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What Information will I need in order to Qualify After the FA?

Posted by The Aramco Group on Mon, Apr 6, 2015 @ 13:04 PM

This is part 2 of 3 explaining the “New Reverse Mortgage” and the Financial Assessment that will change the program on April 27th, 2015


Qualifying for a reverse mortgage will require more documentation than it used to. The Financial Assessment’s legacy will be that it requires you to collect information on your assets and on your incomes/expenditures for the last two years — in as comprehensive a fashion as is possible.

That should be enough information to determine whether a potential borrower qualifies, but your loan originator and any FHA certified counselor that you end up working with will be the ones to direct you more specifically.

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How will the lenders or originators be reading that information?

The Financial Assessment sets some new rules for lenders to follow, but it also leaves wiggle room for lenders to evaluate each individual application. The new rules understand that no one person’s financial life fits neatly into a template. There are plenty of chances to explain any extenuating circumstances you may have come to pass in your life. What counts as “extenuating circumstances” and how to use them will be explained below.

The preliminary information you will have to provide will be in 12 different categories, but do not despair. As was said above—about providing information on your incomes/expenditures and assets for the last two years — should cover most of the information needed. The Financial Assessment just breaks that information down into 12 categories as follows:

A) Property Charge Payment History

B) Credit History

C) Assets

D) Imputed Income (value of assets minus taxes they may be subject to only if sold, e.g. stocks and capital gains tax)

E) Estimated Maintenance and Utility Expenses (from a formula of $0.14/sq. foot)

F) Monthly Effective Income

G) Current Monthly Property Charges/Rates

H) Other Monthly Expenses

I) Residual Income

J) Monthly Property Taxes as Percentage of Monthly Income

K) Extenuating Circumstances

L) Compensating Factors

Some of the above information is just a statement of how much you own. Property Charge Payments and Credit History information is a little different. If you are wondered what a lender may be looking at when they look at these records you can know the basics now:

As per the Financial Assessment rules, they will be assessing whether you are current and/or delinquent with the following Property Charge Payments:

  • Real estate taxes
  • Other assessments
  • HOA/PUD/Condo Fees

The originator will also check the amount of insurance in place on your home during the last 12 months of the following types and whether you have been delinquent on payments at any time in the last 24 months:

  • Hazard/Homeowners Insurance
  • Flood Insurance

What about my credit?

Research at The Ohio State University has shown that potential borrowers with lower credit scores are more likely to end up in default.[i]  The Financial Assessment will therefore check your numeric score, but will more specifically check whether you have had any delinquent payments on any of your lines of credit over the last 24 months. They will make note of whether those delinquent payments were still outstanding at 30, 60 & 90 days, and they will count the number of times.

A mark against your lines of credit over the last 24 months does not immediately disqualify you from getting a reverse mortgage however. The Financial Assessment leaves room for extenuating circumstances. We will explain that now.

What Extenuating Circumstances can I Bring up to Help me Qualify for a Reverse Mortgage?

The FHA and HUD have demonstrated that they understand that no one’s financial lives fit perfectly into a narrow set of expectations. Instead, they have left room for potential borrowers to explain negative occurrences in their financial history, and the process has a capacity for understanding.

The following section is directly from HUD’s manual.

Extenuating circumstances beyond the mortgagor’s control may include, but are not limited to:

  • Loss of income due to the death or divorce of a spouse that directly resulted in late payment of obligations;
  • Loss of income to the potential borrower’s or spouse’s unemployment, reduced work hours or furloughs, or emergency medical treatment or hospitalization that directly resulted in late payments of obligations; or
  • Increase in financial obligations due to emergency medical treatment or hospitalization for the potential borrower or spouse, emergency property repairs not covered by homeowners or flood insurance, divorce or other causes that directly resulted in late payments of obligations.

As you can tell, leeway may be made for circumstances outside of a potential borrower’s control. It will be up to the originator, underwriter, and lender to interpret these types of situations, and if the borrower can prove with documentation that an event directly led to a missed obligation, then the problem may not disqualify a borrower from a reverse mortgage.

We have now talked about half of how the Financial Assessment is going to change the Reverse Mortgage on April 27th, 2015. It will require more paperwork, and that will make it more difficult to qualify. The other half of the Financial Assessment is the “Life Expectancy” Set Aside that some borrowers may have to deal with.

Check back tomorrow for information on the Set Asides and how they may effect you and your loved ones.


[i] Moulton, Stephanie, Haurin, Donald & Shi, Wei, An Analysis of Default Risk in the Home Equity Converstion Mortgage (HECM) Program (January 25, 2015)


Topics: financial assessment, credit, credit report, mortgage news, Mortgage Market, Mortgage applications, Mortgage application

A Guide to Rebuilding Damaged Credit

Posted by The Aramco Group on Wed, Jan 22, 2014 @ 06:01 AM

Good credit is not simply nice to have; it is nearly essential for making any large purchase, including a house, car, or college education. A good credit score shows lenders that you can be trusted with their money. Therefore, if you have a poor or no credit score, you may have a difficult time getting approved for a credit card or loan. 

If you are one of the millions of Americans with a poor credit score, you may be wondering how you can fix your score and have another chance at the American dream. Thankfully, it is possible, though it will probably take some time. Here are five steps you should take. 

1. Fix Any Errors

The very first step you should take to fix a poor credit score is to obtain a copy of your credit report and check for any errors. Be sure that you obtain reports from all three credit reporting agencies—Equifax, Transunion, and Experian—because all three report slightly differently and information that is correct on one might be incorrect on another. By law, each of these agencies offers one free credit report per year. You can request them at

Once you have all three reports, check all of your personal information to make sure that it is accurate. If any incorrect names or addresses are listed, your credit may have been mixed up with someone else’s, which could negatively impact your score. 

Secondly, make sure that all of your account and payment information is correct. If your credit report shows missed payments that you know you made on time, your credit score could be much lower than it should be. If you find any information that is not correct, contact the reporting credit bureau that is reporting the misinformation immediately. 

2. Catch Up On Missed Payments

After reviewing your credit report and fixing any errors, it is time to begin the hard work of rebuilding your credit score. Start by catching up on any missed payments, beginning with the accounts that you have most recently defaulted on. If you can make any recently missed payments immediately, you may be able to prevent them from being reported to the credit bureaus in the first place. 

Because payment history counts for almost 35 percent of your credit score, a missed payment can really hurt your score. In fact, a single late payment can reduce your credit score as much as 110 points if your score is excellent. Once you have caught up on your late payments, commit to making all future payments on time

3. Reduce Your Credit Card Debt

According to, the average debt-to-credit ratio of people with the highest credit scores is only seven percent for revolving accounts like credit cards. Therefore, once you have caught up with all of your payments, your next step is to begin paying down your credit card balances.

Start with the card that has the highest debt-to-credit ratio and begin making payments. Even if you cannot afford much right away, just keep making payments until you can get the balance lowered and eventually paid off. Then, do the same with the next card. 

Once your balances are paid down, be careful not to rack up charges again. You may want to call the credit card company and have your credit limit lowered, or you may consider cutting up your cards or locking them away in case of an emergency.

4. Avoid Closing Old Accounts

If you do decide to get rid of your credit cards completely so that you are not tempted to use them unwisely, you might want to think again. It may not be in your best interest to close all of your accounts. This is because your credit score is determined in part by the length of time you have held your accounts. If you close the account you have had the longest, it can shorten your credit history and temporarily reduce your score. 

Instead of closing your oldest account, consider simply cutting up your old credit cards and leaving the accounts active instead. This way, you will not be able to use them, but you will still have a positive account on your credit report

5. Open a Secured Credit Card

Once you have removed the negative account history from your credit report, it is time to start building positive account history. You need to use credit to earn a good credit score, however, and getting approved for a credit card or loan can be difficult when your credit score is poor. A secured credit card is one positive solution.

With a secured credit card, you make a security deposit and receive a credit card with a limit equal to your deposit. Then, you use the card just like a regular credit card. Secured credit cards are not like debit cards because you are not using your security deposit money to make the purchases; you are still borrowing the money on credit. The security deposit is just to protect the lender in case you default on the card. Make your payments on time and the lender will report your account activity to the credit bureaus. 

Once you have repaired the negative marks on your credit report and begun to create positive account activity, commit to using your credit wisely in the future. Make your payments each month, keep your balances low and continually monitor your credit report to ensure that you are on the right track. While repairing your credit will take time, the benefits are worth the hard work. 

Topics: credit, credit report

Reverse Mortgage vs. Regular Mortgage

Posted by The Aramco Group on Thu, Jul 12, 2012 @ 14:07 PM

Aramco FinancialWe’ve all grown very accustomed to mortgages; almost everyone gets a mortgage to purchase a new house, refinances when rates are low, or uses a line of credit to take advantage of the equity in their home. But now, what is this “new” product we keep hearing about? It seems like everyone these days is talking about the Reverse Mortgage as the panacea to the needs of seniors. While I don’t believe the Reverse Mortgage is a one-size-fits-all product which is best for everyone, it can be perfect for many seniors who are house-rich and cash-poor, or for financially savvy seniors looking to grow their estate or create a safety net for their retirement. But what exactly is the difference between a Reverse Mortgage and a regular mortgage?

Let’s start with the qualifications. In order to qualify for a regular loan, one must prove to have the ability to pay back their debt, thus credit and income documentation is vital. Without a high credit score, and sufficient documented income, a conventional loan is often times impossible to attain, especially for many seniors on fixed incomes. Conversely, with a Reverse Mortgage, there are no monthly payments and thus no need to confirm the borrower’s ability to pay. So in stark contrast to a regular mortgage, there are no strict credit or income requirements and qualification for the loan depends solely on Age, Equity, and Ownership.

How do Reverse Mortgages work compared to a regular mortgage? With a conventional mortgage a lump sum of cash is given and in return for the cash, monthly payments must be made, which slowly decreases one’s debt and increases their equity.  With a Reverse Mortgage a lump sum of cash, monthly disbursement, or even a line of credit is given but mortgage payments are completely eliminated for the life of the borrower (The average amount of cash made available to borrowers at Aramco Financial is over $130,000). So with a Reverse Mortgage equity is slowly decreased as one’s debt increases over the life of the loan unless one’s home value goes up, in which case equity can be retained. But, in contrast to a regular mortgage, a Reverse Mortgage is a non-recourse loan which means this debt is accompanied by no personal liability to the borrower, and is instead paid off by the estate, or given to the bank at the passing of the homeowners.

The issue of loan default differs greatly between a regular mortgage and a Reverse Mortgage. With a regular mortgage if payments are not made due to financial hardship, sickness, etc. the bank can and will take ownership of the house. What many seniors find appealing about the Reverse Mortgage on the other hand is that they are given the security of knowing that the bank will never kick them out of their home. As long as property taxes, insurance, and home maintenance are kept current, the borrower will retain ownership of their home for the entirety of their life without having to make any mortgage payments.

The conventional or regular mortgage has been around for centuries because it works. There are times when a regular mortgage is a much better answer than a Reverse Mortgage to certain financial situations, especially for Americans who are not yet 62 and who don’t qualify for a Reverse Mortgage. That being said, the Reverse Mortgage is a fabulous tool which many seniors know little about, but there is a reason that it is becoming more and more popular, mushrooming from 157 reverse mortgages in 1990, to an estimated 200,000 this year. These numbers prove that seniors are realizing the benefit a Reverse Mortgage can have on their retirement, and with our monthly workshops it is our hope that we can continue to educate the seniors of California on the Reverse Mortgage product.




Topics: Reverse Mortgage, HECM, Aramco Financial, The Aramco Group, San Diego, senior citizen, Retirement, credit report, Interest Rates, Aramco Mortgage, home ownership

Bad News About Credit Reports

Posted by The Aramco Group on Wed, Mar 28, 2012 @ 17:03 PM

An investigative article published earlier this week on (not one of my favorite sites under normal conditions) revealed that hackers, apparently routinely and regularly, access credit report web sites, steal people's credit report information, then sell it - openly and online.

Credit report sites like (Federal law requires the nation's three largest credit bureaus – Experian, Equifax, and Trans Union – to maintain the site under the direction of the Federal Trade Commission.),, and something called "" were all hacked. The credit reports - perhaps your credit report - were then sold to other thieves, who sold them online. Quite a supply chain they've got going there.

The credit reports were sold on sites registered in the .su domain, 'su' standing for Soviet Union. (I thought the Soviet Union was no more; did I miss something?)

So what's your credit score worth? The prices fluctuate depending on the credit score. For credit scores in the 750s, report data might go for $80; reports from victims with scores in the low 600s sell for closer to $40, according to "for sale" pages viewed by

Some of the sites selling the data brag about how easy it is to hack the credit report sites. How easy? This is from the article:

In one how-to posted on a bulletin board, a hacker describes one brute-force attack used to gain access to credit report websites. Most sites are protected by "challenge" questions such as, "Which bank holds the mortgage on your home?" But there's a critical flaw, the hacker said:

"Normally all ... of them will ask you the same question," the hacker wrote.

Because the sites use the multiple choice format, it's easy to use the process of elimination and determine the correct answers, he claims.

The hacker explained that the trick is to open several credit report sites and keep trying random answers until one set works.

The recipe is highly detailed, including helpful tips such as, "Take a shot of screen to remember what answers you gave. After that click the submit button and see what it says."

As of now, there doesn't appear to be a clear way of stopping the problem without making the challenge questions too difficult for the legitimate consumer, which many feel is already a problem.

How does that make you feel? 

Topics: credit, credit report