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Non-Borrowing Spouses and Reverse Mortgages: What you need to know

Posted by Jay Zayer on Wed, Apr 30, 2014 @ 15:04 PM

On April 25th, 2014, HUD released their new reverse mortgage guidelines for non-borrowing spouses.  For HECM loans with FHA case numbers on or after August 4, 2014, non-borrowing spouses will be able to remain in their home and defer payment in cases where the named borrower passes away.

HUD will be updating factor tables that will be based on the youngest borrower or non-borrowing spouse and will be used to calculate the principal limit for borrowers younger than 62 years of age.

Non-Borrowing Spouses and Reverse Mortage: What you need to knowThe reverse mortgage will continue to accrue interest in accordance with the original terms and the borrower will also need to make mortgage insurance payments to the FHA.  The non-borrowing spouse will be able to sell the property regardless of equity however, a non-borrowing spouse certification will also be required prior to closing escrow (this certifies that the borrower is married to the non-borrowing spouse.)

According the Mortgagee Letter 2014-07, in the event the borrower predeceases the non-borrowing spouse, the loan repayment will be deferred for as long as the non-borrowing spouse meets all the necessary requirements. Such requirements include the continuation of the following:

1. Within ninety days from the death of the last surviving HECM mortgagor, establish legal ownership or other ongoing legal right to remain (e.g., executed lease, court order, etc.) in the property securing the HECM;

2. After the death of the last surviving borrower, ensure all other obligations of the HECM mortgagor(s) contained in the loan documents continue to be satisfied; and

3. After the death of the last surviving borrower, ensure that the HECM does not become eligible to be called due and payable for any other reason.

If the non-borrowing spouse is unable to meet these requirements, the deferral period will cease and the reverse mortgage will become due and payable. 

Although these changes will affect the loan amount that borrowers will qualify for, it will also allow non-borrowing spouses to stay in their home without the fear of being evicted down the road.

For more information regarding reverse mortgages or any of the information provided, please contact us at 877-700-0942 or click the link below.

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Topics: Reverse Mortgage, HECM, Aramco Financial, The Aramco Group, San Diego, Mehran Aram, Loans, senior citizen, Certified Reverse Mortgage Professional, Non-Borrowing, Spouses, HUD, Retirement, FHA

5 Reverse Mortgage Myths and the Truths Behind Them

Posted by The Aramco Group on Mon, Apr 21, 2014 @ 06:04 AM

Reverse mortgages are becoming more and more popular as many seniors are discovering that they do not have the funds they need to live the way they want in retirement. Unfortunately, a lot of people who could benefit from a reverse mortgage decide not to get one because they’ve heard false information.

There are a lot of myths about reverse mortgages that simply aren't true, yet they persist. That’s why we would like to take a minute to clear up 5 common misunderstandings about reverse mortgages. If you have any questions about the below information, don’t be afraid to reach out and contact us.

Myth 1: You can only get a reverse mortgage if you don't have any other debts.

So many people automatically assume they can’t get a reverse mortgage because they already have a mortgage or two on their home. Some people even believe that they won't qualify for a reverse mortgage because they have credit card or car loan debt.

Truth: The majority of seniors who qualify for a reverse mortgage have debt. It doesn't matter how much or what kind of debt you have to qualify for a reverse mortgage. It's even possible to get a reverse mortgage if you have multiple mortgages on your home already.

It is important to note, however, that the money you make from a reverse mortgage first has to go to pay off any debts and liens that are against the home. In other words, all of your existing mortgages are paid off first, and then you can decide what to do with the rest of the proceeds.

For example, let’s say you qualify for a reverse mortgage of $500,000 and you already have two mortgages of $100,000 and $200,000. All $300,000 of the home debt would have to be paid off from the money of the reverse mortgage, and then the remaining $200,000 would go to you.

While this seems like a significant cut, keep in mind that the payments and interest for these two loans are gone too. This brings down expenses and provides some extra money for other things.

Myth 2: If I get a reverse mortgage, the bank could kick me out of my house whenever it wants.

Truth: While we understand why this is such a big fear, it simply cannot happen. Reverse mortgages don't affect the ownership documents of a home. That means that a senior who takes out a reverse mortgage will maintain the title to his or her home throughout the entire life of the loan. There is no way to default on a reverse mortgage, so the bank cannot take the home for non-payment. Of course, you will still need to pay property taxes and insurance, and failure to make these payments can result in the bank foreclosing. Keep in mind, however, that this is no different than a conventional loan.

It's also important to note that the bank cannot force you out of your home earlier than you want to leave. Money from a reverse mortgage is often provided as either a lump sum or a series of set payments over a defined period of time. Once this period of time is up, however, the bank cannot make you leave the home, or even force you to sell in order to repay the loan. You can decide how long you want to continue to live in your home, again, as long as you are current with your property taxes and insurance.

Myth 3: Reverse Mortgages are only meant for people who are having money problems.

Truth: While there are a number of people who use a reverse mortgage to help them when money gets tight, a lot of other seniors use them as a financial tool.

Many adults would say that their biggest asset is their home, yet they cannot use the money they have tied up in their home without selling or taking out a loan that they have to start paying back immediately. Furthermore, leaving the money tied up in the house means that you are allocating a huge portion of your resources to one investment.

Keep in mind that you can decide how much money to take out as part of a reverse mortgage. A lot of seniors have decided to take out a reverse mortgage and invest the proceeds in a variety of ways. This diversifies their portfolio and makes them more financially secure.

Myth 4: The money received from a reverse mortgage will lower the amount I get from Social Security.

Truth: Reverse mortgages cannot affect the amount of money you get from Social Security or Medicaid. These programs do not look at the current amount of assets that a person has when determining the amount of benefits that they qualify for. Of course, we encourage you to check with your local Social Security administration office to confirm that a reverse mortgage will not affect your current level of income.

Myth 5: No one can really find an objective adviser who will help them decide if a reverse mortgage is right for them.

Truth: Because this is such a major decision that affects your financial life, the federal government has heavily regulated reverse mortgages. One of the biggest rules that all lenders have to follow is that every homeowner who is considering a reverse mortgage must first consult a HUD-approved counselor. These counselors are paid by the government, and have no financial interest in recommending or not recommending a reverse mortgage. That means that everyone who gets a reverse mortgage also gets the unbiased advice of a financial professional.

Still, it’s very important to choose a reverse mortgage broker you can trust. Although there are many reputable reverse mortgage brokers like The ARAMCO Group, the few bad apples seem to spoil everyone’s reputation. Look out for these warning signs:

  • The lender quotes you an interest rate without delving into the details of your unique financial situation

  • The lender makes you feel rushed

  • The lender asks for upfront money

  • The lender seems to just tell you everything you want to hear

Don’t sign or agree to anything with a lender you don’t trust. Follow your gut. Your lender should have a good reputation, positive reviews, and a good standing with the Better Business Bureau. Choosing a certified reverse mortgage professional (CRMP) ensures that you’re working with a qualified, knowledgeable person. The CRMP designation is only earned after numerous classes and a comprehensive exam are passed. CRMPs are a rare breed—there is only a handful nationwide. In fact, our own Mehran Aram is a designated CRMP with over 20 years of experience in the mortgage industry.

If you’re a senior interested in a reverse mortgage, don’t believe everything you hear. Talk to a trusted professional and weigh your options wisely. Feel free to contact us for help, or look around our site for more reverse mortgage information.

Topics: Reverse Mortgage, Certified Reverse Mortgage Professional

Retirement Prep for All Ages and Stages

Posted by The Aramco Group on Mon, Apr 7, 2014 @ 06:04 AM

It is never too early, or too late, to make decisions when it comes to your retirement planning. Whether you are just starting your career or retirement is just around the corner, do not let the financial and emotional side of planning overwhelm you. There are calculated steps you can take at every age and life stage that will help you reach retirement comfortably and enjoy your post-workforce years without undue hardship.

Take a look at this guide for retirement planning based on your age and how soon you plan to stop working. Remember that this is general advice and your retirement plan will be unique.

40 Years From Retirement
Most Americans will work about 40 years of their adult lives before retiring. It can be hard to comprehend what your life is going to look like several decades into the future, but you will be grateful later for the planning you did in advance.

The main way to plan for retirement at the beginning of a career is to set up a retirement fund and dedicate a small amount to it every month. To figure out the amount you should be contributing, check out a retirement plan calculator online that will take your age, income, and projected retirement savings into account. If your employer offers a 401(k) program or something similar consider joining in unless you plan to start your retirement account separately. However, if your employer offers 401(k) matching, it’s strongly suggested that you take advantage of this benefit. Find out what your employer’s rules are for vested money in the account so that you are sure to take every penny you earned and were given if you switch to a different job down the road.

The bottom line is this: you’re young, but that means that you have even more time to build up the savings you’ll need in retirement. A young person who puts $4,000 per year into retirement beginning at the age of 22 will have $1 million by the age of 62, based on 8 percent average annual returns. Even though it’s hard to put away extra cash for something that’s so far away, remember that nobody else is going to save for your retirement for you.

20 Years From Retirement
If you are right in the middle of your career and have yet to start planning for retirement, you will need to play a little bit of catch-up. Likely, you are more financially secure than you were at the beginning of your career, so it is a great time to start seriously saving retirement money.


The median net worth of workers ages 40 to 49 is $133,100, with the top 25 percent worth $371,000. By comparison, the median net worth of workers in their 20s is just $6,400. You may feel like your paychecks are gobbled up by house payments, car loans, and taking care of children, but prioritize finding a way to put at least 15 percent of your income in retirement accounts.

If you have not actually calculated what you’ll need in your retirement years or figured out what age you want to retire, now is the time. It may still seem far off in the distance, but understanding your financial constraints now will make a difference in how much you are able to save. Even if you think there is no way to save enough, meet with a financial planner to find ways to make it happen. A little is way better than nothing.

10 Years From Retirement
When it comes to what you will need to live out your work-free years in financial comfort, most experts cite 12 times your salary at the age of 65. If you are around 55 or in your 60s but planning to retire a little after that 65 mark, it is time to take a long look at your savings and determine how you can put more away.

Check out your savings. Are you at five times your income? Bump up the savings to 33 percent—putting $5,500 in your traditional 401(k) plan and the rest in IRAs or Roth IRAs. If you are married, you will want to talk with your spouse about the timing of retirements. Research shows that one in five couples retire in the same year as each other but keeping at least one on the payroll a little longer can mean a much happier and more comfortable retirement for both. Sit down and take a long look at where you stand financially and where you want to end up. Then adjust your savings to make it happen.

1 Year From Retirement
At this point, you are getting so close to retirement that you start to feel giddy—and maybe a little bit nervous too. The best way to face that anxiety is to know exactly where you stand financially.

Meet with your planner. If you have money in stocks, adjust it to be no more than 40 to 50 percent of your retirement cash (now is not the time to take risks, it is the time to coast on what you already have). Do a trial spending run based on your anticipated budget for the retirement years and look for ways to pull back on spending. What can you pay off? If you started late with retirement savings or are worried that you will not have enough to last through your golden years, ask your financial planner or a representative from The ARAMCO Group about the possibility of a reverse mortgage to tap into the equity of your home and put your mind at ease. Tie up any loose ends or financial burdens weighing on your mind, then decide if you are truly ready at the end of the year or if you can make it through a few more.

Like all phases of life, retirement takes some planning to truly be enjoyed. No matter where you are in the planning process, there is always time to make a better future for yourself. Use the income and resources that you already have smartly and you can live comfortably in your retirement years.

Topics: Reverse Mortgage, senior citizen, Certified Reverse Mortgage Professional, retirement planning, Retirement Concerns

HOUSE PASSES REVERSE MORTGAGE STABILIZATION ACT

Posted by The Aramco Group on Mon, Jun 24, 2013 @ 13:06 PM

The U.S. House of Representatives passed the Reverse Mortgage Stabilization Act of 2013 by a unanimous vote last week. The act was co-sponsored by House Representatives Michael Congress, House of Representatives, Reverse Mortgage Stabilization ActFitzpatrick of Pennsylvania and Denny Heck of Washington both of which worked closely with the National Reverse Mortgage Lenders Association’s (NRMLA) legislative team. Senator Robert Menendez introduced a similar bill in the Senate and is currently being debated, and if passed, will become law.

The Home Equity Conversion Mortgage (HECM), or Reverse Mortgage as it is more popularly known, allows seniors over the age of 62 to withdraw equity from their home. The program helps alleviate financial constraints that many seniors are struggling with today such as unexpected and rising health care costs, significant home improvement projects and dwindling social security payments that don’t leave much after basic everyday costs are taken into account. One of the major positive aspects of a reverse mortgage is that as long as the borrowers live in their home as their primary residence the loan is not due and there are no mortgage payments. Please follow this Link for details about obtaining a reverse mortgage.

Due to a large amount of defaults on reverse mortgages related to property taxes and insurance, the Federal Housing Administration (FHA) had to push for the Stabilization Act to be heard in Congress in order to give them authority for major issues regarding reverse mortgages to be dealt with in a timely fashion. Because of the defaults and lack of authority to deal with them quickly, the FHA’s Mutual Mortgage Insurance Fund took a substantial hit to its reserves to pay back the defaulted loans which it has struggled to replenish. If the Senate kills the reverse mortgage bill they are currently discussing, the FHA will be in need of a $1 billion bailout package from the U.S. Treasury, a bailout that will be passed along to taxpayers. The FHA is required to maintain reserves equal to 2% of the portfolio of loans it insures. This is why it is important to increase the stability of the reverse mortgage program and the effort enjoys the full backing of NRMLA and the National Council of Aging. In order for the Reverse Mortgage program to maintain its sustainability, HUD will be implementing the following reforms:

Financial Assessment – Loan approval will be based on assessments to see what HECM    product is best suited for them based on the analysis of income and credit.


Tax and Insurance Set-Asides – Is set up to protect from defaulted loans so payment of  taxes and insurance can be fulfilled.


Draw Limits - At origination to mandatory obligations such as closing   costs mortgage liens and federal debt. It’s purpose is to protect the Fund from losses which occurred during maximum loans that were drawn up-front.

Should you have any question regarding a reverse mortgage please feel free to contact us. Our helpful and knowledgeable staff of professionals will be more than happy to speak to you about your various options regarding a reverse mortgage. Isn’t time you were put on a path to financial freedom? Contact us to find out how.

Topics: Reverse Mortgage, Aramco Financial, Certified Reverse Mortgage Professional, National Reverse Mortgage Lenders Association, House of Representatives, Home Equity Conversion Mortgage, FHA, National Council of Aging

The Costs Associated with a Reverse Mortgage

Posted by The Aramco Group on Wed, May 29, 2013 @ 14:05 PM

Reverse Mortgage CostWe here at The Aramco Group believe that a well-informed borrower is a happy borrower. Justlike with any other loan, you will be required to pay certain costs and feesbefore you receiveyour loan. In this blog post we would like to bring to your attention the various costs associated with a reverse mortgage so you, the borrower, can fully understand what to expect.


MORTGAGE INSURANCE PREMIUM
You will be charged an initial up-front Mortgage Insurance Premium or MIP at closing which is either 2.00% (HECM Standard with an adjustable interest rate mortgage) or .01% (HECM Saver) of the appraised value of your property or the maximum claim amount ($625,500 in San Diego County) established by HUD/FHA, whichever is less. Also, there will be a 1.25% charge of the outstanding loan balance accrued on a monthly basis. The Mortgage Insurance Premium is perhaps the most significant fee and considered the backbone of your reverse mortgage. Without the premium payments, the reverse mortgage program would not have enough funding to exist. The MIP also guarantees that as long as you live and whatever happens to the value of your home your benefit will be paid by the Government. It also includes a “non-recourse provision” which means the Lender can never require any person or your estate to pay off the loan and there are no monthly payments due as long as the loan is outstanding. The loan is due when you are no longer living in the home as a principal resident, you pass away, sell the home, or permanently move out. The amount owed can never exceed the value of your home, and if the home is sold and the sale proceeds exceed the amount owed, the excess money goes to your estate.


ORIGINATION FEE
The origination fee is compensation to the originator/lender for processing your loan. If your home is valued at less than $125,000, the lender CAN NOT charge you an origination fee of more than $2,500. However, if your home is valued at more than $125,000 then your lender is allowed to charge 2% of the first $200,000 of the home’s value PLUS 1% of the amount over $200,000. Reverse mortgage origination fees are capped at $6,000. Depending on the program chosen, there may be zero point origination fees as well.


THIRD PARTY CHARGES
Third party charges are also required before your reverse mortgage can be finalized and typically are services that are performed by other companies and not your lender. Some of these charges include appraisals, title searches, surveys, inspections, recording fees, local, state, and federal mortgage taxes, and credit checks. These costs vary by the county you live in as well as the value of your home.


HOUSING AND URBAN DEVELOPMENT COUNSELING
You will also be required to meet with a Housing and Urban Development (HUD) approved counselor. A list of HUD approved counseling companies will be provided to you by your reverse mortgage loan officer. Typically the fees associated with counseling are reasonable and vary depending on your area, but are capped and cannot be more than $125.00 per counseling session. Before you are charged a fee there are certain conditions that need to be met:

• There is no charge for counseling to those that demonstrate they cannot afford the fees.

• Before any service is performed, the agency must inform the clients of the fee structure.

• Fees must be proportionate with the level of services provided.

Aside from the appraisal fee and HUD counseling which are out-of-pocket expenses, we would like to point out that you may use the proceeds of your loan to pay the remaining costs associated with it. This is a great option for those that might not have the immediate funds in their checking/savings account.

Contact us today and speak directly with our Certified Reverse Mortgage Specialist (CRMP) Mehran Aram, and discuss with him how a reverse mortgage can benefit your retirement.

Topics: Reverse Mortgage, HECM, Aramco Financial, The Aramco Group, Housing and Urban Development, Certified Reverse Mortgage Professional, California, Home Equity Conversion Mortgage, Mortgage Insurance Premium