If you’ve been considering a reverse mortgage, there’s news from the U.S. Department of Housing and Urban Development that could affect both your eligibility and your decision. HUD has issued a notice stating that a financial assessment will apply to all case numbers issued on or after March 2, 2015.
Before applying for a reverse mortgage, carefully read the document concerning financial assessments on the HUD site. It’s 87 pages long and will probably give you a headache but it does detail all of the documentation on your finances, and especially your credit, that you will need to compile in order to complete your application.
The main news from HUD is that full or partial life expectancy set-asides will be required for borrowers who fail to demonstrate willingness to meet their loan obligations like property taxes and insurance. This news is spelled out in a Mortgagee Letter that can be read here and thankfully, it’s only three pages.
Here is HUD’s definition of the purpose of the financial assessment: “The mortgagee must evaluate the mortgagor’s willingness and capacity to timely meet his or her financial obligations and to comply with the mortgage requirements. In conducting this financial assessment, mortgagees must take into consideration that some mortgagors seek a HECM due to financial difficulties, which may be reflected in the mortgagor’s credit report and/or property charge payment history. The mortgagee must also consider to what extent the proceeds of the HECM could provide a solution to any such financial difficulties.”
Here’s more: “Where the mortgagor has not demonstrated the willingness to meet his or her financial obligations as stated above and no extenuating circumstances can be documented, the mortgagee must require a fully funded Life Expectancy Set-Aside.”
This could potentially be bad news for those who are seeking a reverse mortgage in hope of resolving debts or other credit problems—especially if you have fallen behind on some obligations. So what should a reverse mortgage seeker do? Be prepared by reading all the pertinent documents on the HUD website and begin to compile the necessary documentation on your financial history. Get your credit score from Equifax or Experian and see if there are ways that you can improve your credit rating. You may find factors pulling down your rating that can be corrected before applying for a reverse mortgage. Consulting with a debt counselor may help you deal with credit problems. Be sure to have documentation for any “extenuating circumstances” that could affect the overall view of your finances.
If you need help wading through all of these new requirements or just want to make the process of getting a reverse mortgage less confusing, call Angella Conrard at 866-949-7030. I will be happy to answer your questions about reverse mortgages and help you to live a comfortable life! Leave a comment below.