What Are They And What Should I Do?
Are you 62 years or older? Chances are you have heard about “Reverse Mortgage” (RM) sometime in the years approaching that milestone. What is it exactly and how can this mortgage program help you in your living a peaceful and worry free golden years of your life?
There are many RM loan officers out there, but it is a special niche and you must be sure that you contact and use one who is knowledgeable. As an Escrow Officer who specializes in handling these types of transactions, I work with many and know that they all do their best for their clients. However, there are many pitfalls and areas of concern that all RM transactions can be subject to, and this is the purpose of this article, to give you, the senior citizen consumer as well as all RM Loan Officers a glimpse into what tips will make your transaction a smooth and satisfying one.
But first, a little background – what is a “Reverse Mortgage”?
A “Reverse Mortgage” is a type of loan for those who are 62 years or older and insured by the Federal Housing Administration (FHA). It is also called a Home Equity Conversion Mortgage (HECM, pronounced hekm). The most salient facts of this mortgage are as follows:
- The property must be the principal residence of the 62 year or older Borrower(s)
- No monthly payments are required.
- The property taxes and insurance must be paid.
- Funds can be taken out in one lump sum or can be drawn in increments until it is used up.
- The funds draw can be used for anything.
- The loan must be paid in full 1 after the 62 year or older Borrower(s) passes away or they cease to use this property as their principal residence.
Of course, the actual Borrower and property qualifications are a little more complicated, and this is when you should contact a good RM loan officer.
But as the Escrow Officer who will open and close an RM loan, there are a few tips that I would l like to share with both Borrower and Loan Officer because making the transaction easier is in all of our best interests!
Tip #1 – COMMUNICATION
Communication between Borrowers, Loan Officers and particularly the Escrow Officer is key. Changes in contract or terms? Changes in life status? Changes in ownership? Your Escrow Officer may need additional documents from the client and the Loan Officer may have to re-disclose or re-calculate the loan figures. Let them know early to avoid any delays.
For instance, was there a private loan that was taken up right before the RM loan is going through? This loan will have to be paid off and the private lender must be contacted for the paperwork.
Another life circumstance example: Is the Borrower hospitalized? Let your Escrow Officer know ahead of time if the signing will be taken place in a hospital instead of at home.
Tip #2 – OWNERSHIP OF PROPERTY
Is the ownership of the property truly under the Borrower? Many elderly clients have owned the property for a long time. Is all as it should be? Order a preliminary report from the insuring title company and review it thoroughly. Here’s what to look for:
- Who owns the property? Is it under the Borrower’s names?
- Is the ownership under the Borrower’s Trust?
- Are there judgements, liens, other mortgages? Or is the property free and clear?