One of the first questions it seems I always get after people are comfortable with the program itself is “Okay, now what are the actual steps to getting the reverse mortgage?”.
There are a few different answers depending on to whom you’re
talking, some lenders make different requirements of borrowers and with
different time frames. But there really is no disputing the first
two steps; filling out an application/disclosure package and getting
your counseling.
Your reverse mortgage
specialist can get a package ready for you and can work with you in a
number of ways to have it reviewed and signed. Some senior
borrowers prefer to read and sign their initial packages in the
presence of a reverse mortgage specialist, whether with or without a
family member present. I actually prefer this as well, it gives me
the opportunity to answer any questions that may arise with any of the
many disclosures and be certain that nothing gets missed.
Some
borrowers prefer to do it with their family or trusted financial
advisor without the presence of a third party and therefore, prefer to
have the package sent to them to fill out and sign on their own. Either
method is fine, or whichever the borrower is more comfortable with we
will accommodate their wishes.
The other initial step which can be done before or after the package is completed for the lender, is the mandatory reverse mortgage counseling. HUD requires that every borrower attend a counseling session with a third party counselor approved by HUD.
To be certain that borrowers are not being pushed into transactions,
lenders cannot set up the counseling session or choose the counselors
for the borrowers.
The borrowers must
make their own appointment with the counselor of their choice.
The lender will supply every borrower with a list of 10 counseling
agencies; 5 of which are mandated by HUD; 1 of which should be within a
reasonable driving distance for those borrowers wishing to attend in
person and the remaining 4 will also all be HUD approved
agencies. Lenders cannot order any services which would incur a
cost for their borrowers until after they have received a copy of the
counseling certificate, signed and dated by the borrower.
After
we receive the counseling certificate, then we can begin processing the
loan in earnest! We have always pulled on-line evaluations to try to
determine if there are going to be value issues before spending a
borrower’s money. We are not appraisers and as such, cannot give
an absolute value on a home, but we can check to see if there are sale
comparables available and whether or not they support the value for
which the borrower believes their house will appraise.
If
we see potential issues, we let our borrowers know what we are seeing
in their market. We also try to look for current listings so we
can see what properties around them listed for sale but not yet sold
are selling for so we can see if there is a trend developing. In
many cases, the value may not make a huge difference, only meaning the
borrower will not receive as much money.
But
in some cases, a lower value may mean that the borrower cannot complete
the transaction and we do not wish the borrower to incur any costs if
they will not be able to obtain the loan they desire anyway. The
appraisal is then ordered with an FHA approved appraiser. The
appraiser will contact the borrower to make an appointment to visit the
home and perform the appraisal.
The
appraisal is such an important part of the reverse mortgage. The
appraiser will tell the lender not only the value, but if there are
needed repairs in the home as well. Sometimes the appraiser has a
very easy job as the property is very similar to all the other
properties in the area, there are several recent sales and the value is
easy to determine by those recent sales requiring very little
adjustment.
Sometimes it is exactly
the opposite. Sometimes the property is very unique, is in a rural
setting or there are no recent comps in the area requiring the
appraiser to use dissimilar properties or excessive adjustments.
Lenders reserve the right to order review appraisals on any property
they receive a request to lend upon and at times like these, the review
value may come in vastly different than the original appraiser’s
value.
While the appraisal is being done, the
loan specialist and processor will be busy opening an escrow, ordering
title services, obtaining all the documents required in the reverse
mortgage loan and gathering everything together as each item comes back
and building the loan file. Once everything is in, the file goes
to underwriting. If the processor is knowledgeable and does a
good job, the underwriter will only have a few conditions, or
additional things that he/she will want to see.
There
are times that the property itself or the transaction itself will
warrant additional review by the underwriter and the processor cannot
begin to second guess every question that may arise by every
underwriter, and then there are always times when underwriters think
they need something that the loan specialist or the processor felt was
very well explained to begin with. But underwriting is an art and
not a science so the trick here is to gather any underwriting
requirements together as quickly as possible so that the loan can be
funded.
After all the conditions are
cleared (the lender’s underwriter has received them and signed
them off as acceptable), the file is moved to the loan document
department and a person, usually the loan funder, will schedule a
closing with the escrow or title company. The loan documents will be
drawn for borrower signature and if the transaction is on a property
that the borrower currently owns, then there is a Right of Rescission
that must pass before the reverse mortgage lender can fund the loan.
This
is a mandatory 3 day period which does not include the day the
documents are signed, Sundays or holidays so it’s really 4 days
and sometimes longer to give the borrower one more chance to think
about it and change their mind without incurring a penalty or being
forced to close the transaction. If the borrowers do not exercise
their right to rescind the transaction, the loan is then funded and
usually recorded with the county recorder the next day…and
that’s when the senior borrower is able to get their funds.
A reverse mortgage is a complex financial
transaction. When performed by a trained specialist, it can be closed
quickly in some instances but typically takes between 30 and 40 days to
complete. We have had some very motivated borrowers who had a
tremendous need to close their transactions quickly to avoid
foreclosure, etc who we were able to accommodate and close in under two
weeks with the assistance of the borrower, appraiser, escrow and
lender.
But as lenders have gotten busier
and fewer, as new programs are introduced and products change,
timeframes can become extended with underwriting delays, especially on
some of the newer products like the reverse mortgage for
purchase. It is important to let your reverse mortgage specialist
know if you have extreme needs up front to be certain that those needs
can be planned for and accommodated accordingly.
by: Michael Branson (CEO All Reverse Mortgage Company)
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