Reverse FAQs (2024)

What is a good definition of a “Reverse Mortgage”?

It is a home loan that could allow older homeowners (62 and older) to access a portion of their home equity now in a lump sum or over time with monthly draws or a growing line of credit.

What is the difference between a 1009 and a 1003 application?

The 1009 is the required application form to be used specifically for Reverse Mortgages. The 1003 is commonly used for traditional Purchase mortgages.

For how much can I qualify?

That will depend on your age, the interest rates, and your home’s value. Older borrowers generally qualify for more funds, as well as lower interest rates.

Does FHA round up borrower ages?

Yes, but the youngest borrower must already be 62. If the closing occurs within 6 months of the youngest participant’s next birthday, FHA rounds up to the nearest age for calculating the borrower’s Principal Limit.

Can a borrower go into assisted living?

Yes, for a period of time. However, if no borrowers remain in the home after 1 year, it is considered permanently vacating (a maturity event).

Can the heirs refinance the property?

Yes. After the borrowers have passed, the heirs may seek financing of their own to refinance the home, often for the lesser of the mortgage balance or the property value.

Is there a monthly service fee?

Servicing fees are based on market conditions at the time of origination, and at this time, we do not have servicing fees on HECMs. If that changes, it will only be for new applicants.

What happens when the borrower dies?

The heirs have the opportunity to sell the home. The HECM is paid off at closing and any remaining equity becomes their inheritance. Otherwise, they can refinance, pay off, or walk away through the use of a Deed in Lieu of foreclosure.

Can we set-aside funds for repairs to be completed after closing?

No. All repairs must be completed by the seller and paid for by the seller, prior to loan closing.

Is Home Inspection Required?

Not usually, unless it is in the sales contract or the appraiser notates a need.

What fees can the seller pay?

The seller can ONLY pay their pro-rated share of taxes or HOA dues, transfer or intangible taxes, costs of repairs, and fees that are required to be paid by the seller for the seller’s benefit.

What fees may be different from traditional HECMs?

Owner’s Title Policy, Transfer Taxes, Homeowners Insurance. Also, review the purchase contract to see what additional fees will be required.

Are counselors part of the government or are they a private company?

HECM counselors usually work for non-profit organizations, but they are approved by HUD and in some cases by their state. In addition, they are required to complete training so they can advise the client on more than just HECMs.

Does the counseling have to take place before the application?

That is preferable. HUD allows the application to be taken first, but no processing can take place until the lender has a signed and dated counseling certificate. There are, however, five states that do require counseling to take place on or before the date of application. They are California, Minnesota, Tennessee, Vermont, and Rhode Island.

How long is a typical counseling session?

It depends on the agency and the borrower’s needs, but it may take up to an hour or more.

Is counseling required for HECM to HECM refinances?

In most cases – Yes. The program changes periodically and an updated counseling cert will be required. However, the borrower can waive counseling with a letter of explanation if their prior HECM closed within five years of the new application date (except in California, Massachusetts, Minnesota, North Carolina, Tennessee, Texas, and Vermont).

When does a counseling certificate expire?

The certificate expires 180 days from the day the counseling was completed. However, it is generally alright for it to expire during processing. Yet, if we have not assigned it an FHA case number by the expiration date, the borrower will need to be re-counseled.

Where do I go for counseling?

Your loan originator will generate a list based on the subject property’s zip code. It will include the 8 national agencies as well as local counselors so the borrower can meet face to face.

Who must attend counseling?

All borrowers, co-borrowers, POAs for incompetent borrowers, conservators, and guardians are required to be counseled.

Things to know about Reverse Mortgages:

Payment FAQs

• Q. When is your first mortgage payment due?
  A. Your first mortgage payment is usually due on the first day of the second month following your mortgage closing.
• Q. Should I make my second mortgage payment with Open Mortgage?
  A. It is unlikely you will owe a second payment to Open Mortgage but if you do we will contact you to discuss your payment options.
• Q. Why was my loan sold?
  A. Open Mortgage does not service loans and we sell them to investors who provide servicing.
• Q. How will I be notified if my loan is sold?
  A. You will get two notices. One will come from Open Mortgage detailing your new servicer’s name and contact information. This is called your “goodbye” letter. The other letter will come from your new servicer. This is called your “welcome” letter.
• Q. What if I already mailed my payment to Open Mortgage and my loan has sold?
  A. If you have already mailed your payment to Open Mortgage and you receive a goodbye letter from us, we will forward your payments to your new Servicer. If you would like your payment tracking information please email Servicing with your name and loan number at [email protected].
• Q. Should I worry about a late fee or credit mark if my loan is sold?
  A. If your loan has been transferred to the new servicer, but you made your payment to Open Mortgage instead of your new servicer, Open Mortgage will forward your payment to the new servicer, and no late fee will apply. This applies to payments made on or before the due date for 60 days after loan servicing has been transferred on a loan. The 60-day timeframe begins on the date of the transfer.
• Q. Why is my loan being serviced by a subservicer?
  A. A subservicer is a qualified outsourcing partner that performs all administrative, compliance, and financial servicing activities related to a mortgage loan.

In most cases, documents that verify employment, income, and assets will be required. These can include:

• Social Security Number

• Last two months of paystubs

• Past two years of W-2 forms

• Two to three months of bank statements

• One to two years of federal tax returns

• Any information regarding current debt (student loans, car loans, credit cards, etc.)