Monthly Archives: December 2017

Restart your conversation in 2018. Frequently Asked Questions about HUD’s #HECM62 Mortgages

The Home Equity Conversion Mortgage (HECM) is FHA’s reverse mortgage program, which enables you to withdraw some of the equity in your home.  The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements and more. It is smart to know more about reverse mortgages, and decide if one is right for you!

Or, if you prefer, call or email Warren Strycker, senior veteran mortgage lender representative to review your thoughts about this amazing product. Call 928 345-1200 or email warren.strycker@patriotlendingreverse.com. Strycker is responsible for this information webpage, Gofinancial.net where informational articles investigate the HECM Reverse Mortgage. Strycker recommends the HECM to get your affairs in order.

1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you.  However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage.  You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

2. Can I qualify for FHA’s HECM reverse mortgage?

To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, have the financial resources to pay ongoing property charges including taxes and insurance, and you must live in the home. You are also required to receive consumer information free or at very low cost from a HECM counselor prior to obtaining the loan.

3. Can I apply for a HECM even if I did not buy my present house with FHA mortgage insurance?

Yes.  You may apply for a HECM regardless of whether or not you purchased your home with an FHA-insured mortgage.

4. What types of homes are eligible?

To be eligible for the FHA HECM, your home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

5. What are the differences between a reverse mortgage and a home equity loan?

With a second mortgage, or a home equity line of credit, borrowers must make monthly payments on the principal and interest.  A reverse mortgage is different, because it pays you – there are no monthly principal and interest payments.  With a reverse mortgage, you are required to pay real estate taxes, utilities, and hazard and flood insurance premiums.

6. Will we have an estate that we can leave to heirs?

When the home is sold or no longer used as a primary residence, the cash, interest, and other HECM finance charges must be repaid.  All proceeds beyond the amount owed belong to your spouse or estate.  This means any remaining equity can be transferred to heirs.  No debt is passed along to the estate or heirs.

7. How much money can I get from my home?

The amount varies by borrower and depends on:

If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.

8. Should I use an estate planning service to find a reverse mortgage lender?

FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA-approved lender.  You can locate a FHA-approved lender by searching online at www.hud.gov or by contacting a HECM counselor for a listing.   Services rendered by HECM counselors are free or at a low cost.  To locate a HECM counselor Search online or call (800) 569-4287 toll-free, for the name and location of a HUD-approved housing counseling agency near you

9. How do I receive my payments?

For adjustable interest rate mortgages, you can select one of the following payment plans:

For fixed interest rate mortgages, you will receive the Single Disbursement Lump Sum payment plan.

 10. What if I change my mind and no longer want the loan after I go to closing?  How do I do this?

By law, you have three calendar days to change your mind and cancel the loan.  This is called a three day right of rescission.  The process of canceling the loan should be explained at loan closing.  Be sure to ask the lender for instructions on this process.  Mortgage lenders differ in the process of canceling a loan.  You should ask for the names of the appropriate people, phone numbers, fax numbers, addresses, or written instructions on whatever process the company has in place.  In most cases, the right of rescission will not be applicable to HECM for purchase transactions.

Consider HUD secretary Ben Carson’s support of the HECM reverse mortgage on these pages. https://gofinancial.net/2017/11/carson/

Rules Have Changed For Buying a House with a HECM Reverse Mortgage

By Jack M Guttentag  — (The Mortgage Professor)

December 30, 2017

When I wrote about purchasing a house with a HECM reverse mortgage earlier this year, a major issue faced by borrowers was whether to pay a penalty insurance premium in order to maximize the cash draw on the HECM. A few months after the article was written, HUD eliminated the option of paying a lower premium if the borrower drew less cash. The upfront mortgage insurance premium is now 2 percent of property value regardless of how much the borrower draws.

The advantage of buying a house with a HECM has not changed. It remains the case that the HECM does not impose a monthly payment burden on the borrower. The only disadvantage is that the reverse mortgage will cover only about 50-60 percent of the house price, depending on the borrower’s age, requiring the purchaser to find the remaining needed cash elsewhere. The most common source is asset liquidation.

Seniors who go this route have two decisions to make. First, they must decide whether they want an adjustable rate or a fixed-rate HECM. Second, they have to select the lender offering the best terms. I will illustrate these decisions with the case of Charles, who is 72 and wants to purchase a $400,000 house on December 18, 2017.

Fixed Rate or Adjustable Rate?

Most seniors will select the option that provides the larger cash draw. Among five lenders quoting a price to Charles on my website, the largest cash draw on an adjustable rate was $201,800 whereas the largest draw on a fixed-rate was $194,600. The adjustable provided $7,200 more, which could settle the matter.

Or perhaps not. If Charles is concerned with the size of his estate, he will also look at how large his future loan balance would be. Looking ahead 10 years, for example, the balance of the adjustable will be $389,356 compared to a balance on the fixed of $406,386. He will owe $17,030 less on the adjustable.

This is not quite the slam-dunk it may appear, however. The future loan balances are calculated at the interest rates on December 18, which were 3.21 percent on the adjustable and 3.99 percent on the fixed. While the rate on the fixed will remain at 3.99 percent over its life, the rate on the adjustable could rise as high as 8.21 percent if market rates increase. Were that to happen in the near future, the balance on the adjustable would quickly come to exceed the balance on the fixed. It is unlikely that the risk of future rate increases will dissuade Charles from selecting the adjustable, but it could.

Selecting the Lender

The reverse mortgage market is extremely inefficient. Except for those seniors who make their way to my website, few try to shop. As a result, the prices of identical transactions can differ materially from one lender to another.

Even on my website, where participating lenders know that their price quotes will be compared to others, price differences are large. For example, on the day my hypothetical house purchaser was quoted an adjustable rate of 3.21 percent with a cash draw of $201,800, another lender on my site quoted a rate of 4.76 percent and a cash draw of $172,005, or $29,795 less. That was the worst quote among five lenders who lend in California. The quotes of the other three lenders were in-between the best and the worst.

Bottom Line

Seniors who want to purchase a house with a HECM and who have no concern regarding the amount of home equity they leave to their heirs can easily shop lenders for the largest cash draw. They can shop multiple lenders with one visit to my site, or by contacting individual lenders one lender at a time. If they shop by contacting individual lenders, the process should be completed within a week ending on a Monday because HECM lenders reset their prices on Tuesday.

Purchasers who do have a concern for what their heirs will inherit will want to see not only cash draws but also projections of future loan balances that are consistent from one lender to another. My site is the only place they will find that.

Those who choose this mortgage loan officer will have the opportunity to make the choices in much the same way as the Mortgage Professor. Access contacts at the “information” tab on the home page. Thanks for asking for Warren Strycker, who manages this information webpage and is a fully licensed veteran (12 years) Arizona loan officer.

 

 

HECM from HELL — one that got away, or did it?

A true story by Warren Strycker.

This is the story of a HECM loan gone bad — to be more accurate, it was the HECM that got away after every thing imaginable was tried to keep it in.

It was a simple solution, I thought, or was it???

Gentleman called to ask me to come talk about Reverse Mortgage with he and his wife. They were both in their early 90’s (can it be that “early” can ever refer to the 90’s?? Probably not).

Anyway, I went and did my best presentation and they decided to get the required counseling, and so they did.

The home was a modest 3 bedroom, appraised well above a hundred thousand. The “fix” was in, more than $70,000 in cash would be placed in their accounts, well, until the discussion centered on which of the two would get the money in their account.

Life was about to be better for them (or so we thought).

The couple had a trust, only she wasn’t in it. It’s OK, she said, she just needed a place to live and they needed to pay  some bills. Lender wouldn’t stand for an unborrowering spouse living in the house without a trust adjustment which would say she had rights to live in the house after he passed, and in the process of writing the paragraph that gave her the rights, his family (and him) halted all discussion as he headed to the hospital for open heart surgery.

That’s when his family entered in. Hmmmm. All negotiations came to a halt while he had bypasses installed (at 92 years of age).

Mrs Stars waited in his hospital room for days on end to see him through the surgery and then she was invited to stay home because… well mostly it was about making sure she didn’t get any rights to the house. One story counted the time she had with him alone in the hospital to talk about all this. It wasn’t about the reverse mortgage that caused the ruckus. It was because she was left out of the proceedings altogether and I was invited to “cease and desist” by the lawyers now filing for divorce. Coming out of the hospital, he moved into the home of his son and daughter in law and she lived in the “big house”.

Oh yes, then she was served with divorce papers for “irreconcilable differences” and partially because she threw a pitcher full of water on the son in law who was staying in their house to protect his dad from his step mother who was still trying to work out an agreement with her husband to stay in the house which now had all locks changed to prevent unagreed entry.

The divorce is set for two days after Christmas.

I’m pretty sure this is a HECM that wasn’t supposed to close. The positive message here is that this not-always-nice lady is now threatened with divorce two days after Christmas when she will be legally invited to leave her home soon after the holidays is now inviting us to eat her chicken soup, and it’s good.

It’s the HECM from HELL that didn’t happen. I am thankful for bunches of others that did. Don’t let this happen to you.

After several months have passed, the nice lady lives in the big house and the husband of eight years lives with his son to protect him from his spouse. The divorce is apparently on hold. Happiness doesn’t live here even with three quarters of a hundred thousand in cash available.

No, it’s not just about the money but it did play a major role. People in their nineties have a sense of stubborn pride that they still play a major role in the family thing — and concession is not an easy thing.

If you live in Arizona and wish to consider a HECM to shore up your finances and take some pressure off, it will be OK to call me for help, but don’t wait until you’re 92 on the way to a heart bypass. See “Information tab” on the home page for particulars.

 

Steps for Getting your Affairs in Order

 

Steps for Getting Your Affairs in Order

  • Put your important papers and copies of legal documents in one place.You can set up a file, put everything in a desk or dresser drawer, or list the information and location of papers in a notebook. If your papers are in a bank safe deposit box, keep copies in a file at home. Check each year to see if there’s anything new to add.
  • Tell a trusted family member or friend where you put all your important papers. You don’t need to tell this friend or family member about your personal affairs, but someone should know where you keep your papers in case of an emergency. If you don’t have a relative or friend you trust, ask a lawyer to help.
  • Give permission in advance for your doctor or lawyer to talk with your caregiver as needed. There may be questions about your care, a bill, or a health insurance claim. Without your consent, your caregiver may not be able to get needed information. You can give your okay in advance to Medicare, a credit card company, your bank, or your doctor. You may need to sign and return a form.
  • https://www.nia.nih.gov/

Consider HECM Reverse Mortgage to use some of your home equity to shore up finances for this “leg” of your finances. Call HECM veteran Warren Strycker, 928 345-1200 or email/write warren.strycker@patriotlendingreverse.com for professional friendship through the process.

Restart your conversation in 2018. Frequently Asked Questions about HUD’s #HECM62 Mortgages