America’s #1 Rated Reverse Lender

Hello Stephanie,

The lender holds a lien on your home, making them an additional insured party on the insurance policy. This practice applies to all loans, including reverse mortgages, to prevent situations where a homeowner might receive insurance funds for a major or total loss and then leave or use the funds for other purposes, which could lead to property neglect.

The lender will typically work with you to ensure the repairs are completed and that the contractor is paid directly from the insurance proceeds. You mentioned it’s been difficult to get the funds to the contractor. Have they been paid yet? Contractors generally shouldn’t be paid until the work is done, or for larger projects, in stages as work progresses. If the contractor hasn’t started, they shouldn’t have received any payment.

You have the option to stay with your current contractor, find a new one, or cancel the repairs. If you choose a different contractor or cancel, you should inform both your lender and the insurance company to clarify any requirements regarding the funds. If you proceed with a new contractor, the insurance company may release the funds once the work is complete, as they have already assessed and approved the claim. If you need more money for additional work, it may be possible to amend your claim.

It's unlikely that your lender would release the insurance check without ensuring the necessary roof repairs are completed, as this could limit your ability to file future claims for similar issues. If there were initial structural concerns that warranted the claim, the lender may not allow the funds to be used for other purposes, as they would need assurance that the repairs are done to protect the property’s value and condition.

The funds were issued specifically for roof repairs, so if the roof damage no longer exists, it may be appropriate to return the funds to the insurance company. However, if the damage still needs addressing, the funds should be used for their intended purpose.

Hello Brenda,

That would be fine. I’m sorry to hear about the damage and hope the repairs are minimal.

Hello Terri,

You can always apply to refinance your reverse mortgage, whether you've increased your property value through improvements or the property has simply appreciated over time. If you qualify for more money under today’s program parameters, you will receive the increase in proceeds according to the disbursement rules. Additionally, if this is your first refinance, you will receive a substantial credit from HUD, significantly reducing your upfront mortgage insurance cost. In some instances, there may be no cost to the borrower for their first refinance.

­­­Generally, a home under construction is not eligible for a reverse mortgage as mechanic’s liens will take priority over the mortgage.  It is hard for me to say no though, because it might also depend on what the appraiser says. The cabinets and doors would almost certainly need to be in, the flooring is questionable depending on what is there now. 

You could start the loan and just not closes until those items were finished if you don’t need the money to complete your project. If that’s a possibility, that’s your best bet. 

Hello Rena,

Commercial zoning may be eligible for a reverse mortgage if the subject property is not being used for any commercial purposes and the appraiser confirms that the highest and best use of the property is as a single family dwelling.  Commercial influence in the surrounding area may still pose issues with the marketability of the property, though, and, therefore, may still render the property ineligible. 

The appraiser would most likely need to find sales comparable that are similar to your home that have sold recently as well to support his/her conclusion of value as well as the market demand for similar properties.  The nature of the property would need to be a single-family residence, meaning, if it were totally surrounded by commercial properties, it would most likely not be eligible, whereas if it were surrounded by single family residential homes that had transitioned from commercial at some point, it would have a much better chance of being acceptable. 

Some commercial properties nearby would automatically render the property ineligible for a reverse mortgage.  One example that comes to mind is a gas station within 500 feet.  Your chances are much better if you know you have all single-family homes surrounding your property.  If there is heavy commercial in the area, you would be better off to be sure to disclose that to your lender from the start so that they can do some preliminary research.   If it looks good, they can proceed with ordering an appraisal. 

If it is obviously a situation that HUD would not approve, perhaps they can advise you before you pay for an appraisal to make that determination.  It is the appraiser’s research that will make the ultimate determination, and it may be that there is no way for the lender to know without ordering the appraisal, but if it is something that can be determined by looking at a Google map with your input, it might ease your mind or save you some money.

• Commercial or Agricultural zoning: Allowed if the subject property is not being used for any commercial and/or agricultural purposes, and the appraiser confirms that the highest and best use is as a single family dwelling.  Commercial influence in the surrounding area may still pose a marketability issue that may impact loan approval.

Hello Mike,

HUD has certain property requirements, including being hooked up to city services for most utilities.  If your home is truly off-grid, it probably will not meet HUD requirements.  If you aren’t sure, though, you should contact a lender and have them review your specific property to determine eligibility.  

The HUD reverse mortgage program can include properties with up to four living units if they follow HUD's rules.  Your property can qualify if it meets local zoning laws, the rental units are permanent (not temporary) structures, and there are enough similar properties nearby that have been sold recently, which appraisers can use to estimate your property's value.

The reverse lender should inspect to verify that all repairs have been completed satisfactorily and then sign off the check.  If the job is big enough, they may want the funds sent to the repair company, but if you can show them that you have paid for the work, they should have no problem releasing the check to you.  Before you pay any money to any party, contact your servicer to know what they need before releasing the funds.

Hello Steven,

You would need to evaluate the property to determine its acceptability for a reverse mortgage program. At that value, it would probably be a jumbo program that would best meet your needs, so the HUD rules are not necessarily going to apply. They would have required you to live in the main or largest unit, but each investor sets their own rules for private programs.

The bottom line is that you should be sure to discuss all property characteristics, zoning, and qualifications with your lender right from the start so that they can determine if your circumstances will fit the program parameters from the start.  It’s possible that they may not be able to give you a definitive answer until the appraisal is complete, but they should be able to tell you if it is possible based on specific circumstances and then it would be your decision whether to continue with an application or not.

I am not sure what you mean by “as is.”  There are minimum standards that all properties must meet.  If your property meets those standards and is an eligible property type, it would be eligible as collateral for a reverse mortgage.  It does not need to be pristine, but some conditions may require correction before the loan closes.  It is not unusual for a few repairs or corrections to be required, but they typically are not extensive.  You should speak to a licensed loan officer to review your concerns. 

The loan officer is not an appraiser or a home inspector.  An experienced loan officer can usually give you a good idea of the types of repairs that would be required—the only way to know for sure is through the appraisal process.

Hello Martin,

The answer is, “It depends.” When the appraiser measures the home, they will probably notice that the square footage differs from the square footage of public record (unless the additions were minuscule, the differences could be chalked up to measuring discrepancies). Once the appraiser realizes there are unpermitted additions, they must take additional steps. The appraiser must determine if the additions violate local codes and zoning ordinances or are consistent with the requirements. Then, suppose they are allowed by ordinance (in other words, the additions are not illegal additions). In that case, the appraiser will need to determine that they are completed professionally and are consistent with other properties in the area. The appraiser will need to be able to support their conclusion of value with similar properties. If your home with the additions now has 3,000 square feet in an area with all 1,500 square foot properties, this would present a problem, permitted or not.  

Suppose the home is homogeneous with the other homes in the area. In that case, the appraiser states that the additions are to code and done in a professional manner, HUD will not require permits, and it would not prevent you from obtaining a reverse mortgage. If the underwriter at the lender gets the file and sees that your home is now the only home with 4 bedrooms and 3 bathrooms and all the other homes have 3 bedrooms and 2 bathrooms due to your additions or the additions were completed in an unsatisfactory manner (or they are not completed with exposed wiring, etc.), then it could be a problem.  

I suggest you alert your lender to the facts from the very start and allow them to review the situation before you begin. They may need to receive the appraisal before they know for sure. Still, in many cases, they can do some preliminary searches. They can get a good feel for the answer before you need to start the appraisal process.

Hello Vicki,

If you have a functioning bathroom in the home and your unfinished bathroom has no exposed wiring or plumbing, that would be acceptable to HUD. 

However, the appraiser would consider this information when determining the value and comparing it to recent sales of homes where the bathrooms were complete.

Hello Ariana,

HUD does allow for some business use of the property depending on the type of business, the zoning restrictions, whether the business changes the nature of the property, etc.  The lender will need to determine if the nature of the residence is changed because the business is there and whether the usage meets HUD allowances. 

When you speak with your loan officer, be sure to let them know from the start what business is operating there so they can give you an honest answer and not wait until after you pay for services only to find out that it will not meet their requirements later.  

If you are talking about a reverse mortgage that you already have, your security documents state that you must reasonably maintain the home.  If the business you run out of the home does not impair the property, you should have no problems. 

If you allow a business to operate out of the property that changes the nature of the home or causes excess wear and tear on the home, the lender could ultimately call the loan due and payable if you do not bring the home back to satisfactory condition once notified. Still, the mere presence of the business would not cause you an issue as long as it does not alter the property, its functionality, or your ability to remain living in it as your primary residence.  

Hello Glynis,

A person who has a loan on a property, any loan whether it be a reverse mortgage or a forward loan, has the description of the property that the loan covers based on the legal description of the property.  This means that the property could not be subdivided without the lienholder’s permission since the entire property is covered by the loan as security for the lien/loan.  There are very few loans that will allow for a “partial reconveyance” of a portion of the property which would allow the lender to release a specific portion of the property and only cover the remaining portion of the lot, but the reverse mortgage is not one of them.  

You can pay the loan off and then apply for a new reverse mortgage under the new property parameters/value after the subdivision or lot split has been completed.  You would need to be sure that the other properties in the area conformed to your new property profile and that there were sales of properties in the neighborhood that was comparable to your new size that had sold recently, or you could find yourself with a home that would not meet the requirements for a reverse mortgage. 

I can’t think of a specific circumstance off the top of my head where this might happen other than if there was a recent zoning change that now allows 1-acre parcels when it had always been 5-acre minimums, you wanted to subdivide to 1-acre parcels but there were no sales in the area on 1-acre parcels yet.  You want to be sure that there are ample sales that are like the new parameters if you plan to get another reverse mortgage after you alter the property.

Hello Lori,

He should not have the church there, but it gets into a little bit of a gray area of he is still living in the home as his primary residence.  Commercial usage of the property is not permitted with a reverse mortgage but if the borrower is still living in the home as their primary residence and they have not altered the residential nature of the property (in other words the house is still a single family residence that he lives in and uses to meet with others for church services), it might not qualify for the a new reverse mortgage but you may not have any luck getting a lender to take any action against a current reverse mortgage borrower.  They would need to determine that the borrower was in default of the terms of the loan agreement and security documents and that their security in the property had been impaired as a result.  There is no cell tower there now so the lender can only act or not based on the current facts.

If the borrower has altered the structure so that it no longer conforms to the area or is clearly not a single-family residence, is no longer occupied by the homeowner as their primary residence, you can try to bring these points up to the lender if you know who the lender is.  The original documents are recorded but there is always a chance that the loan has been sold and is not even owned by the same company but that’s a start.  Those documents do have the HUD Case Number on them and if the transition of the property is egregious enough, you could contact the HUD office that services your area with the Case Number and inform them, but I can’t promise they will be extremely responsive.  You would think they would pass the information on to the current servicer immediately in an attempt to mitigate future losses, but it has been my experience that HUD is not very responsive in these matters. 

If the home has been altered to where it is no longer a single-family residence, the lender may act but if the homeowner “plans” to do something (put up a tower, etc.), there really is nothing the lender can do.  If the home is no longer occupied by the homeowner and the lender’s security is impaired, they may act so I would try the lender first if you are able to determine who that is.  If you cannot from the recorded legal documents or that lender no longer owns the loan, HUD lists the location of their offices on their website here: https://www.hud.gov/program_offices/field_policy_mgt/localoffices.  I warn you though, if it is just a matter of you not appreciating the homeowner’s choices and they are within the zoning and do not affect the residential nature of the home or the borrower’s occupancy, there really isn’t much the lender will or can do.

Hi Silvia,

Basements are not considered part of the living area and are not required to be finished.  If they are, they may be given some additional value by the appraiser with adequate sales to substantiate the adjustments and there is a possibility that if all the sales in the area have finished basements your value may come in lower as a result, but there is no requirement that the basement be finished.

If the home is currently being used as an Air BnB, through a different door or not, that is considered commercial usage of the home and it would not be eligible for a reverse mortgage.  HUD does not allow reverse mortgages for properties being used for commercial purposes, agricultural or that do not otherwise conform to their property requirements. 

They also have restrictions for certain characteristics that could deem a property ineligible (zoning, location, proximity to hazards such as gas storage facilities, overhead wires, etc.).  It doesn’t mean that your property is not a nice home, it just means that it does not meet the HUD requirements for this program as is.  

Hello Marce,

There are all kinds of “home inspections” available and I am not sure if you just want someone to come in and look at a property for you or if you are thinking of doing it in conjunction with some other service like a home warranty or what.  And there is also the consideration of where the property is located.  If you just want someone who is a licensed contractor to look at a property for you and conduct an inspection for your own purposes, if I do a quick internet search for several metropolitan areas around the nation, I see costs ranging from $300 on the low end all the way to $1,025 in New York City.  Most appear to be between $300 and $500 in most areas though.  There are one or two who say they will inspect homes for $199 but I honestly cannot say how complete the inspections are or the quality of their work.  

If it was me and I didn’t need the report for a specific purpose, I think I would just use my Google search function and type in “home inspection in my area” and look at the inspectors nearby.  They will be listed by reviews you can read, and you can also check to see if they are listed on Yelp or the Better Business Bureau.  And then check the ratings and their fees once you determine who has the best ratings from homeowners who have used their services.  If you need the report for a specific purpose, find out first if there is a particular requirement so you don’t have to pay for the inspection twice.  For example, if the inspection is for the permanent foundation of a manufactured home for a reverse mortgage, you will want to be sure you are using someone who has the license required by HUD to do the inspection.  Otherwise, it will need to be done a second time at additional expense if you use the wrong inspector.  If the inspection is something you want done and there are no third-party requirements (like a lender), then you are free to go with anyone you determine is best for your needs and can give you the best deal for your money.

Hello Melanie,

I am afraid to give you any advice on this with just the information presented.  For example, there is a question in my mind immediately about the type of dwelling.  Is it a true modular home that is built in sections then brought to the site and put on a permanent foundation or is it more like a manufactured home that is built in a that is completely built in a factory and shipped to the location? 

From your description, it sounds like a true modular but there is a distinction and the rules vary.  Also, is the lot in the retirement community a lot you own or is it leased?  And since it is a retirement community, the lender would need to review any restrictions the community has on the ownership of the property to determine if the home would even be eligible for HUD financing (not all communities are). 

And finally, the reverse mortgage program would require the property to be complete with the certificate of occupancy issued to be eligible for a reverse mortgage loan, assuming the property meets all of HUD’s other requirements.  If you own the property and are refinancing a construction loan at the time or applying for permanent financing after financing the build with your own cash, it would be a refinance transaction.  If a builder owns the property and is selling it to you after it is complete, it would be a purchase transaction. 

The best thing you can do is to get the property information and all the details of the proposed transaction together and present them to a lender so that they have the exact facts and can let you know from the start if there are any issues with the retirement community or ownership of the lot, the property, etc.  As it is, the lender will not be able to tell you 100% if the property will be acceptable because they will not know what the appraisal will say by the time the property is completed. 

There is no way to know what the sales in the area will be like at that time (there may be many comparable sales and the appraisal is easy, there may be none or the only sales verify a much lower value).  Unfortunately, no one can predict the future and if the property is unique, it could be that much more difficult.

Most sheds are given little or no value in the appraisal and would be the owner’s discretion whether they kept it, lightning strike or no. 

Hello Kenneth,

You won’t find any terms in your reverse mortgage requiring you to carry an appliance warranty because there is no such requirement.  If you look closely, you will see that this notice is not from your lender.  If the sender has made it appear as though it is coming from HUD or your lender, that notice is illegal. At any rate, you can just discard this or if you believe it is written in a way to falsely imply it is from another sender, you can report the mailer to the authorities in your state that regulate advertising.  But no, you do not need to purchase their warranty to be in compliance with the reverse mortgage.  

Hello Marilyn,

If it is cosmetic, probably won’t be an issue.  If it is something that would present a health or safety issue, it may need to be addressed. 

At any rate, I would wait and let the appraiser/lender tell you for sure if they will require the work to be completed unless the pool is empty and then it is definitely something that would require attention as that does constitute a health and safety issue.

Hello Ed,

Borrowers with a reverse mortgage are supposed to live in the primary residence.  If the lender were to do an occupancy inspection and someone other than the borrower answers the door, the lender can make the determination that the borrower is not occupying the property and could call the loan due and payable.

Hello James,

All owners with reverse mortgages are required to carry insurance against such an event.  The property would be rebuilt.

Hello Richard,

I am not aware of any reverse programs for business (commercial) properties. 

The HUD program and the current jumbo or proprietary programs are for owner-occupied residential properties.

Hello Diana,

There are times when a single property is comprised of two lots but it is a single parcel number and, in that case, it is treated as a single property and eligible for a reverse mortgage as long as it meets all of HUD’s other requirements.  However, you cannot use two separate properties and encumber both of them with a reverse mortgage. 

That’s a procedure known as cross-collateralization or a blanket mortgage (when one loan covers more than one real estate property) and it is not allowed on reverse mortgages.

Hello Mark,

Your reverse mortgage documents state that you agree not to use the property for certain purposes but as long as your continue to live in the home and do not violate the terms of the documents, you are not prohibited from renting or leasing out a portion of the property.

So my waring to you would be to review your loan documents and verify that your intended usage (the reason and to whom you are leasing) does not violate the terms of the loan. 

Hello Jake,

While I cannot make any definitive statements, it certainly sounds like the issues you describe are typical wear and tear for a home.  I’m not sure what has brought on the question though. 

Has the lender requested something from you?  Remember, the loan is a non-recourse loan but that doesn’t mean that the lender is required to accept a lower sale price on a short-sale proposition. 

If the lender or HUD feel that they can do better by taking the home back and selling it themselves or that the sale price that you accepted which is lower than the amount owed is lower than the amount at which the property should sell, they are not required to accept that amount. 

Hello Bob,

I can’t say for sure.  HUD didn’t post an explanation for their guidelines and I have never seen a write up on this particular requirement.  It usually comes down to what their experience tells them might hinder the marketability of a property if they should ever need to take it back but I don’t know if they have ever allowed other manufactured homes that had marketing issues, if their research indicates there could be problems or what. 

Hello Joanne,

HUD has gotten more lenient in the recent years regarding some non-residential uses of properties used for the HECM program but they do still require that the property be mainly residential in nature and that no more than 49% of the total floor area be used for non-residential use. 

In other words, the space used for your living area must be more than 51% of the space and the space used for raising dogs or other space used for agricultural, equestrian, livestock, etc. cannot exceed 49% of the total floor space.  The lender will depend on the appraiser to make this determination in the appraisal.

The zoning must support that the activity is permitted (in this case dogs but could be other livestock or agriculture).  The lender will also require your tax returns to support two things, that your income or loss is a hobby and not a business enterprise and also that the borrowers qualify with all expenses (even if income is not being used for qualification purposes). 

The appraiser will be called upon to comment that the business use of the property does not impair the residential character of the property nor does it affect the marketability of the home.  And this is also now true of homes that have hobby vineyards and orchards as well (which is a positive step for many homeowners because properties with these amenities were automatically declined in the past). 

Hello James,

I am afraid I cannot comment on the conversation you had with the agent at the time.  I have no way to know what he said to you or what assertions were made but generally speaking, HUD does not allow the valuation of excess land and the HECM program is approved for residential properties.  Therefore, homes with more than 5 acres, especially if that was not common for the area or if it placed an inordinate value in the land, or homes properties being used for agricultural type purposes were are not eligible for the program.  Since “excess acreage was often deemed anything over 5 acres for a residential property (but it really depends on the individual property and the sales of similar properties in the area), many times the appraiser would appraise the home and just not give additional value to any acreage above 5 acres.

This allowed homeowners to obtain a reverse mortgage because the loan did not include proceeds due to additional value due to excessive land value as defined by HUD.  When homeowners do have more land than HUD’s guidelines are willing to evaluate for loan determination purposes, the borrower has a few different options.  One is obviously not to get the reverse mortgage and attempt to obtain different financing.  Another is to only consider the value of the homesite including 5 acres of land.  The third is to subdivide the property because any loan placed on the property will encumber the entire lot, not only a portion of it.

The option you seek, being able to subdivide your lot may not even be possible.  The difficult part will be that any loan you have on the property will include all of the property so you would have to get creative and find a lender willing to give you enough money to pay off the existing reverse mortgage while only encumbering a portion of the land.  At that point, you could possibly sell the excess acreage then refinance the loan with a new reverse mortgage to eliminate those payments if that is your goal but I think this is a risky proposition.

A move like this would have an awful lot of moving parts with a lot of chances to go bad.  You would need to find a lender willing to refinance your existing reverse mortgage loan on only a portion of your current lot; then you would need to be sure that you could afford any payments on that loan while it was outstanding; then unfortunately there is no way you could be sure that the new parameters (new value, your age, interest rates and current reverse mortgage guidelines in effect at that time) would qualify you for a sufficient enough loan to pay off the new loan you took out to subdivide your lot that would need at least 1 year seasoning before it was eligible for a new reverse mortgage to pay it off. 

I know you probably don’t want to hear this, but I honestly believe you may want to look into the value of your home now with the additional acreage and see if there is an opportunity to sell and net enough money to set yourself up in another location.  You may even be able to use another reverse mortgage to purchase a smaller home or smaller lot and be able to keep the funds you need for other purposes.

Hello Elizabeth,

As long as the maintenance and repairs and not considered substandard and are up to code, the lender will not become involved in your parents’ choices for materials. 

Hello Tracie,

There is a clause in the loan documents that borrowers may not alter the premises due to the fact that the lender loaned money based on the value of the home as is.  If by filling in the pool your father lowered the value of the home, he is in breach of the contract and the lender could declare the loan in default.  Rather than fill the pool in with the equipment broke, the correct action should have been to replace or repair the equipment.

Hello Thomas,

The credit may be acceptable if all debts have been paid in a timely manner since the BK but the property is really a question, I cannot answer from the information provided.  It would depend on the zoning, which is considered the “main” residence and the sales in the area and if they support the property type. 

My suggestion to you would be to contact a lender directly to discuss your credit history so that they can determine if a LESA (Set aside to pay for taxes and insurance out of the loan proceeds) would be required due to the credit issues and then if the remaining funds would meet your needs. 

At that time, you could explore the property and whether it would meet HUD requirements so that you do not need to pay for counseling and an appraisal if the circumstances would prevent you from receiving as much as you would need or if the property does not meet the HUD requirements with the multiple living units and your living arrangements. 

Hi John,

I am a little hesitant to answer without ever seeing the preliminary title report, but I can tell you that we have closed many loans with properties that had one parcel that included 2 lots. 

If your property is 2 separate parcels though (2 separate legal descriptions which constitute two distinctly different properties), that would be a different issue.  You really need to have a lender review the title work to verify its status before you would know for sure. 

My advice would be to let the lender know of the situation before they order an appraisal so that they can hold the appraisal for a few days until after the title policy is in and they can verify that situation before you pay for the appraisal.

You will need to keep the lender involved because they will need to sign off on insurance checks as the mortgagee.  The 12-month requirement to be moved back into the home is for a temporary leave for illness and time allotted for repairs is not outlined in the legal documents. 

If the repairs are progressing and the lender is aware of the circumstances, there should be no problems if the job runs longer than 12 months.  The documents do state that if it is not feasible to rebuild because the damage is too great, the insurance proceeds would be used to pay down or off the reverse mortgage though so you would want to keep your lender in the loop to be sure they knew that the damage was being repaired and that it was not so great that the house was beyond repair. 

After all, 12 months is a long time to complete repairs.  It’s also important that they know what is happening in case they did an occupancy inspection during that time, so they didn’t think she moved and call the loan due and payable.

Hello Rose,

I honestly don’t know that the lender would know for sure.  Airbnb is a public listing (advertising) and I do not know if loan servicers monitor this listing for audit purposes.  I know that underwriters often check this listing if that are any questions at loan origination to determine whether they will approve a new loan request, but I cannot tell you for certain about after the loan closes. 

I do know that lenders/servicers do contract for on-site inspections pursuant to HUD requirements and if there is any signage or activity that would indicate that the property was being used in a manner that was contrary to the terms of the loan, the lender could act upon that information.

Hello Sherrie,

An apartment over the garage can be a few things.  It can be a legal second unit or as is the case in most instances, it is known as an “Accessory Dwelling Unit” or ADU when it is not a permitted second unit on a property in a zoning that allows for multiple units.  HUD allows loans on properties with ADU’s as long as the following conditions are met:

1. The square footage of the ADU is less than the main dwelling
2. The ADU is legal and permitted or it would be required to be removed to get a reverse mortgage
3. An ADU must be customary for the area as is evidenced by comparable sales from the appraiser with other properties with ADU’s that have recently sold
4. The ADU is not rented unless you can provide evidence from the local municipality that retains jurisdiction over such rentals that local laws/codes allow it to be rented
5. The borrowers must not reside in the ADU but rather must live in the main dwelling
6. The existence of the ADU may not jeopardize future hazard insurance claims
7. There can only be one ADU contained within, attached or detached to the subject property

If your apartment is a legal rental in your area and it is permitted, then there should be no issues with you having it rented out.

Also See: What Are Reverse Mortgage Accessory Unit (ADU) Guidelines?

Hi Jackie,

HUD has maximum limits for the home that can be used for business purposes.  You need to talk to a lender and let them know exactly what your circumstances are to see if you meet the HUD parameters.  

Hello John,

The terms of your reverse mortgage do allow you to rent a portion of your home while you still occupy it, but they do not allow for commercial or transient usage.  An Airbnb would not be an approved usage under the terms of the loan.

Hello Dee,

An off-grid home would not qualify if it was not hooked up to permanent sources of power and water (which is what the term “off-grid” implies). 

Also, for a property to be eligible for HUD-insured financing, there must be adequate recent sales nearby of similar homes with similar amenities for an appraiser to determine a value. 

Most off-grid properties are also somewhat secluded which would make appraisal by HUD-required methods impossible. 

Hello Eileen,

If you qualify with both properties and occupancy is not in question, there is no requirement that you sell an existing home before buying a new home with a reverse mortgage.  I will tell you though that buying a condominium with a reverse mortgage purchase loan can be a bit difficult though, especially if the project is not already HUD approved. 

You can look here on the HUD website to see if the project into which you wish to purchase is already approved with HUD.  If not, the transaction can take much longer and there really is no guarantee that the project will meet the HUD guidelines for approval and if it does not, the transaction would never be able to close with a reverse mortgage. 

With most real estate purchase contracts containing clauses that allow for specified time limits to remove loan contingencies, if the project is not already approved, it can put a lot of stress on buyers, sellers and agents alike.  It could also cost you money if you fail to perform.

Getting a condo project approved is not typically a quick process and many projects are never approved since they do not meet HUD requirements for one or more of a number of reasons.  There is a large amount of documentation that must be gathered and reviewed to get a project approved through HUD and it also requires some input from the Homeowners Association. 

Just to give you an idea of the task this may become.  If I look up Broward County, Florida on the HUD list, there are 611 projects that have been submitted to HUD from that county that appear on the list.  Without going through all 611 projects, I just looked at the results from the first page (the projects are listed in numeric/alphabetic order). 

There are 25 projects listed per page and on page one, all 25 projects are in a non-approved status.  16 were either rejected or withdrawn (withdrawn usually means that they never got enough information to HUD to receive an approval or rejection but that usually happens when they cannot meet the requirements and withdraw the request prior to HUD formally rejecting the submission) and the other 9 projects that were approved have all had their 2 year approvals expired and therefore would require a whole new approval.   

In fact, I must go to page three to find the first project with a valid approval but that is the only one in the first 75 listed projects.  None of page 4, none on page 5, none on page 6, none on page 7, then finally 1 on page 8 and I did not go any farther.  So that is just two projects in the first 200 listings that are approved and that is a little over 32.7% of the entire county.  If I change the parameters for the report and search just the approved projects, there are only 8 projects listed out of a total of 611 submitted.

Are all counties in the country this low?  I doubt it but I haven’t checked all counties and I picked Broward County Florida because I knew there was an abundance of condo units there and so the data would be plentiful.  The point is that condos have a lot of areas that may not meet HUD eligibility and approvals are only valid for 2 years at a time so even if it was approved at one time, it may no longer be approved now and my no longer be approvable now if things have changed. 

So, it is really important to do your homework before you make any offers that could wind up costing you time and money. 

Hello Diane,

Before you make any material changes to the property, you should contact your lender and request their agreement to the changes in writing.  The terms of the Deed of Trust or Mortgage state that the borrower will not substantially change the property or allow the property to deteriorate. 

If you do so without the lender’s consent, the lender has grounds to call the loan due and payable if they later determine that the value was lowered as a result of the changes. The verbiage that is contained in the legal documents that your father signed appears below. 

If you feel that the change is necessary and will not adversely affect the property (lower its value), then I would suggest you send the request to the lender with your proposed changes described and the reasons for making the change but don’t make any changes until after they have agreed that your proposed changes do not represent a risk to their collateral.

4. Occupancy, Preservation, Maintenance and Protection of the Property; Borrower's Loan

Application; Leaseholds….

Borrower shall not commit waste or destroy, damage or substantially change the Property or allow the

Property to deteriorate, reasonable wear and tear excepted. Borrower shall also be in default if

Borrower, during the loan application process, gave materially false or inaccurate information or

statements to Lender (or failed to provide Lender with any material information) in connection with the

loan evidenced by the Note, including, but not limited to, representations concerning Borrower's

occupancy of the Property as a Principal Residence. If this Security Instrument is on a leasehold,

Borrower shall comply with the provisions of the lease. If Borrower acquires fee title to the Property,

the leasehold and fee title shall not be merged unless Lender agrees to the merger in writing.

Hello Wendy,

If you sell the home and there is a profit to be made at the time of the sale, then you would certainly recoup any costs at that time.  If you are unable to sell the home, then you should check with your accountant to determine what tax benefits any losses on sale you may be eligible for, under what circumstances and what documentation you would need. 

The lender is not going to pay you for any improvements you may have made for the home if they need to foreclose on the property and the value is still not adequate for you to sell the home at a price higher than the existing loan amount. 

As far as your name not being on the home, if you are concerned with investing cash into the property and other heirs not recognizing the investment, you can always have a written agreement with your parents at the time the investment is made in the home that would protect your position as an heir before you put any money into it. 

I would encourage you to speak with an attorney to discuss different possibilities to decide if a Promissory Note, a Trust, or what instrument would work best for your circumstances.

Hello Steve,

HUD has actually revised their 4000.1 manual where they define and state their policy regarding mixed use property.  The most recent update is available on their site here:  https://www.hud.gov/sites/dfiles/OCHCO/documents/4000.1hsgh_Update8.pdf.pdf.  Page 167 of the manual now states the following about mixed use properties:

(5) Mixed Use of Property Mixed Use refers to a Property suitable for a combination of uses including any of the following: commercial, residential, retail, office or parking space. Mixed Use one- to four-unit Single Family Properties are eligible for FHA insurance, provided: • a minimum of 51 percent of the entire building square footage is for residential use; and • the commercial use will not affect the health and safety of the occupants of the residential Property.

HUD Still requires that the property be residential in nature and that the type of other use does not affect the health and safety of the occupants of the residential property so there are still some uses they will not allow (i.e. a gas station on the premises) but they no longer are a strict limit of 25% of the property and also no longer use the term “business usage”. 

They now concede as you can read by their manual above that several mixed uses may be considered.  You still need to remember that the appraiser will need to demonstrate with current sales that the use of the property will not limit its marketability by providing other recent sales of similar properties.

Hello Diane,

Reasonable manner for the most part means that you must attend to health and safety issues or items that can create a lien on the property.  Lenders can do a home inspection and are not typically concerned with the paint job but having said that, peeling paint can be considered a health and safety item. 

Having just a little focused scraping and touch up is fine if you believe the peeling paint may become an issue.  After all, the lender is not like a Homeowner’s Association whereby the CC&R’s may dictate that you must paint your home if they deem that the paint is too faded, etc.  But having said that, I have never seen or heard of a lender calling a loan due and payable for the paint job. 

You may find that if you limit the attention to the peeling areas, the touch up is not too expensive and it is always good to protect your home from further damage from direct exposure of the wood to the elements though and I would recommend it if you can find the funds for it in your budget.

Hi Mark,

HUD requires a borrower living in a property with an accessory dwelling unit (ADU) to be living in the main or larger dwelling.  The gray area is really what happens if you were living in the larger unit when you got the loan and subsequently decided to change and move into a smaller of the two after the loan closed.  

The loan documents state that you must occupy the property as your primary residence, but I am not aware of any provision that states you agree that you will not move into the ADU at some point later.  If you still live in at the property as your primary residence, I have never heard of a lender or HUD even trying to exercise a default for the living arrangements.  

You can also rent out rooms to roommates under the terms of the loan and there is no provision in the agreement that you will always stay in the owner’s suite and rent out the minor rooms for a home with no ADU.    

Hello Dirk,

The 1976 restriction is for manufactured homes only.  Single family homes that are “stick built” homes do not have any preset date that they must be built after to be eligible.  They must meet HUD requirements and must have adequate remaining economic life but being built before 1976 is not a problem.

Hello Blair,

If you meet the HUD requirements, you can do a reverse mortgage on your primary residence. 

There may be some specific requirements you must meet regarding documentation on the sale of the rental property due to qualification, but I cannot comment on that because I cannot begin to guess what may or may not be required and would depend on your qualifications as they pertain to financial assessment guidelines and the circumstances of the sale, etc.

Hello Debbie,

HUD takes over servicing a loan when the loan to value reaches a certain point based on the original value of the property.  This makes HUD the lender, not the owner. 

Your mom still owns the property, not HUD.  HUD is not responsible for making repairs to the home under the reverse mortgage program nor are they responsible for paying the taxes or insurance on the property. 

All the reverse mortgage loan documents clearly state this.  Just like any other loan, the borrower/homeowner is responsible to keep the property maintained in a reasonable condition. 

However, there may be other alternatives for mom to investigate for additional ways to repair the home and some are administered through HUD with other programs. 

I did a quick internet search of “home repairs for seniors” and there were a lot of sites that popped up for free repairs, grants and financial help.  Some direction to HUD and others for help in specific locations. 

Some mention Section 504 Home Repair programs for seniors age 62 and over.  I would suggest that you help mom by doing the research on the programs for her in her area if she is not adept at searching on the computer to see what is available. 

With as many sites and programs as I see just using that search phrase, I sincerely hope you can find something that will work well for mom.

Hello Pat,

HUD requires the foundation inspections to verify that the homes are on a permanent foundation that meets HUD’s requirements.  

If the home is not on a permanent foundation, HUD will not insure the loan and you cannot get a reverse mortgage.

Hello Michelle,

I guess the only way I can answer this is if you could sell it if he did not have the reverse mortgage, you can sell it if he does have one.  In other words, the loan on the house has no effect on the truck whatsoever. 

I am not aware of the laws regarding the sale of personal property (especially in all states) so I do not know what if any procedures you must follow so my answer cannot be a definitive yes or no, but the reverse mortgage has no bearing on the truck one way or the other. 

If you are your father’s heir, you would need to have the title placed into your name in order to sell the home and that usually requires a probate of some sort, but I would direct you to an estate attorney to determine exactly what you must do in order to sell the property (and if there is equity in the home, you should definitely look into doing it). 

It would probably be a good idea to ask the estate attorney about the truck and any other personal items that also require the transfer of a title of some sort at the same time.

Hello Arthur,

Outbuildings are often added and removed during an owner’s tenure in a home and if it is not attached to the home, or permanently affixed to the land, there should be no issue with you doing so. 

It was obviously not valued in the original appraisal based on your comments and since it is not attached it would be considered personal property anyway.  You are free to sell your personal property at your discretion.

Hello Charlie,

HUD has no specific requirement for Hurricane Shutters (even though they are a great idea).  The only requirement is that of local building codes. 

If they are required by code for the location of the property, then they must be there and must be up to the local ordinances. 

The appraiser will let the lender know if they are present or not, and adequate or deficient if required by local codes.

Hello Sharon,

Reverse mortgages are available for 1-4 family residential properties used for principal residences only.  Business or commercial properties are not permitted.

Hello Susan,

The home is still your mom’s or belongs to her estate until your either decide to sell it, Deed it to the lender if you decide you do not want it or want to sell it, or the lender ultimately takes it by a foreclosure action if you do not do any of the above. 

But mom or her estate still own the home until one of those events happen.  If you are her heir, that would mean that you own the home until that time.  If you are not her heir, you should check with her heir(s) to see how they feel about you removing things form the year. 

You see, plants become part of the real property once they are permanently affixed to the land (planted).  When they are in pots, they are personal property and may be removed at any time up until the day you turn over the property to the next owner.  Once planted, they become real property and are part of the land.

In all honesty though, unless the plants/shrubs you refer to were in the property when the original appraisal was completed and the absence of those plants would make the property less desirable and therefore affect the value of the home now, I doubt anyone would even notice the removal of some of the greenery (again if you are not talking about so much that it would make a noticeable difference in the property). 

I would encourage you to speak with a local real estate specialist to determine the value of the home, compare that to the most recent mortgage statement at the time to see if it is not better for mom’s estate or heirs to sell the home and if so, whether it is better to leave the landscaping as is for the sale or what could and could not be removed without adversely affecting your ability to sell and ultimately the selling price. 

Perhaps it would be better to remove only a few particularly sentimental plants but leave the remaining?

Hello Walter,

You cannot subdivide any land that has an existing mortgage unless the lender is willing to issue a partial reconveyance on that portion of the land. 

Most loans are sold into securities and the lender may not even have the option to issue that partial reconveyance so you would need to contact the lender to request if it were possible in your circumstance and if so, they would do an assessment of the value differential and probably require a payment on the existing loan in an amount to offset the loss in value due to the smaller lot. 

I honestly do not believe they will have the option to do this, but you never know until you contact them and ask. 

You may need to pay the loan off, subdivide and then if you want another reverse mortgage after that, you could obtain one based on the new property parameters (assuming both you and the property qualify under HUD’s current program guidelines). 

Hi Tom,

The terms of the reverse mortgage state that you are not to substantially alter the property. 

If you are talking about replacing the entire unit, that would be a substantial alteration. 

Not to mention that anything permanently affixed to the land becomes real property and to meet HUD requirements, a manufactured home must be on a permanent foundation. 

I would strongly urge you to contact the lender before you make any alterations.  You might also want to get a copy of their reverse mortgage statement to determine what they owe then get a valuation of the property with whatever improvements you intend to make. 

It just might be that you can ultimately improve the value more with the right improvements and then you can work it out with your parents that the home becomes yours after then pass. 

If you can recoup at least what you put into it and maybe more, there may be an opportunity for all of you. 

Your parents or their designated heirs always own the home so if more value can be had by making the improvements, it would seem that you just need to work with your parents to be certain if there are any other heirs you are protected from them expecting a piece of your investment. 

An attorney may be necessary to ensure the passing of the title and you will need to pay off the loan by either selling the property or obtaining a new loan if you do not have the available cash to repay the loan on your own after they no longer live in the home, but if it makes sense, it might be a better alternative to a home that loses value if you need to move it again and many lenders will not lend on a manufactured home that has been moved from its original delivered location after it leaves the factory (but don’t forget to include the lender in your plans so there are no issues later if you plan to make alterations to the property other than fix it up). 

Hello Phillip,

Yes you can.

If it is a townhouse style condo, the project must be on the HUD approved list but if it is a true single family attached or detached townhouse where you own the lot and tract, then no project approval is required.

Hello Michelle,

The HUD manual states that among other conditions, the following is considered unacceptable to HUD about the source of drinking water:

Properties served by springs, lakes, rivers, or cisterns

HUD requires a permanent source of potable water and if not hooked up to city water, there are several requirements for wells, etc. that the property’s facilities must meet. 

It does not mean that your property is not a very nice home, it just means that it does not fit in HUD’s guidelines for insurance and therefore would not be eligible for the reverse mortgage program. 

Good Morning Linda,

Typically, interior doors and scratches are considered deferred maintenance and would not require replacement. 

Unless the door was one that was a fire door (from the garage, etc.) the appraiser might note that the value was affected by the door missing but would not typically require the door to be installed for his final conclusion of value.

Hello Linda,

HUD prefers that a property be hooked up to a public sewer system when it is available and when the cost to hook up to such a system is not cost prohibitive. 

I have copied and pasted the HUD comments regarding sewage system requirements.  If you have a septic system, there is a public sewer system available and the cost to connect to that system is 3% or less than the total value of the home, it could be required. 

As you can see, there may be additional requirements of private systems if the lender allows the use of a private sewage system.

Hello Kathleen,

There is no HUD requirement that an Accessory Dwelling Unit (ADU) have an entrance into the primary residence. 

In fact, here is HUD’s definition of an ADU straight from their manual states that it may or may not have a separate means of entry:

Accessory Dwelling Units (ADUs) are commonly understood to be a separate additional living unit, including separate kitchen, sleeping, and bathroom facilities, attached or detached from the primary residential unit, on a single-family lot. ADUs are usually subordinate in size, location, and appearance to the primary unit and may or may not have separate means of ingress or egress. Attached units, contained within a single-family home, known variously as "mother-in-law apartments," are the most common type of accessory dwelling unit.  Accessory units usually involve the renovation of a garage, basement, or small addition to a single-family home.

I would not want to speculate what the circumstances may be that would cause your unit to be treated one way or another, but you really do not need to speculate. 

You are entitled to a copy of the appraisal.  The appraiser will state what he/she is appraising and how they arrived at their opinion of value. 

You may also find that the value was given but it is split off the main residence and may be included in the lower section of the appraisal on Page 2 of the Uniform Residential Appraisal Report but I cannot say for sure. 

We often see appraisers use this area when the square footage is not as valuable as the main residence but warrants some value (in one of the boxes below the “Porch/Patio/Deck” box). 

Then again, if it was done as an addition without permits and there are no sales with similar ADU’s available to support a conclusion of value, the appraiser may not have been able to assign any value to the addition. 

Again though, I would hate to start guessing at every conceivable circumstance. 

You really need to read the appraisal report to see what the appraiser has said and see if it matches what your lender is telling you.

Good Morning,

Unless the garage is located on another lot that is a separate parcel of land and not included in the legal description of the land on which the loan is being placed, the appraiser must take into consideration all improvements on the lot. 

If you had outbuildings such as a barn, or a second dwelling that were also on your lot, he would also be required to take those structures into consideration and that would include their condition, any health and safety issues, zoning compliance and how well the property conforms to the neighborhood. 

It all goes into his final opinion of value and marketability of the property that HUD and lenders use to determine the loan amount and whether the property meets the requirements to lend under the program parameters.

Hello Sharon,

If both homes are on the same parcel/lot with one legal description, unless you do a legal lot split, both homes must be included in the same loan. 

But the stipulations that you will need to meet are that the zoning must allow for two homes, there must be adequate sales of similar properties that the appraiser can use for comparable sales to support a value and marketability of the property and typically HUD requires that you are living in the main home and using any secondary or smaller dwellings as rentals. 

If they are about the same size with a small difference you may be ok with the lender but if one is an accessory dwelling unit and much smaller, the lender would require that you occupy the main residence.

Hello Martin,

I would need to tell you that typically most off-grid homes will not qualify for a reverse mortgage. 

Most off-grid homes do not meet all of HUD requirements for permanent heat source with power, water and acceptable sewer or septic systems. 

And then you need to have sufficient sales of similar properties to support the marketability and value of the home even if it does meet all HUD property requirements and most off-grid properties are not in an area with a lot of other off-grid homes that have sold recently which would allow an appraiser to provide an appraisal that HUD would accept. 

Hello Drew,

This would not be an appropriate use of this loan. 

The terms of the reverse mortgage do not allow you to substantially alter the property. 

You would be better suited with a construction type loan and then refinance later with a reverse mortgage.

Hello Richard,

The program is available for 1-4 family residential properties. 

Your duplex would still need to meet all of HUD’s other requirements but a 2-unit property that is owner-occupied is eligible.

Hello Kim,

I cannot really advise you one way or the other.  I can’t say if it is financially feasible or not but I will remind you that when they are no longer living in the property, the reverse mortgage becomes due and payable. 

If you are unable to repay the loan at that time, the lender would eventually be forced to begin foreclosure proceedings if you did not sell the property to pay the loan off. 

If you believe the property to be of sufficient value and the loan amount on the reverse to be low enough for this to not be an issue and wish to proceed.

I would suggest that you contact the lender with the plans before you begin as the legal documents of the reverse mortgage do prohibit certain changes and it would be best to determine that the proposed addition met all zoning standards and did not create a problem with the reverse mortgage as well.

Hello Anne,

HUD does allow homes with common walls in their acceptable property’s classifications. Naturally, there are some requirements that the property must meet depending on the classification and whether there are other shared amenities, but that would need to be reviewed based on your individual property.  

Hello David,

I assume you are referring to your home and you are getting the reverse mortgage?

If so, the property must conform to local zoning requirements and for a single-family home, HUD typically will not allow a second kitchen if the kitchen has a stove.

It will depend on what the appraiser says but the second entrance should not be an issue and you can remove the stove to make the home conform (if it even has one).

Good Morning,

The reverse mortgage has no prohibitions against any programs that would offer any repairs in CA or any other state. 

My guess is that this is a loan that they put on the property and the lender is unwilling to place their lien behind a reverse mortgage due to the fact that the reverse mortgage requires no payments and the lender in a junior lien position does not know how high your reverse mortgage balance will rise to over the years if you never make a payment and the interest keeps accruing. 

HUD guarantees that the borrower and their heirs will never owe more than the property is worth, but that does not help any junior lien holders if the borrower does not pay their debt and there is no money left in the property for that lender to recoup amounts owed to them.

I do not have any suggestions for you as I do not work with home improvement or AC companies, but my recommendation is to keep looking on the internet.  As I said, I am not aware of any issues with the reverse mortgage and believe it is the companies with whom you are speaking and their offer of financing. 

As a temporary measure, I just did an internet search for “Free Air conditioning units for seniors” and there are a surprising number of results for everything from assistance programs supply free AC units to seniors, to repair programs.  I would wholeheartedly suggest you give this a try!

Hello David,

HUD allows guest houses or what they call Accessory Dwelling Units (ADU’s) for single family homes – not 2-4 family residences.  The ADU must be secondary to the primary residence and therefore, a smaller structure. 

The ADU must be a legally permitted.  You must occupy the primary structure and not the ADU.  The presence of an ADU must be customary for the area as is evidenced by sales also containing ADU’s on the appraisal. 

If the ADU is rented at the time you apply for the loan, you would need to supply evidence from the loan municipality that such rental is lawful according to local codes.  There may only be one ADU per property. 

HUD will not allow multiple guest houses or for example, a guest house and a manufactured home on a larger lot. 

And finally, the existence of the ADU cannot create an issue with any possible insurance claims on the property. 

Hello Cynthia,

Unfortunately, one of the requirements for a reverse mortgage on a manufactured home is that you own the property on which the home is located. 

There are several other requirements that manufactured homes must meet to be eligible for the HUD reverse mortgage program and you can find them here. 

Hello Ronda,

That all depends on how the title is vested and if there are any restrictions on it.  A lender could not tell you for sure without first reviewing the title report, but chances are good that he can.

Hello Gene,

Your estate or your heirs own the home and always have full access to it for as long that remains true.  The only thing that would change that would be if your family did not want the house and did not want to sell it and planned to let the lender take it through a foreclosure action.  

If they decided they did not want to repay the loan and keep the home or sell it, the lender would ultimately foreclose and when that foreclosure was final, the lender would own the home and at that time they would no longer have access to the home.  

The quickest that could happen is approximately 6 months with all notifications required as well as foreclosure processes, but it is typically 8 months or more to complete the foreclosure.  Your family would have more than enough time to remove your personal belongings if that was their plan.

Hello Ester,

I cannot answer this question without first seeing the title report and checking for deed restrictions. 

There may be a leasehold involved or restrictions on the ownership that would make the property ineligible for the HUD program but any lender would need to review the property before being able to answer this question. 

Hi Charles,

To be eligible for the HUD reverse mortgage program, the property must be a 1-4 family home zoned for residential use. 

HUD will allow some commercial usage of the property as long as no more than 25% of the dwelling/property is used for commercial usage, it is still a residential property and the commercial use is minimal that does not affect the nature of the property. 

The property may not be used for agricultural or other uses that are not deemed residential.  A property with a recreational vehicle (RV) however would never be acceptable as HUD would not insure a loan on such a property even if it did meet HUD’s other requirements for commercial usage. 

Hello Elizabeth,

The terms of your loan state that you cannot substantially alter the property.  I cannot say for sure, but I would guess that an added dormer would typically be considered an insubstantial addition. 

I know they can be added in some cases for as little as $2,000 - $2500 and can cost as much as $20,000 in some cases for larger additions.  If the addition conforms to the original dwelling, is permitted and the work is done in a workmanlike manner, you should have no issues if your project is a smaller one. 

If you are considering a large addition, you may wish to run your plans by your lender before you begin to be on the safe side.

Hello Jeff,

The terms of a reverse mortgage loan do not allow you to use the property for transient or business use.  You may rent the rooms for long term tenancy (i.e. month to month or on an annual lease) as long as you also live in the property as your primary residence, but the terms of the loan do not allow you to use the property for hotel, hostel or other short-term rental such as Airbnb type rentals. 

If this is your intended purpose, you should seek a different type of financing other than a reverse mortgage.

Hello Jerry,

I cannot give you legal advice and would suggest you contact an attorney if you feel that the loan was originated improperly. 

Typically, the legal description is already determined and on file with the county when you apply for a loan and a survey is only completed to verify the boundaries and that there are no encroachments from other properties onto the subject or from the subject onto other properties and that all improvements are located on the property within acceptable boundary lines. 

The lender does not set the property lines, they either agree to lend on the property or not based on the legal description and the property as it is.  With a reverse mortgage, lenders are not supposed to do a “cross-collateralization” of more than one legal parcel under the HUD Home Equity Conversion Mortgage (HECM) program. 

If the property you reference that you believe should not be covered by the loan was part of the legal parcel (included in that legal description with your home), you would have needed to subdivide the lot before you got your loan and do the loan after the legal subdivision so that there were two separate parcels with separate legal descriptions. 

That way the appraiser could appraise the property as is which would be minus the separated portion as it would be a totally different property.  And then the lender’s documents would include the legal description that only covered the lot on which your home is located. 

If there were two legal separate lots with separate legal descriptions that the lender rolled into one loan, that would be highly unusual.  I would suggest you have an attorney review the matter as he/she can tell you the status of the property and if it is just one legal parcel or if it really is two that are encumbered by one Deed of Trust. 

The attorney can also let you know what your rights and remedy would be in this situation depending on any agreements you did or did not have with the lender.

Hello Tom,

The property is not eligible under HUD guidelines if it is being used for farm or agricultural purposes.  If the appraiser notes that the property is being used for such purposes on the appraisal, the loan would not be granted.

Hello Brenda,

There are no prohibitions preventing a borrower with a reverse mortgage from renting a portion of their property as long as it is not for transient or business uses, they cannot change the nature of the property, the use is for legal purposes and they still live in the home as their primary residence as well. 

From what you are telling me, I can see no reason why they would not be able to rent out a second unit on their property for residential purposes.

Hello Sam,

HUD does allow Accessory Dwelling Units (ADU) if the zoning allows for it and the borrowers are living in the main property.  To give it any additional value, the appraiser would need to be able to find other similar properties that also sold with ADU’s to justify any adjustments to value he/she used for the unit.

Hello Debby,

To be considered your primary residence, you should be occupying the main structure and then if you rented an ADU (accessory dwelling unit) that is allowed by code, HUD has no objection to that. 

Hello Christie,

Your documents state that you agree not to substantially alter the home.  I guess the term substantially alter might change depending on which wall you were considering. 

Changing the home from a 2 bedroom to a 1-bedroom home (especially in an area with no other 1-bedroom homes available) might substantially affect the value of the home.  Removing a wall from a service porch and a hallway might not alter the room count or the value at all and may in fact, improve the functionality of the home and therefore the value. 

Under that scenario, it would not require any permission if done according to code and in a workmanlike manner. 

If you are not sure if your contemplated changes are considered a substantial alteration, you can submit your plans to your lender in advance for a determination.

Hello Char,

I do not feel as though I can advise you on this issue.  As an originator, the HUD rules tell us that if there is an accessory dwelling unit (ADU) or a second unit on the property, the borrower must occupy the main or primary unit. 

There is nothing in the loan documents of which I am aware that says that you could not change which unit you occupied later if you still occupied the property as your primary residence. 

There is also a provision in the documents that you agree not to substantially change or alter the property (item #4 of the Deed of Trust).  Would an addition of a garage and ADU be considered a substantial change?  I cannot answer that.

With regard to occupancy, one would think that if you still occupied the property as your primary residence you would meet the requirements as they do not state that you cannot move from one unit to another on the property at a later date but if you applied for the loan with an existing ADU or second unit, you must occupy the primary home or larger unit to be approved. 

However, there is no verbiage in the documents that says if you have the loan and you have a smaller unit on the premises, you must always agree to occupy the larger unit.  The bottom line is that I just don’t know how to advise you.  I would not want the lender to do an occupancy inspection and find the home rented and call the Note due and payable before you had a chance to argue the point! 

My advice would be to contact the lender and let them know what you wish to do and ask them if they have a problem with it.  If they say yes, ask them to specifically point out the paragraphs in the legal documents that prohibit you from doing this. 

Remember, the lender only has the power you agreed to give them as a result of borrowing their money.  If you do not agree with the lender’s answers, you can always seek legal advice after that and before you are in the middle of a foreclosure action and it may turn out that they just have a couple of conditions you have to meet (i.e. the ADU has to be permitted and they want a copy of the certificate of occupancy) and your concerns are not warranted anyway. 

In any case, I just believe it would be best to know what you are up against before you started down a path you wish you had never begun later or to ease your mind in advance.

Hello Burt,

I really could not answer this without seeing the legal description of your property.

It all depends on your property and its legal description.  HUD must approve the project if it is considered condominium ownership wherein you do not own the land you are on and own an interest in the common ownership of the entire project. 

There may be other requirements depending on how extensive the common amenities are even if you do own the land on which your home sits. 

If I had to guess, based on the very little experience I have had with coach homes (and I am sorry, it is not a lot) and what I have been able to read this morning, I would say that HUD approval of the project is probably not required but I certainly would suggest that you have your title and your association docs reviewed before you started incurring a lot of costs to be sure.

Hello Beverly,

I am not quite sure in what context you mean this so let me take a stab at it and if I do not answer your actual question, please feel free to follow up.  You can sell a lot to get a down payment or for additional funds needed to close the loan. 

You would just need to supply the closing statement if those funds are required for you to be able to close and you need to verify where they are coming from.  If the lot is part of your current parcel, you would not be able to just split it off and sell it if a current loan already covers the parcel without the lender’s approval. 

Before you did anything to split the lot in that case, you should contact the lender. 

Hello Todd,

If you have two separate lots with separate legal addresses, the loan should not be covering both lots.  Reverse mortgage loans do not “cross collateralize” multiple legal description properties with one loan.

If the property is currently one legal description but can be subdivided into 2 separate lots, you would need to contact the lender to request whether they could entertain such a change.  Often loans are used as collateral for mortgage backed securities and they may not even have that option.  

I suspect that if your value will change though, it will make the loan terms change and to do so would require a refinance of the loan with a new reverse mortgage at this time based on the parameters of the new property.  You would need to contact your lender to verify for sure though.

Hello John,

A daycare facility would not be allowed under the terms of a reverse mortgage.  HUD allows up to 25% of the property to be used for a home business if it does not change the residential nature of the property.  

However, when the business use cannot be limited to 25% as would be the case with daycare or a boarding facility, etc.) the business use cannot be limited to a defined space of 25% or less (as a single room used to operate a bookkeeping service, etc.).  

Hello Zak,

HUD allows 1 – 4 family properties on the reverse mortgage program if the property meets their parameters.  Since you do live in the property, so far, from what you have said you would meet the program requirements. 

I obviously cannot tell you if you or the property meet all other HUD requirements but would invite you to visit our site to run your individual parameters through our online calculator to see what you can expect to receive under the program. 

Only an appraisal will tell us for sure if there are any property issues, but we can eliminate most concerns with a phone call if you like the numbers you see from the calculator!

You must also keep any assessments current (HOA fees, etc., if any) and you will be required to acknowledge to the lender your occupancy at least annually.  Otherwise, unless the lender receives notification of property damage or non-occupancy, you really won’t have much interaction except receipt of your monthly statement.

Hello Flavian,

Typically, Section 8 housing is a program administered by HUD for certain rental housing for low income and other eligible individuals. 

The reverse mortgage has nothing to do with Section 8 and in fact, requires the borrower to live in the property as their primary residence or the loan would be called due and payable by the lender/HUD under the terms of the Note and Deed of Trust/Mortgage.  Therefore, a residence encumbered by a reverse mortgage cannot be a rental unit. 

I am not extremely familiar with the Section 8 program and have never personally worked with it.  I understand that some public housing agencies (PHA’s) receive federal funds from HUD and issue vouchers under the Section 8 program.

Furthermore, according to the HUD website, in some circumstances, if authorized by the PHA, a family may use its voucher to purchase a modest home but I cannot provide the information about this program as it is not used in conjunction with the reverse mortgage. 

Information on that program may be found on the HUD website at https://www.hud.gov/topics/housing_choice_voucher_program_section_8.

Hello Patty,

The survey is not usually recorded but is it is included in the legal description of your Schedule A of the Preliminary Title Report.  Check with your title company to see what they will need from you.  They may need you to send them the survey to prepare the title report, but they should be able to return the original back to you after they have prepared their report.

 Hello Richard,

HUD will not insure a loan in a complex that has too many rental units but they will insure loans in projects with no rentals.  The project will still have to meet all of their other requirements though so I cannot say you can get a reverse mortgage, I can only say that this specific circumstance would not prevent it.

Hello Donna,

HUD will allow you to get a reverse mortgage on a property that is residential from which you run a small business under certain circumstances.  The property must be residential in nature. 

In other words, it can’t be a store or other commercial, industrial or agricultural zoned property that has a living unit attached to it.  No more than 25% of the property can be used for business purposes. 

If you have a business like a bookkeeping service that is run from one of the rooms, that is an easy requirement for the lender to monitor but if you board dogs, you often cannot verify that animals roaming can be limited to just 25% of the property and this type of business probably would not be approved. 

Another example of a business use that may well not be approved would be a day care center.  There would be no way to ensure that the business use of the property was confined to 25% of the property. 

And while HUD does allow borrowers to rent out a portion of their home (a room or rooms), they do not allow for transient or short term usage so if your business is for an AirBnB type of business, your home would not be eligible for a reverse mortgage at this time.

The business cannot change the residential nature of the property.  If you have signage and other features that make the property appear more like a business than a residential property, it would not meet this requirement. 

And finally, the business use cannot violate HUD’s restrictions for eligible properties.  A good example of a property on which we could not place a reverse mortgage was a single-family residence that also had a small gas station on the property. 

The one pump was not very large and absolutely did not encompass more than 25% of the property (and none of the actual residence) but HUD will not allow gas tanks and other potential hazards within a close proximity to a property that they insure so this also was not eligible for a reverse mortgage. 

Hello Art,

I would encourage you to contact your lender before you start a venture like this.  You have a couple of issues that could endanger your reverse mortgage. 

Firstly, your loan documents state that you are not to alter the property.  For most “alterations”, the lender and HUD have no problems because it is just a room addition or adding square footage, etc. 

However, what you are describing would alter the usage of the property.  HUD does not allow for transient or temporary rental and this would turn the property into a short-term rental. 

I don’t know how large the home is, but when looking at a home-based business, HUD allows up to 25% of the property to be used for the business and it sounds like you intend to use more than 25% of the property as your rental and live in the minority portion of the home. 

By adding a separate unit, you would also be changing the nature of the property from a single-family residence to a 2-unit home.  I would encourage you to either obtain prior approval or get the determination that it does not meet the requirements of the loan before you begin any alterations. 

If may be that you still want to go forward with your project but perhaps the reverse mortgage is not the proper financing under the circumstances.

Hello Sandra,

What you really need to do is to speak with an estate attorney in her area.  The attorney will be able to let you know what you can and cannot do in the way of safeguards and I cannot give you legal advice. 

I would think the first thing would be a review of her equity position now, what it would be if you put $100,000 into the home and what you can do to protect the title. 

The attorney will have to be the one to tell you all that though and I would suggest that you do this sooner rather than later while she is still able to participate in the decisions and execute legal documents.

Hello Janine,

I would suggest that you contact the local senior assist programs in your mom’s area.  I am not aware of any national free repair network but often there are services available to homeowners locally through their church, their city/community or other grants. 

The internet is the best place to start looking and HUD counseling agencies sometimes have some information as well because they do more than just counsel for reverse mortgages in most instances.

Hello Rick,

HUD does not allow this under the program parameters.  If there is a trailer on the property at the time the loan is originated, it would have to meet all zoning requirements and may still not meet HUD requirements for ADU’s or accessory Dwelling Units. 

Even if the ADU did meet HUD requirements and could be on the property, HUD requires borrowers to occupy the main residence, not the ADU.  If the servicer did an occupancy inspection later and found the residence to be occupied by renters, they could call the Note due and payable.

Hello Robert,

I am not sure how to read your question.  Do you currently have a reverse mortgage?  Do you live in the property as your primary residence?  You speak of a tenant turned Air BnB, that makes it sound like the property is a non-owner occupied property which is not eligible for a reverse mortgage.  I am not sure I can adequately answer your question but I will give it a try.

HUD does not allow for transient use of a property.  Therefore, any hotel, hostel type usage that includes AirBnB is not acceptable use for borrowers wishing to take part in the reverse mortgage program.  If you received a reverse mortgage in 2009 and had a long-term tenant who rented a room, HUD did allow this and still does. 

If you are using the property for an AirBnB now and you are still occupying the property full time as your primary residence, I have told others that I have never heard of HUD or lenders calling the loan due and payable as long as all taxes, insurance and any other assessments are paid in a timely manner and the property is properly maintained, but you need to realize that this usage is outside of the terms of the loan. 

If you have a reverse mortgage and do not occupy the home as your primary residence or fail to meet any other conditions of the loan, you run the risk of having the loan called due and payable.  If you do not currently have a reverse mortgage or are considering a HECM to HECM refinance of an existing an existing reverse mortgage loan, and the property is currently being used as an Air BnB, it would not meet the current HUD eligibility requirements. 

Therefore, even though you were able to obtain the first loan, the request for refinance would not be approved as any refinances must meet current HUD requirements.

Hello Dawn,

While I cannot give you any assurance, I have never heard of a lender or HUD calling an existing loan due and payable due to the short term rental of some of the property as long as all of the other terms of the loan were still being met. 

In other words, if you are living in  the home as your primary residence and not away while you rent it, you pay the taxes and insurance in a timely manner and the home is being maintained in a reasonable manner, I have never heard of an existing loan being called due and payable even though the loan would not be approved in the first place had it been rented as such at the time the lender was considering the application. 

Also to be considered though, with the losses HUD has been experiencing on the program due to non-compliance by some borrowers not living in the homes and heirs who continue to live in the home long after borrowers move, HUD may be forced to begin more aggressive servicing policies at some point for those who do not follow the program requirements, but I honestly cannot say that that will happen for sure, if so what measures they would implement or when.   

Hello Jean,

HUD does allow a single-family home in a residential area in which no more than 25% of the property is currently being used for commercial use. 

In other words, if the office you describe does not change the residential nature of the property and the house is still basically a single-family home with a business legally being run out of it, HUD allows it under certain conditions.  It must be in a residential area and the commercial usage may not comprise more than 25% of the total property square footage. 

However, if your home is not zoned residential (the zoning is commercial), if the highest and best use of the property is not residential (the properties are mainly being used as commercial now possibly due to the transition of the neighborhood) or there is signage and a parking lot that makes the property more of a commercial nature than a residential one, it probably would not be acceptable. 

Hotel, hostel, air bnb are not acceptable property uses per HUD parameters at this time.  HUD does not allow transient or temporary rentals for properties in the reverse mortgage program.

Hello Siglinde,

Just like any lender for a forward loan or a reverse mortgage, any claims for insurance payments are made payable to both the homeowners and the lender.  The lender will be sure that the repairs are made to the home then they will sign off the insurance check.  

They would not allow borrowers to take insurance proceeds and not complete necessary repairs and so they will require an inspection to verify that damage was repaired before they would release insurance proceeds.

Hello Bobbie,

Unfortunately, no.  Cisterns are not an acceptable water source per HUD requirements.  As printed in the HUD appraisal manual 4150.2, HUD considers properties with the following water situations ineligible for insurance:

Unacceptable Conditions: properties served by springs, lakes, rivers or cisterns (3-6)

Hello Lorna,

If the unit is permitted and the improvements you made are not forbidden by zoning, they would be fine for the reverse mortgage.  As far as it being rented out, again, if the zoning permits it, you are ok if the rental is not for temporary or transient type occupancy.  HUD does not allow hotel/hostel or airbnb type usage of the home, but they do allow lawful rental of the property as long as it is permitted by zoning for the property to be eligible for a reverse mortgage.

Hello Brian,

HUD does not insure loans on properties in agricultural zoning.  It must be a residential zoning to be eligible for the program.  I cannot advise you on what you need to do in order to split the lot, that would depend on the city or county that controls such things where the land is located but you would need to be certain that the zoning of the property after such a split would still qualify for the loan, otherwise, it would be wasted effort. 

There would also need to be other sales of similar properties available once the split was completed.  In other words, if there are many properties in the area that are similar to the smaller property you wish to ultimately end up with and there are sales for the appraiser to use to determine the value, that would be fine.  However, if everything in the area is also 40 acres and now the smaller lot is very difficult to assign a value as it is no longer homogenous with the other properties in the area and the appraiser can find no sales of similar properties as a result, it also would not meet the requirements of HUD. 

So your biggest issues are making sure that the zoning would be residential and that the lot split will result in a property that meets all HUD guidelines as well as conforms to the area.  To answer your question directly, I do believe you will ultimately be required to have a survey completed to supply to the county for the process to be completed, but I would verify that the property will meet the other criteria first before going to that expense.

Hello Linn,

When you say, in working order, I guess it depends on the degree to which it is not working.  A swimming pool with a heater that is not working at the time would probably not even be known by the appraiser.  Most borrowers would not even have their heaters on during various times of the year and appraisers do not turn them on to see if they will heat. However, if the pool is growing algae due to the filter not working, that would be easily seen with just a visual inspection and that is also a health and safety hazard as pools like that will begin to breed mosquitos, etc. 

And if the pool is empty due to leaks or other issues, it is also a health and safety hazard and would be required to be repaired and filled.  HUD will not allow a reverse mortgage on a home with health and safety issues and those repairs would have to be made before the loan could close, they would not allow a repair set aside to close the loan with the repair to be completed later.

Good Afternoon,

Reverse mortgages can be utilized on residential properties only.  HUD guidelines do not allow the loans to be placed on agricultural properties so if by farm homestead you are referring to a property that is zoned and used for agricultural purposes, it would not be eligible. 

Hello Ellen,

I must assume from the start of your question; you and no other family members are interested in the home.  “Horrible” or no, all family members have had a chance to look at the situation and do not want the house for themselves or for investment?  If so, I will go from that premise. 

The reason I ask, is because a lot of what I am going to say assumes certain costs and that could include real estate commissions and any costs to fix the place up and horrible to you might be a good starter home for another family member if you can discount the house what you would have paid anyway to fix/sell the home making it a win/win for other members of your family willing to put in the work sometimes and who otherwise might not have been able to purchase.

I would suggest that you contact a senior real estate specialist and have that individual look at the property to determine the most probable selling prices - as is and what the house might sell for with some improvement (and there might be more than one level of improvement you need to consider). 

The individuals who work with seniors are typically very aware of the issues the homes are likely to have and can guide you through what repairs/improvements can be made for small investments to larger costs and then you can compare these numbers to the outstanding balance of the loan to determine the best course of action for your family.  It doesn’t pay to put a bunch of money into a losing proposition, but a small investment might pay off in multiples based on sales in the area. 

These senior specialists also usually work with estate sales professionals and can help you get the personal items out of the home that the family cannot take or does not want through a combination of sale/donation.  This achieves three goals.  It allows for a smoother sale as well as clears the way for any actions you want to take with the lender if you decide you don’t want to sell (and I will get into that later). 

And finally, while I cannot give you tax advice and you would need to contact your tax professional to see how your circumstance are affected if at all, some seniors may benefit from the deductions of the donations from unsold and unwanted items. 

The loan is a non-recourse loan so your father in law will not have to pay the lender anything if the home is not worth what he owes.  If the determination you ultimately make is that the improvements would not bring enough to make it worth doing or to sell the property could only be done at a loss no matter what, you can always have dad move and notify the lender of him vacating the property and offer them a Deed in Lieu of Foreclosure. 

They would not be able to accept it if there are title issues and the property must be cleared of all personal property.  It also must be “broom clean” before a lender can accept a Deed.  Having the estate sale and removal of all personal property early on comes in handy for all of you and gives you the option of sale or deed so contacting the real estate professional and estate sales team was not a waste of time, whether you sold or not.

Other than that, I don’t know what else I can offer.  Dad can live in the home regardless of the value for life with no payments due but if he requires the assistance of others now, you all need to figure out what is best for dad.  I truly believe that if another family member can step in and take the home to live in or for investment and same the sales and improvement costs it’s a win for all parties, but I understand that is not possible in all circumstances.

Hi Paul,

Unless the lender has foreclosed on the loan, the owner or the owner’s heirs still own that property.  You would have to purchase the house the same way you would any other property – search out the owner or the individual authorized to act on the owner’s behalf and make them an offer for purchase. 

The lender or HUD cannot do anything with the property and cannot negotiate a sale for the property if they do not own it and just the borrower’s vacating the property does not necessarily mean that the title has passed yet.  The borrower or the borrower’s heirs could be in the process of trying to sell the home, they could be trying to negotiate a Deed in Lieu of foreclosure at which time the title would be Deeded to the lender, or there may be no heirs, they may not be interested in keeping or selling the home and the lender may be in the process of foreclosure as we speak. 

A title company can tell you all public records that have been filed on the property and that would include if a notice of foreclosure had been filed but had not been completed, if it was foreclosed by the lender or if no action had been started by the lender at this time.  At the time the borrower or the borrower’s heirs Deed the property to the lender, or the lender receives a Deed upon Sale after a completed foreclosure, the property would then be owned by the lender and it could sell it as it sees fit (or HUD if the lender had transferred the loan back to HUD). 

In either case, you could tell by public records who the legal owner of the property is at this time and that would be the entity with whom you had to negotiate to try to complete a sale.

Hello KC,

Without going out on a limb, you are probably ok if you didn’t do anything that violates local zoning ordinances and would trigger the city or some other municipality to start issuing violations that were also sent to your lender.  I really can’t tell you if your alterations are ok or not. 

You are still living there so you’re covered on occupancy, but if the city, county or anyone else who had jurisdiction determined your alterations to be a health hazard or zoning violations, you could have problems but that seems unlikely.  If you are living in the main home, your lender will probably never be brought into that issue.  And as far as when you sell it, again, that would depend on if your alterations created any kind of violation that required you as the owner to correct.

Hello Norma,

The short answer is no.  For a manufactured home to be eligible under HUD guidelines, there are several requirements it must meet but one of them is that it must be titled as real property.  Therefore, any DMV titles would have had to be returned to the DMV and the unit would have to be permanently affixed to the land and titled as real property.  You can read all the manufactured requirements here. 

From: help@reverse.mortgage <help@reverse.mortgage>
Sent: Saturday, February 23, 2019 3:33 PM
To: mike@allreverse.com
Subject: New Question Received

A browser norma sauvain (joeybuddydoggie@hotmail.com) has sent the following question(s) in the ask experts blog.

can a reverse mortgage be acquired even if the property is titled thru the department of motor vehicles?

Hi Gary,

I’m not sure what “HUD Inspection” you are referring to.  If you mean an appraisal for the origination of the loan, that usually is completed in about 1 to 2 weeks depending on weather, property location and the number of appraisers in the area.  I have seen them take a month or longer though in some instances depending on the circumstances.  If you are talking about other inspections required to originate a loan, again, it depends on the type of inspection and the availability of the individual needed to perform the inspection such as licensed inspectors or other staff for the needed work. 

We saw one case where an inspection was required on a manufactured home for the foundation and due to the heavy snow in the area, the inspectors could not perform the inspection for a couple months.  A reinspection from an appraiser for work that needed to be completed by a homeowner in order to close a loan under ordinary circumstances with no delays might take just a day or two.

There are many different inspections that could be required during the origination or servicing of a loan depending on the circumstances and certainly not all of them would be required in every situation.  The time required to complete the inspection you are waiting for would depend on the people who had to be involved, their schedules and any delays they faced (work back-ups, weather, government shut down delays, etc.).  I’m sorry, I really would be doing you a disservice by giving you an off-the-cuff timeframe for something I can’t determine without knowing what kind of inspection you are referring to or what the individuals involved were facing.

Hello Gary,

The owner is still responsible for all property charges including the taxes, insurance, HOA dues, etc. because the owner still owns the property.  If the owner chooses to sell the property a year later, the equity in the home still belongs to the owner or the owner’s heirs if the owner should pass.  Just as with any other loan, the costs to maintain the home are the responsibility of the owner of the property.

Hello Susan,

HUD has requirements for properties to be eligible, they cannot be under the influence of some external hazards.  Gas storage tanks that are too close to the home being considered, power lines that extend over the house itself, large propane storage tanks, etc. can all render a property ineligible for HUD insurance and therefore ineligible for the HECM program. 

With the information provided, I cannot say if one lender missed the hazard or if the property on the other side is farther from the tanks, thereby making it acceptable under the HUD restrictions.  HUD and lenders rely on the appraiser to be their eyes and ears in the field and if the appraisal of the other property you mention that received a reverse mortgage indicated that the property met the HUD restrictions about the distance of the hazard in question it might not have the same issue.  There is also a possibility that the appraiser missed the hazard or mis-reported the distance of the hazard to the other property but that would not mean that another such property would also be approved for FHA/HUD insured financing as a result. 

Unfortunately, if your mom’s home falls within a certain distance of certain hazards, it is not eligible.  BUT that does not mean that you cannot check with another lender and let them also verify the information.  The appraisal can be transferred to another lender and there is no charge for you to have a second lender verify that the first underwriter did not incorrectly interpret the HUD requirements.  I would certainly suggest that you have another set of eyes look at it to verify the information.

Good Afternoon,

Remembering that a reverse mortgage is just another loan in this respect, you should probably contact your insurance company first.  Get an adjuster for the damage and let them tell you what they need to do for the payment.  The contact your servicer and let them know what you are doing. 

 The check from the insurance company will include the lender because they are listed as “also insured” because they have a lien interest in the home, just as any lender would with any other type of financing.  They will want to see that the work to repair any damage has been completed before they sign off on the check (probably depending on the nature of the damage and the amount), but your servicer will confirm all of that for you.

Hello Marty,

You cannot put a reverse mortgage on a vacant lot.  The program will insure HUD eligible single-family residences including manufactured homes that meet their guidelines.  Those homes cannot be “mobile homes” but if they were manufactured after June of 1976, are on a permanent foundation, are taxed as real property and meet all the other HUD requirements, they might be still eligible. 

I use the word “might” because there are several requirements for manufactured homes including the requirement that there are enough like properties that have sold in the area to determine the value and marketability of the properties.  They do not require city water or sewer in all cases, but the property would have to have an eligible permanent water source (i.e. well) and if not sewer, an acceptable alternative such as septic system that is common for the area.  If the property has no water source and no septic or sewer of any kind, it would not be eligible as a manufactured home or if it was a stick-built property either.

Hello Kathy,

HUD allows for up to 25% of the property to be used for commercial usage if it is permitted by the zoning and it does not change the residential nature of the home.  If you have an art studio in your garage and the property was a residential home in every other aspect, that typically would not be an issue for the loan under most circumstances. 

This is especially true if the garage was still a functioning garage in every way but just had the studio equipment in it.  However, if the garage was converted so that it was no longer usable as a garage, local ordinance would have to allow for such a change.  Some areas do require the property to have covered parking and if your zoning also makes this requirement, but you have converted the garage so that the home no longer conforms to the zoning requirements, then it would not meet the HUD eligibility as is.

If you “host” students or retreats, you are probably ok but that really gets to a judgement call.  HUD does not allow for transient use of the property such as hotel or AirBnB use.  There are no restrictions about having guests at your home though.  If you have a business that advertises short-term or transient stay opportunities for guests, that would not meet HUD requirements.  If however you invite people into your home as part of your love of art, HUD has no restriction as to whom you may entertain as part of your hobbies/passions. 

I am not trying to be evasive or give you a “wink wink” answer here, I am not sure by your phrasing the exact nature of the question and I do not want to assume anything.  HUD does allow for some commercial use of the home within acceptable parameters but does not want to insure reverse mortgages on properties used primarily for commercial use. 

A lot would depend on the home, the zoning, whether the lender did its due diligence and determined that the home was being used for a purpose outside of HUD’s allowable use or what.  It could be just fine, or it could be determined that the property is not eligible due to the use/zoning and I would not want to lead you in the wrong direction only because I didn’t have all the information.

Hi Gary,

That is standard procedure for any lender when there is an insurance claim due to damage.  The lender is an “additional insured” party on the policy.   This is the case on any property that has a loan, whether that loan is a forward or traditional loan or a reverse mortgage.  When the property is damaged, the insurance proceeds to pay for the repairs, are made payable to both the homeowner and the lender.  In this way, the lender can inspect the home to be sure that the homeowner has completed all repairs before signing off on the check.

It may sound crazy, but sometimes borrowers decide that they can live without the repairs and would rather use the insurance proceeds for something else.  This would impair the lender’s security for the loan (the house).  For this reason, to protect the lender’s security for the loan, they just want to be sure that the repairs are made before they release the funds and the only way, they can do this is with an inspection of the home.

Why is the reverse mortgage company requiring a HUD inspection on my mom's house that had to have a re-roof due to hail damage.

Hello Barbara,

Yes, you can rent out rooms to your friends and if you have two year’s income reported that you can verify, you can even use the income to qualify for the loan.  However, HUD does not allow the transient use of the property for a reverse mortgage.  If the property is listed on Airbnb, it would not be eligible for HUD reverse mortgage financing.

Hello Lois,

Great question!  The answer would depend on how near.  To be eligible for any HUD program, the property must not be in a hazardous area which includes several situations that would render a property ineligible for the HUD/FHA insurance.  Among other things, the home cannot be within 500 feet of a gas tank or a propane storage tank.  You can’t have high voltage wires that span over the improvements which includes a swimming pool, etc.  I would have to say that if you are within 500 feet of a gas station, you will be ineligible but if it is farther away, you should check with your lender to see if it will qualify. 

The other thing you need to consider is the affect the gas station will have on the value and marketability of the home.  The appraiser will have to find recent sales of homes with similar external influences or the lender may not accept the appraisal.  After all, not all home buyers are willing to purchase a home that is near a gas station.  It would be the appraiser’s job to show that the home being appraised was still marketable and the only way to do that would be to show that other properties in the area still sell with similar influences – if those sales exist.

Hi Joanna,

If the lots are separate parcels, we not only would not, but could not place a lien that cross-collateralized both parcels under the reverse mortgage.  Therefore, we would only be able to consider the residence in which you lived and the value of that home to consider the loan benefit.  If it was a single parcel that contained two homes on that taxable parcel, you could not separate the two homes unless you did a lot split.

Many people use the terms “lots” and “parcels” as being one and the same, but they are not always so.  While it is common for a parcel of land to be a single lot, a taxable parcel of land may include a legal description that is comprised of multiple original lots or pieces of lots and it is a single taxable parcel.  If there are more than one home on the parcel, you cannot separate them without splitting the parcel and making the properties two separate parcels as well. 

This would give each parcel of land its own legal address, it would be taxed on its own and could then be sold separately.  If mom’s 3 acre “lots” have one legal address for both lots and are taxed on the same tax parcel, they would need to be split if you wanted to keep them separate and not included in the same loan.  If they are both contain their own legal address and have their own taxable parcel number, the reverse mortgage would only cover one property and it would have to be the one mom lives in.

Also See: https://reverse.mortgage/property-eligibility-acreage-zoning

Hello Susan,

I would strongly suggest that you help your mom and place a call together with her to the lender.  I have never heard of an Arizona lender contacting an existing borrower and requesting a termite inspection on a current property after a loan has already been closed for a single family detached home let alone a condominium. 

Typically, the termite work for a condominium would be performed by the association even if there was any sign of termites and not the individual homeowner anyway, but lenders don’t require termite inspections after the loan is closed. 

Having said that, no one from the lender should need to contact mom about termite work but there is a possibility that the HOA has a termite company doing inspections.  If mom has the notice or the phone number of the individual who contacted her, you may also want to try contacting them first or if the lender is unable to help you. 

It’s not uncommon for the association to hire a termite company, especially if they are made aware of a termite issue in one area of the project and need to determine the extent of the infestation.  You may be able to save yourself some time if mom has the information of the individual who first contacted her, and you can reach that person from the start.

Hello Mel,

Just as with any loan, the lender is a co-insured on the insurance policy.  You could not collect a dime of the insurance without the home being repaired and they sign off on the insurance payment.  If you chose not to repair the home, the lender ultimately has the authority to step in and repair the home and then the insurance payment to reimburse the costs of rebuilding in that case would go to the lender.

Hi Mike,

It all depends on what the two structures are and how it is built.  Most of the time, when you have two structures, one is considered the main residential home and the other is considered an accessory dwelling unit (ADU).  The ADU can be a guest house, “granny flat”, casita, etc.  If you have such a structure, then in addition to other requirements, you are required to occupy the main home as your residence at the time you obtain a reverse mortgage.    

If the home is a duplex and one unit is larger than the other, there is no requirement that the owner live in either unit.  But if the property contains two separate dwelling units, there are several tests the property must meet in order to be eligible.  It must conform to local zoning ordinances. 

It must be identified by the appraiser as being part of the property’s highest and best use.  Only one ADU is permissible per property.  The living area of the ADU cannot be included in the gross living area of the primary dwelling of the appraisal.  And finally, to give the ADU value, the appraisal must be able to support that value with comparable sales of similar properties that have sold with ADU’s as well. 

Good Morning,

This is a question to which I cannot give you a certain yes or no answer.  There are times when a Deed in Lieu of Foreclosure means that a lender is accepting title to a property “as is” and it may impact their ability in one area or another.  To accept a Deed in Lieu, most lenders require that the property be “broom clean” which means that the home is not scrubbed from top to bottom but free of all personal belongings and has been cleaned out.  As the term indicates, it has swept out after all items have been removed. 

 It should be damage free and the reason for this is because if it is not, there will be a question of which entity or whose insurance will be liable for any damages.  The property must be free of any other liens or the lender would be accepting responsibility for those liens.  Otherwise, those liens would be resolved in a foreclosure action and so the lender would not accept the Deed in Lieu under those circumstances as well.  Therefore, I cannot give you an uninformed answer as to under what conditions or for what damages a lender may or may not accept a Deed in Lieu of Foreclosure.  That would be a call the lender would have to make, and they may even have to consult with HUD.

Hello Keith,

One of the property requirements is that the property have a permanent water source acceptable to HUD.  There may be others in the area who also rely on water delivery, but without a permanent source of water to the home, the home is not eligible for the HUD reverse mortgage program and in addition, none of the proprietary programs with which we work would accept a property under these circumstances.  

We’ve had homes that rely on river water, cisterns and other alternative water sources as well that HUD would not accept. I’m sorry, without a permanent source or water to the home I believe HUD feels that the marketability of the home is greatly reduced as fewer prospective buyers would accept such an arrangement and therefore the risk of default or loss is greater (to borrower, lender and HUD) if the property is not as easily or readily marketable.

Hello Rhonda,

You would not be able to have both a single-family residence and a mobile home on a lot and qualify for a reverse mortgage in any instance so there definitely would be no way to do the loan and exclude the mobile home from the reverse mortgage. 

If the mobile home was not on the property at the time the loan was closed and was later moved onto some portion of the lot, the lender would not necessarily take any action to call the Note due and payable but could if by moving that mobile onto the lot you violated local ordinances that in any way endangered the lender’s security in the property. 

I cannot give you legal advice, but you must remember that when you permanently affix things to the land or to the existing dwelling in most states that makes those items real property instead of personal property.  Before you made any decisions to put anything else on the land that would require a permanent foundation, it would be wise to seek counsel from a local attorney.

Hello Mike,

The first thing you need to know is that the property has to be zoned for the two houses and that there must be sales of comparable two on a lot properties that have sold recently for the appraiser to use in order to determine a reasonable value.  If those criteria are met, then you would have to occupy the main home is one of the two is considered an accessory dwelling unit (guest-type home or in-law unit). 

A true mobile, no.  A manufactured home that meets all the HUD requirements, yes. We have a complete guide you can access HERE to see if your home meets the HUD minimum requirements.

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.

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.

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.  

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.

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.

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. 

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.

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.

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).

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.

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.

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.

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.

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.

Hello Michael,

I’m sorry but this is a legal question having nothing to do with reverse mortgages.  This is a question you need to ask of a licensed attorney in the state and area where your mom’s property is located as the laws may differ from state to state.  I wish you the best.

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.

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.

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.

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.

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.   

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.

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!

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.

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.

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

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.

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!

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.

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.

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.

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.

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. 

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.

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.

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.  

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

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. 

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.

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.

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.

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.

Hello Dianna,

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

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.

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.

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.

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.

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. 

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.

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.

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.

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. 

Hello David,

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

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. 

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.

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.

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.

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).  ;>)

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 2^nd 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.

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

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.

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.

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.

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. 

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.

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.

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.

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.

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.

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. 

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.

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.

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.

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.

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.  

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.

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.

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.

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.

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.

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.  

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.

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.

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.

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.

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.

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.

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.  

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.

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.

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. 

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.

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.

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.

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.

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.

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.

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.

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.

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. 

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.

 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)

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.

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.

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.

Hi Jojo,

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

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. 

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

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!

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/

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. 

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.

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.

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.

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.

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/

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.

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.

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.

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.

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.

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.

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.  

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.