Skip to main content

Home mortgage rates hit 18 percent!

National Mortgage Professional
Dec 29, 2004

Forward on reverse: Reaching out to my reverse readersAtare E. Agbamu, CRMSreverse mortgage, questions, answers, qualifications James Thurber, humorist for The New Yorker, was right when he wrote, "It is better to know some of the questions than all of the answers." Readers from around the country have been sending me reverse mortgage questions since the inception of this column in the February edition of The Mortgage Press. Therefore, I have decided to use this column to answer some of the more pertinent reverse mortgage questions. Question: How does someone qualify for a reverse mortgage? Answer: Borrowers must be 62 or older and own their own home as a principal residence. Additionally, the house must have substantial equity, and the borrowers must receive reverse mortgage information from a HUD-approved counseling agency. Question: Should available credit be a concern? Answer: Credit is not a relevant qualifying factor in a reverse mortgage transaction, though reverse lenders generally pull credit for varying reasons. Also, income is not required. Question: In a reverse mortgage transaction, what happens to the underlying mortgages? Answer: Underlying mortgages must be paid off or, in some cases, subordinated, because a reverse mortgage must be in a first lien position. Question: Are the interest rates and closing costs the same as conventional loans? Answer: Yes. The interest rate is usually based on a monthly or yearly adjustable rate mortgage (ARM). In addition to conventional closing costs, there is an up-front mortgage insurance premium of two percent and a monthly insurance premium of 0.5 percent of the monthly balance. There will also likely be a service fee for both the monthly and annual ARMs, applied respectively. Question: What happens if the borrower outlives the term of the loan? Answer: Reverse mortgages are designed to address longevity risks. If the reverse product is either an FHA-insured Home Equity Conversion Mortgage (HECM) or Fannie Mae's HomeKeeper, and the payment plan is a tenurelasting as long as the borrower resides in their homepayment from lender to borrower will continue uninterruptedly, even if the borrower lives as long as te biblical Methuselah (approximately 970 years)! Question: What happens to the property when the borrower dies? Answer: When a borrower dies before the loan is payed, the property is still owned by the deceased's estate or heirs, and they are required to pay off the reverse mortgage balance. To do this, they have three options: They can use other funds from the deceased's estate; they can refinance the balance with a new "forward" mortgage, keeping the property in the family; or they can sell the property, pay the remaining balance, and keep any positive difference from the sale. Question: Is this program offered for manufactured homes? Answer: Yes, some manufactured homes are eligible for reverse financing. For more information, visit the National Reverse Mortgage Lenders Association's (NRMLA) Web site, www.reversemortgage.org. Question: Must a Mortgage Broker be approved to originate FHA loans in order to originate reverse mortgages? Answer: Yes and No. Yes, if you will be working with HECMs,which are FHA-insured and require FHA approval to originate them. No, if Fannie Mae's HomeKeeper and Financial Freedom's Cash Account will be your primary products. They are non-government products and, therefore, different rules apply. Generally, for FHA-approved lenders and anyone interested in brokering these mortgages, a correspondent relationship with a reverse mortgage wholesaler is required. Question: Where can I obtain a list of reputable reverse mortgage lenders? Answer: Currently, there are three wholesale lenders in the reverse mortgage arena: Financial Freedom Senior Funding Corporation in Irvine, Calif., Seattle Mortgage Company in Seattle, and Standard Mortgage Corporation in New Orleans. For a more comprehensive state-by-state list of reverse mortgage lenders, visit the NRMLA Web site. Question: Can you offer some ideas on how to market reverse mortgages? Answer: To successfully market reverse mortgages, I suggest the following tips: a. Constantly read and study reverse mortgage lending and its products. It is a very complex financial instrument. b. Visit your senior and community centers and share your knowledge and excitement about reverse mortgages. c. Do not sell. d. Develop professional relationships with reverse mortgage counselors in your community. The experienced ones will be highly knowledgeable about the product and, consequently, have some influence with potential borrowers. e. Finally, be persistent! Thanks to everyone who wrote in! Keep it up and remember to keep thinking, and writing, in reverse. Atare E. Agbamu, CRMS, is a senior consultant and director of training at Iver Grove Heights, Minn.-based Peoples Choice Mortgage. Headquartered in Erlanger, Ky., People's Choice mortgage is a member of the National Reverse Mortgage Lenders Association. Mr. Agbamu has served on the Minnesota Association of Mortgage Brokers Inc. 2000-2001 Executive Council and currently sits on the Board of Little BrothersFriends of the Elderly in the Twin Cities. He can be reached by phone at (651) 389-1105 or e-mail [email protected]
Published
Dec 29, 2004
Reports: Evergrande Group Makes $83.5M Interest Payment

Faltering Chinese development firm fends off default with payment to international bondholders.

Industry News
Oct 22, 2021
FAR Establishes Borrower Engagement Division

Finance of America Reverse LLC announced its formally established Borrower Engagement Division.

Industry News
Oct 22, 2021
Automating Appraisals No Panacea For Removing Bias

With racism 'grandfathered in' to housing prices in minority neighborhoods, a solution to 'unconscious bias' is difficult to find

Industry News
Oct 21, 2021
Reports: Evergrande Group Arranges Bond Extension

Reuters, REDD say company's billionaire chairman has agreed to provide additional collateral to ensure a construction project tied to a $260M bond is completed.

Industry News
Oct 21, 2021
New American Funding Hires Regional Manager

Mark Tribuna will lead effort to expand company's partnership with affordable nonprofit builders in mid-Pacific region

Industry News
Oct 21, 2021
Rocket Pro Announces Initiatives To Boost Brokers

Company brings Rocket Tech, the Rocket Network and Rocket Marketing to mortgage brokers across the country

Industry News
Oct 19, 2021