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Interested in a reverse mortgage without a lot of hassles? Better get your application in fast. As of April 27, the federal government is imposing a series of extensive “financial assessment” tests that will make applying for a reverse mortgage tougher — much like applying for a standard home mortgage.
Great read Tuborg. Thank you. I wish the Fed would address the big fees associated with a RM which certainly limits the amount of money one can get out of the house.
Great read Tuborg. Thank you. I wish the Fed would address the big fees associated with a RM which certainly limits the amount of money one can get out of the house.
I found it fascinating that with the new rules some folks will get even less money out.
IF you are required to do a full LESA (lender enforced set aside) the bank will escrow taxes and insurance for the entire life expectancy of the youngest borrower. this is not a requirement for everyone taking out a reverse mortgage, only for people behind on property taxes or certain types of debt within the last 2 years.
There are also residual income requirements now that vary by region. If you are current on your taxes but don't have enough income to meet the thresholds, you may be forced to receive a monthly tenure payment to make up the difference. For example- if the govt says you need $400 in residual income but you only have $300, the lender may force you to take a lifetime $100 monthly tenure payment to make up the difference.
From what I understand (and verify with a bank lenders have some wiggle room. If there are compensating factors, they can factor that in to the decision on whether or not to require a full/partial LESA.
Too many people took out reverse mortgages, blew through the cash, and stopped paying taxes and insurance. For better or for worse, this was HUDs solution to prevent future foreclosures do to delinquent taxes/insurance....
Great read Tuborg. Thank you. I wish the Fed would address the big fees associated with a RM which certainly limits the amount of money one can get out of the house.
Exactly. When I saw the thread I was thinking as anohter poster, finally they are reducing the ridiculous fees that make reverse mortgages such a bad move. Instead they are making it an even worse move.
you knew it couldn't go on as it was. those needing to mortgage their home to make ends meet are not likely to be in the best financial health and likely to meet their other obligations.
usually all it taks is one unplanned major expense and they default on other things involved with the house.
the problem is few got as much as they thought they would.
reverse compounding interest is very powerful when it works against you.
even here in long island with the typical home worth more than 500k it can be quite painful.
On a $250,000 lump-sum in ten years the balance will climb to $465,841. Assuming 3% home price appreciation, that would leave about $72,000 in equity based on a home's $537,566 value. In 20 years, the loan balance would reach $868,031, exceeding the home's $722,444 value.
be careful though , that can be one major tax disaster if the child sells that house after you are gone. it can also create tax issues for the parents if they need to sell and move at some point as they lose all or part of the tax free exclusion.
that cost basis stays with the child as opposed to inheriting that house at current market value. divorce of the child , law suites can also put that house in jeopardy for the parent..
it can create gift tax issues on both federal and state levels too.
Last edited by mathjak107; 05-04-2015 at 03:52 AM..
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lenders have some wiggle room. If there are compensating factors, they can factor that in to the decision on whether or not to require a full/partial LESA.
