Maggie's Reverse Mortgage Blog : HECM Reverse Mortgage Financial Assessment Explained

HECM Reverse Mortgage Financial Assessment Explained

HECM Reverse Mortgage Purchase and Refi

Financial Assessment Guidelines and Documentation List

Maggie O'Connell is a Reverse Mortgage Specialist with offices in Danville, California and Reno, Nevada

offering HECM and Jumbo Reverse Mortgages in all 50 States  

 A Financial Assessment is now part of the HECM Reverse Mortgage loan process and Reverse Financial Assessment Analysis for HECM Reverse MortgagesMortgage Lenders must determine a borrower’s credit-worthiness.  It is not about a credit  or FICO score, but about  willingness and capacity of the homeowner.  We will evaluate the credit report to assess “willingness” and the borrower needs to show a history of timely installment debt payments for the previous 12 months, on-time mortgage payments for the last 12 months, no more than TWO 30-day lates in previous 24 months, no major derogatory credit on revolving accounts in the previous 12 months which includes any payments made more than 90 days after the due date, or three or more payments more than 60 days after the due date. If credit history isn’t satisfactory, payment history will require additional analysis. We will analyze delinquent accounts to determine whether late payments were based on a disregard for financial obligations, an inability to manage debt, or extenuating circumstances. If the borrower cannot demonstrate the willingness to meet his or her financial obligations and no extenuating circumstances can be documented, a Life Expectancy Set-Aside will be required.  It could be fully funded where the servicing lender makes  direct payments  of property taxes and homeowner’s insurance or Partially Funded Set-Aside where the borrower makes the payments and the lender releases the set-aside each year.

 Contact Maggie O'Connell for more information or Financial Assessment evaluation

We also evaluate “capacity” or the borrower’s ability to pay.  The reverse mortgage doesn’t require monthly payments so the income and asset requirement is much less than traditional forward mortgages.  But we must demonstrate the borrower’s ability to pay property charges and living expenses. Any kind of employment can be counted with proper documentation plus residual income from liquid assets is shown through bank statements and other documentation.

 

Below are examples of documentation HECM Reverse Mortgage borrowers will be asked to provide for the Financial Assessment evaluation:

 

Income:

       Past 30 days computerized pay stubs, to include year-to-date earnings

        Last 2 years W-2’s (2013 & 2014)

        Last 2 years Personal Federal Tax Returns - 1040’s (including all pages & all schedules) (2013 & 2014)

        (If self-employed) - Last two years’ corporate tax returns and year-to-date profit & loss statements

        (If self-employed) – Last two years 1099s

        (If K-1 entities on Schedule E) – If less than 25% owner, last two years copies of K-1s for every entity

        (If self-employed) – CPA letter stating you have been self-employed in the same business, same industry, for the last 2 years (banker will provide further direction)

        Copy of most recent Pension Award Letters

        Copy of the most recent Social Security Award Letter

        Copy of the most recent Annuity payment letters

 

Assets:

        2 months current bank and asset account statements (checking, savings, IRA, 401K, etc) including all pages (no screen prints)

 

Credit:

        Letter of Explanation for any derogitory credit and new credit inquiries supporting no new credit lines opened 

 

Identification:

        Photo ID (Driver’s license, state ID card, Military ID Card) for every borrower  

        Social Security Card

        For non-US citizens: resident alien card

Property:

        Copy of current mortgage statement for each property

                     €        Copy of real estate tax bill for each property

        Copy of leases for each property

        Copy of homeowner’s insurance bills or Agent name & phone number for each property

        (If Condo or PUD) – Copy of homeowner association dues statement OR Name & Number of HOA contact

        (If Condo) - Condominium declarations, bylaws, budgets, and copy of master insurance policy (if applicable)

        Signed flood certification for the subject property

 The Financial Assessment is an enhancement to the HECM Reverse Mortgage which further protects borrowers.  In fact, because FHA and HUD has now enhanced the product, The Federal Savings Bank has rebranded it the “Life Mortgage for Seniors".  The Life Mortgage allows older homeowners to utilize the stagnant equity in their home for additional funds in retirement and live the life they deserve!

 

Maggie O'Connell  800-489-0986

ReverseMortgageStore.com   

 

 

Comment balloon 2 commentsMaggie O'Connell • May 05 2015 06:24AM

Comments

Happy Cinco De Mayo to you!  Great post, and I hope you have a fun day too!

Posted by Kristin Johnston - REALTOR®, Giving Back With Each Home Sold! (RE/MAX Realty Center ) about 2 years ago

Thank you Kristin - Happy Cinco De Mayo!

Posted by Maggie O'Connell, Reverse Mortgage Purchase Specialist about 2 years ago

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