We’ve been expecting financial assessment guidelines for two years now. We finally received those new rules early November. After March 2, 2015, reverse mortgage applicants will undergo a financial assessment as part of the process in applying for a reverse mortgage.
Those applying who are behind on credit card payments, taxes or who do not carry homeowner’s insurance may find themselves denied or subject to a mandated escrow account for their expected life time to qualify for the loan.
I attend the National Reverse Mortgage Lender’s meeting every year. One of the most important reasons I attend is because I like to hear “the vibe or the hum” of the industry. Kathleen Zadareky, Deputy Assistant Secretary for Single Family Housing (SFH), addressed the crowd. This year the head of SFH threw the industry a curve ball guideline.
Effective Dec 15, 2014, the payoff of existing non-reverse mortgage liens including Home Equity Line of Credit (HELOC), can only be paid off if the lien has been in place for at least of 12 months or resulted in less than $500 cash draw. See Mortgagee Letter 2014-21
In other words, if you have refinanced recently you must wait until your loan is in place at least one year OR if you have a HELOC, it must be at least one year seasoned or you cannot have drawn more than $500 in the last year whether at closing or through cumulative draws.
Your loan officer will gather your final settlement statement, payoff statements and recent HELOC statements showing any draw activity over the last year.
My personal prediction is that these guidelines will create the floor of the market. Lenders are currently scrambling to meet the financial assessment guidelines. As soon as the dust settles you’ll see more reverse mortgage and equity release products developed to meet the boomers growing retirement needs.