2015 Brings new rules for California Reverse Mortgage Borrowers
A reverse mortgage counseling cooling off period is required for all seniors applying for the FHA insured HECM Reverse Mortgage as of January 1st, 2015. A disclosure form, Important Notice to Reverse Mortgage Loan Applicant and Reverse Mortgage Worksheet Guide must be provided to all California prospective reverse mortgage borrowers and prohibits the reverse mortgage lender from accepting a reverse mortgage application until at least seven days have lapsed since receiving the reverse mortgage counseling. REQUEST DISCLOSURE AND WORKSHEET The disclosure explains the terms of the reverse mortgage and its effect on the borrower’s future needs and the requirement to consult with a counselor to discuss whether or not the reverse mortgage is right for them.
Things to consider with the new counseling requirement:
The worksheet and disclosure MUST be provided prior to counseling and signed and dated by the borrower(s).
The loan process cannot start until day 8 after counseling is received. For example, if the date of counseling is Thursday January 1st, 2015, the date we can start the loan process is Friday, January 9th, 2014.
The delay has a potential of impacting certain transactions. HECM Reverse Mortgage purchasers must be aware of this delay and their Real Estate Agents must be informed as it will have an impact on the length of the escrow. Many Realtors are anxious to open escrow immediately and this could result in having to start over if counseling rules are not followed properly.
There are many reasons borrower’s want to close quickly such as a pending foreclosure or emergency need for funds. We must follow the rules and do the best we can. As we move forward with these rules, it may be necessary to encourage the California Legislature to ease these rules so that California reverse mortgage borrowers don’t experience negative impacts as a result. The National Reverse Mortgage Lender’s Association commented: “The proposed 7 day delay is an ill-conceived and unnecessary safeguard that could exacerbate timeline issues in certain circumstances under which HECMs are commonly used, such as when the reverse mortgage is being used to save a senior’s home from foreclosure, cover emergency medical expenses, pay for home modifications or repairs, or for the purchase of a new home.”
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Maggie O'Connell 800-684-9438 firstname.lastname@example.org