Hi Nancy, As long as the bankruptcy is completely discharged, under the current guidelines, as long as no home was involved in the bankruptcy resulting in a loss, there is no effect on the HECM for purchase.However, starting on March 2nd, all loans issued with Case Numbers as of that date must qualify under the new Financial Assessment guidelines. Those guidelines state that a borrower should have 2 years since any bankruptcy and must have re-established their credit. They do allow for some leeway that the borrower can go down to a period as short as 12 months since the BK if the documentation can be provided to show that the reason for the BK was unusual and out of the borrower's control (accident, illness, etc), but even then the borrower has to be able to show that they had good credit prior to the BK and that they have re-established their credit.

Hi Theresa,Your dates for financial assessment is correct, and the guidelines for someone in Chapter 13 bankruptcy are that you have to have at least 12 months' on time payments and you must have permission from the bankruptcy court to obtain the reverse mortgage which you cannot squeeze in prior to the March 2nd deadline. You would have to have another 7 months' on-time payments before application to be able to qualify for a reverse mortgage even under the current guidelines.However, this does not mean that you will never be able to qualify. It may take a stronger equity position but HUD has indicated that borrowers who do not meet income and credit criteria may still be able to qualify for a reverse mortgage if they have the income required to meet the residual income requirements and can establish the set aside for taxes and insurance. In other words, if the borrower's income is sufficient to cover the anticipated living expenses for the region of the United States in which they live and there is enough money available to them through the reverse mortgage that the lender can set aside sufficient funds to pay their anticipated taxes and insurance over their estimated life span based on actuarial tables, borrowers may still be eligible for reverse mortgages.We have only had one industry-wide conference call with HUD about the new guidelines and their implementation thus far so there are many things we still don't know. There were many questions still left unanswered from the call so HUD still needs to iron out several issues. The basic idea is that HUD does not want to insure reverse mortgage loans for borrowers who will not be helped by the program anyway or have shown that they have a total disregard for the payment of their obligations and in either case, will default on taxes and insurance or do not have the resources to continue to live in a home, reverse mortgage or not. HUD is not trying to stop the loan for borrowers who have had some credit issues, they are trying to make certain that the program remains solvent for all borrowers. They believe, rightly or not, that these are the steps that will do so. In your case specifically, you have 7 months to be certain that all recent credit is current (and all bankruptcy payments must be made on time). Your income will be reviewed as will all borrowers at that time and you will have to meet the income requirements of the program. If you have a lot of equity in your home, you will be in a much better position as the lender will be able to establish the set-aside for the taxes and insurance which will most likely be required for borrowers with recent bankruptcies.

Hi Doug,To get an approval for a reverse mortgage for a borrower currently in Chapter 13 bankruptcy, you need to have been making on-time payments for a minimum of 12 months and have court approval to enter into the reverse mortgage transaction. since HUD has announced that they will be implementing financial assessment guidelines, most lenders will also verify that you have the financial capability to make all the payments in a timely manner, especially in the case of a purchase where additional taxes, insurance HOA dues may be incurred. If you think you may want to consider a Chapter 7 Bankruptcy later, then a reverse mortgage is not a good option for you. The reverse mortgage loan documents give the lenders the right to call the loan due and payable if you file the bankruptcy after you close the loan. The documents do not state that the loan will definitely be called, but borrowers contemplating a bankruptcy action should know that this is a reason that the loan can be called due and payable.

Hello Jennifer, When the last surviving borrower passes the heirs will have up to 6 months to refinance the loan or up to 12 months (with extensions) if they are making efforts to sell the property. There are no payments required within this timeline and interest will continue to be added to the balance each month until the loan is repaid. Read more on the reverse mortgage maturity in this post or feel free to contact us at 800-565-1722