standard & Capped Interest Rates. The interest rate is the same no matter which lender a senior chooses. On the HECM, interest rates are adjusted either monthly or annually and published weekly by the Federal Reserve. Both the monthly and annually adjusted rates have lifetime caps.
Limitation on Fees. Origination fees are set by HUD regulations and are financed as part of the Reverse Mortgage. This means a senior incurs very little out-of-pocket expense to get a reverse mortgage.
Independent Counseling. Before a reverse mortgage application can be processed, the prospective borrower must first meet with an independent HUD approved counselor. HUD and oversees a network of counselors whose job is to review the transaction, answer any questions the borrower may have about reverse mortgages, and suggest alternative options.
No Maturity Date. A reverse mortgage cannot become due during the homeowner’s lifetime. This is because the term of the loan is set to 150 years. The fact that there are no required payments and there is a lifetime right to occupy the home provides great protection against unforeseen or unanticipated future circumstances. This renders the reverse mortgage vastly safer than other loan alternatives.
No Prepayment Penalty. Although the loan is not due and payable until the senior permanently moves out of the home whether by selling the home or by their passing, the reverse mortgage can be paid off at any point prior with no additional fees or costs.
No Penalty for Canceling the Loan. After the loan closes, a senior has up to three days to cancel the transaction, the so-called “right of rescission”period, for any reason whatsoever.
Asset Protection. The HECM is a “non-recourse” loan. This means that the amount due can never exceed what the home is worth. When the loan becomes due, the lender is repaid the sum of funds advanced plus the accrued interest, but never more than the value of the house. If there is remaining value, it belongs to the homeowner or their estate.
No Shared Appreciation. No reverse mortgage product in the marketplace has “equity-sharing” or “shared appreciation” features. In some earlier reverse mortgage products, the senior could obtain more money in exchange for giving up a percentage of the future value of the home. Such products are no longer offered.
Another safeguard is FHA mortgage insurance. Mortgage insurance, known as M.I. ensures you will never owe more than the home is worth; this is because of a feature called non-recourse which was mentioned above. Lenders can only recoup shortages or be made whole by putting in a claim to FHA through mortgage insurance which is a feature of the Reverse Mortgage. In the documents you sign at closing (a blank is provided at time of application) called the Note, the Mortgage, and the Loan Agreement, there is a section called NO DEFICIENCY JUDGMENT. This means that if there is a deficiency in the payback to the lender (such as homes under water), the lender cannot recoup any of their loss from you but will instead use the FHA mortgage insurance to recoup their loss. FHA mortgage insurance protects you but also protects the lender.
In this section it also states you are NOT personally responsible for the loan — meaning nothing can be attached should the loan foreclose for any reason — other than the home itself. Bank accounts, retirement funds, and other assets cannot be used to pay the loan. The home stands for the debt.
There are considerations you will make to ascertain if a reverse mortgage is right for you. You may have questions and your family may also be asking about how the reverse mortgage will work. Is it truly the right vehicle for you? The next link will provide even more information.
As mentioned on "Is It Right for Me" on this website, it used to be that if a borrower had a spouse who was under age 62 and that borrower was not on the reverse mortgage. once the borrower passed away, the spouse would eventually have to leave the home if they could not pay off the reverse mortgage. Death is considered a "maturity event" in the reverse mortgage world, and this was a tough situation. For this reason, we discouraged borrowers from taking out a reverse mortgage if their spouse was under 62 years of age.
Thankfully, all this has changed. Through the Mortgage Stability Act, there has been a change in reverse mortgage parameters. The reverse mortgage will not become due when the borrower passes away, and spouses who are under age 62 will be able to remain in the home. However, the HECM line of credit would not be accessible and any monthly proceeds would end. Speak to your reverse mortgage professional about these issues to see if this is still a viable option for you, and if you qualify for a reverse mortgage. You can also refer to the HUD Mortgagee Letter # 2014-07 , April 25, 2014 regarding non-borrowing spouse parameters.
NOTE: Prior to getting a reverse mortgage, consult an attorney to obtain any necessary documents you have such as will, life estate, power of attorney, marriage certificate as these documents will need to be reviewed by the lender especially if there is a non-borrowing spouse. (See https://reversemortgagedaily.com/2015/06/12/hud-expands-options-for-reverse-mortgage-non-borrowing-spouses/ )
KATHIE ADLER, SENIOR REVERSE MORTGAGE SPECIALIST - RESIDENT OF LONG ISLAND FOR OVER 50 YEARS CAN HELP! Member of Sun Suffolk (http://www.SunSuffolk.org )) - and NRMLA (http://www.NRMLA.org )
KATHIE ADLER'S NMLS ID: 65780 - NMLS Consumer Access Site, go to: www.http://nmlsconsumeraccess.org
Reverse Mortgage Helpline - Answering Your Questions about Reverse Mortgages
Advisors MortgageLindenhurst Branch: 1045 Route 109, Lindenhurst, NY 11757 - NMLS 301453
Advisors Mortgage Group, LLC is a Multi-State Mortgage Company with Headquarters located in Central New Jersey with offices throughout the US. Headquarters: 1411 Highway 35, Ocean, NJ 07712. New York Mortgage Broker License: 206697. Licensed by the N.J. Department of Banking and Insurance. Licensed Lender and Secondary Mortgage Lender no. 631155. (FHA License #1548300002). NMLS 33041. Licensed Mortgage Banker-NYS Dept of Financial Services, Registered Mortgage Broker, NYS Dept of Financial Services - Kathleen Adler, Mortgage Loan Originator, NMLS Identifier 65780.Licensed by the NYS Department of Financial Services, Licensed by the New Jersey Department of Banking and Insurance, Advisors Mortgage Lindenhurst Branch, 1045 Route 109, Suite 104, Lindenhurst, NY 11757, Branch NMLS 301453, This Website designed and maintained by Adler Web Design Copyright 2014 - All Rights reserved. NOTE: Website authorization by New York State Dept of Financial Services is pending. Until this website is authorized, no mortgage loan applications for properties located in New York will be accepted through this site.
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