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Reverse Mortgage Property Requirements

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Question From Larry on 12/07/2018

My father’s home was destroyed in California's Campfire. CeLink (prior Freedom Financial) is servicer and will only give payoff. Need original documents (gone in fire) to educate ourselves in regards disaster terms. Freedom Financial closed, Citibank sold loans to yet unnamed entity. CeLink refuses to give loan owner info. What do we do?

Expert Answer

Hello Larry,

Celink does not need to have the original file to be the servicer for the loan but I am still surprised that they don’t have the documents there.  I don’t know what their reasoning would be for not sharing the information with you for a contact for the Note Holder, especially if they have already admitted they don’t have the legal documents to send to you themselves. 

It could be something as crazy as a contractual arrangement between the servicer and the Note Holder that the Note Holder relies on servicer to handle the servicing and will not allow them to refer borrowers to them but that doesn’t help you if they don’t have the information you need.

There are however laws regarding notification required to borrowers when loans are sold in the secondary market.  If your loan was sold more than 30 days ago and you have not been notified as to the identity of the new loan holder, your new and old lenders may be in violation of the law. 

If no one is informing you of this information and it has been longer than 30 days, I would suggest that you contact a licensed attorney to determine your lawful remedy.  Your attorney will know what exactly you can and cannot do and will probably start with a few certified letters to the servicer and the old Note Holder reminding them that they may be violating the law, but that’s just my guess.  I cannot advise you on legal matters and your legal counsel will tell you for sure.  

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Question From Sharon M. on 11/30/2018

Hi, In answer to a previous question you stated that manufactured homes must be built after 1976, but I've been told it must be after 1990. Which is correct?

Expert Answer

Hi Sharon,

HUD Mortgagee Letter 2009-16 outlines HUD’s minimum requirements for Manufactured homes.  It states that the home must be constructed after June 15, 1976 in accordance with the Federal Manufactured Home Construction and Safety Standards, as evidenced by an affixed certification label in accordance with 24 CFR 3280.11. 

It goes on to state that any homes manufactured prior to that date or that do not contain the certification label (often referred to as the HUD tags) are not eligible.  Those are not the only minimum requirements and if you would like to read the entire HUD Mortgage Letter to see all the minimum requirements, you can find it here HUD Mortgagee Letter 2009-16.

That does not mean that the individual who quoted to you that their required build date was 1990 or later was “wrong” though.  The HUD requirements are the absolute minimum that HUD will accept for the program.  Lenders may impose additional “overlays” or guidelines/restrictions they feel are necessary in addition to the HUD guidelines. 

If you spoke with a lender who was saying that they could not place a loan on a manufactured home built before 1990, that is the date the lender feels are necessary for responsible lending.  They cannot make their guidelines less restrictive than HUD, but they can determine that they need to impose an even stricter rule and often do. 

Most reverse mortgage lenders also require that a manufactured home must be at least a doublewide in size.  HUD only stipulates that the minimum size is 400 square feet, but lenders have found this size property very difficult to market in the case of a foreclosure and therefore, most will not allow a manufactured home of this size.  So, when you look at the HUD requirements, know that these are the absolute minimum requirements that must be met. 

If your home meets all these requirements and you speak with a lender that will still not lend on your property, take heart, you may still be able to find the loan you are looking for.  It may be just a matter of shopping around to find a lender willing to accept your circumstances, so my advice is to keep looking and asking.

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Question From Samuel L. on 11/28/2018

Our condo association is not yet FHA approved, can I apply for a reverse mortgage.

Expert Answer

Hello Samuel,

Unless your home is eligible for a proprietary or private reverse mortgage, the project must be HUD/FHA-approved in order to get a reverse mortgage at this time.  The best way to determine if you are eligible for the jumbo programs is to check on our website at https://reverse.mortgage/jumbo

If you are not, then the best possible action at this time would be to check HUD’s website at https://entp.hud.gov/idapp/html/condlook.cfm and check not only to see if your project is approved, but to see if it was submitted and rejected. 

Some things for which HUD rejects project submissions are clerical or can be corrected, some cannot.  I your project was rejected for one of the reasons that would make it permanently ineligible, you should know that so that you are not hoping that status will change. 

Most private programs would deny a unit in the project for some of the same reasons as HUD would deny the project so having this information would really help to know if it’s just a matter of submitting the correct information or if there is no reasonable expectation of receiving a project approval at all.

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Question From Judy G. on 11/17/2018

I live in a condo, are there any special requirements that are required?

Expert Answer

Hello Judy,

Condominiums must be approved by HUD in order to be eligible for the HECM reverse mortgage program.  You can check on the HUD website here to see if your project has been approved.  The easiest way to use the site is to first type in your zip code and then all projects approved in your zip code will appear, then you can look for your project.  If your project is not approved, you can check to see if you can find a lender that will still work to approve projects, but most borrowers find the most success with condo approval companies if they wish to still pursue it. 

Because the process takes about 6 to 8 weeks after HUD receives all the documentation and most projects are not approved, most lenders will not undertake the condo approvals any longer.  The companies that do work with HUD approvals are specialists in this area and can tell you whether the project will meet HUD requirements before they ever submit the paperwork to HUD and they usually will not charge borrowers for projects that are not able to get a HUD approval. 

Please check back with us if you are unable to find a company to help you with condo project approval and you would like us to recommend a couple.  We are not affiliated with any companies that perform this function but usually know of several and would be happy to give you some contact information if you need it.

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Question From Hemmersley on 11/16/2018

Do HECM for purchase loans in California require earthquake insurance on the property?

Expert Answer

Good Morning,

No, earthquake insurance is not an FHA requirement for California properties.  The only special insurance required on some properties are those located in FEMA identified flood areas and then those properties must be covered by flood insurance. 

Other properties located in areas that have high winds etc. (such as Florida in Hurricane season) are not required to have “hurricane insurance”, but their policies may not exclude wind damage, or those policies would not be accepted.

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Question From Dan on 11/16/2018

A. Can a Bank force maintenance on a home or foreclose if the owner is unable to make major repairs.B. Will the bank come after the owner for the remainder loan amount if the loan value is higher then the actual sale amount.C. Will Banks ever take a lower payoff amount for a property that is clearly and significantly worth less than the loan value.

Expert Answer

Hello Dan,

Every loan has provisions in it that the borrower must reasonably maintain the home.  If the lender cannot be confident that you are at least maintaining the security for the loan, they can step in and eventually foreclose if it impairs their security.  The would not do it lightly though, no lender wants to become a property manager and will only step in it necessary. 

A reverse mortgage is a non-recourse loan which means that you can never owe more than the property is worth and the lender can never seek repayment from the borrower’s or heirs’ other assets.  Finally, the loan does have provisions for accepting payoff for less than the full amount owed.  For example, if you pass and your heirs wish to keep the home, but it is not worth the amount left owing on the loan, HUD allows them to keep the house and pay off the balance at 95% of the current value if that is less than the amount owed.  However, if you are living in the home and you just decide you want to pay off the loan and the balance is higher, HUD will not agree to a short payoff at that time. 

If you pass or need to go to a permanent assisted living, etc., the timing of the move is beyond your control.  If you are selling the property by choice or just desiring to pay off the loan for convenience, then HUD would require a full repayment because otherwise if you wait, increases in value may eliminate any shortfall.  If you walk away from the home causing a loss to HUD, the home is still the only recourse the lender must repay the obligation, but you would not be eligible for future HUD/government insured financing and there could be possible tax ramifications.  I would strongly encourage you to speak to your tax professional to get that information as I cannot give you tax or legal advice.

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Question From Laurie C. on 11/11/2018

Can A reverse mortgage be done on a manufactured home that sits on leased property?

Expert Answer

Hello Laurie,

For a manufactured home to be eligible, it has several specific requirements it must meet.  Properties on leased land (not rented space as in a park as that is ineligible) have their requirements that they also must meet.  The fact that your home is a manufactured home in and of itself does not make it ineligible with HUD for the reverse mortgage. 

However, when you overlay the two sets of requirements dealing with the unit, its placement on the land and restrictions on movement,  the appraisal requirements and everything else that must be met, the number of homes that meet all the HUD requirements are few and many lenders will not accept manufactured homes on leased land at all due to the additional risk. 

But it is possible if your home has never been on another site (was moved from the factory directly to your site and has never been relocated to another site), was manufactured after 1976, is on a permanent foundation, there are many current sales of other manufactured homes on leased land that have sold recently for the appraiser to use for comparable sales and your lease extends at least 50 years beyond the youngest borrowers’ 100th birthday or is a 99-year renewable lease and meets all other HUD requirements, you might be able to find a lender who can accommodate your request.

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Question From sharon on 11/10/2018

Does our mobile home and land qualify for a reverse mortgage?

Expert Answer

Hi Sharon,

HUD will insure reverse mortgage loans on manufactured homes provided they meet the eligibility requirements.  I can tell you that there are several specific requirements that a manufactured home must meet in order to qualify for FHA/HUD insurance.  In addition to HUD requirements, lenders often have their own requirements as well. 

The only way to know for sure whether your specific property will be eligible would be to contact a lender and let them review the property with you and look at the sales in the area.  In addition to the specific property requirements, there must be adequate recent sales in the area of similar manufactured home properties or HUD feels that the marketability and value of the home cannot be established, and the property would not be acceptable. 

Many times, a lender can make the recent sales determination from online sources, but it may require an appraisal to be sure.  You can tell from a phone call whether your home will meet HUD’s property guidelines such as date of manufacture, type of foundation, whether the home has been in another site prior to its existing location, size and type of home, the title must be real property and not personal, must have the HUD tags, etc. 

However, some things cannot be ascertained without inspections from engineers and appraisers.  But if you get past the first hurdles, at least you know you would not be spending your money on the appraisal and other inspections needlessly by taking your time and checking into the obvious issues first.

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Question From Don R. on 11/09/2018

What are the roofing standards?

Expert Answer

Hi Don,

Generally speaking, the roof has to be sound and must have a remaining life of at least two years.  If the appraiser notes that there are stains on the ceiling or other issues with the roof, or the underwriter sees excessive wear or other detrimental conditions based on visual inspection of the pictures from the appraiser, they will typically call for a roof inspection by a licensed roofer.

If the inspection comes back stating that the roof requires repair, is not water tight, or does not have a life expectancy of at least 2 more years, the lender will require repair or replacement of the roof in order to complete the loan.  If the roof certification comes back as needed, the lender may still require some repairs if there is chipping a peeling paint on the trim or facia.  

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Question From Mimi M. on 11/09/2018

I was denied an appraisal for a reverse mortgage because of non permitted work in my house, the creation of a basement apt. with kitchen and bath. Because of this I couldn't complete the process. Is there any way I can qualify for a reverse mortgage despite this issue of not having gotten permits for the addition to my home?

Expert Answer

Hello Mimi,

I’m a little puzzled.  No one can really “deny” you an appraisal.  I don’t know your circumstances but what I think may have happened is that someone, the appraiser or the originator, looked at the situation and determined that the property would not meet HUD eligibility guidelines and in an effort to keep you from paying for an appraisal on a property that would not be eligible anyway, they stopped the process before you incurred a cost. 

HUD will not insure the mortgage on a property that has an addition with a kitchen in the basement under some circumstances.  If the local zoning does not allow the basement apartment, then the property is not eligible under the HUD guidelines.  If your home is a duplex and has an unpermitted accessory dwelling addition, then it also would not be eligible for the reverse mortgage.  In either of these cases, the appraiser or lender was trying to help you out by not making you pay hundreds of dollars for an appraisal, knowing in advance your home would not meet eligibility requirements.

But let’s also talk about what you might be able to do.  If your home is a single-family home and your local zoning does not prohibit the basement apartment and all the work was done to code and in a workmanlike manner, you can talk to the municipality that approves additions in your area about what it would take to permit the addition now.  Many times, owners do not like to do this because it will sometimes require the inspector to open a wall to inspect plumbing and/or electrical, but we have had borrowers do this and the permitted addition raised their property value.  In one specific instance, the cost of the entire repair to drywall the area the inspector made them open and have the addition permitted was less than $1,000. 

You might not be so lucky though and would certainly want to get bids before you started to do anything in your basement.  If getting the addition permitted now is not an option, we have also had borrowers remove the kitchen from an unpermitted addition.  If you remove the stove and there is no kitchen, then the appraiser will give the space no value and if this space does not violate local zoning ordinances, this is also acceptable. 

Obviously, the first thing you would want to do is check with your local zoning to determine what is and is not allowed under the zoning.  If the addition is not allowed per zoning ordinance, the only option you must get the loan would be to remove the kitchen so that the basement qualifies as a finished basement only.  If your zoning municipality would allow you to permit the addition post-completion, then you would have to determine the work and expense to do so now and then make the decision whether you wanted to go through that. 

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Question From Cindy on 11/06/2018

Can you get a reverse mortage on a home that is USDA owned?

Expert Answer

Hello Cindy,

Forgive me if I sound like I am correcting you here, but I am not 100% sure I understand you and I want to be sure I answer you correctly.  Firstly, if the home is currently owned by the US Department of Agriculture, or anyone else for that matter, you can’t get a reverse mortgage on it because you don’t own it.  You can only get a reverse mortgage on a home on which you hold title or to buy that house. 

If you mean that you wish to buy a property that was acquired as a result of a foreclosed USDA loan and you would own it and want to get the reverse mortgage after you bought it, the answer is maybe.  Typically, USDA loans are offered to those living in rural areas and many rural homes will qualify for the HUD HECM program, but not all will.  The only way to know for sure if a particular property would qualify would be to let a lender research the property for you and check the sales and the property for you. 

Hopefully it will be one that they will be able to tell if it will meet all the HUD requirements without having to order the appraisal, but it is entirely possible that they would not know for sure until the appraisal had been completed in some instances.  In that case, it might be best to plan to do the purchase of the property with the HECM and make sure that you have a contingency in the purchase agreement for the approval of the financing and that way if the property does not qualify, the only expenses you would be out would be the counseling fee and the appraisal.

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Question From Lori N. on 11/05/2018

Need reverse mortgage to make home improvements, how are you expected to pass inspection with hud?

Expert Answer

Hi Lori,

It all depends on the repairs that are needed.  Some repairs are desired, but not needed to get the loan.  Some repairs are needed, and they will allow what they call a “repair set aside” and finally, there are some repairs that HUD deems too important or are health and safety issues and those are required to be completed before the loan can close. 

For the repair set aside, we must have you get bids for the completion of the work and then one and a half times that amount is set aside to complete the work. So, if the work totals $4,000, $6,000 is set aside to complete the work. 

If you have the line of credit loan, then the $2,000 left over is freed back up and you can use it after the work is completed and paid for.  However, if you choose the fixed rate option, the loan is a single draw and therefore, after the work is done, any money left over is not available to you. 

You never borrowed the funds and therefore they are not added to your balance, but you also do not have the ability to use them so if you plan on using those funds, be sure you select the line of credit program and not the fixed rate, lump sum draw. 

Finally, for those borrowers who must get work done but cannot afford to do the work and it is work that HUD will not close the loan without completion, there are other options, but I caution borrowers to be very careful when choosing this last option. There are companies who work with FHA/HUD borrowers and are familiar with the loans who will perform some work knowing they will not be paid until after the loan closes. 

You must be very careful when choosing this type of arrangement for a few reasons.  Firstly, you must be sure the loan will close before you agree to doing this as contractors will get very forceful if they are expecting payment and your reverse mortgage is not approved and cannot be approved for some reason. I have heard of people signing contract that if the loan does not close and they do not pay off the contract within certain time periods, the contract becomes a lien on the property with very high interest rates. You also need to get multiple bids.  

Those willing to wait for payment may not be the lowest bid available and you need to weigh the additional cost with the need to have the work done to determine if the added costs are worth it.  The only way you can do this is by obtaining multiple bids to see how much that extra cost will be to determine if it is worth it to you to get the work done.  

Lastly, check references.  Don’t do something just because they are available, and it seems it would work for your circumstances.  Get a list of past clients and call them to determine work quality and ease of the transaction.  The work is between you and the contractor and your lender cannot help you if you do not like something so be sure you check them out carefully.

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Question From Rose on 10/29/2018

I have 5 acres with a 1979 double wide manufactured home in very good condition had all new Windows put in 5 yrs ago and new carpet. It is not on a foundation but wheels were removed and is cable down. Would I be able to get a reversed mortgage on it?

Expert Answer

Hi Rose,

To be eligible, the home would have to be on a permanent foundation and the foundation would require an inspection by a licensed engineer.  Among other things, the manufactured home would have to meet a number of criteria including your site would have to be the first location it had been placed after leaving the factory, it and it would have to have the HUD eligibility tags on the unit.  There would need to be similar homes in the area that had sold recently that the appraiser could use for comparable sales that would both indicate the value and the marketability of the home.  HUD issued Mortgagee Letter 2009-16 in which they outline all the requirements for manufactured homes and you can review those requirements on the HUD website here https://www.hud.gov/sites/documents/09-16ML.PDF.

Please keep in mind that if you do go to the HUD website with the link above to review the letter, it refers not only to manufactured homes in relation to any one HUD program but to HUD guidelines for other programs as well.  There are things listed that do not pertain to reverse mortgages with regard to loan to values, etc.  The property issues that are delineated though for manufactured homes are universal and are HUD requirements for all programs. 

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Question From DANA I. on 10/25/2018

I am a realtor and am helping my parents explore options in terms of doing a reverse mortgage. One of their biggest concerns is that the house they live in is 100 years old and they are concerned there will be issues with the systems when it is inspected/appraised. The pipes are galvanized, the electrical is copper wiring and electric panel is in a closet and the furnaces are over 40 years old. They live in the San Francisco Bay area. Is there any way to know if these things will be issues?

Expert Answer

Hello Dana,

HUD has no prohibition on older homes, just that the systems are functional and the appraiser will be able to find similar homes to establish a value and marketability.  So as long as those systems are all operational and there are other homes of similar age that have sold that the appraiser can use to establish the value and the market acceptance of this type of home in that area, you should not have an issue.

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Question From Lisa L. on 10/19/2018

I have a reverse mortgage and my house caught fire. Is the lender responsible for any damages or replacing anything?

Expert Answer

Hi Lisa,

Your lender is a lienholder and as such, they have given you a loan that is secured by the property.  When you pledged your home as collateral for the loan, you agreed to a number of things, which among other things included maintaining the home in a reasonable manner, living in the home as your primary residence, paying your property taxes on time and always keeping adequate homeowner’s insurance on the property to replace the dwelling in the case of a fire.

The lender cannot by law require you to insure any of the contents of the home, but they do require you to insure the dwelling itself as part of the terms of the loan.  When you purchased your insurance, you chose an insurance agent and company.  Hopefully, that agent worked with you to not only supply you with a policy that would replace the dwelling or any part thereof in the instance of a fire, but also gave you adequate coverage on the contents.  It is the insurance company to whom you must look to at this time for replacement of damaged or destroyed items resulting from the fire, not the lender from whom you borrowed money.

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Question From Jandice on 10/18/2018

Can we use property for aclf with one of owners as tenant

Expert Answer

The HUD guidelines do allow you to have boarders and as long as the owner occupies the property.  You can also have a live-in caregiver living in the home.  But HUD does not allow commercial use of the property of more than 25% of the home and then only under certain circumstances.  So that would eliminate the full on use of the property as a board and care facility.

At that point, it would no longer be a single family residence with just a room or two being rented out.   It would be business usage of the home as an assisted living facility would be 100% usage of the property for that purpose even though the owner still occupied one room (the entire home including kitchen, bathrooms and common areas would be utilized for the business use and there would be no way to limit the assisted living facility to just 25% of the home).

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Question From Gary on 10/17/2018

Can one get a reverse mortgage if the house / condo is not approved for FHA?

Expert Answer

Hello Gary,

Houses do not require an advance approval but condominium projects do need to be on the FHA/HUD approval list to be eligible for the HUD HECM reverse mortgage.  There are other proprietary or private programs that may or may not work for you though if your project is not HUD-approved.  Due to the fact that they are private programs, they typically do not accept property values lower than $350,000 at this time but if your property value is at this amount or higher, you can look into the proprietary product as well as the HUD program.

There are also always rumors that HUD will revise the condo approval process (albeit those have subsided lately since HUD put in more appraisal restrictions this October and did not announce the condo approval changes as many hoped). 

There are also companies that will work directly with borrowers, many staffed with former HUD employees, that will help borrowers get the projects approved if possible and will let them know if the project cannot be approved.  Some even state that they will not charge any fees whatsoever if the project cannot be approved so this is always an option as well.  One such company is The FHA Condo Approvals Company, Inc http://fhacondosapproval.com.

A little disclaimer, we are not affiliated with this company and although we have worked with borrowers who have had good results with them in the past, we would always encourage borrowers to do their homework as we do not know their fee structure and cannot guarantee that they are the best price, etc.  Their information is being provided as an example of a company of which we are aware that provides this service and a simple internet search will show more results if you wish to look.

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Question From Julie on 10/11/2018

Can you borrow money to make repairs on your home our home is with reverse mortgage?

Expert Answer

Hi Julie,

If you have money left on your current reverse mortgage you can use that for necessary repairs.  If you are talking about a new loan, nothing in the reverse mortgage documents prohibit you from getting another loan behind the reverse mortgage but many lenders are hesitant to do it. I suggest you try a lender who specializes in FHA Title I Loans for home improvement if you need to.

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Question From Irwin on 10/08/2018

I have a reverse mortgage on my home, If get earthquake Insurance and insurance for sum of money while home is being repaired. Does the reverse mortgage company have any right to my payouts

Expert Answer

Hello Irwin,

Just as the same with any other loan and any other insurance policy, the reverse mortgage lender is named on the policy as “additional insured”.  This does not give them access to your money per se, but what it does do is it gives the lender the opportunity to verify that any needed repairs are completed on the home before all the funds are released.

For example, if a home suffers $200,000 damage, and the borrower has only $50,000 remaining equity, the lender of a reverse mortgage or any other loan for that matter, must as the additional insured sign off on the claim payments as the work is completed so that homeowners don’t decide they would rather just take off with the $200,000 rather than getting the property repaired. 

This is actually true of most repairs even if they don’t exceed the equity in the home.  Unfortunately, some property owners would choose to let the home deteriorate rather than making needed repairs and so the only way a lender can be certain the insurance proceeds are actually used to repair the home are to do an inspection to verify the completion of the repairs before signing off the claim check.  As I said, this is common practice for all lenders to protect their interest in a property, not just with reverse mortgages.

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Question From Darrel H. on 10/06/2018

Can I get a reverse mortgage on a new home that is built on rural land?

Expert Answer

Hello Darrel,

Yes you can as long as the property meets HUD’s requirements.  HUD has some additional requirements for properties located on rural land that include the proximity to other sales, the maximum amount of the value that can be in the land itself versus the improvements, the zoning of the property, etc.  For instance, if the land is zoned agricultural, it would not meet the HUD requirement of being residential only and would not be eligible or if it was on a very large parcel with a small home making the majority of the value in the land, that would also not meet HUD’s requirements.  You could easily find out if your property would qualify by having us take a look at the property by contacting us on our website at https://reverse.mortgage/calculator

The chances are very good that we will be able to see with online tools whether or not the property meets the HUD definitions but unfortunately, the only way to be 100% sure is when we get the appraisal from a HUD approved appraiser.  We can tell a lot based on the online information and most of the time we know if the property is going to work because we know the zoning, the size, have a good idea of the sales in the area but until the appraiser actually visits the home and does the report, we just can’t tell if there are any hidden factors that could render the home ineligible.  An example of some of these items that we have run into in rural areas are ineligible water sources, proximity to hazards, etc. that we can’t get from online resources.

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Question From Beth G. on 10/05/2018

Mom has reverse mortgage on mobile home. Lots of repairs are needed including hole in roof and she can't afford repairs. Property is in great condition/location. Should we try to short sale, maybe even to family so repairs can be afforded, or walk away?

Expert Answer

Hi Beth,

There are so many avenues and I would never advise anyone to walk away if there was any way to recoup some of their money. I would first check into local assistance programs to see if there is one available that would help your mom with the repairs. After all, if she can get the help she needs for the required repairs, where else can she find a place to live for the rest of her life with no mortgage or rent payments?

If you feel like there is no way to keep the property habitable and you have looked into any possible assistance programs in her area and those are not available, I would suggest you seek the advice of a local real estate professional to see if there is any equity to be kept on a sale. You just never know until you look at all the alternatives and there is no recourse on the reverse mortgage so she would not owe anything if she just allowed the lender to foreclose, but then she also would not gain anything either.

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Question From Gary S on 9/30/2018

My mom owns a house that is under a reverse mortgage, this summer the roof was damaged from a hailstorm she has received a settlement check from her homeowners insurance my question is does a licensed roofing contractor have to do the work or can i do it I do construction work and I have done re roofs in the past.

Expert Answer

You need to check with your servicer to find out what they will require. They may need a roof certificate from a licenced roofing contractor or they may want another inspection but you should check before you do the work.

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Question From Dana on 9/07/2018

How often you need to replace the roof on a house bought with reverse mortgage?

Expert Answer

Hello Dana,

There is no timeframe requirement regarding the replacement of your roof.  The only provision the reverse mortgage has is that you maintain your home in a reasonable manner.  If the roof is sound and not leaking and you don’t want to replace it, you do not have to.  If however it is leaking and allowing mold to grow or water to reach the structure of the home, it becomes a health and safety hazard and allows undue wear and tear on the structure as water reaches the rest of the building.

This would not be considered maintaining the home in a reasonable manner and you would be expected to replace or repair the leaking roof as needed.  Whether or not the roof of your home ever has to be replaced depends entirely on the roof itself.  If it’s doing the intended job with no issues, there is no time limit that you must adhere to in order to replace the roof just because you reached that arbitrary timeframe.

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Question From Nadine on 9/06/2018

Can a reverse mortgage be used to build an adu? If I don't live in the adu but down the road I want to downsize, can I move into it then?

Expert Answer

Hello Nadine,

Yes you can use the reverse mortgage proceeds to improve your property and that includes the addition of an accessory dwelling unit such as a guest home, cassita, mother-in-law’s unit, etc.  As long as you still live on the premises in the future, you would still be in compliance with the terms of the loan.

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Question From Sue on 9/05/2018

I realize that rules may change in the next two years, but based on what is in place today, I have 2 questions. Husband and I both on house title. Husband is 4 years younger. In two years when I turn 62 we are considering a reverse mortgage. 1) Home is paid in full - $300K. It is located on the Mohave Indian Reservation so we own the house and lease the land. Can we get an RM in this situation? 2) If we get the RM when I turn 62, based on what I'm reading here, there is no way to add my husband to the RM when he turns 62?

Expert Answer

Hello Sue,

HUD has provisions for insuring loans on leased land but the leases are subject to review and must meet HUD requirements.  I’m afraid I could not possibly tell you whether or not your particular lease is acceptable without a full review of the lease and that often includes a legal review of the documents.

The second part of your question is easier.  If you choose to obtain the reverse mortgage before your husband is 62 years of age (assuming your lease qualifies), he would be included as an “eligible non-borrowing spouse”.  This would allow him to stay in the home for life without making a mortgage payment just the same as you, but since he would not be a borrower on the loan, if anything happened to you and you were no longer living in the home, he would not have access to the loan.

In other words, if there was still a balance left on the line and something happened to you, he could still live in the home for life, but he would not be able to access any of the remaining funds on the line and he could not simply be added to the loan when he turned 62.  If you wanted to have a reverse mortgage that included him after that time, you would have to refinance your loan with a new loan that included him in the new terms.

We actually see this question or some variation of it quite often.  It would be great if this was possible but would defeat the program safeguards.  If later spouses could simply be added or younger spouses could be added later, there really would not be any reason to exclude them in the first place.

This would also tend to eliminate all repayment expectations for the loans and could endanger the program for all.  With no way to quantify the repayments or the risks, there would be no way to protect the MIP fund for all borrowers and also the loans would not be palatable for investors of the mortgage backed securities who now provide the funding for borrowers when they buy the securities.  In short, there really is a reason that the restrictions regarding subsequent borrowers are placed on the program and without them, the program would probably not exist.

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Question From Charles on 9/05/2018

I have a six family home that I live in that has no mortgage can I get a reverse mortgage I am 70 years old?

Expert Answer

Hello Charles,

Unfortunately no.  HUD through FHA, insures loans for the HECM reverse mortgage program on eligible 1 -4 family properties only. I don’t know which is better for your circumstances, the rents you collect on the property you are in or the money you would receive from a reverse mortgage but if the greater benefit would be from being able to use the funds from the loan, you could sell your existing property and purchase a new 1-4 family home using a reverse mortgage which would free up those funds.

I know a lot of folks are happy with their current homes and have no desire to move and so I don’t know if this is something you would even consider but it is an option.   

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Question From Pati on 8/26/2018

Are reverse morgage holders required to obtain earthquake and flood insurance?

Expert Answer

Hello Pati,

Earthquake insurance is not required, it is an option borrowers decide if they want or not.  Flood insurance is determined by FEMA (Federal Emergency Management Agency) maps.  If your home is located in a FEMA designated flood area, then flood insurance would be required as a condition of the loan.  If you are not located in a flood zone, then you still can opt for flood insurance if you wish, but it is not required.

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Question From Gail D. on 8/21/2018

I have a condo with no mortgage. What is the lowest appraisal value it can have to be approved for a reverse mortgage?

Expert Answer

Hi Gail,

It’s not really a matter of the lowest appraised value and still be eligible for the loan, it’s more a matter of at what value does it no longer make sense to get the loan.  There are fixed costs and HUD limits the amount you can get at closing and in the first 12 months so when you have a property where the cost to get the loan exceeds a certain percentage of the available loan proceeds and in some cases, the amount of the loan itself, most lenders will not participate in something that could be deemed predatory lending.

The condo project has to be HUD approved and if it is, then there really is no minimum but you have to look at the costs of the loan, especially in some parts of the country, and decide if this is a viable loan product for you. 

You can check to see if your condo is HUD approved by checking the HUD website at this link: https://entp.hud.gov/idapp/html/condlook.cfm.  If your project is HUD approved, then you can visit our website to determine if the loan makes sense for you at https://reverse.mortgage/calculator.  If the project is not approved, we would not even be able to do a loan in that project at this time and you could try checking with a company that works with borrowers to see if it is possible to get the project approved. 

Again, depending on the value o f the home and the anticipated loan amount, you may find that the reverse mortgage may not be the most advantageous program but then again, it might work well for your needs.  The only way to know for sure is to check it out and there is no cost to check!

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Question From Kathy on 8/17/2018

Can I get a reverse mortgage on manufactured home built in 1988? I owe the home with up to date payed taxes and insurance. Also, I have a court approved bankruptcy from 2014, no debt and a credit score of 750. Thank you

Expert Answer

Hi Kathy,

HUD has some very definite requirements for reverse mortgages on manufactured homes that you can find here. As for the credit, as long as the bankruptcy is either completely discharged now or you have been meeting your obligations on it as agreed and you have been current on your taxes and insurance on the home and other obligations (which with a 750 credit score it sounds as though you have) and you have a reasonable explanation for the cause of the bankruptcy for circumstances beyond your control, you should be fine and probably won’t have to get the set aside to pay your taxes and insurance.  If there are other issues, the Life expectancy Set Aside may still be required and I can’t say for sure without all the information.

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Question From Tracy S. on 8/17/2018

My Mom has a reverse mortgage. She has a detached garage. Can she convert the garage to a bedroom unit, move in the conversion and rent the main house for rental income? And does it have to be permitted?

Expert Answer

Hello Tracy,

As long as mom occupies the home as her primary residence and does not use the property for any unlawful purposes, she is fine under the terms of her existing reverse mortgage.  If she was trying to get a new reverse mortgage, it might be a different matter.  Let me also just add that if the addition is not permitted, you may run into issues regarding the legal use of the property. 

Does the zoning allow for the garage conversion?  As a practical matter, if mom converts the garage without the permits, is she opening herself up to possible violations, substandard or hazardous conditions or might she actually lower her value later?  All things you should consider and if it is possible to get the conversion permitted, I would strongly recommend it. The permitting and inspection process really protects the homeowner from many issues later.

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Question From Kathy G. on 8/17/2018

I have a reverse mortgage on a home with 5 acres. I am trying to get a line of credit for my house on five acres but it won't appraise. I actually live on 11.5 acres. Does Hud have rules about larger tracts of land.

Expert Answer

Hi Kathy,

HUD does have different ways to treat different properties due to the fact that they want to insure loans on residential property, consisting of one parcel, not being used for agricultural or commercial purposes or raw acreage.  I’m not sure what you mean but it sounds to me like you are saying that you have more than one parcel of land, one that is 5 acres and includes the dwelling and an additional 6.5 acres that is not included in the reverse mortgaged property, is that correct?

That might help you when you sell the home and you might even be able to sell the 6.5 acre parcel separately, but HUD does not consider the value of excess acreage when insuring a residential loan.  Therefore there would be no benefit to joining the lots (as far as the reverse mortgage is concerned anyway).  If the value cannot be established, it actually could be ineligible for HUD insured financing if the property is not consistent with others in the area.

If the entire parcel is 11.5 acres and you are telling me that the lender only considered 5 acres in the appraisal and value at the time the loan was made, it could be because they determined that the typical sites were 5 acres in size in your area and there were insufficient sales to support a value conclusion for the larger lot.  5 acres has been used as a benchmark many times in the past to determine that there was not excess value in the land rather than the improvements.

Again, HUD is interested in insuring loans on residential properties against the risk of default so that lenders will make those loans (reverse and forward) available to borrowers and it would be hard to say without first seeing your appraisal and other properties in the area what your circumstances are.

Also See: https://reverse.mortgage/acreage

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Question From David B. on 8/09/2018

My Dad's property has a non-conforming guest house on his property being occupied by his son and family. My Dad lives in his primary residence. He would like to apply for a reverse mortgage. Must he subdivide the guesthouse from the property before he can be considered for a reverse mortgage?

Expert Answer

Hi David,

Not necessarily but there is a good chance that the property may not meet HUD property requirements.  When you say “non-conforming”, how is it non-conforming?  Is it allowed by the zoning laws?  Was it built to code not using permits but the guest house would comply and would have been able to be permitted if they had gotten them?  Is it up to all standards and built in a workmanlike manner?  Are there other properties that have sold with guest houses in the area that can be used for sale comparables on the appraisal?

If it is allowed by the zoning, he may still be able to get the loan if the home is built in a workmanlike manner and there are other sales available to support the value.  If not, then it might take a subdivision to eliminate the additional home but before you do that, make certain that the removal of the land and house do not make the property so different from other homes in the area that the appraiser can no longer find similar sales.

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Question From Carol B. on 8/04/2018

I own a free standing home with no mortgage in a gated community. The community is not FHA insured. Can I get a reverse mortgage and if so where?

Expert Answer

Hi Carol,

Only condominiums must receive HUD approval on the community or project.  If the home is free standing and you own the lot, chances are very good that you won’t have to worry about the project needing approval.  Having said that, there are some communities that even though they are not condo’s are not eligible for HUD insurance due to some of the provisions in the CC&R’s with regard to future sales and/or mandatory obligations and we can let you know pretty quickly after we receive your project documents.

Please feel free to try our calculator and you can start things there to see if we can help you!

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Question From Sophia W. on 8/03/2018

Ed Bruton has a private property next to the commercial property. Can we get a deal on that?

Expert Answer

Hi Sophia,

I have to assume you are asking if a property next to a commercial property is eligible for a reverse mortgage?  That would depend on a number of factors.  The property that Ed owns would have to meet HUD requirements and many properties with commercial influence or with commercial near them will still meet HUD’s minimum requirements as long as the property itself is residential, the commercial property does not have any serious negative effects on the property on which you are trying to place the reverse mortgage and the appraiser can locate adequate sales with similar commercial influence to arrive at a reasonable value. 

The commercial property can’t be something like a gas station within 500 feet of the subject property as HUD will not allow that.  But if your home is zoned residential and if the commercial property is something like a small community store and there are plenty of other homes in the area with the same influence that have sold to support marketability and value, the chances are pretty good you could get the loan.  It would be difficult if not impossible to give you a definitive yes without having all the information.

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Question From Gerold B. on 8/01/2018

I am 75 years old, and have had a reverse mortgage on my townhouse for about 8 years. Everything is paid: taxes, insurance, HOA fees. With my latest monthly statement from the reverse servicing agent, a form was included asking the name, address, phone no., and contact person for my HOA. This has me really concerned. The HOA here is aggressive, and is presided over by a grounds manager who is a bully with an anger-management problem. He has a long enemies list and I'm on it. the last thing I want is for the reverse agent and the HOA to be chatting about me. Am I legally required to provide the requested information?

Expert Answer

Hello Gerald,

This is a little bit tougher to answer than a lot of questions we receive because we can’t speak for all lenders but let me do my best.  This is a question that has come up many times recently though so it appears that more and more folks are having difficulty with their homeowner-run HOA boards.  Firstly, the lender has a right to verify that you are current on all your homeowner obligations as outlined and agreed to by you in your legal documents, including your HOA payments.  They can’t do anything you did not authorize them in your legal docs and I am not aware of any form that states you authorize them to disclose your personal financial information to your neighbors.

If your HOA is managed by other unit owners and not managed by a professional management company, how do you get around their legitimate need to know about the payment of dues and your desire to have your personal business kept personal?  I think you should contact the lender and tell them exactly what you have told us.  That the association is not managed by a professional association but rather by a unit owner in the project.  That your neighbor is hostile and you do not want to have them know any of your personal financial information.  That you realize that, among other obligations, your reverse mortgage requires you to always pay your HOA dues in a timely manner and that you hereby attest that those dues are paid in full and always will be paid on time.  That you are willing to provide any reasonable documentation the lender would need for a spot check, (a statement if you could get one from the HOA and forward showing all payments made), reasonable requests for cancelled checks, etc. but that you were not granting them authorization to contact the unit owners and disclosure your personal and private financial information as would be the case if they contacted the HOA and disclosed the existence of your reverse mortgage. 

I think if you were professional and polite about your request, the lender would be willing to work with you to determine some alternative documentation that would take care of their needs while maintaining your financial privacy.  Keep in mind this might mean you have to send copies of checks or a statement you obtain from the HOA regarding the status of your dues, but that should make things much better than having them contact your neighboring unit owner to request information from them directly.

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Question From Frank on 7/30/2018

With a reverse mortgage who pays for the upkeep of the reverse mortgaged property, especially for major repairs?

Expert Answer

Hello Frank,

The reverse mortgage is a loan.  Just as with other loans, the property is still owned by the borrower.  The owner of the property or the borrower, is still responsible for the maintenance and repairs on the home.  The owner can still sell the home at any time and pay the loan off with no prepayment penalty and all equity in the home still belongs to the borrower/owner.  This would include both small and major repairs, just as borrowers would have with any other loan.

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Question From Yvonne on 7/29/2018

If you have a reverse mortgage and later on the road you want to start a business does that affect care reverse mortgage.

Expert Answer

Hello Yvonne,

A reverse mortgage does not affect your ability to run a business.  There are some restrictions on the use of the property with any home loan so if you wanted to convert the property for instance and put a gasoline station in, that would be prohibited but otherwise, the loan has no bearing on you, personally.

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Question From Jane Doe on 7/27/2018

Reverse mortgage lender having trouble defining whether I have a townhouse or a condo. It's been appraised as a townhouse. However our hoa association is called a condo association. It is def. a townhouse, I bought it as a townhouse and the lender is having problems defining it as a townhouse . The loan docs all say townhouse, but some legal docs are calling it a condo. It is three stories, semi attached, and I take care of the front courtyard and back deck. There are approx, 200 units in this community same as mine. We are not FHA approved. What to do? I don't want to put my name on this for privacy reasons.

Expert Answer

Good Afternoon “Jane”,

We can usually make the ultimate determination from the legal description.  The tricky part comes in when the project may have the legal description of a single family planned unit development or townhome but then the property has common amenities that HUD requires us to treat as a condominium project.  But the determining factor is not what the HOA calls the project, the lender should make the distinction based on the legal description and the amenities in line with HUD requirements. We would be ha happy to help having extensive experience with these legal descriptions if you'd like to call in. (800) 565-1722, be sure to ask for Caren or Michael. 

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Question From Tim on 7/23/2018

Is it necessary to provide a reverse mortgage lender permission to talk to the Home Owners Association?

Expert Answer

Hi Tim,

Not sure how you mean this.  Some HOA's may require a written authorization from the borrowers to work with the lender and if you are asking the lender to supply information about your loan to the HOA for some reason, they would need your written authorization to do so due to financial privacy laws.   But I can't think off the top of my head what the lender would need to tell your HOA about your loan.

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Question From Joann B. on 7/22/2018

What about prefab homes?

Expert Answer

Hi Joann,

Some prefab homes are fine if they meet HUD parameters and some are put together on the premises and are considered almost the same as stick built homes. It all depends on the home itself and the sales in the area to determine the marketability of the housing type.

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Question From Eva L. on 7/11/2018

My residence was bought back in Dec 1979 it was recorded as a "condo" we don't have an HOA or ever paid homeowners association fee, neither my neighbors due to the recording as a condo the mortgage lender which I need to get a loan almost at the end of the closing told me due to the fact that is listed as a Condo I cannot get an FHA loan, what can I do, I'm sick and I need the loan please help?

Expert Answer

Hello Eva,

The only thing that can make your home a condo or a detached single family residence is the legal description of the property.  It either has the legal description of a condominium or not.  If it is a condominium, HUD has certain requirements the home must meet due to the fact that homeowners are not in complete control of their own property and the fractional ownership creates additional risk that HUD wants to assess and approve before they will insure any loan on a condo. 

I don’t know to what extent the lender reviewed the legal description of the home.  They should have known what they were dealing with as soon as they received a preliminary title report and that happens very early on in the process.  If they were aware of the condo designation, perhaps they were trying to have the home approved through HUD still, perhaps not.

I would suggest that you contact a condo project approval company that works only with project approvals and can tell you if the home even meets HUD guidelines.  They will usually be able to review your documents and let you know even before you incur any costs if HUD will insure the property based on the fact that they are in many cases former HUD employees who have done this for HUD.  

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Question From Betty V. on 7/10/2018

I have a reverse mortgage for the last 6 years. I live in a gated community and pay hoa fees. All of a sudden a get a letter from the reverse mortgage servicing dept and they want the ability to contact my hoa association/home owner ins where I send my maintenance payments to better service my loan - legally can they do that - originally when I signed all the doc via Hud/FHA and the original mortgage company nothing was said like this this is my personal info to the HOA they are just people on the board they know none of my business and legally I do not have to tell them what kind of loan I have and if I give this info to the servicing dept then the HOA would know my private business.

Expert Answer

Hello Betty,

The lender does have the right to verify that the property is adequately insured, but your question is a valid one.  There is fine line between the lender’s need to know and your right to privacy in this case.  I think the first step would be to contact the lender to determine why they are asking for this information.  It could be something as simple as the fact that the insurance company has changed and the lender is no longer receiving notices of coverage, the servicing of the loan may have changed to a new servicer and they may be looking to update the loss payee on the policy or any number of things that they are just trying to resolve without having to get you involved.  You may find it easier to determine what they are looking for and just help get them the required information and it might be an easy issue to rectify.

If they do not have something this easy to fix and they just want the information and you are adamant about not wanting the lender to contact your HOA, I would suggest the following but cannot guarantee its success.  Firstly, do you live in a condominium project?  I ask this because typically if the HOA pays your individual homeowner’s insurance it is because your units are all attached.  If so, I would suggest that you go to the HUD approved condo list and see if your project is still on the approved list.  You can find that list here: https://entp.hud.gov/idapp/html/condlook.cfm.  The easiest way to look up your project is to start by entering your zip code.  Be sure the correct county and state are populated in the boxes on the page and then click on the “Send” tab at the bottom of the page.  This should bring up all HUD approved projects in your zip code.  If it comes back with no results, take the zip code out and type in just the state, city and county and then you will see all projects, approved, expired and rejected in your city. 

This in and of itself will not resolve your issue.  However, the next step will depend on whether or not your project is still in an approved status with HUD.  If your project is approved and has not expired (far right box on the grid), I would suggest that you write a letter to your servicer and inform them that you have complied with all reverse mortgage requirements when you got the loan, for the last 6 years, and continue to do so at this time.  Furthermore that your project is still approved by HUD so they do not have an issue with the insurance in the project or it would not be on their approved list.  And finally, notify your lender that since your board is made up of unit owners and not professionally managed, you do not wish to have them involved in your personal financial business and do not feel that the lender has the right after 6 years to change the terms of your loan to require you to open up your financial privacy to your neighbors.  Tell them that you would stringently oppose any such action and would seek any action available rather than waive your rights to financial privacy.

As I previously stated though, your lender does have the right under the legal documents to determine that the property is adequately insured.  Usually communication is the key to any good relationship and that works with your lender as well.  If you talk to the servicer, you may find that it would be easy to find a remedy that would work for both of you and that is certainly where I would start.

Also See: https://reverse.mortgage/condominiums-shocking-truth

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Question From Rebecca on 7/02/2018

My aunt has five acres on a reverse mortgage? Can we board out to horses we have facilities but all our horses have passed from age leaving room to board out? Can we get a business license etc and be within the 25% rule?

Expert Answer

Hi Rebecca,

If your Aunt already has her reverse mortgage and she is not planning on altering her home to change to a business usage, she would not have a problem boarding horses on the property. 

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Question From John H. on 7/02/2018

Can a reverse mortgage company be held responsible for knowingly falsifying documents in order to complete the guidelines for which a loan can be made? A couple was given a home equity conversion mortgage even though the residence did not qualify. The property is a 3 apartment dwelling and has an established business building the land has 3 address. 3025 Apt.a,b,c and 3025-1/2 is the business. Now, if there was an inspection this must have been noted. The couple got the loan and continued to collect rent on the units. Now they're dead the deed was given to the son and daughter. The rmc is acting quickly to take the home. There are 3 family's living here and a big business. The company took advantage of an old couple who had no idea what they were doing. The reverse mortgage company has been ask and notified by lawyer yet they can produce no records of this couple ever getting a cent from them. How can a clerk file the papers for a Sheriffs auction what gives them the authorization to do this there just clerks. What are the options of recourse to stop this shady company Best regards need help quick!

Expert Answer

Hi John,

I would be really hesitant to tell you that the company did or did not do anything illegal or that they falsified anything to close the loan based solely on the information you have supplied.  If as you say, the couple who obtained the loan have passed, there is no way to know what they did or did not do, what they did or did not know, during the procurement of the loan and the company who now owns and services the loan may not even be the same company that originated it.  Does the son and daughter have any of the original paperwork?

They could easily see if mom and dad got any money just by looking at the closing statement from the transaction.  The original borrowers may never have gotten a cent from the transaction, but their loan may have been used to pay off an existing loan so that they had not more payments on the property for as long as they lived in the home, allowing then to collect and live on the rent from the other units without making mortgage payments, so that may also not have been a factor.  I just don’t know.

Having said all that, if the heirs are concerned that the lender has not acted legally in the closing of the loan or are somehow violating the law in the calling of the loan now that the borrowers no longer live in the home as their primary residence, they can certainly seek legal counsel and petition the courts to stop the foreclosure sale if they have grounds to do so.  You need to speak with a licensed attorney in the area as they will be able to review the circumstances and would be more than capable of seeking injunction to stop the proceedings if the grounds exist.

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Question From Michael A. on 6/29/2018

I have a duplex and I live in one half and I rent out the other half. Can I do a reverse mortgage and still receive the rental income from the other unit?

Expert Answer

Hello Michael,

The reverse mortgage would not affect you receiving the rent from the second unit of the duplex.  As long as the property is a legal 1 - 4 unit property meeting HUD parameters and you do occupy one of the units as your primary residence, it is acceptable under the program and any rental income from the secondary unit(s) is your income, and no one else’s.  As is the case with all multiple unit properties, there would be a 1 – 4 family rider on the Deed of Trust that allows the lender to step in and collect the rents to pay taxes and insurance if you ever stop paying these expenses, but as I stated, these riders are present on all FHA, and conventional loans as well.

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Question From Mary M. on 6/26/2018

My friend died and had a reverse mortgage. Her daughter asked me to donate her things to charity. Are the appliances in the deal or can I give them away ?

Expert Answer

Hi Mary,

Free standing appliances such as free-standing refrigerators, washer/dryers, and counter top microwaves are considered personal property and you can do with them what you wish.  Appliances that are “built-in” which typically include dishwashers, ranges and refrigerators or microwaves that are built in to the cupboards are considered real property and should not be taken as they are part of the property.

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Question From Antionette S. on 6/24/2018

My grandmother has a reverse mortgage. I would like to get a Tiny house and live in the backyard. She told me that it would affect her RM and that I can’t do that and I am going to need permits. Is that true? This is a self sufficient home with full solar panels and it’s own plumbing system and water supply.

Expert Answer

Hello Antionette,

As long as the zoning allows for it, that would not be a problem. The only real risk you run is if you place anything on the property that would create a possible problem with the local zoning (city or county or whoever regulates) that could cause them to take some sort of punitive action.

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Question From Dianna L. on 6/19/2018

I have a reverse mortgage I got years ago and now I need emergency roof repair. Are there any options for me as a senior citizen. I don’t have any of the reverse mortgage money left, it was only for $5000. Does federal programs disqualify me for grants if I have a reverse mortgage?

Expert Answer

Hello Dianna,

One should not have anything to do with the other.  I wish you the best in your search.

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Question From on 6/16/2018

Can the reverse mortgage on my primary residence even though I have a rental unit on the same property

Expert Answer

Hello,

The HUD HECM (Home Equity Conversion Mortgage) reverse mortgage program is eligible for 1 – 4 family homes that meet HUD requirements.  As long as the rental is a legal unit and meets HUD parameters and there are ample sales of similar properties for the appraiser to use to determine the value, yes, you can get a reverse mortgage on a property with up to four units when you occupy one as your primary residence.

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Question From Dave on 6/09/2018

I'm buying a home through HUD that was a foreclosed reverse mortgage. The appraised price seems high to me relative to other condos in the complex. What happens if it doesn't meet bank appraisal? Will HUD negotiate to lower the asking price or just allow me out of the deal?

Expert Answer

Hi Dave,

A reverse mortgage is just a loan.  If they could put the lien on without the loan, they can do it with the loan.  The reverse mortgage will not shield or hurt the borrower in any way when it comes to other creditors’ rights.  If you are concerned about a specific scenario, you really should seek legal counsel.

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Question From PHIL B. on 6/04/2018

We live in a manufactured home park, the home being 5 years old. We also own our land, we are a condo association. The home is worth approx $750,000 to $800,000. Mortgage is $370,000. I am 71 and my wife is 68. File BK in 2015, discharged on 4/27/15. Need to all of our options and specifics. Have heard many many opinions. The community is FHA Approved. Thank you!

Expert Answer

Hi Phil,

If the project is FHA approved, it is possible to get a reverse mortgage, but the other parameters you laid out for me in your question make me think that you will have other challenges as well.  As long as the project is FHA approved, lender can do the FHA-insured loan in the project (although it still has to meet the lenders criteria as well) but I’m more concerned with your other statements.  Firstly, with the age of the younger borrower, based on the HUD maximum lending limit of $679,650, you probably will not receive a Principal Limit that would be high enough to pay off your outstanding loan amount of $370,000.

When you add to that the credit issues you describe (recent BK), there is a very real possibility that you may be required to have a Life Expectancy Set Aside (LESA or “Lee-sah”) for payment of taxes and insurance as a condition of the loan under HUD’s financial assessment guidelines.  If this is the case, that amount would be determined based on the amount of your taxes and your insurance costs and could run quite high.  Your shortfall just based on the ages and the HUD calculator, without even taking the LESA into effect, would probably be in excess of $40,000 and with your taxes and insurance, could be over $100,000, depending on the cost.

If bringing in this much money is not an option to live in the home payment-free for the life of both of you, you do have another option.  Since you said the home may be valued as high as $800,000, if you had any thoughts of selling and downsizing a bit, a purchase of a home worth $679,650 or less with a new reverse mortgage may be just what you are looking for.  Since you don’t get any more money on the reverse mortgage for a property valued at $800,000 than you do one valued at $679,650, the difference could go toward paying down your housing debt and might mean that you no longer find yourself short to close.

I know many people like their homes and don’t want to move, but if this is something you’ve been considering anyway because your current home no longer meets your needs, is too far from family or for whatever reasons, the reverse mortgage purchase may be a viable option whereas the refinance may not.  If you would like to see how either loan would work in your case, I would invite you to visit me at my online calculator.

I will be happy to run-time scenarios for both a refinance of your current home and a purchase of a new home and show you how the numbers look with no obligation and no hassles.  Then if you want to talk to a loan officer to discuss the LESA, that is completely up to you but no one will be pressuring you and I would be happy to give you the facts and information you need to make an informed decision.

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Question From Brian on 6/01/2018

If you have a reverse mortgage can you run a business out of your home?

Expert Answer

Hello Brian,

HUD allows borrowers to have home-based businesses under specific conditions. The home has to be zoned residential and must be primarily used for that purpose. No more than 25% of the total property may be used for the business purpose. This is where a lot of people get caught up. If you want to be an accountant and offer tax services and use one room that accounts for 20% of the home as a home office preparing tax returns, this would meet HUD guidelines. However, if you wanted to breed dogs and had 25% of the lot covered with kennels, HUD would deem that the dogs could not be confined solely to the kennel area at all times and therefore, the 25% rule could not be ensured. Likewise, if you wanted to run a bed and breakfast from your home, guests are never confined to just the bedrooms using the bathrooms, kitchens and other part of the house. This is specifically stated in the HUD manual when they outline that transient use (hotel, bed and breakfast, etc) of the home is not allowed.

Other than that, some business activities themselves would not qualify. The HUD rules will not allow FHA to insure a loan on which the secured property contains a gas tank or if other hazardous conditions exist within so many feet of the home. If your home based business is a convenience store with a single pump gas station on the far side of the lot, your property would not be eligible (and yes, we have had that exact request). If you are unsure about your specific case, please feel free to send us your specific circumstances and we can better answer your questions.

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Question From Patricia on 5/29/2018

My father recently passed away and we are looking into a reverse mortgage for the house as my mother still lives there. My question is, the property has two houses on it, one that she lives in and one that my sister lives in. Will she still qualify for reverse mortgage if there are two houses on the property?

Expert Answer

Hello Patricia,

HUD will allow the reverse mortgage on 1 – 4 family properties that meet HUD requirements.  It is next to impossible for me to tell you if your mom’s property will meet HUD’s requirements from your description.  As long as the home is zoned for 2 units, your mom’s house meets the zoning requirements and there are other properties available for the appraiser to use for sales comparisons in the appraisal process, it would meet the HUD requirements.  Then you get into a myriad of “what if” possibilities that may or may not be allowed if any of these conditions are not met.  If the second home is not permitted, if the property is not currently zoned for 2 houses but once was and can or cannot be rebuilt as it is, if the second home is considered an accessory dwelling unit (ADU) or a full second home or of what type of construction the second home is constructed.  All of these factors will go into the decision as to whether or not the property will meet the HUD requirements. 

If you let the lender know exactly what the property is before the loan is started, they can probably pull a title profile and get some information on sales comparables.  Unfortunately, the only way to know for absolute certain what the final outcome will be is to order an appraisal and to see how the appraiser designates the property and does the inspection and the only way for the lender to do that is for you to formally apply and attend the required counseling. 

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Question From Sue on 5/18/2018

My neighbor has a reverse mortgage, she wraps her house in plastic, blocks common property, assaults neighbors, $7k behind in hoa, doesn’t follow by-laws and realtor doesn’t want to list my home because it will reduce the value of my property. Can I call her bank and have them repossess her home?

Expert Answer

Hello Sue,

It sounds like the lender may be ready to do something already if they have to protect their security due to delinquent HOA dues and possibly taxes and or insurance but if not, you can't have them initiate proceedings because you do not like the way she keeps her home. It sounds like you also have plenty of cause to have the HOA exercise their right to enforce the CC&R's but that would be a matter for the HOA.  The lender can only  enforce certain provisions of the legal documents of the loan if the borrower defaults on promises made in the Note, Deed of Trust and Security Agreement and being a good neighbor is not one of them.

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Question From Mark on 5/18/2018

Hello my primary residence is free and clear of mortgage .i rent my home on some weekends on homeaway.com average about 8 days per month will hud allow this or is it up to the underwriter

Expert Answer

Hi Mark,

Home Away, AirBnb, VRBO and other temporary rentals are not allowed by HUD under the reverse mortgage program.  HUD does not allow transient or hotel usage of the property under the program and HUD’s Santa Ana Home Ownership Center has recently confirmed to us that these programs fit into this non-allowable category.

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Question From Katie on 5/18/2018

Is it possible for me to use money from my Reverse Mortgage to construct a second story ADU (granny flat) onto my house? My intention would be to rent it for additional income. Would it make any difference which of the two units I lived in? For example, could I instead live in the smaller ADU and rent out the larger original house downstairs?

Expert Answer

Hello Katie,

Once you closed your loan and were living in the property, as long as you continued to meet the loan requirements (occupied the property, paid the taxes and insurance on time and maintained the home in a reasonable manner), the lender would not be able to keep you from adding to the property and living in the smaller unit on-site.

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Question From Mary B. on 5/14/2018

As the trustee of paid off home can I get a reverse mortgage? I am the domestic partner with life time access. I am responsible for maintenance but don't have the funds to replace a roof.

Expert Answer
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Question From Bob S. on 5/11/2018

My condo association is no longer FHA approved. Can I individually access a reverse mortgage under new FHA/HUD rules, or must the entire association have to re-apply?

Expert Answer

Hi Bob,

Unfortunately there is still no spot approval process that allows a condo to receive an FHA-Insured loan in a project that is not HUD approved.  There had been talk that it was coming, but HUD never reintroduced the spot approval program as was much anticipated.

There are companies that can help you determine if your project can be approved if you are interested in trying. 

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Question From David S. on 5/09/2018

Can a reverse mortgage be obtained if you own a mobile home but lease the property?

Expert Answer

Hello David,

No, that would not be eligible.  You must also own the land to which the manufactured home is permanently affixed.

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Question From John S. on 5/05/2018

Doesn't my condo need to be HUD or some agency certified before I can qualify ??

Expert Answer

Hi John,

Yes, all condominium projects must be approved by HUD for you to get the HUD HECM reverse mortgage. We have more information on that process and companies who can help with that process if your project is not currently approved here

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Question From Jerry T. on 4/30/2018

I have read that older mobile homes are not eligable for a reverse morgage. i understand why. My home is not your average mobile home because it has been completely rebuilt with quality material such as 3/4 inch ply wood floors instead of particle board all the joist have been strengthened. It has 1/2 inch sheet rock instead of paneling. all walls are insulated. along with the ceilling and floors. It has been appraised for more than it sold for new. I want to know if ther is any chance that it could qualify for a loan?

Expert Answer

Hello Jerry,

HUD does not have any provision for exceptions to the manufactured home requirements for specific upgrades.  If you do not meet their age and other requirements, I am aware of no ability to request a special consideration for building upgrades instead.

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Question From Brad on 4/30/2018

How is the current value of the property determined? Is it from property tax evaluation or an independent appraisal?

Expert Answer

All properties are valued by using an appraisal by an FHA/HUD approved appraiser.  Under the HUD Appraiser Independence Rules, neither you nor your originator get to choose the individual appraiser and the licensed individual is usually chosen by an Appraisal Management company to ensure that the appraiser is under no undue stress to “hit a value” higher or lower, than current market for the home.

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Question From David on 4/28/2018

Can we get a reverse mortgage loan on a manufactured home.?

Expert Answer

There are definitely more restrictions and requirements of manufactured homes about which we have written extensively and you can find the particulars here but the short answer is yes, subject to HUD’s requirements you can do a reverse mortgage on eligible manufactured homes.

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Question From Dante V. on 4/27/2018

Is a reverse mortgage eligible if the property is located within an association that is not FDA approved?

Expert Answer

That depends on whether you plan to eat it or try to get it insured.  The FDA does not approve associations, but then again, they are also not involved in any way with reverse mortgages (unless we have another Democratically controlled congress after November and then all bets are off).  ;>)

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Question From Vicki on 4/24/2018

California requires a home to have a 'permanent heat source' before funding a loan. Is a baseboard heater considered a permanent heat source? My home was appraised for a HECM on Jan. 9, 2018, + logged on Jan. 23, 2018. Is it correct that this appraisal expires on May 9, 2018 — 4 months later? If I get a 2nd appraisal after May 9, will the new appraiser have any way to see the Jan. 9 appraisal?

Expert Answer

Hello Vicki, 

HUD requires that all homes have a permanent heat source in order to do a reverse mortgage, some areas of CA may also require one but HUD does for sure.  A baseboard heater may and may not be considered a permanent source depending on the heater itself and the appraiser’s comments.  Some baseboard heaters are installed and would be considered permanent sources and some are no more than a free-standing portable, plug in unit that would be considered a temporary heat source that would not qualify.  The answer to that question would depend on the specific unit that you have and how the appraiser viewed and commented on it.

The appraisal normally expires after 120 days, but there are a couple of exceptions to this.  If there file has already been to underwriting and the property is not in a declining market, the underwriter can grant an extension for up to 30 days to allow for closing at their discretion.  Yes there are sites on which existing appraisals can be viewed by other appraisers and HUD will have a copy of both appraisals that were completed, but the new appraiser should complete his or her appraisal based on the information that is available at the time he/she completes the assignment.  It should make no difference what any other appraiser’s estimate of value was prior to their estimate as each appraisal is a snapshot in time taking the information available to him/her into consideration to derive at a value as of that date.  An appraisal is only an opinion of value.  A professional opinion based on education and training, yes, but only an opinion that the appraiser makes by analyzing the best information available at the time.

In other words, the new appraiser will have to look at the property and compare to current sales activity of similar homes and determine a value at that time and not consider what another appraiser felt the value may have been at some other time in the past.  The new appraiser will consider any sales information regarding the subject property as well as sales in the area at the time of the appraisal in their analysis.  It would be the recent sales activity that would dictate a value conclusion for the appraiser not previous opinions of other appraisers.  That’s not to say that they may not reach the same or similar conclusions.  If the sales activity in your area at the time of the 2nd appraisal is very similar, the outcome might also be similar.  If there are other homes that have sold more recently at the time, are closer or that the second appraiser feels more closely resemble your home and therefore are a better indicator of a probable value, the second appraisal could be higher (or even lower for that matter – remember it’s an opinion). 

I hope this doesn’t muddy the water more than it helps but the answers aren’t always black and white when it comes to appraisals.  I wish you the best and if we can be of assistance, please don’t hesitate to give us a call.

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Question From Michael B. on 4/20/2018

Do you do a mortgage on single wide mobile home?

Expert Answer

Hello Michael,

We have written extensively on the requirements for Modular homes and you can also find HUD’s complete guidelines on their website but you have to remember that lenders start with HUD guidelines and may have additional requirements.  For example, HUD states that the unit must have been built on or after June 15, 1976 but most lenders, due to investor restrictions, are limiting the units to no older than built in 1990 at this time.  Also, HUD has a minimum of 400 square feet but again, due to the salability of the loans, most lenders will not accept a single wide home and per HUD guidelines and lender rules as well, require at least 3 recent sales comparables on units to adequately verify the acceptance and marketability of manufactured homes.  This often becomes extremely difficult especially in the case of smaller manufactured homes.  If there are not a lot of recent sales of similarly sized homes, then any attempt to determine the actual value is purely subjective.  Lenders and HUD will allow appraisers to make objective adjustments with other sales that support the adjustments they make. 

For example, some sale with and some without pools can verify how much an appraiser should allot for the addition of the absence of a pool in the home he is appraising.  If there are not 3 sales of other single wide manufactured homes that have sold in the area in the last 6 months, the appraiser has nothing to compare the home to in order to come to a logical conclusion of value.  There would also be no way to determine how long it would take to sell such a home in that market. This inability to determine value, marketability and the past experience with losses on this type of homes has led many lenders to limit the product.

I included links to the HUD information below that can all be found on the HUD website but remember, this is just the start.  HUD simply gives the minimum guidelines and they rely on lenders to do a prudent job of lending and reserve the right not to insure any loan if they believe the lender has not done a good job of supporting the value or marketability of the property. 

Guidelines

https://www.hud.gov/sites/documents/41502C8HSGH.PDF

FAQ’s

https://www.hud.gov/program_offices/housing/rmra/mhs/faqs

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Question From Vickie C. on 4/18/2018

Hello, I am in the process of trying to get a reverse mortgage. I just have one question. I am needing a reverse mortgage for house repairs, like replacing a roof that is 31 years old and other repairs. Bought the house brand new in April, 1987. It has been paid off since 2008. No liens. I just had it appraised for $157.000. This reverse mortgage company will pay my insurance and taxes for life and I will get about $17,000 for roof and other repairs. According to this company and FHA rules I have to have the roof and other repairs done before I can get the reverse mortgage loan, which I do not have the money. When I started this I thought I'd get the loan and then have the roof and repairs done. If I had the money I wouldn't need the loan. I am behind in taxes one year and do not have insurance. My question is, does your company operate the same way? I need money first , then repairs. I have tried to be as detailed as possible. If you need any more information, please let me know. I already have all the information I need so all I want you to do is answer my question. please. Thank you for your time and help. Vickie

Expert Answer

Hi Vickie,

The reason for the set aside to pay the taxes or the LESA (Life Expectancy Set Aside) is because of the tax delinquency and that is a HUD requirement.  There are a few instances in which HUD allows an additional set aside to complete the repairs on the roof but that would be for 1.5 times the cost of the repairs and is often hard to do if the total set aside would be more than the amount you have left in your line of credit.

There are other options though.  I don’t know where you are located, but there are some contracting companies who are familiar with reverse mortgages who are willing to complete the work and get paid after the loan is closed.  You need to check the company out very carefully though and compare their bid to others.  It would not surprise me if they charged a little more because they have to wait to be paid, but you want to be sure they are still competitive and not taking advantage of the situation.  You and your lender should check your area to see if there is a roofing contractor willing to replace your roof on this basis on terms acceptable to you.

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Question From Sue H. on 4/13/2018

What type of home will qualify for a reverse mortgage?

Expert Answer

Hi Sue,

Any 1-4 family home that meets the HUD program requirements.  It would be very difficult for me to tell you specifically what properties and exclusions in a blog post as HUD has an appraisal manual that is over 400 pages long.  It’s probably easier to say that the home must be owner occupied residential (not industrial, agricultural, or commercially zoned property) then let you ask specific questions about specific properties that may have different requirements or exclusions.

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Question From Deborah on 3/30/2018

I own a legal two family home with a mortgage. We are looking into a reverse mortgage and not sure if it is the right thing to do. Can we still collect the rental income on the apartment upstairs when you are in a reverse mortgage and can you do a reverse mortgage if you have a mortgage out on the home?

Expert Answer

Hi Deborah,

Borrowers age 62 and over can obtain a reverse mortgage on properties that are 1 – 4 family units that comply with HUD eligibility requirements.  It sounds like your property does meet the HUD requirements but only a review of the actual home could say for sure on that count.  As the owner, the rental income is yours and so yes, you would still collect it and keep it.  The last issue is the current mortgage.  Any liens or mortgages on the home would have to be paid in full with the reverse mortgage so that the reverse mortgage was the only loan on the property at closing.  In other words, if your current mortgage totals $100,000 and your reverse mortgage benefit amount is $150,000, you would have to pay off the current mortgage and that would leave you with $50,000 to use as you wish and of course, you would have no mortgage payment for as long as you lived in the home.

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Question From Viki D. on 3/25/2018

Has HUD brought back spot approvals for condos?

Expert Answer

Hi Vicki,

Sadly, no.  HUD threw us all a curveball last September when they issued their Final Rule that did not include a condo spot approval revision and went on to announce the massive changes to the program that cut everything back.  The entire industry was anxiously awaiting the news of the spot approval process or a similar program as hints had been released that it was coming and then not only was that not announced, but HUD pulled the reins in sharply on the HECM program.  At this time, there is no anticipated release date of a spot condo approval process but we are still hopeful. 

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Question From GREGORY H. on 3/23/2018

My father's home was reverse mortgaged. He died on 3/27 17, the one year anniversary days away. The lender (NOVAD) and HUD were immediately notified and paperwork provided as requested to "walk away" from the home. Still "in process" the director of the homeowners association told me that I, as trustee of Dad's revocable living trust must pay the monthly association dues and an additional $300 special assessment last year. I am not nor have ever been an owner of the home nor listed on the deed. Only owner residents have right to vote, though the director told me how she wanted me to vote. Initially stating that if the vote passed, I would not be liable for the $300 additional assessment, then told to pay or face interest, penalties and legal action if not paid. Last week when I balked at the on going dues payment, the director admitted not knowing the rules as to who paid: me, HUD or no one. Shouldn't she be the one to provide me with the code specified the answer to this question rather than me provide for her? Can you tell me the section where I might find this section? If not liable, am I entitled to a reimbursement of fees paid at her direction since Dad's death? I assumed she was being honest with me in that this is her business should know the law. She made it clear last week that she does not. PLEASE advise me and where I might find this ruling among the thousands of HUD paper. I am sincerely grateful for your assistance as my wife and I are on fixed incomes. I want to do what is right, but do not want to be foolish with our limited funds. Thank you.Greg

Expert Answer

Hi Greg,

Unfortunately, I can’t be of much help because this is a legal question regarding the HOA and you as the heir and not necessarily a question about reverse mortgages.  I can tell you though that this is a recurring theme I hear quite often and I would highly suggest you contact an attorney in the area where the home is located and if the cost is prohibitive, there are usually legal aid opportunities and paralegal options as well for those on tight budgets.  I think a lot of this will depend on your decision as to what you plan to do with the home but the attorney will have to tell you for certain.  If you plan to keep the home or sell it, then you would have to make sure it is free of any liens or encumbrances.  If the loan and property are being foreclosed by the lender and you do not intend to try to retain the property, then it might be a totally different situation.

The reverse mortgage loan is a non-recourse loan.  In other words, the lender cannot look to any other assets of the estate to repay the obligation.  Not being an attorney or licensed to give you legal advice, I cannot tell you whether or not the HOA dues are the same.  I cannot tell you if the HOA only has the option of placing a lien on the unit and if so, would make no difference to you if you did not intend to keep the home or sell it or if they have any other way to place a claim on other estate assets.  This is what the attorney will advise.  The one thing I will tell you though is that I certainly would NOT take the word of the director of the HOA! 

The Director’s interest is best served by getting you to pay so that they do not have deficits in their budget, even more so if they are also a homeowner in the project.  You need to know what the law says the obligations of the estate are because you never signed anything agreeing to pay for one cent on the loan or to the HOA.  Once the foreclosure is completed, the lender will own it and so you need to know if the HOA has any rights to seek repayment from estate assets (if there are any).  It probably would be well worth the attorney visit.

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Question From Dante V. on 3/21/2018

My home is appraised at $372,000, would I be able to get a proprietary reverse mortgage? Or must it be valued at at least $500,000?

Expert Answer

Hello Dante,

There typically is no $500,000 minimum for the proprietary programs.  You just have to be sure that it makes sense for your circumstances and in the past, it has not for most borrowers.  The rates of the proprietary programs are higher in most instances and the amount you receive as a percentage of the home’s value is lower.  At this time, most proprietary or jumbo programs that will accept condominiums at HUD value limits also require them to be on HUD’s approved list

Having said all that, there is some talk of new programs in the not to distant future that may not still make this requirement.  Talk of new programs is constantly in the air and we in the industry would welcome some new, more-inclusive programs and with HUD’s recent pull-back on their guidelines it finally looks like there is a door opening for other products.  Please keep checking back.

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Question From Julie C. on 3/15/2018

Property located at 19315 Casper Drive, Spring, TX 77373- I live next door to this property. There was an eighty year old lady named Lola Lovelle Salinas living in this home. During Harvey we were evacuated and our homes received about four feet of water. In speaking with Ms. Salinas during this time she informed me she did a reverse mortgage and was going to abandon the home. No one has been back to her house since that time. It has not been touched in over six months. I can only imagine what is growing inside that house. She had at least four feet of water and it stayed inside the house for four days before receding. My husband has been paying to have the yard mowed and we have started a contract with Orkin due to the rats coming from her house. I have been trying for months to locate the secured lender to inform them of the situation because I am certain she has not.

Expert Answer

Hi Julie,

Have you contacted your local city?  If the home represents a health and safety hazard, they will file a legal notice that the lender will receive and they can take legal action on receipt of that notice.  Borrowers have up to 12 months for a temporary absence from the home pursuant to the terms of the mortgage, before the lender can legally do anything as long as they are in compliance with the terms of the mortgage.  Allowing the property to decay and become uninhabitable does not comply with the terms of the loan.  They would move to protect their security once notified of substandard conditions by the city through a recorded notice.  I would suggest that you contact the local city manager or whichever department in your area that oversees this type of issue as they may red tag the home or file other notices that would get the lender’s immediate attention.

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Question From Laurel W. on 3/12/2018

Can I parcel out land that is leased to a farmer? We make no money from the crops. We get $600.00 once a year for the rent of the land. We have been advised to have a survey to separate into 2 parcels in order to qualify for a reverse mortgage. Thank you

Expert Answer

Hi Laurel,

According to the HUD property requirements, the property to be used for a reverse mortgage must be residential.  They do not insure loans on agricultural property, businesses, commercial, industrial, etc.  Property being used for agricultural/business purpose (leased to another to grow crops) would not be eligible and so if you did do a property split and there are plenty of sales to support the value of just the parcel with the residence, you would be eligible for the reverse mortgage loan on that parcel.  I would check to be sure that there are sales available that would be similar to the new property you created before doing expending the time and expense to change your property though.  For example, if you split your parcel into two parcels, one being 1 acre and one being 24 acres intending to get the reverse mortgage on the 1 acre parcel with the residence on it but now there are no similar sales available because everything in the area that has sold also contains 25 or more acres, you could also have trouble supporting the salability of the home under the new parameters and might also make the home ineligible for the loan.  HUD will require the appraiser to find sales of “like” or “comparable” properties and if plenty of those exist based on the new size of the lot after you split it into 2 parcels, then you would most likely be fine. 

I also always advise homeowners to contact an attorney knowledgeable in such matters because some areas will tax a residence with agriculture completely differently than they will a home without it.  You should know what the total affect on the property and taxes will be before you do any changes to the lot.

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Question From Gary W. on 3/11/2018

My mother-in-law needs to know if her daughter can store some furniture in her garage for a few months. Is this acceptable?

Expert Answer

Hi Gary,

The house belongs to your mother in law.  As long as she lives there as her primary residence, pays the taxes and insurance on time and maintains the property in a reasonable manner, it is her home and she can do as she pleases.  There are no restrictions that would prevent her from placing furniture in her garage.

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Question From Gina on 3/01/2018

Hello,My grandmother has a reverse mortgage... Her home has a 2 car garage attached. She’d like to renovate the garage into additional rooms on the house since she doesn’t use the garage. Is this possible - or does it have to remain a garage?

Expert Answer

Hi Gina,

It’s not so much a matter of just whether or not she uses the garage as much as if the conversion is legal and done in a workmanlike manner.  The home belongs to your grandmother and as long as she doesn’t do any illegal conversions or put something on the home that hurts the value or makes it a health and safety hazard, she can make alterations/additions to the home.  For example, if she wanted to convert the garage but planned to have your uncles do the work and not pull permits and the local zoning states that every home must have a garage (and in many places they do), then it would be an illegal conversion and she would run the risk of having her loan called due and payable.  If she had the work completed by someone who didn’t know what they were doing and the conversion resulted in health and safety hazards, that also could create problems.  But if the zoning ordinances just say that you have to have “off-street parking” and she still has two spaces in the drive way or elsewhere to meet the requirement and had the work permitted or done in a workmanlike manner with no issues, she would be fine. 

HUD allows borrowers to rent a portion of their home but they do not allow for transient usage such as hotel, bed and breakfast, etc. 

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Question From Linda on 1/27/2018

I have a reverse mortgage on my house and live in it. Can I run a business out of my house?

Expert Answer

Hi Linda,

HUD allows you to run a business out of the home as long as the business is ancillary to being your primary residence.  The way they determine this is that no more than 25% of the residence may be used for business purposes.  This can sometimes be a bit tricky depending on the type of business.  If you have a business as a CPA and you use one of your rooms as an office, it is really easy to calculate and you can tell that you are typically not using more than 25% of the property for business purposes.  Where the lines get blurred is with something like a B&B where the guests may only stay in one area when they sleep and you might contend that are is 25% or less of the home, but then the kitchen, bathrooms and common areas are also most often used as well.  Another example was a couple who boarded and trained dogs.  The kennels spanned about 25% of the total grounds but they also trained and walked the dogs and therefore were using a much greater percentage of the total overall for business purposes.  If your business is legal, is allowed by the zoning of the property and there is a positive identification of the area used by the business of no greater than 25% of the property, you should have no problems.

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Question From Joseph C. on 1/07/2018

CAN A REVERSE MORTGAGE BE GRANTED ON A HOUSE THAT HAS AN UNPERMITTED ADDITION?

Expert Answer

Hi Joseph,

In many instances you can still get the reverse mortgage even though the property has an unpermitted addition.  The addition has to be constructed in a workmanlike manner with no hazards or detriment to the property.  The appraiser will have to comment that the addition conforms to the original structure and the addition cannot be illegal or contrary to zoning or local ordinance.  There should be sales comparables available to support the marketability of the structure as changed – just because a home is larger or has additional amenities does not make it more appealing in all neighborhoods and the appraiser must support the fact that the addition does not detract from the value by supplying sales with similar changes. 

One example I can think of off the top of my head was a property on which a homeowner added more than twice the square footage with a very well-constructed addition for extended family.  He could not get permits as the city would not allow the construction of an additional 2500 square feet on his small lot and he proceeded with the addition anyway.  The addition was done very well, with high grade materials, but since it was an illegal addition and if the city became aware of the addition it would have to be removed, we could not do the reverse mortgage loan on the property.   There were also no homes of this size, age and utility anywhere in the area and the borrower’s opinion of value was based on some brand new homes located far away which could not be used to determine the value of his 48 year old home in its location.  All things you have to keep in mind.

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Question From Pete on 11/29/2017

Can I purchase a lot that is part of a reverse morgage? What steps can be taken to buy the property?

Expert Answer

Hi Pete,

If the lot belongs to a parcel covered by any loan, reverse mortgage or otherwise, the borrower would have to approach the lender to determine the possibility of a lot split and a partial reconveyance of the released portion.  The value would have to be determined minus the portion that the borrower is requesting the lender to release from the existing loan and then the determination would be made as to whether or not the value would require the borrower to lower (pay down) the balance of the existing loan in order to achieve.  In some cases, it might require the borrower to do a complete refinance of the existing loan with the new parcel parameters in order to achieve this.

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Question From Toni H. on 11/26/2017

What happens when my house catches on fire and I had it in reverse mortgage?

Expert Answer

Hi Toni,

Just the same as with any home that has a loan on it.  There is an insurance claim, the home is repaired and the check is made payable to the homeowner and the lender so that there is an assurance that the repairs are made.

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Question From Thomas & Kathy on 11/20/2017

Does anyone in Texas do reverse mortgage loans when your home & improvements are on a lake lot in a hunting & fishing associaton?

Expert Answer

Good Afternoon,

I’m sorry, I can’t give you a yes or no answer for this.  HUD guidelines do allow for some commercial usage under very strict parameters but I can’t say if your hunting and fishing association rules and requirements would meet those specifications.  You would have to approach the lender with the complete details so that they could review your circumstances and give you an answer.  

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Question From Lauren on 11/16/2017

I own a condo not fha approved but need a reverse mortgage.. any lender out there?

Expert Answer

Hi Lauren,

If the value is over $636,150 there are other options of which I am aware but if the value is within the HUD limits, even the proprietary programs require that the project be FHA-approved.

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Question From James A. on 11/11/2017

Thinking of a reverse mortgage. My home has a unpermitted bath. You would not know it. All works and looks great. I bought the house 22 yrs ago from the guy that built the house. I know he did not get a permit. Can I get a reverse mortgage? Thanks

Expert Answer

Hi James,

HUD does not require permits.  The addition must be completed in a workmanlike manner, must conform to the original dwelling and must conform to the neighborhood (which the appraiser will comment on).  The unpermitted addition must comply with all local ordinance and zoning laws and if the local laws/ordinances require a permit, then the permit would be required.  Lastly, if a portion of the structure was changed to allow for the unpermitted bath that now makes the remaining structure no longer comply with local laws, the structure would have to be changed to be in compliance with local laws.

This last case could possibly happen if the original owners converted the garage to bathroom so that the home no longer had a garage but the local ordinance required each home to have a minimum or one garage space.  In that case, the laws may not require the permit for the addition/change and it may have been done in a workmanlike manner (and if you can’t tell it’s an addition, it obviously conforms to the original dwelling), but if the local zoning requires every house to have at least one garage space and it no longer does, it would not qualify for HUD insured financing until it was converted back to a garage or a suitable garage was added.

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Question From Cheryl on 11/10/2017

My husband wants to get a reverse mortgage. We need new carpet or just new flooring, new blinds, painting outside and new furniture. He’s thinking all that must be done before we can get the loan. That is one of the main reasons we need the loan. What all must be done to our home to be approved? We have 5 acres.

Expert Answer

Hi Cheryl,

HUD does not require that the home is completely updated and furniture is never a consideration since that is personal property anyway.  The painting could be an issue because if there is chipping and peeling paint, that would need to be repaired and flooring would depend on whether it was worn, or if it was bad enough to where there was a health and safety hazard.  Faded or older paint does not need to be replaced and an older carpet is ok as long as it does not have spots that are worn through that create hazards.  However, please keep in mind that the condition of your home will be considered when the appraiser determines your value.  If you are looking at other houses in your area that all sold for $200,000 for example that had recently been upgraded, then your appraisal will be lower than those sales prices.  The appraiser will make adjustments for the differences in your home to the other sales in the area, up or down.

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Question From Joan H. on 11/02/2017

I own a condo that is not FHA approved. I have been waiting almost a year for "single unit approval" or "spot approval" to begin. Can you tell me when it will be starting? I need a reverse mortgage right away or I will lose my home. Thank you

Expert Answer

Hi Joan,

I wish I could give you a firm timeframe.  HUD released information and asked for public comments in the past which indicated this would be available before September and then we were hit with the HUD surprise program changes that severely cut back program benefits that no one anticipated.  I honestly can’t say if the condo approval changes were placed on hold to implement the other massive changes that HUD made and that they are still coming soon or relatively soon, or if they made the decision to delay any further changes to the condominium program entirely.  There have been no further rumblings and no further indications.

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Question From Donna on 10/31/2017

If you have an existing reverse mortgage and now want to build a unit over the top of the garage and the city allows it can we do that?

Expert Answer

Hi Donna,

You own the home and the reverse mortgage is just a loan secured by the property.  There are no provisions against you making any legal improvements of your choice to the home as long as they are done in a workmanlike manner and do not jeopardize the security for the loan.

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Question From Kathleen F. on 10/27/2017

Housing Cooperatives: Would you please update your 2012 advice about the availability of reverse mortgages for housing cooperatives? If co-ops are still excluded from federal insurance program, are any private companies offering other options? Do you know which advocacy groups are working to get co-ops included? Or the most current arguments pro and con (from the government's perspective).

Expert Answer

Hi Kathleen,

Co-ops are still not approved but recently Dr. Carson was pressed on this issue by the Representatives from New York and said he would review the matter.  I don’t think this particular issue was even on his radar prior to that encounter so I think that is a positive sign.  

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Question From Jeff P. on 10/26/2017

My mom has a reverse mortgage. She has 3 acres her neighbor is buying an acre she has already gotten the partial release from the mortgage company. There is a 2nd loan showing with hud/fha as a security for her 1st loan do we need to have them approve a partial release also? The mortgage company is telling me no that they will handle what needs to be done after the sale and they receive their 20%

Expert Answer

All reverse mortgages have both a first and a second trust deed filed, the first to the lender and the second to HUD to cover any expenses that HUD may have to forward on the borrower’s behalf.  If the lender has already secured a partial reconveyance to allow for the sale of the portion of the land, they are working in conjunction with HUD and will have already obtained HUD’s approval or they would not be able to give you their partial release.  They should have no problem filing the partial reconveyance for both Deeds for your mom.

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Question From Tina on 10/24/2017

How long does the 62 year old client have to be on title before they can get a reverse mortgage ?

Expert Answer

Hi Tina,

There is no minimum time requirement for time on title.  I will tell you though that the circumstances have to make sense.  For example, if the borrower has just been deeded on to the title and has not owned it in the past and did not purchase the home, that would raise red flags and the underwriter would be compelled to find out the circumstances of the transfer.  However, if you bought or inherited a property, there is no minimum time of ownership required before you can get a reverse mortgage and in fact, you can even use the program to buy the property which has no ownership at the time the borrower receives the loan - they are using the loan to obtain the property.

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Question From Mae W. on 10/18/2017

Can you qualify for a reverse mortgage if you own a condominium? What is the rule regarding home association fees?

Expert Answer

Good Afternoon Mae,

The condo project has to be on HUD's approved list for us to be able to do a reverse mortgage on a unit located in the project.  You can look on the HUD website here: https://entp.hud.gov/idapp/html/condlook.cfm and the easiest way is to just type in your zip code on the first page and then check to see if your project is listed and if so, it must be in an approved status.

It's hard to say what rule you are referring to regarding HOA fees but if you would like to email or call us, we would be happy to discuss any specific questions you might have.

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Question From Ken E. on 10/17/2017

What if you took out a permit to add an extra bedroom- so the permit is still on going- could you apply for a reverse Mortgage?

Expert Answer

Hi Ken,

If the work is started but not yet complete, you can apply, but the loan may not close until the work has been finished.  The house would be appraised with the new improvements and you would also be allowed to use any new value increases that would result from the improvements in your loan request.  The appraiser would have to do a reinspection of the property and certify that the property was completed and that the value was now consistent with the completion as per plans and specifications.

If there is a permit that has been issued but on which no work has started, then you can apply and do not have to begin the work as long as the work does not start before the close of the loan.  The appraiser would appraise the home in its current state and give it a value without the new permitted improvements and you could close the loan with the permit outstanding before any work begins. 

However, I would caution you that while the existence of a permit is usually not an issue if there is no work started, it could require some explanation and the work to be completed would have to be consistent with your home and neighborhood.  In your question, you talk about a bedroom addition.  If your home has 2 bedrooms and there are two and three bedroom homes in your neighborhood this would not be an issue at all.  If you home has 6 bedrooms in a neighborhood with 2 and 3 bedrooms, this could be cause for some alarm as it appears the home is to be used for a different purpose.  If the permit was for a different purpose, for example to change the home to some sort of commercial usage in a mixed use area, that would cause a problem.

So in the example you cite, it really does depend on whether the work has begun or not and whether or not the work is consistent with the neighborhood improvements as to what other documentation you may have to provide.

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Question From Dianne M. on 10/08/2017

If I decide to give up my house with a reverse mortgage, di I have to make any repairs?

Expert Answer

Hi Dianne,

I'm not sure what you are asking so I really don't want to give you any bad information.  If you can sell your home, even with an "as is" sale and get something from the sale, that would be the best option for you if you are planning on leaving the home.

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Question From Andrzej K. on 10/06/2017

I signed a lease one we could go for a rental house, and the homeowner has a second home on the property that he resides in. Is he legally allowed to have a reverse mortgage on the property when we are under a lease for the apartment

Expert Answer

HUD allows 2 - 4 unit properties under the reverse mortgage program and the borrower does have to occupy one of the units.  If it is just two single family residences on a lot or a single family home with an accessory dwelling unit, it would depend on a number of factors as to whether or not it meets HUD guidelines.  The owner would have to contact a Loan Officer and let them go over his specific circumstances to see if he meets the requirements for the program if it is anything other than a straight duplex situation with the second unit being rented.

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Question From Alan K. on 10/02/2017

The FHA approval for my condo development expired some time ago and the HOA Board decided then not to renew it. Can I get a HECM loan without this approval?

Expert Answer

Hi Alan,

The project must be approved in order to get a HUD/FHA-insured reverse mortgage (HECM).  You can work with a company yourself to get the project approved and all the HOA has to do is supply any required documentation that you do not have as well as complete and sign the certification letter.  

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Question From Sarah W. on 8/10/2017

My husband and I want to buy a portion of land (20 acres) from a property (total 146 acres) that has a Reverse Mortgage. What do we (and the seller) need to do to make this happen?

Expert Answer

Hi Sarah,

The process would be no different than any other property that was already encumbered by an existing loan, forward or reverse.  The owner of the property would have to approach the lender and request a partial reconveyance for the portion of the lot that they wished to split off of the existing parcel.  The lender would have to determine if the lot split and the loss of the particular section of land represented an impairment to their security and if so, they may not be willing to allow any reduction to their existing security.  They might be willing to do it with a reduction to the existing loan amount and they might have no problem with the split, determining that the acreage in question really does not add/subtract from the value of their security.

At any rate, the borrower always has the right to pay the loan off if terms cannot be agreed upon and then seek a new loan later if it becomes that important to complete the deal regardless of the lender's willingness to participate.

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Question From Marilyn on 7/19/2017

If you have a reverse mortgage for 10 years and your house burns down, the mortgage holder would receive the insurance proceeds I believe. What if the proceeds just cover what is owed on the reverse mortgage? What happens to the homeowner who now has no insurance money to rebuild the house?

Expert Answer

Hi Marilyn,

The reverse mortgage is just like any other loan.  The proceeds would go to pay for the rebuilding of the home, not to the lender.  The lender is listed as "also insured" to be certain that any checks are sent to both the borrower and the lender so that both must sign off on the claim check and in this manner the lender can always be sure that the home has been repaired/rebuilt and the borrower does not decide to move to a tropical island somewhere with the proceeds!

There is one instance where all borrowers must be concerned, both on forward and on reverse mortgage loans.  There is a clause in the standard loan documents that states that if the property cannot be rebuilt, then the loan would have to be paid off with the loan proceeds.  This is almost never an issue because with almost any disaster, the improvements can be rebuilt but there are some instances where this might not be possible.  A couple of things that come to mind are landslides wherein the entire lot falls into the ocean or down a mountain and is gone or a sinkhole that becomes unbuildable.  So if you think you are in an area where you might have a situation where the house could not be built back, you may want to consider all your options as this is standard language for any loan type.

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Question From Shelly E. on 6/27/2017

My dad has approximately 10 acres split into 4 plats each approx. 2.5 acres each. The house sits on the majority of 1 plat but a small portion of it is over the line to another plat. We have been told that we would have to have the property re-platted and surveyed at our cost which is very expensive in order to do process the loan. My question is WHY it cannot be done on just the two plats the house is on? They are telling us that the legal description shows 4 different legal and cannot do that. Thank you for your feed back.

Expert Answer

Hi Shelly,

We can't cross-collateralize multiple properties with the loan, it must be a single residential parcel to be eligible for a reverse mortgage.  Then the question still exists about the fact that the improvements physically sit on more than one parcel.  The improvements must be entirely located within the boundaries of that one parcel that the reverse mortgage will encumber.  They cannot encroach upon neighboring parcels. 

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Question From Jim F. on 6/25/2017

Can I buy a Condo in Biloxi MS under the HECH program if I make the down payment required and it is my primary residence

Expert Answer

The project currently has to be on HUD's approved condo list so you would want to see if it is listed here to be certain it is listed before you make any offers.  You would also have to find a lender licensed in the state to determine what they would require of you, unfortunately, we are not licensed there.

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Question From Jan-Michelle S. on 6/19/2017

I have an "non-admitted" property insurance from Scottsdale Insurance. They are the only insurance carrier in my area. I live in California in the Sierra Foothills. I have a IBR student loan since 2010. Do you have a reverse mortgage I would qualify for?

Expert Answer

Hi Jan-Michelle,

The student loan we could work with although we do have to use the payment or 1% of the loan amount, whichever is greater for purposes of qualification.  However, the insurance would not be acceptable by a non-admitted carrier.  Unfortunately, we have found some properties over the years that due to issues such as this or zoning, property usage, proximity to external issues, etc. just made them ineligible for the reverse mortgage.  If you are unable to obtain insurance from a rate insurance carrier which contributes to the state fund and protects those insured in the instance of bankruptcy of the carrier, we would not be able to approve the loan.

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Question From Ted R. on 6/02/2017

1. Which comes first: Condo owner applying for Reverse Mortgage or HOA applying for general HUD approval? 2. How does a HOA initiate HUD approval process?

Expert Answer

A lender may not currently begin an application on a unit located in an unapproved project so the project would have to be approved at this time in order to start a reverse mortgage loan.  This may change in the future, but for now, that is the process.  There are companies that can help with the project approval and are staffed with folks who quite often are former HUD employees and know the process well.  Two such companies with whom we have known borrowers that have worked successfully are:

http://fhacondosapproval.com/TheFHACondosApprovalProcess.php or www.tattersallconsulting.com. 

You can contact either one of them and they can walk you through the entire approval process or you can wait and see if HUD changes their process to allow for units in unapproved projects in the near future.

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Question From Ila on 5/20/2017

I have a separate building from my house on my property that I rent out. Can I keep that rental income if I get a reverse mortgage

Expert Answer

Hello Ila,

The property must meet all of HUD's requirements to be eligible so any rental properties must meet the HUD parameters.  However, if you do receive rental income on your home, it is your income to do with as you see fit.

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Question From Gail on 5/20/2017

What happens to a reverse mortgage loan if the home gets damaged in an earthquake? I live in California where we are overdue for a major quake.

Expert Answer

Hi Gail,

A reverse mortgage is like any other loan.  All loans contain provisions for insurance requirements and if the property cannot be repaired, there are also provisions in the loan documents for those circumstances as well.  If you are concerned about your property being protected from earthquake damage, you should look to your insurance provider to see if you have adequate insurance for such issues and if not, what coverage is available for your protection.

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Question From Ruth on 4/27/2017

I have a question regarding the appraisal process. Is the appraisal done just to determine the value of the property, or does it also serve as a "home inspection" detailing what repairs need to be undertaken before a reverse mortgage is approved? If more than minimal repairs are needed, can they be paid for with proceeds from the loan? Thank you.

Expert Answer

Hi Ruth,

The appraisal determines both value and needed repairs.  HUD will allow for some repairs to be completed after the close while holding money aside to complete the repairs under some conditions, but usually only those repairs that cannot be completed due to weather related delays.  There are companies who specialize in HUD repairs though and will agree to complete repairs with the agreement that they will be paid after the closing if that would work in your circumstance.  If you choose to complete needed work in this manner, remember that the repairs are between you and the contractor, not the contractor and the lender!  Make certain that you understand all repairs and costs and agree fully with the work to be done.  If you are unhappy with the work, you would have to confront the contractor about the repairs so make sure you feel comfortable with the company/individual doing the work in advance and check references.

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Question From Sharon Y on 4/17/2017

When using the reverse mortgage to purchase a primary residence. What is the criteria regarding the property it is a SFR built in 1951 on just shy of an acre lot. Will an appraisal need to be done? What other property requirements are there that we should be aware of? Thank you.

Expert Answer

Hi Sharon,

Yes, there is an FHA appraisal performed and the property must meet all of HUD's property requirements.  I really could not begin to get into all of HUD's requirements (which the property will probably meet anyway) since the HUD manual for properties must be 300-400 pages long and it would be impossible to cover all aspects in a comment like this.  If the property is a 1 - 4 family residential home, has similar homes that have sold recently in the near vicinity and is in good repair, you are probably just fine.  If there are a lot of quirky or unique issues or the property is in disrepair, is zoned something other than residential or has commercial influences, hazards (propane or gas tanks nearby, high voltage electrical overhead, etc) then you would be best to discuss your specific home to determine what areas of concern there might be.

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Question From Patricia B. on 4/03/2017

Inquired once before and was told I was not in a "HUD approved" building. It would cost $1200 up front to get the building "blessed". Is there any way around this?

Expert Answer

Hi Patricia,

I can only guess that you are referring to an approved HUD condominium project?  HUD currently requires that the project be approved before we can do a single loan in that project (and that includes even taking a loan application).  There are some things you can do about that.

Firstly, you might be lucky enough to still find a lender who is working with HUD condo approvals if you need to proceed immediately.  Many lenders ceased trying to get projects approved after HUD changed the guidelines in 2010 because so many of the projects submitted were rejected by HUD and the process is fairly long and labor intensive.  Some HOA's did not want to cooperate in the first place and spending weeks getting the documents together just to wait 6 - 8 weeks for a HUD rejection was not a profitable venture for most lenders.  I do not know if any lenders still offer this service or not.

There are several companies that have sprung up that do condo approvals.  Most are staffed by former HD employees and are very good at knowing if the project is going to be one of the high ratio of projects that are rejected long before the documentation is sent to HUD.  Some even have a guarantee that there is no cost is the project is denied but this does not avert the need to pay their fee if in fact, they are able to get your project approved.

Finally, and it sounds like this may be your best bet, HUD has announced that they are going to reinstate a process they employed prior to 2010 in which lenders could approve a limited number of loans in some projects without having to get the entire project approved.  The process used to be called the spot approval process and it will be launched under a new name but we do not know exactly when or what the parameters will be yet.  There will be some requirements the project has to meet, there always were.  If your project is not mostly rented units, is not involved in a lawsuit, has an adequate budget for maintenance and repairs and has not been previously denied by HUD for cause, you may be best to hold off for a little while to see when the new condo procedures are announced.

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Question From Julia on 2/22/2017

I don't think my condo is HUD approved. Is it still eligible for a reverse mortgage? Same size units in same building range in value of $420,000 - $615,000 (Cocoa Beach, Florida)

Expert Answer

Hello Julia,

Right now you have one of two options. Either convince your Association to submit to FHA for a full approval on the project which may take up to five weeks, or you can wait for new guidance from FHA on what is called the condo single unit approval.

Late last year FHA announced upcoming changes to the condo approval process which will soon enable lenders to do what is called a "single unit approval" where lenders do not have to approve the entire project for those seeking reverse mortgages. You can read about these upcoming changes here https://reverse.mortgage/condo-changes-spot-approval

I will also add your email address to our follow-up series once these guidelines are published. 

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Question From Ray M. on 2/21/2017

I want to buy a portion of land from a property that has a Reverse Mortgage. The property, beyond the value of the home, has appreciated well beyond the loan amount. Will the entire loan have to be renegotiated by the owners? And would there be excessive costs?

Expert Answer

Hi Ray,

I'm sorry but I cannot answer this for you.  This would be up to the lender and to HUD but typically when any lender is requested to do a partial reconveyance of land included as security in a loan, a proportional portion of the loan amount would have to be paid off.  But I honestly do not know if that would work with the reverse mortgage, especially if the borrower has a line of credit that has a growth feature.

Lenders do not typically give up pieces of their security simply because the value has increased just as they do not contact the borrower and tell them to bring in more property at times when values fall.  The borrower would have to contact their lender to make such a request and since the loan is insured by HUD, I am sure they would have to approve as well but I honestly have never heard of them doing so.  I guess it couldn't hurt to ask though, the worst they can do is tell the owner no.  If they did agree to it, I have no idea what costs might be associated with such a change.

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Question From Bruce G. on 2/19/2017

Can my father get a reverse mortgage if his house has an in ground oil tank?

Expert Answer

 Hi Bruce,

There are a number of factors that will determine whether or not having an oil tank will be acceptable.  Sometimes they can be left alone and other times they have to be removed.  HUD has a number of requirements that come into play when dealing with a storage tank.  Appraisers have to assess their location, condition, impact on marketability and value, etc. and whether or not there has been any effect to the soil of the property or if there is any leaking or odors.  The appraiser would also have to note whether or not the tank being there presents any issue with current local codes or ordinances.  If the town or city no longer allows for a tank and the mere existence of the tank violates any regulations, that could require the removal of the tank in order to get the loan completed.

The size of the tank also can play a factor as HUD will not allow a property that is within 300 feet of a tank that can store 1,000 or more gallons of flammable liquid.  Now this usually only applies to homes near gas stations, but the appraiser would have to address that as well.  I wish I could give you a definitive yes or no answer, but there are simply too many factors to consider.

Source: https://portal.hud.gov/hudportal/documents/huddoc?id=41502c2HSGH.pdf (Pg. 14)

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Question From S. Russo on 2/09/2017

Do redwood decks have to be treated or painted for a reverse mortgage

Expert Answer

Hello,

HUD has a rule that they do not allow "bare wood" contact with the home for decks, fences, or other wood to prevent damage to the home.  This means that most decks and fences that come in contact with the home must be painted or stained in order to comply and most often Redwood decks are "sealed" which protects the wood and preserves the beauty of the wood (and meets HUD's requirement). 

But now the important distinction is whether or not the deck is connected to the home.  We also see some decks that are stand alone, that are not connected to the home in any way in another location in the yard.  Decks that have no contact with the home are not required to be sealed, stained or otherwise treated.

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Question From Ginny Andersen on 1/29/2017

I have a bathroom in the garage that was not permitted can I get a reverse mortgage

Expert Answer

Hi Ginny,

We see this very seldom and the few times it has come up, the addition of the unpermitted bathroom/toilet in the garage violated the local zoning laws and the bathroom did have to come out in order to complete a reverse mortgage.  I can't tell you that yours absolutely would have to though.  If the local ordinances and zoning allowed for it, it was done in a workmanlike manner and the appraiser found no issues with it, it is possible that it would not be required to be removed but this has not been the case on any we have seen yet.

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Question From Jeanie T. on 12/28/2016

Mobile home sets in a mobile home park. I pay both space rent and mobile home payment monthly. This is eating up all the monthly income fast. Does this factor disqualify me?

Expert Answer

Hi Jeanie,

Unfortunately, Mobile Homes in a Mobile Home Park where you pay space rent are not an eligible property type for an FHA loan which includes the Reverse Mortgage.  For a Manufactured Home property to be eligible, it must have been manufactured through the HUD program and be installed on a permanent foundation on a parcel of land that you own.  There are other requirements as well, but that is the bare minimum.

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Question From Jojo on 11/27/2016

I live in WA state. I am the executor of my friend's estate and the sole inheritor. He died in 2015 and had a reverse mortgage. He moved from the house in 2014 so that I could care for him. He has heirs. I have contacted the reverse mortgage lender to tell them I want to buy his old house (empty now since 2014). If the reverse mortgage lender agrees to my 95%-of-HUD-appraised-value-offer, will his heirs also have to approve the sale?

Expert Answer

Hi Jojo,

This is a legal question and not a reverse mortgage question.  I would suggest that you contact a family attorney.

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Question From Helen S. on 11/23/2016

Was working with a loan officer only to find that the complex wherein I reside is not "certified" and must seek a "spot" certification and we dissolved our relationship, he telling me his company cannot help me. Tried contacting the Official Site for HUD/FHA. Was told changes to the rules are imminent, so guess my quest will be slower than anticipated. This seems to be the only logical remedy to my financial woes, elderly, retired, on Social Security only.

Expert Answer

Hello Helen,

At this time, the spot approval is not offered by HUD.  They have indicated that they are considering offering it once again (they did several years back), but we have not gotten the details regarding when or under what parameters.  Until the HUD announces that they have re-implemented the spot approval process for condominiums and those guidelines/rules, I honestly can't tell you when or under what restrictions you can expect this to take place.  We will be making the announcement as soon as we have anything from HUD but until they do, it is strictly speculation as to what those requirements will be and at this time, we cannot take a loan application for a borrower whose condominium unit is not located in a HUD-approved project.  I wish I could be more exact, but I just don't have the information yet. 

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Question From Steven H. on 10/24/2016

We are not a HUD approved condo group........Do you do jumbo conventional reverse mortgages? If so at what rate?

Expert Answer

I Steven,

There is a jumbo non-FHA reverse mortgage program that works for condominiums with property values over $500,000 but to be honest with you the interest rate is so high and the available proceeds are so low in comparison with the federally insured home equity conversion mortgage (HECM loan) I would personally recommend waiting for what is called a spot approval. This method was available for many years which allowed lenders to look at a condominium project and give a spot approval rather than having the entire project seek for FHA approval.

FHA has recently proposed new rules which will allow us lenders to again offer spot approvals. We are currently in a comment waiting period and I expect this to pass early part of 2017. You can read more about these developments here.

What you can also do is start by requesting your formal quote on our website at https://reverse.mortgage/quote

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Question From Gregory M. on 10/12/2016

My condo association has not been recertified for FHA mortgage insurance; it has reapplied and is awaiting a decision. Will I be able to secure a reverse mortgage under these circumstances?

Expert Answer

At this time, you would have to wait for the HUD approval before you can even fill out an application.  BUT, there is hope on the horizon.  HUD has announced that they will soon go back to the spot loan approval process for condos.  What this means is that if your project is not approved and has not been rejected prior to the time HUD begins to allow the spot approval process, lenders will again be able to take condominium loans in those projects.  We have to wait for HUD to make the announcement to know the parameters, but this is good news!

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Question From John H. on 9/27/2016

Do you do reverse mortgages on very nice double wide?

Expert Answer

Hello John,

As long as you are manufactured home was constructed after 1990 and there are other manufactured home sales within your area you shouldn't have much of a problem getting a reverse mortgage. For a complete set of guidelines for manufactured homes visit our qualification page here:

https://reverse.mortgage/manufactured-home/

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Question From Bob on 9/04/2016

I live in a condo that is not HUD approved. Does that mean I can't get a reverse mortgage of LOC?

Expert Answer

Hello Bob,

That is correct. The federally inssred reverse mortgage is an FHA program and FHA requires that all condominium associations submit for approval. We can facilitate this process for you if your condominium project meets the minimum requirements https://reverse.mortgage/condominiums-shocking-truth/ and your board of directors / association agrees to become FHA approved. 

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Question From Lovette E. on 8/20/2016

Trying to find out if property has to be in pristine condition for one to be approved for an a reverse mortgage as my air conditioning units are not working and I cannot afford to get them repaired or replaced. I have no funds at all, please advise.

Expert Answer

Hello Lovette,

There must be a working heating source but having a central air conditioning system is actually not a requirement of any FHA mortgage program including the reverse mortgage.

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Question From Robert Q. on 8/08/2016

I have a 1970 manufactured home that is permanently attached to ground with a real shingled roof, brick and siding, added onto on both sides. Mortgage is paid off. Can I get a r.m.? If not can I appeal? I am 69.

Expert Answer
Hello Robert, 
 
Unfortunately your property would not be qualified for a reverse mortgage. The minimum year built is set by FHA as June 15, 1976. 
 
 
 
 
 
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Question From Jim on 8/06/2016

Does a boat qualify as a vacation home?

Expert Answer
Hello Jim, 
 
I assume you are trying to complete our online application intake and a boat would be considered personal property and not a vacation home. 
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Question From Jo on 8/01/2016

Our solar panels are leased. will we have to pay them off when getting the reverse mortgage.

Expert Answer

Hi Jo,

No, the lease does not have to be paid off but there are specific steps that have to be taken.  Firstly, because the panels are leased and not owned, the appraiser cannot give them value.  The lender must get a copy of the lease to determine that there are no objectionable terms (most are fine).  There has to be a UCC Termination that the company leasing the panels has to do until the reverse mortgage has closed and then they can re-file afterwards.  It's actually a fairly easy process and most go very smoothly.

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Question From Debbie J. on 7/30/2016

If repairs are made to my home it would be valued at 200,000. Would the reverse mortgage use that or appraise it without repairs which would be a out 160,000.

Expert Answer

Hi Debbie,

An appraisal would be performed on the property and the lender will use the value of the appraisal.  An appraisal is a snap-shot in time.  The appraiser determines the value of the home at that time based on comparing the property to other similar homes in similar condition.  Just as the appraiser would not look at a home in excellent condition and compare to properties in poor condition and lower the value to take into consideration the value drop if the home were to fall into disrepair, the appraiser will not look at the possible future value of a home if alterations of upgrades are made later.  The appraiser has no way to know what the future of the home will bring and so his or her evaluation must be based on that moment in time.

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Question From Leslie J. on 7/01/2016

I am 75. I own a condo valued at $850,000 with only a $74,000 remaining loan. My net worth is tied up in this condo. My HOA board refuses to get FHA approved because they "don't want those kind of buyers" buying into this building. That thinking which is "keep the riff raff out who can get low down payment loans"...now is keeping me from applying for a reverse mortgage. And I need funds to hire a care giver. WHERE CAN I FIND PRIVATE REVERSE MORTGAGE LENDERS?

Expert Answer

Hi Leslie,

At a value above the HUD maximum lending limit of $625,500 there are jumbo products but the only program available is a single draw, fixed rate that gives borrowers so much less money in relation to the value of the home and while they do not require HUD approval, they do have to approve the project also.

Have you approached the board and other owners to show them the added benefits of HUD approval?  I have seen this reluctance in the past and also have seen some owners sway the board when they present the facts to the homeowners that the approval not only allowed senior owners access to the reverse mortgage product, but also other owners to a much larger purchaser base and not only didn't hurt the project from "those kinds of buyers" being able to buy, but gave current owners a greater market when they did decide to sell their units.  The type of buyers in the $850,000 price range are not those who would typically be worrisome to the HOA in that they can typically afford to pay their HOA dues on time, etc.  Other than that, they are only preventing qualified buyers from purchasing and seniors from obtaining the reverse mortgages they desire.

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Question From Edd O. on 5/13/2016

Will a manufactured home qualify for a reverse mortgage?

Expert Answer

HUD does have specific requirements for manufactured homes that must be met, but yes, they will allow them under the proper circumstances.  We have their information on our website at: https://reverse.mortgage/manufactured-homes/

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Question From John on 5/08/2016

I had a fire in my home three years ago and the restoration is approximately 90% complete. Is there a dollar limit on the amount of money that can be escrowed for needed repairs?

Expert Answer

Yes there is John and there are also limitations on the types of repairs for which funds may be set aside to complete and those that must be completed prior to loan closing.  The repairs cannot be for items deemed health and safety issues if not completed.  Lenders use a "repair set aside" which is to be calculated at 150% of the work to be completed so if the cost of the needed work is $10,000, then the set aside would be for $15,000.  The dollar amount may be limited by the total Principal Limit available to the borrower or other issues as well so I'm not comfortable giving you a dollar figure and the guidelines don't quote a dollar figure, it's always a percentage of something else.  If you contact us with the particulars, we would be happy to review your circumstances and give you an answer.

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Question From Michelle L. on 4/30/2016

If i just recently closed on a home but not even a day after the closing we find hidden surprises with the house like leaks in the roof, ac unit leaking etc, what can i do to get the loan reversed or even if I can under these circumstances?

Expert Answer

Hi Michelle,

I'm not 100% sure I understand your question. I would hope that you had a home inspection and home warranty that would take care of any issues that you're now finding on the home. The property requirements would be the same for every other reverse mortgage borrower. The lender would conduct an appraisal and the appraiser would note any deficiencies. Some repairs can be completed after the close of the loan with a repair set aside but that would depend on the scope of the repair and your lender.

One of the documents contained in the FHA loan package advises borrowers to obtain a home inspection. We always advise borrowers to also look into home warranties on new purchases. Unfortunately, there's just no way to know what may or may not be working or what issues may arise with just a visual inspection of a property. I wish you the best with your new home.

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Question From Edward I on 4/15/2016

Can you get a reverse mortgage on a rental property that you own outright.

Expert Answer

Hi Edward,

Reverse mortgages are currently only available on owner-occupied properties that meet the property requirements. Even when there were more proprietary programs available and some did allow for bona fide second homes, I'm not aware of any programs that have ever allowed for rental properties.

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Question From Becca on 4/14/2016

I own a big house and a small guest house on same land. Can I rent out the big house and live in the small one with a reverse mortgage

Expert Answer

Hi Becca,

The rules of the reverse mortgage state that you have to live in the main home as your primary residence. As long as the guest home is a legal unit HUD has no issues with you renting it out and in fact you can even rent out rooms in your home. However the terms of the loan state that you are supposed to occupy the main residence on the property.

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Question From Craig on 3/24/2016

If my mothers house has a reverse mortgage can an addition be put on the house

Expert Answer

Hi Craig,

Your mom has the same rights with a reverse mortgage that she would with any other loan.  There are very few home improvements that would be considered ineligible under the documents she signed for the reverse mortgage but if the proposed addition were to alter the use of the property (turn it into a commercial property), if it was done against county zoning or as substandard work causing health and safety issues, that could present some issues.  If there is any question at all with the use or the permits, she can always contact her lender in advance to let them know of her intentions to be certain that her plans do not alter the home in a manner inconsistent with her legal documents. 

But if you are talking about adding a room such as a living room, bathroom, bedroom, etc and are planning on obtaining permits, there would be no problems as the work would also be approved when the permit was finalized upon inspection.

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Question From Denise S on 3/17/2016

Does your company do reverse mortgages on manufactured homes?

Expert Answer

Hi Denise,

There are a number of requirements that HUD has for manufactured homes and sometimes the most difficult comes with the appraisal and finding the required sales comparables but yes, we do lend on manufactured homes that meet the HUD criteria.  I would invite you to contact us with your information and we would be happy to take a look at your circumstances to see if you meet the parameters.

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Question From David B on 1/10/2016

Can you get a reverse mortgage on a condo in a building with less than 10 units?

Expert Answer

Hi David,

HUD's minimum number of units that must be in the project is 2 so the answer to your question is yes you can get a reverse mortgage in a project containing fewer than 10 units, BUT the project still has to be approved by HUD.  You can check to see if the project is already approved by HUD but looking on their approved project list at https://entp.hud.gov/idapp/html/condlook.cfm.  If the project is currently approved, the lender still has to get a current HOA questionnaire to be certain nothing has changed since HUD approved the project and that it still meets their requirements.   If it was previously rejected or is not on the list at all, it can still be submitted to HUD for approval if the circumstances that caused the previous rejection have been corrected or for initial approval.  

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Question From Bill K on 12/15/2015

Quick question, do attach villas qualify for reverse mortgage? I know my condo doesn't because it's not FHA approved. Thanks

Expert Answer
Hi Bill,
 
Whether a project requires HUD approval or not depends on the legal description and property rights.  An "attached villa" could also be a condo by legal definition or it could be an attached townhome or PUD (planned unit development).  A condominium gives a borrower a fractional interest in a parcel and usually just the right to occupy their individual unit whereas the townhouse or PUD legal description actually shows an individual parcel for each owner.  So the legal for a condo might start out like "a 1/53rd interest in lot..." whereas a PUD will just say "Lot 23 of Tract...". 
 
The common areas of the condo would be included in the parcel as a whole where the PUT might also include an additional interest in another parcel that would be the common area.  HUD feels that with this distinction, if you strip away the common area, you still have a parcel that can stand on its own and therefore they don't insist on approving the entire project.  If you have any questions about your project, we would be happy to look it up for you.
 
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Question From charles boyes on 11/07/2015

Can i get a reverse mortgage on duplex if i live in one side and rent the other????

Expert Answer
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Question From Belinda on 11/10/2014

Hi... we own our house with no mortgage payments. If we get a reverse mortgage, can we still rent the house out?

Expert Answer

Hi Belinda,

Reverse mortgages can only be done on your primary residence.  If the property meets all of HUD's guidelines and is zoned for rental use in other parts of the home (i.e. a 2 - 4 unit property) then yes, you can live in one of the units and rent out the other legal rental(s).  If you are asking if you can place a reverse mortgage on a rental property though that you do not live in, the answer is definitely no. 

HUD states that some nominal commercial usage of the home is allowed providing it does not change the residential nature of the home and no more than 25% of the property is so used.  This is typically used more when considering a home office.  So while it is not specifically forbidden, HUD's 25% rule is much more difficult to apply to a rental situation when you rent a portion of your home to others.  It's easy to say that a 200 square foot office is 13.3% of a 1500 square foot home and therefore would meet HUD's requirements if a borrower ran his accounting business from that location so long as the residential nature of the home is not changed.  However, when you rent out a portion of the home, that most likely includes bathroom space, kitchen and common area usage and therefore lines are blurred as to the actual space used for commercial or income purposes.  So if you are talking about can you rent out just a portion of your house such as a room, I would have to tell you that it would depend on the circumstances.

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Question From Cheryl on 8/20/2014

Would a person still qualify if you live in a manufactured home but live in a mobile home community where you pay lot rent?

Expert Answer

Hi Cheryl,

HUD and lenders both have specific requirements of manufactured housing and one of the requirements is that the home must be permanently affixed to the land that you own.  Unfortunately, the scenario you describe would not meet that requirement.

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Question From robert thomssen on 8/10/2014

On a condominium reverse mortgage who pays the maintenance fees?

Expert Answer

Hi Robert,

The borrower always owns the property and therefore is responsible for the insurance, taxes, HOA dues, any maintenance, etc.  You can sell the property at any time you wish and the equity is always yours.  It's just like any other loan except that you do not make monthly payments and instead of the balance going down each month as you make a payment, the balance rises as you accrue interest on the unpaid balance.

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Question From Susan on 6/27/2014

How much land do they take with a reverse mortgage? We have several acres but I was wondering if there was a fixed amount?

Expert Answer

Hi Susan,

That's a great question.  There is not a set fixed maximum amount of land that the parcel can include with a reverse mortgage, but there are a number of requirements that properties have to qualify for a HUD,  FHA-insured loan, including land value, land use and excess land.  For example, HUD requires that the property is not used for agricultural purposes, that it is a residential property.  Also, the amount of land can be several acres, but the value cannot be primarily in the land except in certain circumstances where land is at an absolute premium and then even with an average size lot, the land value is very high (such as in high cost areas).  The amount of land must be similar to the other sales that the appraiser uses to determine the value and therefore excessive adjustments are not required.  For example, if you have 5 acres and all the sales around you are all about the same size, that would not create a problem as the appraiser would have no problem comparing "like" properties - but if you have 5 acres and everything around you is a half-acre or less, that could create a difficulty determining the true value for a property such as yours in that area with no similar sales to compare to. 

Sometimes borrowers do a lot split before the loan application when the parcel of land is too large and there are sales available to support smaller parcels.  For example, we recently closed a loan on which the borrower had 35 acres of land in an area full of properties recently sold on 1 acre parcels and no other large acreage sales.  The borrowers did a lot split and kept the 34 remaining acres separate and only obtained the reverse mortgage on the 1 acre parcel with the dwelling on it.  This worked for them because the value attributed to the excess land was not high anyway and there were many sales available to support the value with the smaller lot.  Remember though, if you think you might have to do something like this, before you do any kind of alteration to your property, you really need to verify whether or not it will make any positive difference in your application and also if there are any tax ramifications as well so that you can make an informed decision as to whether or not it makes sense to proceed in your case.

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Question From Jackie on 3/12/2014

What is the negative side of a condo-unit owner obtaining a reverse mtg? Why is it difficult for a condo-unit owner to get a reverse mtg?

Expert Answer

Hi Jackie-

I'm not sure if you are asking me what the negative side of getting a reverse mortgage is for a condo unit owner or for HUD.  For the unit owner, getting a reverse mortgage is really no different than for an owner who owns any other type of property.  For HUD though, it does contain additional risks and that ties in to your second question as well.  Condominiums are usually the first type of properties in any market to lose value when those markets do depreciate.  Condominiums, even more than other properties are affected by the units and even the project in which they are located much more than a single family residence.  If an entire neighborhood is affected by an external influence, all properties can be adversely affected but individual unit owners can be affected also by the HOA, lawsuits, building defects on other units that affect an individual owner's value, assessments, vacancies, rentals in the units as opposed to owner-occupied units, etc. that may not even be present at the time some buyers move in and some loans are made.  Therefore HUD requires all loans in condo projects to be in projects approved by HUD and even after a project is approved, the approval is only valid for a limited time. 

The reason that it may be harder in some areas than others is that the lender is required to verify that the project does not contain more than a certain percentage of rentals, that the insurance on the project is adequate, that the project has an adequate budget for ongoing operations and expenses and all entities who handle funds for the project are covered with adequate fidelity insurance and many projects try to cut expenses by not carrying the coverages required.  In short, HUD and lenders have many years' experience with condominiums and they know where the greatest risks lie and what characteristics are most prevalent when projects fail.  Over the years they have developed an approval process designed to protect both the FHA insurance fund and their borrowers.   It's unfortunate, but we find that only about half of the projects from which we receive requests are approved or even approvable and this is not saying that all projects not approved by HUD will fail.  It simply means that the risks are greater than HUD is willing to accept in order to insure the loan.

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Question From Rosa on 3/02/2014

Is it possible to obtain a reverse mortgage on a fully paid primary residence that is not fha approved?

Expert Answer

Hi Rosa,

Not FHA approved, yes, but the property must meet FHA guidelines in order to get a current reverse mortgage under the HUD HECM program.  When you say the property is not FHA approved, I do not know if you mean that the property has in some way been deemed unacceptable for FHA insurance (such as a property that underwent an FHA appraisal and was deemed to be outside of HUD's acceptable parameters) or that it has not ever been approved (as is the case with a non-approved condominium project that was never reviewed or submitted for approval).  If the property has already been declined, it might be worth a second look depending on the reason(s) for denial and if it has never been approved or denied, then a review of the property and then an appraisal if no glaring deficiencies would be in order.

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Question From silvia Zehn on 1/21/2014

If I get a reverse mortgage , can I still rent my condo as a vacation rental? no more than one month at a time?

Expert Answer

Hi Sylvia,

This is one of those areas that start out black and white then quickly can become more and more gray.  The loan documents state that you must keep the property as your primary residence.  In fact, the loan may be called due and payable if the lender can show that the property is no longer your primary residence and typically the measure for this determination is that you may not be out of the property for more than 12 months at a time.

If I left it just at that, it would seem that there would never be an issue and your answer would be an unqualified "yes" to the question above.  However, HUD will not insure a loan on an income producing property that is not built, zoned and maintained as such that meets their guidelines.  A good example of such a property would be a duplex in which the owner occupies one unit and rents the other.  Your condo does not meet HUD's definition of an owner-occupied multiple family property and as you describe it.  "No more than one month at a time" is also somewhat vague - that could be one month with a small respite and then another month for several months out of the year or it could mean only one month a year or ?  I do not believe most lenders would approve such an arrangement.

At any rate, there is no specific language in the security documents that states that you could not go on a vacation once a year and swap houses with another family to defray expenses or rent your home while you were gone.  However, if this is something that you regularly do and plan to continue doing in the future, I would suggest that you fully disclose this to the lender in advance and verify that you do not violate any provisions in the documents before you even incur any costs in the transaction.

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Question From David on 8/28/2012

Can my mother get a reverse mortgage for a duplex even if she doesn't live there?

Expert Answer

Hi David,

1-4 Units are acceptable properties for the HECM program but the reverse mortgage was designed for primary residences only, she would need to occupy at least one of the units to qualify.

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Question From John on 6/06/2012

I have a triplex and I am purchasing a travel trailer that will sit on the property - I want to know if I lived in the trailer and rented my apartments -all 3 -can I still have a reverse mortgage, also I get all my mail and bills at this residence. I just do not want to make a mistake by living in the trailer by not occupying one of the units. If I get a reverse mortgage I need the rents -my social security doesn’t cover my bills.

Expert Answer

Hi John,

To be eligible for the reverse mortgage, you would have to occupy the property itself.  Just living in a travel trailer that was parked on the property would not meet the requirement and therefore would not make you eligible for the program.  You would be eligible if you did occupy one of the units and rented the other 2 as long as they are legal units in a zoning that allows for a three unit property.

However, you bring up a good point.  If, with the reverse mortgage and the rents on the remaining two units you still cannot afford to live in the property, then you really need to ask yourself if this is the right course of action for you.  If, even with the rents and the reverse mortgage the costs are still beyond your means, this is really a time when a hard look at the downsizing may be in order.  Reverse mortgages are not for everyone and if you still cannot afford to live comfortably in the property while paying your taxes, insurance, maintenance and other expenses, the reverse mortgage would only further erode your equity while delaying the inevitable - a sale of the property and relocation.

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Question From James on 4/28/2012

I applied for a reverse mortgage & followed all required steps. Due to pending litigation, that my HOA is involved in, my application was not approved. Is this standard?

Expert Answer

Hi James,

HUD has very explicit requirements for condominium project approvals.  They will not insure a loan in a project unless the project is HUD approved.  One of the criteria that HUD looks at to determine whether or not they will approve a project (among many other things) is whether or not the project is currently in litigation. 

Not all litigation automatically disqualifies the project.  If the HOA is suing a vendor for something minor or there is a small lawsuit for which the HOA has adequate insurance that will cover all losses anyway, and if the project meets all other requirements, it may still be approved.  If the HOA is involved in litigation due to faulty construction of the project or anything that could be deemed as detrimental to future ability to sell the units, then HUD would not approve the project on that basis.

On a side note though, we are seeing more than 50% of the projects currently being submitted declined for several reasons.  Litigation, ratio of homeowners to renters, inadequate insurance, inadequate reserves by the HOA are just some of the reasons we see on a weekly basis for project declinations.  Borrowers who live in condominium projects or who are contemplating a purchase in a condominium project with a reverse mortgage should make certain that the project is on HUD's approved list as soon as possible to be sure the loan can be done in that project.

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Question From Altha on 4/20/2012

If my roof is over the age that insurance will replace it but still in good shape and there is a hail storm and damages it who is responsible for replacing it?

Expert Answer

Hi Altha,

The reverse mortgage is just like any other loan in that you are still responsible for your taxes, insurance, maintenance and repairs on the home.  It's still your home and just the same as if you did not have a reverse mortgage, any maintenance or repairs that come up are your responsibility.

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Question From Paul on 3/05/2012

Is it possible to buy a short sale or reo with a rev mortgage purchase.

Expert Answer

Hi Paul,

As a matter of fact, yes it is and we've done it! I will advise you though that the sellers of the property have to know that you are using a reverse mortgage as there are several things on a reverse that do not go exactly as a forward or traditional mortgage do. The Title and Settlement services must be handled by a company/individual who is familiar with reverse mortgage transactions or it can be extremely frustrating for all parties. Finally, there can be no credit to the buyer and the property cannot close if it does not meet HUD's minimum condition requirements so those would be issues that you would also want to keep in mind. Keep in mind that the borrower's benefits will be determined from the sales price or appraised value, whichever is less (or the HUD lending limit if it happens to be less than either of the above and it's currently at $625,500).

Most REO's and Short Sales are a matter of "hurry up and wait". Everyone is anxious to get some things done and then it seems that time drags while you wait for approvals, etc. Then, everything is back to being a huge rush. As long as everyone knows what to expect from the onset, things can go smoothly with no problems.

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Question From Harvey on 3/01/2012

Are reverse mortgages available for cooperative apartments? If not, why not? And, if not, do you anticipate if this policy will change?

Expert Answer

Great question and I don't have a great answer. The short answer is that "no", the HUD HECM is not currently available for cooperative units. There were some proprietary programs in the past that did accept cooperatives, but I have not seen any recently. As for whether or not it will change, I absolutely expect that it will, the question is when.

In 2008, the rules were changed so that HUD could insure loans on cooperative units under the HECM program, but they have either found other priorities since then or simply have not found an acceptable method to do it yet. They have the authority to do them, they just haven't yet.

There are also rumors of large insurance companies about to enter the market with private programs again. While I have no indication that they will include cooperatives at this time, it would not be unreasonable to think that they may be included sooner or later, especially if and when more investors get back into the market with these private programs.

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Question From Judy on 12/05/2011

Hello. I live in rural Arizona and own my 10-acre site built home with no mortgage. It was built in 2003. I keep hearing that because I have water delivered and stored in my 5,000 gallon tank, I will not be able to qualify for a RM? I purchase water from a licensed company. There are no wells here...everyone has water delivered. Does it make a difference if my house is NOT a manufactured home? Thank you for your time, Judy

Expert Answer

Hi Judy, HUD has very specific guidelines with respect to water sources, water pressure and water testing when the systems are not public systems. A tank with water delivery is not listed in HUD's acceptable water sources list. (Link to HUD's water system requirements)

Having said that, since we are not licensed in AZ, I have not had to deal with this particular set of circumstances and you may not have been given the final word on the matter, I really can't say. HUD does have a procedure available for waivers and they do grant them, we have gotten them on some water systems specifically mentioned as unacceptable conditions in the HUD manual. It is not quick or easy and requires several inspections and reports and then a waiver directly from HUD, but I would suggest that you ask a reverse mortgage specialist licensed in your area if they have ever tried for a waiver request on a property such as yours. If they have and HUD just won't grant them, then it did not hurt to ask and if they have not tried, you may find that HUD will grant a specific waiver for your home.

I wish you good luck and let us know how you make out.

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Question From John on 4/25/2011

Can a reverse mortgage appraisal and loan include renovations which are to be done after closing?

Expert Answer

This is a great question. The reverse mortgage program is not intended to be used as a renovation program. Some lenders do offer the HUD/FHA-insured loan program known as the 203-K loan which is intended exactly for just that purpose. However, since it is a "forward" loan and not a reverse mortgage, it does require a completely different qualification and monthly payments.

Now having said that, reverse mortgage borrowers can get what is known as a "repair set aside" if they are unable to finish all required repairs prior to close to complete certain approved items. There are restrictions on which repairs may be done after close and the amount of the money which can be set aside to complete the repairs. The amount available for set-aside fluctuates with the amount of money the borrower is receiving from their loan up to the HUD maximum of 15% of the maximum claim amount - which is the appraised value or the HUD Lending Limit, whichever is less. Depending on the type of repair, the lender may need a statement from the appraiser to determine what the repairs should cost or they may require bids from licensed contractors if they feel it greater than the appraiser's expertise to determine this amount. For this reason, borrowers who are aware of needed repairs should make their originator aware of those repairs right away. This way, the originator can let the borrowers know if the necessary repairs can be done after closing or must be done before the lender will issue the funds. In many instances it makes all the difference in the world.

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