ARAMCO Report - The Mother of ALL Mortgage Blogs!

New and Improved: It's Not Your Father’s Reverse Mortgage

Posted by Valerie Jansen on Mon, May 19, 2014 @ 15:05 PM

While some things never change, the opposite is true for the Reverse Mortgage program during the past few years.Even though there has been considerable debate about the abundance of changes to the program, the consensus is that these changes have resulted in a strengthened program and allows borrowers to be further protected.

New and Improved: It's Not Your Father’s Reverse MortgageOn the immediate horizon of change to the Reverse Mortgage program, is the HUD Financial Assessment. For Baby Boomers contemplating Reverse Mortgages both now and in the future, these new rules will transform and enhance the program even further. Borrowers, prior to application, will have a clear picture of their current financial situation and how it will change as a result of using a Reverse Mortgage for retirement planning or other financial goals. This is change that is definitely for the better.

From a Borrower’s and an Originator’s point of view, the new rule is both a challenge and an opportunity.  The challenge for the borrowers would be presenting more information, questions and paperwork up front, and resulting in longer presentations and further borrower education for the Loan Originators. Ultimately, the opportunity is invaluable and worth the challenge as it produces increased clarity and certainty that a Reverse Mortgage is the right long-term choice for the Borrower.  It’s a sustainable decision that the homeowner can rely on to serve them well, accomplish their goals, and also gives the Loan Originator a feeling of truly serving the needs of their client. 

An additional benefit of the financial assessment is the choice to bring your advisors into the decision making process. Whether it be family, mentors or professionals that you have relied on for guidance over the years, don’t be reluctant to include them in the equation.  A Reverse Mortgage can be a powerful tool in financial planning.  While it may not be for everybody, it can be perfect for some--even financial planners and investment advisors are quickly discovering its tremendous value.

The bottom line is that this financial assessment is not a pass-fail. Unlike in the forward market, it won’t cause a denial but rather, it will simply determine whether or not the borrower will need a "set-aside" payment for future property taxes and homeowners insurance.  Think of it as the “New, Improved Reverse Mortgage”--A safer, more attractive option for all prospective consumers who are considering using their home equity in planning their retirement.

For more information on Reverse Mortgages, refinancing or on a home purchase contact us at www.ARAMCO.biz or call 877-700-0942. 

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Topics: Reverse Mortgage, financial assessment, Reverse Mortgage Program, Aramco Financial, Housing and Urban Development, HUD, Aramco Mortgage, Southern California, mortgage, Loan Options, Homeowners Insurance, property taxes, borrower

Would You Make The Cut?: New Assessment for Reverse Mortgage Borrowers

Posted by Jay Zayer on Thu, May 15, 2014 @ 15:05 PM

Later this year, the FHA will begin a financial assessment on borrowers looking to obtain a Reverse Mortgage. The purpose of the assessment is to evaluate the mortgageor's willingness and ability to meet their financial obligations.The assessment will also be used to calculate whether a portion of the Reverse Mortgage proceeds will need to be held back in order to cover property taxes and insurance in future years. According to HUD, the new financial assessment guidelines will focusWould You Make The Cut?: New Financial Assessment For Reverse Mortgages on:

•performing credit history analysis and cash flow/residual income
analysis;

• evaluating extenuating circumstances and compensating factors;

• evaluating results of the financial assessment to determine eligibility
for the HECM;

• determining if funding sources for property charges from HECM proceeds
will be required;

• completing a financial assessment worksheet; 

• verification requirements and documentation standards for credit, income,
and expenses.

Additionally, underwriters will look at the borrowers current monthly obligations (found on their credit report) and property charges that include property taxes, home owners insurance, and HOA payments. HUD will require a calculation based on the square footage of the home and is similar to the VA calculation of $.14/sq. ft. If a home is 1800 square feet, an assessment of $252/month would be included in the calculation when determining if a borrower qualifies.

Another component of the calculation will be based on the geographic region the borrower resides in. In the Southwest region, $589/month for a single person and $998/month for a couple would be added to the equation when calculating the financial assessment. For example: a couple living in Southern California who have a 2000 square foot home, $350/month in credit card debt, property taxes of $3000/year and paying $1200 for homeowners insurance would need to make $1978/month to qualify according to the new financial assessment. For many couples living in Southern California $1978/month may not seem like a lot of money however, many senior borrowers looking at a reverse mortgage are doing so because they are on a very tight budget and possibly living month to month.

Unfortunately, the few that do not pass this financial assessment may not qualify for a reverse mortgage and may be forced to sell their home. On a positive note, most borrowers will pass this new policy imposed by FHA.

For more information on purchasing a home, reverse mortgages or home financing contact us at www.ARAMCO.biz or call 877-700-0942.

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Topics: Reverse Mortgage, HECM, financial assessment, Aramco Financial, Housing and Urban Development, HUD, credit, Aramco Mortgage, Southern California, borrowers, FHA, Mortgage applications, Homeowners Insurance, property taxes, HOA Payments, mortgagor

Reverse Mortgage Stabilization Act: What it Means for Seniors

Posted by The Aramco Group on Mon, Aug 12, 2013 @ 13:08 PM
The Aramco Group Senate Image

On July 30, the Reverse Mortgage Stabilization Act of 2013, a House of Representatives bill, was approved by the Senate. The next stop for the legislation is the President’s office, where it is expected that he will sign it into law.

For seniors who already have reverse mortgages, nothing should change—you shouldn’t have anything to worry about. Butfor those considering the option, it is important to understand what the potential ramifications of this bill could mean in terms of loan eligibility and cost. For those who’ve already had an analysis but haven’t moved forward with the reverse mortgage, you may need to get an updated analysis, and quickly (more on this under “What Does it All Mean?”).

What is a Reverse Mortgage?

This financial solution that taps into the equity of your home is only available to people over the age of 62. By taking out a reverse mortgage, the homeowner no longer makes a mortgage payment in principal or interest. The loan, plus interest, is due when the homeowner dies or decides to move. It is an attractive option for people who have built up strong equity in their home and want to tap into that cash for retirementor other expenses. The reverse mortgage process is overseen by the Federal Housing Authority and must follow guidelines that call for proper home maintenance, among other details. Before this bill, there were virtually no credit or income requirements for seniors wanting the reverse mortgage option but that could soon change.

Background on Legislation

In a 2012 audit of the FHA’s insurance fund, it became clear that the reverse mortgage program needed some modifications to prevent government losses. The Reverse Mortgage Stabilization Act was introduced in May by Representative Denny Heck, a Democrat from Washington, and Representative Mike Fitzpatrick, a Republican from Pennsylvania. Instead of calling for a sweeping overhaul of the entire reverse mortgage program—a move that could negatively affect senior citizens who rely on it—the bill instead gives the U.S. Department of Housing and Urban Development (HUD) the authority to take a closer look

 at losses and where to specifically make changes.

HUD has until September 30th to decide if it needs bailout help from the U.S. Department of the Treasury, or if some adjustments to the reverse mortgage program will be enough to keep the initiative financially stable. Some financial experts say that the reverse mortgage program has lost money simply because of property value decline and that tighter restrictions will only hurt the seniors who need the low-cost financial help. Whatever the reason for the financial squeeze, it is clear that HUD has some decisions to make, and quickly, to avoid asking the U.S. Treasury for help for the first time in nearly 80 years.

Possible Reverse Mortgage Changes

Seniors who apply for and already benefit from the reverse mortgage program are likely to see some changes, including:

  • No Fixed Rate Standard option. This change actually took place back in April, but is important to note for seniors planning to apply for a reverse mortgage. The Fixed Rate plan allowed borrowers to take out a larger amount of money upfront at a higher interest rate (2 percent). Instead, borrowers can opt for the Standard Adjustable Rate or Saver programs, which both limit the amount of withdraws but also come with a much lower interest rate. In the case of the Saver Program, interest is only .01 percent.

  • No lump-sum payouts. In the past, seniors had the option to take all of the value of their loan out upfront. This bill will place limits on the amount that is initially available to reverse mortgage borrowers. The exact details of payment amounts and percentages will not be known until HUD sends out official Mortgagee Letters.

  • Creation of escrow and impound accounts. In order to cover tax and insurance costs, HUD is considering a requirement of impounds or escrow accounts. The bill passage gives HUD this authority, though no official decision has yet been released. If this mandate goes into effect, borrowers will have less money at closing and there could be a significant delay in when the borrowers see the money. It could also mean no equity to the borrower when all the numbers are crunched.

  • Stricter qualifications. Before the Reverse Mortgage Stabilization Act, seniors did not have to meet traditional financial loan requirements. There were no credit or income checks and the program hinged simply on the equity in the borrower’s home. HUD is now considering the addition of a “financial assessment” portion of the application process. If implemented, prior credit and current income could impact a senior’s ability to obtain a reverse mortgage.

  • Higher loan costs. A side effect of all the other possible HUD changes to the reverse mortgage program is that it will all add up to higher costs for borrowing seniors. Before this legislation, reverse mortgage lenders were often willing to take on the initial costs to the borrower, like closing costs or origination fees. Lenders were able to do this based on calculating how much they could get for selling the loans on the secondary market. With more limits on the loans, lenders cannot receive as much for selling them so they do not have as much money to put toward borrowers’ costs. This means more money out of borrowers’ pockets to pay for their loans.

What Does it All Mean?

If you are a senior and considering a reverse mortgage to help improve the quality of your retirement years, the terms of your loan may no longer reflect earlier estimates. If you have already had an analysis completed but haven’t moved forward with a reverse mortgage yet, you’ll need to get a current analysis from reverse mortgage professionals like The ARAMCO Group. Be sure to do this before the secondary market worsens (as the experts predict will happen) and before the changes proposed in this bill are implemented.

The seniors who will most be hurt by any or all of the potential changes are those who may have eligibility issues. Seniors may also soon have to pay more in borrower’s costs, and not have a lump-sum payment option.  If you feel like a credit or income requirement could hurt your chance at obtaining a reverse mortgage or to make the most of the equity in your home, do not wait to reach out to a reverse mortgage professional. If HUD changes eligibility requirements, the money you had planned to use may no longer be available to you.

Again, make sure you consult reverse mortgage professionals like the ARAMCO Group if you’re concerned about your own unique situation. The ARAMCO Group’s president and CEO is a Certified Reverse Mortgage Professional (CRMP)—a designation that comes with passing numerous classes and a comprehensive exam, and that has been given to less than 50 reverse mortgage brokers nationwide. The benefits of working with a CRMP are numerous—stay tuned for our next blog post to learn them!

Topics: Reverse Mortgage, Aramco Financial, The Aramco Group, Mehran Aram, Housing and Urban Development, Aramco Mortgage

NRMLA and HUD Working Together for the Benefit of Seniors.

Posted by The Aramco Group on Mon, Jun 3, 2013 @ 15:06 PM

NRMLA, HUD, Helping Seniors, Reverse Mortgage

The National Reverse Mortgage Lenders Association (NRMLA) is lending a helping hand to theDepartment of Housing and Urban Development (HUD) in assessing the financial stability of potential reverse mortgage borrowers under the Home Equity Conversion Mortgage plan or HECM. The NRMLA policy committee did extensive research on historical data. The committee looked at various factors including credit profiles, as well as tax and insurance histories to determine which borrowers were likely to default on their reverse mortgage.


The NRMLA committee found through its research that borrower defaults required a complete solution involving financial assessment to meet their obligations over the life of the loan. The committee believes two test are required, capacity and willingness to pay ongoing property charges. The capacity test looks at income and the ability to pay property taxes and insurance charges and considers residual cash flow and the willingness test basically shows that borrowers are willing to keep up those payments in a timely manner through a review of the borrower’s credit history, current property tax payments, and active homeowner’s insurance policy. For those not meeting the requirements additional requirements would be necessary. Those might include reduction of principal limit (less cash to the borrower), raising the mortgage insurance premium (MIP), and creating a set-aside/impound account by the lender or servicer for seniors in the event they are unable to pay the charges on their taxes and insurance.


The HECM plan is in need of a major overhaul in order to make it more successful and sustainable for potential qualified borrowers. Senator Robert Menendez in March introduced The HECM Stabilization Act of 2013 which grants the Federal Housing Administration (FHA) the authority to implement changes to its reverse mortgage program, something that could expedite the reform process which before would take months and even years. Under the bill the reform programs would include reducing the money taken by borrowers at origination to sustainable levels; performing borrower financial assessments to determine if a HECM is affordable; and establishing escrow accounts with lenders to prevent foreclosures from tax and property insurance delinquencies.


The HECM Stabilization Act of 2013 has the full support for the changes in the bill from the Mortgage Bankers Association (MBA), NRMLA, and the Coalition for Independent Seniors. The MBA believes that if HUD is not granted the authority to make the needed changes it will restrict the program thereby eliminating an important financial tool for American Seniors.


Without the support of the bill HUD could be forced to end the reverse mortgage program for seniors. HUD states that because of recent declines in home prices and the inability of many seniors to keep up with rising costs of taxes and insurance the number of borrowers facing foreclosures has grown over the last few years. Since HUD insures these loans for lenders the increasing cost to taxpayers has also grown leading HUD to consider ending the program altogether a move that would be detrimental to seniors who are looking for some form of financial freedom.

Visit the U.S. Department of Housing and Urban Development for frequently asked questions regarding a Reverse Mortgage or visit ReverseMortgage.org to use their free calculator to see how much a Reverse Mortgage can offer you

Topics: The Aramco Group, Mehran Aram, Housing and Urban Development, National Reverse Mortgage Lenders Association, Home Equity Conversion Mortgage

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