Reverse Mortgage The Federal Savings Bank

March 15, 2015 - PRLog -- The Federal Savings Bank Reverse Mortgage

 A reverse mortgage provides cash payments based on home equity. Homeowners normally defer payment of the loan until they die, sell, or move out of the home. Upon the death of homeowners, their heirs either give up ownership to the home or must refinance the home to purchase the title from the reverse mortgage company. Specific rules for reverse mortgage transactions vary depending on the laws of the jurisdiction.

In a conventional mortgage, the homeowner makes a monthly payment to the lender. After each payment, the homeowner's equity increases by the amount of the principal included in the payment. In a reverse mortgage, a homeowner is not required to make monthly payments. If payments are not made, interest is added to the loan's balance. Although the rising loan balance can eventually grow to exceed the value of the home, the borrower (or the borrower’s estate) is generally not required to repay any additional loan balance in excess of the value of the home. To apply for a reverse mortgage The Federal Savings Bank is ready and able to help. https://www.thefederalsavingsbank.com

Regulators and academics have given mixed commentary on the reverse mortgage market. Some economists argue that reverse mortgages allow seniors to smooth out their income and consumption patterns over time, and thus may provide welfare benefits. However, regulatory authorities, such as the Consumer Financial Protection Bureau, argue that reverse mortgages are complex products and difficult for consumers to understand," especially in light of misleading advertising, low-quality counseling, and risk of fraud and other scams. Moreover, the Bureau claims that many consumers do not use reverse mortgages for the positive, consumption-smoothing purposes advanced by economists.

To qualify for a reverse mortgage in the United States, the borrower must be at least 62 years of age and must occupy the property as his or her principal residence. In addition, any mortgage on the property must be low enough that it will be paid off with the reverse mortgage proceeds. Reverse mortgages follow FHA eligibility standards for property types, meaning most one to four family dwellings, FHA approved condominiums, and PUD's qualify. Manufactured housing qualifies based on standard FHA guidelines.

In a 2010 survey in the United States, 48% of seniors cited financial difficulties as the primary reason for obtaining a reverse mortgage and 81% of seniors stated they would like to stay in the home in which they are currently living for the rest of their lives.

On March 2nd 2015 FHA implemented its financial assessment for Reverse Mortgages. Those who have been assigned a case number on or after March 2nd 2015 will be subject to the financial assessment. A case number is assigned to a borrower by FHA so that lenders can identify them. The financial assessment means lenders will now be required by FHA to do a much more comprehensive credit, income and asset underwriting. Lenders will look at things like late payments on credit reports, unpaid property taxes, etc., and determine what they call a willingness to pay. Borrowers who show that they have not in the past had a willingness to pay bills on time, for example, will see set asides for items like property taxes and homeowners insurance.

The gross amount of money that a borrower can receive under a HECM reverse mortgage (i.e., a reverse mortgage insured by the federal government) is called the principal limit. The principal limit is based on the maximum claim amount, the age of the youngest borrower, and the expected average interest rate. The maximum claim amount is equal to the appraised value of the home or the maximum amount HUD will insure, whichever is less. At least through December 14, 2014, the maximum amount HUD will insure is $625,500. The maximum claim amount is multiplied by a principal limit factor to determine the principal limit. Principal limit factors are determined by HUD and are based on the borrower's age and the expected average rate of interest. The table below gives some examples of what the initial principal limit will be if a home is worth $250,000 and for borrowers of different ages and with different expected average rates of interest.

To get started on your reverse mortage today, contact The Federal Savings Bank.  https://www.thefederalsavingsbank.com