The month of April brought not only changes in the weather for us
here in Texas but also new requirements to the Reverse Mortgage process.
Over the last several years HUD (Housing and Urban Development) has been
dealing with reductions in the mortgage insurance fund due to the great
recession. Since the government requires this fund to stay at a certain level
in order to protect lenders and programs changes were deemed necessary to keep
the fund viable.
Defaults on taxes and insurance over the past several years were
not isolated to the Reverse Mortgage programs. In fact most were related to
regular mortgages but since taxes and insurance are the customers’
responsibility with Reverse Mortgages HUD is requiring more financial verification
going forward. What this means to the customer is what HUD refers to as a
"mini financial assessment". Basically a smaller version of what goes
into a regular mortgage except that it won't include credit scores but will
include verification of income and debts to make sure the customer will still
be able to pay the taxes and insurance as well as normal maintenance and any
HOA dues that may be required.
The documentation that will be necessary will include a
combination of bank statements, pay stubs, proof of assets if the customer owns
other real estate, all similar to that required for a regular mortgage. These
changes may make it more difficult for those seeking assistance from of reverse
mortgage in a foreclosure or bankruptcy situations where in the past a reverse
mortgage could have helped. Individuals with a history of late payments or
severe defaults who can't show the ability to overcome that debt by utilizing a
reverse mortgage will also find it more difficult getting approved with the new
requirements.
On the other hand, those individuals who can show a history of
paying the taxes and insurance on their property will not really see any
difficulty with the HUD changes. For those individuals that may be struggling
slightly due to reduced income and may need the assistance of a reverse
mortgage HUD may set aside funds out of the reverse mortgage into a reserve
fund that would be there to cover taxes and insurance over a calculated period
of time based upon each individuals situation.
While some folks may find that a Reverse Mortgage is not the
solution they had hoped for, the program remains extremely beneficial to many
62 and over homeowners who want to gain some financial freedom and utilize the
major part of their assets which are tied up in the home. For more information, contact me at
210-493-7332 or visit my website at www.texasreverse.net .
