The FHA has just changed the seasoning requirements for liens being paid off with a Reverse Mortgage. Any existing mortgage loans or equity lines will now have to be at least 12 months old before you can use a Reverse Mortgage to pay them off. (See the excerpt from Mortgagee Letter 2014-21 below for more details.)
Please bear this new requirement in mind if you are considering placing a standard mortgage or equity line of credit on your home prior to obtaining a Reverse Mortgage. Please also pass this information on to anyone you know who may be considering a Reverse Mortgage.
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000
ASSISTANT SECRETARY FOR HOUSING
FEDERAL HOUSING COMMISSIONER
November 10, 2014
Mortgagee Letter 2014-21[1]
Seasoning Requirements for Existing Non-HECM Liens
Mortgagees may only permit the payoff of existing non-HECM liens using HECM proceeds if the liens have been in place longer for 12 months or resulted in less than $500 cash to the mortgagor, whether at closing or through cumulative draws (e.g., as with a Home Equity Line of Credit (HELOC)) prior to the date of the initial HECM loan application.
Mortgagees must review the HUD-1 from the transaction that resulted in a lien that is to be paid off using HECM proceeds, the payoff statement and, if applicable, the most recent HELOC statement or its equivalent, to ensure that the lien had either been in place for more than 12 months or that it resulted in less than $500 to the mortgagor, whether at closing or through cumulative draws. The HUD-1, payoff statement, and if applicable, most recent HELOC statement or its equivalent, must be included in the case binder.
Guidance provided in Mortgagee Letters 2006-20 and 2009-49 regarding subordinate liens resulting from state and local court judgments, judgment liens, and Federal judgments and debts, remains in effect.
[1] Excerpt from Mortgagee Letter 2014-21. The full text may be read at this link: http://portal.hud.gov/hudportal/documents/huddoc?id=14-21ml.pdf
Please bear this new requirement in mind if you are considering placing a standard mortgage or equity line of credit on your home prior to obtaining a Reverse Mortgage. Please also pass this information on to anyone you know who may be considering a Reverse Mortgage.
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000
ASSISTANT SECRETARY FOR HOUSING
FEDERAL HOUSING COMMISSIONER
November 10, 2014
Mortgagee Letter 2014-21[1]
Seasoning Requirements for Existing Non-HECM Liens
Mortgagees may only permit the payoff of existing non-HECM liens using HECM proceeds if the liens have been in place longer for 12 months or resulted in less than $500 cash to the mortgagor, whether at closing or through cumulative draws (e.g., as with a Home Equity Line of Credit (HELOC)) prior to the date of the initial HECM loan application.
Mortgagees must review the HUD-1 from the transaction that resulted in a lien that is to be paid off using HECM proceeds, the payoff statement and, if applicable, the most recent HELOC statement or its equivalent, to ensure that the lien had either been in place for more than 12 months or that it resulted in less than $500 to the mortgagor, whether at closing or through cumulative draws. The HUD-1, payoff statement, and if applicable, most recent HELOC statement or its equivalent, must be included in the case binder.
Guidance provided in Mortgagee Letters 2006-20 and 2009-49 regarding subordinate liens resulting from state and local court judgments, judgment liens, and Federal judgments and debts, remains in effect.
[1] Excerpt from Mortgagee Letter 2014-21. The full text may be read at this link: http://portal.hud.gov/hudportal/documents/huddoc?id=14-21ml.pdf
RSS Feed
