Reverse Your Mortgage

65+ Up Looking for Work - Unemployment rate for 45+ is 6.3%

We new that the baby boomers wre going to work longer. There are more than 1/3 more  workers  over 65+ in the job market than in 2001. There are more than one half a million workers 65 and older who want to work and are looking. Click Here to Read More.

$625,500 FHA LENDING LIMIT EXTENDED THROUGH DEC. 2010 -FINALLY, SOME GOOD NEWS OUT OF WASHINGTON!

House Approves Loan Limit Extension; House, Senate Leaders Reach Agreement on Home Buyer Tax Credit
The House and Senate approved a continuing resolution that includes a provision that would extend current loan limits for FHA and the government-sponsored enterprises through next year.
Additionally, Senate leaders announced they have agreed to an extension of the $8,000 first-time home buyer tax credit through April 30. The popular credit, which has strong support from the Mortgage Bankers Association (MBA), is set to expire Nov. 30.
The CR, which keeps the federal government running through Dec. 18, passed the House on a 247-178. The Senate vote was 72-28.
MBA commended both chambers on their actions. "Given the lack of a private secondary mortgage market, FHA, Fannie Mae and Freddie Mac are pretty much the only game in town," said MBA Chairman Robert Story Jr., CMB. "Extending the current loan limits through 2010 will allow more loans to qualify for these important programs and will help keep mortgage credit more accessible and affordable for qualified borrowers."
The CR provision would keep in place current conforming loan limits of $625,000 ($729,750 in designated high-cost areas). Without approval from the Senate, those limits will expire on Dec. 31.
MBA and other industry trade groups sent a letter this week to leadership of the House and Senate urging Congress to pass legislation “as soon as possible” to extend current higher loan limits. The letter called the higher limits a “key component of the economic recovery efforts because they help make affordable loans available for a broader spectrum of consumers who want to purchase a home or refinance an existing mortgage.”
"As we try to maintain the momentum of the housing recovery, providing affordable financing for qualified borrowers is critical," Story said. "Extending the loan limits, along with other initiatives such as extending and expanding the homebuyer tax credit, will help restore stability to the housing and mortgage markets."  

Meanwhile, members of the Senate said they substantially reached an agreement on extending the first-time home buyer tax credit, adding it to a bill that would extend expiring unemployment benefits.
The amendment would extend the existing $8,000 tax credit for first-time home buyers and offer a new $6,500 credit for existing homeowners who have lived in their current residence for a consecutive five-year period within the past eight years. Under the amendment, home buyers would be required to be under contract by April 30 and close before July 1.
MBA has supported extension and expansion of the tax credit, noting that the Internal Revenue Service recently reported that more than 1.4 million taxpayers have benefited from the tax credit, enacted by Congress as part of the Housing and Economic Recovery Act of 2008.
“MBA believes the first-time home buyer tax credit has had a stimulating impact on our economy, and MBA supports extending and expanding it so it can help more buyers and sellers,” MBA said in a recent Call to Action from its grassroots advocacy arm, the Mortgage Action Alliance. “Our fragile economy is just beginning to show signs of stabilizing. We should not jeopardize our recovery by letting this tax credit expire. The home buyer tax credit is helping hundreds of thousands of Americans realize the American dream, and it is creating thousands of jobs that rely on homeownership .

As a side note, the original bill did not include the provision to includes reverse mortgages in the extension of the 625,500 FHA lending limit extension. Lobbyists, including AARP and the National Reverse Mortgage Lenders Association were key in adding reverse mortgages to the extension.

PreNeed (Pre-Paid) Funeral and Burial Plans

Advantages and Disadvantages of Prepaid Plans
One way to plan in advance for the end of one's life is to sign a formal contract called a "preneed funeral plan." With this plan, money to pay for a funeral and/or burial is held in a trust, in an escrow account or paid through an insurance policy on the life of the person desiring the plan. Parts of or all of the funeral service and burial are designed in advance and pre-funded in advance and the family has little to do but show up.

This type of planning has become very popular in recent years. A survey conducted by the AARP in 1999, found that two out of five people over age 50 had been approached to pre-purchase funerals and burial goods and services. An AARP survey in 1998 indicates that 32% of all Americans over age 50, roughly 21 million people, have prepaid some or all of their funeral and or burial expenses (but not necessarily through a formal preneed plan). Breaking that down; about 25% of the over age 50 population have prepaid for their burials (cemetery plot, mausoleum or niche), 18% have prepaid for headstones, urns, caskets , grave liners or vaults, opening and closing of graves and so on and 13% have prepaid for goods or services from a funeral home or funeral director. The same survey indicates that over $25 billion is being held in preneed trust funds. Roughly another $25 billion is waiting to be paid out in life insurance benefits. Prepaid or preneed funerals and burials are big business.

Funerals and burials funded privately by the family, or paid from an individual life insurance policy and arranged informally through a funeral home or funeral director are generally not subject to state regulation. Any formal arrangement through a second party or involving a contract is subject to regulation in all states. Each state has adopted different rules as to who can sell these plans, what the plans can provide, what contract provisions must be, how the plan is to be funded and what recourse purchasers might have in the event of fraud or default. All states call these regulated plans "preneed" funeral and burial arrangements.

Here are some advantages as to why one would want to buy a preneed plan for funeral and burial services and goods.

• It provides peace of mind knowing these arrangements have been made in advance.
• It avoids the burden on family members to make decisions when they are most vulnerable to manipulation.
• It allows one to virtually control from the grave by determining in advance the funeral products, funeral services, burial products and burial services that one would prefer having for final arrangements.
• It helps the family to avoid taking loans, arranging finance plans, raiding savings or selling assets to pay for a funeral and burial.
• It guarantees (for many contracts) that if products and services currently purchased are not available in the future, equivalent substitutes will be provided at no additional cost.
• It locks in guaranteed prices (available with some contracts) forever.
• It allows for inflation in future costs (for those contracts that do not guarantee prices) by investing money in an interest-bearing account or buying life insurance that increases in value over time.
• Depending on the contract, it may allow for transfer to another funeral home or for partial or full refund.

Unfortunately, there are also problems with prepaid, preplanned final arrangements.

• With some trust fund and insurance funding options there may be no refund if someone wants to cancel the plan in the future.
• If a purchaser moves to another state there may be no transfer options or there may be different rules governing the funding option.
• In some contracts, interest earnings on investments resulting in excess money not needed for the plan may be retained by the funeral home or funeral director.
• On installment plans interest may be charged but not credited to the account.
• In certain insurance funded contracts, the ownership or death benefit may be irrevocably assigned to the contract holder (funeral home), preventing the purchaser from enjoying ownership rights in the policy.
• In certain insurance funded contracts, a growth in the death benefit over time that exceeds the cost of the preneed plan services and goods may be pocketed by the contract holder (funeral home) instead of being refunded.
• If the contract provider goes out of business or fails to secure 100% of the funds for future payment, there may be no recourse to get all of the money back that was put in.
• If certain services or goods that were purchased initially are not available in the future, but more expensive versions might be, the family may be forced to pay extra for those items.
• In certain insurance funded plans, if the insured dies too soon, there may have been a waiting period in which few or no benefits are paid at death, thus forcing the family to pay out of pocket for the funeral.
• Certain unscrupulous providers may have failed to provide an itemized list of services and goods or failed to identify properly, specific services and goods, thus allowing the provider in the future to substitute less expensive items or to leave out services and goods that were originally anticipated in the agreement.

What Services and Goods Can Be Prepaid?
All states allow for prepaid plans for funeral services and merchandise. This would include such things as picking up the body, embalming and restoration, rooms or chapel for viewing and funeral services, casket, vault or grave liner, transportation, permits, death certificates, obituaries and so forth. Almost all states allow for prepaid burial services and merchandise as well. Only about six states do not allow it. Burial services and merchandise might include opening and closing the grave, grave markers, vaults or grave liners, mausoleums or niches. Cemetery plots are excluded from prepaid plans in all states.

The AARP has excellent information for consumers on planning for funerals. Quoting from the AARP:

"Most states have a licensing board that regulates the funeral industry. You may contact the board in your state for information or help. If you want additional information about making funeral arrangements and the options available, you may want to contact interested business, professional and consumer groups."

To find a planner in your area you may also contact the National Care Planning Council at inquiry@longtermcarelink.net or call 800-989-8137

E Street interview by AARP’s Sheilah Kast, on Retirement Living TV is an frank & excellent discussion on reverse mortgages.

HUD Reduces Reverse Mortgage Proceeds by 10% -Housing Values/Economy affect FHA Program

For the first time in the history of the FHA Reverse Mortgage program, it is running at just under an $800 million dollar deficit.

FHA insures reverse mortgages against lender losses and borrower owing more than their home values when their reverse mortgage loans become due.* until recently the FHA reverse mortgage program has never run a deficit. But with falling real estate values, FHA has been paying more on claims.

In order to preserve the program helping older home owners to access their equity HUD posted a Mortgagee Letter 09-43 lowering proceeds by 10%.

All loans with case numbers (loans) after October 1, 2009 will be affected.

It is unfortunate the program has been affected by the economy; however I commend HUD in taking into account the importance of preserving the reverse mortgage program. Over 93% of consumers who attain a reverse mortgage are very happy with them. In the appropriate situation, reverse mortgages change the lives of the better older homeowners.

A couple of years ago I thought the reverse mortgage industry was on its way to developing a market where FHA reverse mortgages would take a back seat to the proprietary products. Then the recession hit. This reduction of proceeds on FHA reverse mortgages is part of the “reset” that is happening across our economy on multiple levels. The program will survive. We will continue to help senior homeowners improve the quality of their lives with this program. It will just be a less money. The reality is that some consumers will have to, some will have to and some will have to become very creative in order to ride out the shift in our society.

* See: Reverse Mortgage post 1/19/09 they said I can never owe more than my home value, HUD clarifies what is true when your reverse mortgage becomes due

if you have a reverse mortgage question, call Angella Conrard, Reverse Mortgage Advisor at 866-949-7030 or log onto www.reverse -your -mortgage.com

WHY ARE REVERSE MORTGAGES EXPENSIVE? What are Allowable Fees?

Reverse mortgages are often perceived as expensive. You'll hear this feedback from consumers and financial professionals alike. What makes a reverse mortgage expensive is that it is still an emerging industry. HECM or home equity conversion mortgages are FHA insured and still require mortgage insurance. The FHA insurance initial premium is 2% of the appraised value of your home. For example, on a $350,000 home the initial mortgage insurance will be $7000.00.

The FHA insurance which is a government sponsored insurance program for the housing industry ensures that the consumer will receive the promised loan advances no matter how long they live in their home or what happens to their home value or the lender from whom they've gotten their loan. The mortgage insurance also guarantees that the total debt the loan can never be greater than the value of the home at the time the loan is repaid.* As a government program the HECM insurance program does not generate a profit.  Until the industry grows on both a consumer level, and as a secondary market product, the mortgage insurance will be necessary on these loans. HUD and the industry has discussed over the last few years to lower the upfront premium and raise the ongoing insurance cost (currently 1/2% of your loan balance). This would be ease the upfront costs, however, this has only been a discussion.

All the other fees in attaining a reverse mortgage our traditional costs any mortgage refinance. There is the origination fee and third-party closing costs. There are no junk fees in a reverse mortgage, nor can any of the fees be padded. When you are shopping for reverse mortgage, the costs should not vary that much.

Please see the following list of fees that are allowed in attaining a reverse mortgage:

Origination Fee – 2% of the maximum claim amount for the first $200,000 and 1% after that with a maximum of $6000.00 & a minimum of $2500.00

*This applies only if the home is sold at the time the loan is due. If the borrower's estate chooses to keep the home, they will have to repay the full amount of the loan.

If you have a reverse mortgage question, please call Angella Conrard, Reverse Mortgage Advisor at 866-949-7030, or log onto www.reverse -your - mortgage.com.

HUD is considering developing a smaller reverse mortgage. Lower proceeds ad COSTS! Better for folks who needs smaller amounts. read more: http://ping.fm/nc7TD

Motley Fool Rule Your Retirement - Good Real Estate Options for Retirees

Motley Fool talks about options surrounding most retirees biggest asset, their home.

• How much home do you need?
• Should you pay off your mortgage? If so when?
• What items should you look at before tapping in to your equity as a retiree?
• When is it optimal to consider a reverse mortgage? How can you use a reverse mortgage as an exit strategy?

Download Real estate motley fool

CONDO OWNER’S CONTEMPLATING A REVERSE MORTGAGE MAY WANT TO ACT SOONER TO AVOID LONG DELAYS

Earlier this summer HUD issued MORTGAGEE LETTER 2009-19. This letter indicates that all condo projects with the exception of single family detached condos that were FHA approved prior to September 2008 will need to be reapproved. In years past, when a condominium homeowner wished to attain a reverse mortgage in a project that was not FHA approved, the lender could use what was called a “FHA Spot Condo Affidavit”. This was essentially a 1 page questionnaire filled out by the association and was submitted with the reverse mortgage package and utilized by the lender in attaining mortgage insurance through FHA for the loan. No longer will lenders be able to use this questionnaire. Starting October 1, 2009 all approved projects prior to September 2009 will be wiped out on FHA connection & will have to go through the approval process by either their local HUD office or by an approved lender review. I can only anticipate this to be somewhat of a lengthy and muddled process that will be added to an already heavily regulated loan process. It is interesting to observe the boomerang affect the subprime experience is having on the mortgage process in general. I personally am in favor of some assurance that people understand the loans they are attaining. However I caution our legislatures in not overburdening the public as to curtail their freedom in attaining financial products and squashing private business in the process by over regulating our freedoms.  I hope I am proved wrong in that this recertification process will not be lengthy. Here is the Mortgagee Letter for your own review. Let me know WHAT YOU THINK!  Or Click Here to Download Mortgagee Letter 2009-19

June 12, 2009                                                                         MORTGAGEE LETTER 2009-19

TO:                 ALL APPROVED MORTGAGEES

ALL FHA ROSTER APPRAISERS

SUBJECT:    Condominium Approval Process – Single Family Housing

In accordance with the passage of the Housing and Economic Recovery Act (HERA) of 2008, the Federal Housing Administration (FHA) is implementing a new approval process for Condominium Projects to insure mortgages on individual units under Section 203(b) of the National Housing Act.  FHA will now allow lenders to determine project eligibility, review project documentation, and certify to compliance of Section 203(b) of the NHA and 24 CFR 203 of HUD’s regulations.  HUD will continue to maintain a list of Approved Condominium Projects.  The requirements of this Mortgagee Letter are effective for all case numbers assigned on or after October 1, 2009 except as noted.

The purpose of this Mortgagee Letter is to provide guidelines and instructions on options available to lenders to receive mortgage insurance on condominium units which are located in a project.  The lender will be required to retain all the project legal documents, contracts, conveyances, plats, plans, insurance coverage, presale and owner occupancy conditions and other documentation in connection with their review and approval of the condominium project.  When requested, the lender must provide such documentation to HUD staff for verification of compliance with HUD’s regulations.  

I.          Approval Processing Options

A. The lender will have two condominium project approval processing options.  The applicable documentation requirements will be the same for each option:

1.      HUD Review and Approval Process (HRAP).

2.      Direct Endorsement Lender Review and Approval Process (DELRAP), outlined in this Mortgagee Letter.  This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects.

B. The processing options stated above will be applicable to condominium developments that are: 

1. Proposed/Under Construction;

2. Existing Construction; or

3. Conversions.

II.                Eligible Projects

The Condominium Project has been created and exists in full compliance with applicable State law requirements of the jurisdiction in which the Condominium Project is located, and with all other applicable laws and regulations.

III.       Ineligible Projects

A.    Condominium Hotel or “Condotels”

B.     Timeshares or segmented ownership projects

C.     Houseboat projects

D.    Multi-dwelling unit condominiums [i.e. more than one dwelling per condominium unit]

E.     All projects not deemed to be used primarily as residential

IV.       General Requirements   

A.    Site Condominiums

Site Condominiums are single family detached dwellings encumbered by a declaration of condominium covenants or condominium form of ownership.  Condominium Project      approval is not required for Site Condominiums; however, the Condominium Rider (Attachment D) must be included in the FHA case binder submitted for insurance endorsement.  Manufactured housing condominium projects (MHCPs) may not be processed as site condominiums; these projects will require approval under HRAP.

NOTE:  Site Condominiums requirements are effective immediately with issuance of this Mortgage Letter.

B.     “Spot Loan” Approval Process

The Spot Loan Approval process as defined in Mortgage Letter 1996-41 is eliminated with issuance of this guidance.  The DELRAP and HRAP processes have been streamlined to allow for uncomplicated condominium project approvals eliminating the need to approve units on a “spot loan” basis. 

C.     FHA-to-FHA Transactions

Project Approval is not required for:

a.       FHA‑to‑FHA streamline refinance transactions; or

b.      FHA/HUD Real Estate Owned (REO) Division sales.

D.    Environmental Review Requirements

If a lender elects to use the HRAP option, then environmental reviews will not be

required for projects that, at the time that condominium project approval is requested,

have progressed beyond that stage of construction where HUD has any influence over the

remaining uncompleted construction.  This occurs when:

·         a condominium plat or similar development plan and any phases delineated therein have been reviewed and approved by the local jurisdiction and, if applicable, recorded in the land records, and

·         the construction of the project’s infrastructure (streets, stormwater management, water and sewage systems, utilities, facilities (e.g., parking lots, community building, swimming pools, golf course, playground, etc.) and buildings containing the condominium units has proceeded to a point that precludes any major changes.

Environmental reviews will not be required for condominium projects approved using the

DELRAP option.  If the appraiser identifies an environmental condition or the lender is

aware of an existing environmental condition through remarks provided on the Builder’s

Certification, form HUD-92541, the appraisal or other known documentation, the lender

must avoid or mitigate the following conditions before completing its review process:

1.      The project is located in a Special Flood Hazard Area designated on a Federal Emergency Management Agency flood map.

2.      Potential noise issues, where the property is located within 1000 feet of a highway, freeway, or heavily traveled road, within 3000 feet of a railroad, or within one mile of an airport or five miles of a military airfield.

3.      The property has an unobstructed view, or is located within 2000 feet, of any facility handling or storing explosive or fire-prone materials.

4.      The property is located within 3000 feet of a dump or landfill, or of a site on an EPA Superfund (NPL) list or equivalent state list, or a Phase I Environmental Site Assessment indicates the presence of a Recognized Environmental Condition or recommends further (Phase II) assessment for the presence of contaminants that could affect the site.

5.      The property has any hazards or adverse conditions listed in Section 1.f. of the Builder’s Certification, including, but not limited to, high ground water levels, unstable soils, or earth fill.

6.      The project is located in a wetland designated on National Wetlands Inventory maps or designated by State or local authorities.

7.      The project is on the National Register of Historic Places or is within a historic district listed on the Register.

8.      The appraiser or DE lender is aware of any other condition that could adversely affect the health or safety of the residents of the project.

V.        Project Eligibility Requirements

A.     The following requirements apply to all Condominium Project approvals:

·         Projects consist of two units or more.

·         Projects must be covered by hazard and liability insurance and, when applicable, flood insurance.

·         Right of first refusal is permitted unless it violates discriminatory conduct under the Fair Housing Act regulation in 24 CFR 100.

·         No more than 25 percent of the property’s total floor area in a project can be used for commercial purposes.  The commercial portion of the project must be of a nature that is homogenous with residential use, which is free of adverse conditions to the occupants of the individual condominium units. 

·         No more than 10 percent of the units may be owned by one investor.  This will apply to developers/builders that subsequently rent vacant and unsold units.  For two and three unit condominium projects, no single entity may own more than one unit within the project; all units, common elements, and facilities within the project must be 100 percent complete; and only one unit can be conveyed to non-owner occupants.

·         No more than 15 percent of the total units can be in arrears (more than 30 days past due) of their condominium association fee payment. 

·         At least 50 percent of the total units must be sold prior to endorsement of any mortgage on a unit. Valid presales include an executed sales agreement and evidence that a lender is willing to make the loan.[1] 

·         At least 50 percent of the units of a project must be owner-occupied or sold to owners who intend to occupy the units.[2] For proposed, under construction or projects still in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units (the minimum presales requirement of 50 percent still applies). 

·         Legal Phasing is permitted for condominium processing.  It is recommended that developers submit all known phases for initial project approval.  For purposes of calculating the owner-occupancy percentage:

a.       On multi-phased projects the owner-occupancy percentage is calculated on the first declared phase and cumulatively on subsequent phases if the ownership of the condominium project remains the same;

b.      If multi-phasing includes separate ownership per phase, each phase is calculated individually; or

c.       Single-phase condominium project approval requests must meet the owner-occupancy percentage requirement.

·         FHA Concentration

a.      Projects consisting of three or less units will have no more than one unit encumbered with FHA insurance.

b.     Projects consisting of four or more units will have no more than 30 percent of the total units encumbered with FHA insurance.

·         Reserve Study - a current reserve study must be performed to assure that adequate funds are available for the funding of capital expenditures and maintenance.  A current reserve study must be no more than 12 months old – if recent events or market conditions have affected the finished condition of the property that information must be included.  When reviewing the reserve study, consideration must be given to items that have been replaced after the time that the reserve study was completed.

VI.       Manufactured Housing Condominium Projects

Pursuant to HERA, manufactured housing condominium projects are now eligible for FHA mortgage insurance.  Accordingly, all outstanding and current FHA Manufactured Housing individual unit requirements remain applicable for both Home Equity Conversion Mortgages (HECM) and forward mortgages, including elevations in flood zones and foundation requirements.  MHCPs must be submitted to the applicable Homeownership Center for review and approval – these projects are ineligible for DELRAP processing.  MHCPs may not be processed as site condominiums; these projects will require approval under HRAP.

1.      Appraisal reporting requirements for condominium manufactured homes:

a.          Appraisal must be reported on the Manufactured Home Appraisal Report (Fannie Mae Form 1004C).

b.         Subject condominium project must be inspected and the Project Information section of the Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073) must be completed and included as an addendum to the appraisal report.

c.          Comparable sales must be condominium manufactured homes.  Detailed explanations must be provided when search parameters are expanded due to the lack of comparable sales in subject market area.

VII.     Condominium Conversions

Conversion to condominiums occurs in those projects which involve changing the title of an existing structure generally under one title, to property that is separated into units so that the title to most units can be held separately.   Changes to condominium conversion requirements are defined below:

1.      The one-year waiting period requirement for conversions is eliminated;

2.      In the event that FHA is insuring a mortgage on a unit and an undivided interest in the common elements on a project undergoing remodeling or rehabilitation, the entire condominium project, including the common facilities, must be 100 percent completely built before any mortgage may be endorsed.  Escrow provisions will be permitted for weather related delays for common areas only.

VIII.    FHA Connection (FHAC)

System modifications will be made to capture additional information, remove obsolete fields, and identify points of contacts.  Major planned system modifications are:

1.      Establishment of a Condominium Project Approval screen in FHAC that will be used by DE lenders and HUD staff to enter approval, rejection and recertification data.

2.      System generated condominium project identification numbers based on the HOC of jurisdiction.

NOTE:  While major system modifications have been identified, other modifications will be made and released as necessary to ensure collection of all valid information.

IX.       Condominium New Construction Pre-approval and Inspection Requirements

Mortgagee Letter 2001-27 prohibited condominium processing under those guidelines.  This Mortgagee Letter now permits condominium processing under the policy as established below.

In cases where a building permit and a certificate of occupancy (or its equivalent) are issued by a local jurisdiction that performs a minimum of three inspections (typically the footing, framing and final) neither an Early Start Letter nor a HUD approved ten-year warranty plan is required.  For those jurisdictions that do not issue a building permit (or its equivalent) prior to construction and a Certificate of Occupancy (or its equivalent) upon completion of construction, a condominium unit that is one year old or less must have either an Early Start Letter (with a minimum of three inspections by an FHA Roster Inspector) or be covered by a HUD-approved ten-year warranty plan (with a final inspection by a FHA Roster Inspector) to be eligible for high-ratio mortgage insurance.  All condominium types are eligible to follow this process (e.g. Multi-family).  Projects are still required to be on the FHA-approved condominium list.

FHA will require the completion and retention of the following documents when processing new construction condominium project approvals:

·         Builder’s Certification of Plans, Specifications and Site, form HUD-92541

·         Builder’s Warranty, form HUD-92544

·         Building Permit (or its equivalent)

·         Final Certificate of Occupancy (or its equivalent)

            FHA will not accept a temporary Certificate of Occupancy; all units within the building

(where the specific unit that is security for the insured financing is located) must be complete.

X.        General Processing Steps for DELRAP or HRAP

A.    Determine acceptability of the site and location of the project.  Refer to Attachment A, Condominium Project Approval Matrix.

B.     Review the project’s financial and legal documents; if acceptable, authorized personnel will sign and date the Lender Certification of Condominium Requirements

(Attachment B).

C.     Place the Lender Certification of Condominium Requirements and other required certifications in the FHA case binder.

D.    Retain and maintain all documents used to review and approve the project for a period of three years from the date of project approval.

E.     Mixed condominium review and processing is not permitted.  If a lender opts to participate in the DELRAP process, all future processing submissions must be processed, accordingly, in that sole and particular manner with the exception of manufactured housing condominium project approvals (these must be submitted to the applicable Homeownership Center for review and approval).

F.      If a project is listed as Rejected or Withdrawn on the FHA-approved condominiums list, the only approval process accepted is HRAP. 

G.    Second and subsequent lenders that submit a unit for insurance in a project that is listed on the FHA-approved condominium list are not required to complete any further approval process.  At the lender’s discretion, they may seek any additional information to satisfy their own requirements and/or perform their own due diligence.  FHA will require the lender to certify it has no knowledge of circumstances or conditions that might have an adverse effect on the project or cause a mortgage secured by a unit in the project to become delinquent. 

H.    Subsequent phases being approved by a different lender must follow the general procedures listed here in Section X.  The original lender must also follow these general procedures but will have already satisfied some of the steps listed.

I.       All required certifications, as applicable, must be included in the FHA case binder submitted for insurance endorsement.

J.       For both new construction and conversions if the developer intends to market five or more units within the next 12 months with FHA mortgage insurance, an Affirmative Fair Housing Marketing Plan (AFHMP) or a Voluntary Affirmative Marketing Agreement (VAMA) must be in place.  Form HUD-935.2C, Affirmative Fair Housing Marketing Plan – Condominium or Cooperatives, is to be used for condominium projects.  This completed form must be submitted to the Director of the Processing and Underwriting Division in the jurisdictional

HOC

for approval.  If “a, b, c, or d” is checked on response to Question 2 in the Applicability section, the developer is not required to complete an AFHMP.  The developer should complete block 11 on form HUD-92541, Builder’s Certification of Plans, Specification and Site.

K.    Environmental reviews will be required for proposed and under construction project approvals submitted under the HRAP option consistent with the Environmental Review Requirements listed in Section IV.  D.  Environmental review is not required under DELRAP, but the lender must take necessary actions to avoid or mitigate identified environmental conditions prior to completing its project review.

L.     Transfer of control of the Homeowners Association shall pass to the owners of units within the project no later than the earlier of the following:

1.      120 days after the date by which 75 percent of the units have been conveyed to the unit purchasers, or

2.      One year after completion of the project evidence by the first conveyance to a unit purchaser.

XI.       Certification for Initial Approval

Lenders must provide certifications on company letterhead signed by a company authorized representative (signature stamps or electronic signatures are not authorized) that:

1.      The eligible condominium project complies with applicable FHA requirements addressed within this Mortgagee Letter;

2.      All condominium legal documents meet HUD regulations, state and local condominium laws; and

3.      Pre-sale and owner occupancy ratios per loan are met.

NOTE:  FHA will not require an attorney's certification; however, lenders may obtain this as part of their due diligence process.  Lenders are reminded that this document will not replace other condominium certifications required from the lender.

XII.     Certification of Projects Previously Approved

If a project has been previously approved, lenders must certify that they are not aware of any change in circumstances since initial approval of the project that would result in the project no longer complying with FHA requirements.

XIII.         Recertification of Project Approvals

Condominium Project approvals will expire two years from the date it has been placed on

the list of approved condominiums.  This will also apply to all projects currently on the list of approved condominiums.  Further participation in the program after this two-year period has expired will require recertification to determine that the project is still in compliance with HUD’s owner-occupancy requirement and that no conditions currently exist which would present an unacceptable risk to FHA.  Items that should be given consideration are:

1.      Pending special assessments,

2.      Pending legal action against the condominium association, or its officers or directors,

3.      Hazard, liability insurance and when applicable flood insurance.

XIV.       Quality Assurance

Monitoring the condominium approval process is critical to the success of the program.  Lenders who approve condominium projects utilizing the DELRAP option will be required to submit a copy of the complete condominium project approval package to the applicable Homeownership Center within five business days of approval.  Lenders are required to submit the first five DELRAP approvals for review.  Further, to manage FHA’s risk, and ensure compliance with all condominium project policy requirements, additional condominium project approvals will be selected for review.  The criteria for selection of the additional approvals will be determined and lenders will be notified in future guidance.

XV.          False Certifications

Title 18 U.S.C. 1014, provides in part that whoever knowingly and willfully makes or uses a document containing any false, fictitious, or fraudulent statement or entry, in any matter in the jurisdiction of any department or agency of the United States, shall be fined not more than $1,000,000 or imprisoned for not more than 30 years or both.  In addition, violation of this or others may result in debarment and civil liability for damages suffered by the Department.

XVI.       Insurance of Individual Units

All applicable, outstanding and any additional FHA insurance requirements not defined in this guidance must be met for individual units.

If you have questions regarding this Mortgagee Letter, please call the FHA’s Resource Center at 1-800-CALL-FHA (1-800-225-5342).  Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

                                                                        Sincerely,

Brian D. Montgomery

                                                                        Assistant Secretary for Housing-

     Federal Housing Commissioner

Attachments

 

Attachment A

	Condominium Project Approval Matrix
		Proposed/UC	Existing	Conversion
1	All Condominium Legal Documents	x	x	x
a	Recorded Plat Map indicating Legal Description	x	x	x
b	Recorded Covenants, Conditions and Restrictions (CC&R’s)	x	x	x
c	Signed and Adopted Bylaws	x	x	x
d	Articles of Incorporation filed with the State	x	x	x
e	Recorded Condominium Site Plans	x	x	x
2	Plan or Evidence of Transfer of Control	x	x	x
3	Proposed or Actual Budget	x	x	x
4	Reserve Study	x	x	x
5	Management Agreement, if applicable	x	x	x
6	Equal Employment Opportunity Certificate (Form HUD 92010)	x
7	Affirmative Fair Housing Marketing Plan or Voluntary Affirmative Marketing Agreement (VAMA)	x		x
8	FEMA Flood Map	x	x	x
9	Estimated Construction Completion Date	x		x
10	Outstanding or Pending Litigation Analysis		x	x
11	Pending Special Assessment Analysis		x

 

Attachment B

LENDER CERTIFICATION TO CONDOMINIUM REQUIREMENTS

The undersigned hereby certifies that (1) the Lender has reviewed the project and it meets all requirements of Section 203(b) of the National Housing Act, 24 CFR 203, State and local condominium laws and any Mortgage Letters thereto applicable to the review of condominiums; (2) to the best of his or her knowledge and belief, the information and statements contained in this application are true and correct, and (3) the Lender has no knowledge of circumstances or conditions that might have an adverse effect on the project or cause a mortgage secured by a unit in the project to become delinquent (including but not limited to: defects in construction; substantial disputes or dissatisfaction among unit owners about the operation of the project or the owner’s association; and disputes concerning unit owners; rights privileges, and obligations).  The undersigned understands and agrees that the Lender is under a continuing obligation to inform HUD if any material information compiled for the review and acceptance of this project is no longer true and correct.   

                                                                                                                                                           

Authorized Lender Representative                                                                                 Date

(Signature and Title)

Title 18 U.S.C. 1014, provides in part that whoever knowingly and willfully makes or uses a document containing any false, fictitious, or fraudulent statement or entry, in any matter in the jurisdiction of any department or agency of the United States, shall be fined not more than $1,000,000 or imprisoned for not more than 30 years or both.  In addition, violation of this or others may result in debarment and civil liability for damages suffered by the Department.

 

 Attachment C

LENDER CERTIFICATION TO CONDOMINIUM REQUIREMENTS FOR APPROVED PROJECTS

The undersigned hereby certifies that (1) the Lender has verified the condominium unit in connection with this loan file has been verified to be in a project that appears on FHA’s list of approved condominium projects; (2) to the best of his or her knowledge and belief, the information and statements contained in this application are true and correct, and (3) the Lender has no knowledge of circumstances or conditions that might have an adverse effect on the project or cause a mortgage secured by a unit in the project to become delinquent (including but not limited to: defects in construction; substantial disputes or dissatisfaction among unit owners about the operation of the project or the owner’s association; and disputes concerning unit owners; rights privileges, and obligations).  The undersigned understands and agrees that the Lender is under a continuing obligation to inform HUD if any material information compiled for the review and acceptance of this project is no longer true and correct.   

                                                                                                                                                           

Authorized Lender Representative                                                                                 Date

(Signature and Title)

Title 18 U.S.C. 1014, provides in part that whoever knowingly and willfully makes or uses a document containing any false, fictitious, or fraudulent statement or entry, in any matter in the jurisdiction of any department or agency of the United States, shall be fined not more than $1,000,000 or imprisoned for not more than 30 years or both.  In addition, violation of this or others may result in debarment and civil liability for damages suffered by the Department.

Attachment D

condominium rider THIS CONDOMINIUM RIDER is made this _______________ day of _____________, 20__, and is incorporated into and shall be deemed to amend and supplement the Mortgage, Deed of Trust or Security Deed ("Security Instrument") of the same date given by the undersigned ("Borrower") to secure Borrower's Note ("Note") to ________________________________ ("Lender") of the same date and covering the Property described in the Security Instrument and located at:   [Property Address]   The Property includes a unit in, together with an undivided interest in the common elements of, a condominium project known as:   [Name of Condominium Project]   ("Condominium Project"). If the owners association or other entity which acts for the Condominium Project ("Owners Association") holds title to property for the benefit or use of its members or shareholders, the Property also includes Borrower's interest in the Owners Association and the uses, proceeds and benefits of Borrower's interest.   CONDOMINIUM COVENANTS.  In addition to the covenants and agreements made in the Security Instrument, Borrower and Lender further covenant and agree as follows:                 So long as the Owners Association maintains, with a generally accepted insurance carrier, a "master" or "blanket" policy insuring all property subject to the condominium documents, including all improvements now existing or hereafter erected on the Property, and such policy is satisfactory to Lender and provides insurance coverage in the amounts, for the periods, and against the hazards lender requires, including fire and other hazards included within the term "extended coverage," and loss by flood, to the extent required by the Secretary, then: (i) Lender waives the provision in the Security Instrument for the monthly payment to Lender of one-twelfth of the yearly premium installments for hazard insurance on the Property, and (ii) Borrower's obligation under the Security Instrument to maintain hazard insurance coverage on the Property is deemed satisfied to the extent that the required coverage is provided by the Owners Association policy. Borrower shall give Lender prompt notice of any lapse in required hazard insurance coverage and of any loss occurring from a hazard. In the event of a distribution of hazard insurance proceeds in lieu of restoration or repair following a loss to the Property, whether to the condominium unit or to the common elements, any proceeds payable to Borrower are hereby assigned and shall be paid to Lender for application to the sums secured by this Security Instrument, with any excess paid to the entity legally entitled thereto. Borrower promises to pay all dues and assessments imposed pursuant to the legal instruments creating and governing the Condominium Project.   If Borrower does not pay condominium dues and assessments when due, then Lender may pay them. Any amounts disbursed by Lender under this paragraph shall become additional debt of Borrower secured by the Security Instrument. Unless Borrower and Lender agree to other terms of payment, these amounts shall bear interest from the date of disbursement at the Note rate and shall be payable, with interest, upon notice from Lender to Borrower requesting payment.   BY SIGNING BELOW, Borrower accepts and agrees to the terms and provisions contained in this Condominium Rider.   _________________________ (SEAL) Borrower   _________________________ (SEAL) Borrower   [ADD ANY NECESSARY ACKNOWLEDGEMENT PROVISIONS.]

---

[1] Secondary residences can only be included if it meets the requirements of 24

CFR

203.18(f)(2).

[2] If the owner-occupancy ratio includes presales, FHA requires an executed sales agreement and corresponding evidence that a lender is willing to make the loan and the buyer intends to occupy the unit.  A separate owner-occupancy certification is also required in the FHA case binder for loans where the Individual Condominium Unit Appraisal Report, Fannie Mae Form 1073, does not contain the required data or the condominium project is proposed or under construction.

REVERSE MORTGAGE PROCEEDS MAY BE GOING DOWN – WHY REVERSE MORTGAGES ARE AN EXPENSIVE LOAN

-         Here’s  a FHA history & current events lesson as to why

Although the reverse mortgage program has been around since the 1980’s it is still a very immature program and an expensive loan. The largest cost in attaining a HECM reverse mortgage is the FHA mortgage insurance. FHA is a government  agency providing insurance designed to urge lenders to lend and make it easier for borrowers to borrow. Here is how FHA started.

Just after the great depression:

• Two million construction workers were out of work.
• Banks demanded a 50% down payment and mortgages to be paid off within 3 to 5 years.
• 9 out of 10 American families could not afford to own their own home.

FHA was created to promote housing ownership. The agency started to insure loans and urge lenders to offer lower down payments and affordable interest rates to Americans who would have been turned down for a mortgage. 

For a similar reason, FHA started to endorse and insure reverse mortgages in the 1980’s. Many seniors needed a resource of retirement cash and most people’s largest asset is their home. Because reverse mortgages differed from traditional mortgages in that they were based upon the asset value & actuarial tables, it was an “out of the box” financial tool. It made sense for FHA to urge lenders to lend seniors money on the largest asset that people have, their home and get the industry started.

The purpose of the insurance is twofold. If the loan balance exceeds the home value at the time the loan becomes due, the lender can put in a claim to FHA & be reimbursed for the difference. Along the same lines, the borrower can be assured that if the lender goes out of business, FHA takes over the loan and the borrower’s funds and loan continues as contracted. An added assurance is the estate of the borrower are not responsible if the home’s sales proceeds are not enough to pay off the reverse mortgage to the lender. The estate is only responsible for an excess loan balance if they choose to keep the home in comparison to selling it.

For years, FHA has been criticized by the lending industry for what was viewed as an excessive premium to insure these loans. Lenders have endured shocked responses from financial professionals and consumers regarding the costs involved in attaining a reverse mortgage. The largest fee in attaining a reverse mortgage is the upfront 2% MIP & ½% per year (mortgage insurance premium).

With the plummet of home values, all that has changed. In June 2009, for the first time in the history of the program, FHA asked the administration for a $798 million subsidy or to decrease reverse mortgage proceeds to seniors and avoid the subsidy.  

I have personally seen reverse mortgages that balances exceed the value of the home and the borrower still had access to $40k in a credit line. This will be an automatic claim by the lender  to FHA when the loan becomes due. I think we will see more of these.

It’s an unfortunate additional result of today’s economic state. In order to avoid further burden on the government and to keep the program alive, reverse mortgage proceeds will have to be reduced. Late last week, The House of Representatives passed HR 3288.

The House Appropriations Committee approved the appropriations bill on July 17,2009  instructs HUD to reduce the principal amount a senior can receive on a HECM.

Peter Bell, president of the National Reverse Mortgage Lenders Association, told National Mortgage News that the committee’s action "reduces what seniors will get, which is problematic at a time when there is great need."

As a lender & advocate for seniors, I am saddened by the challenges that the program faces. The program has changed many lives for the better and will continue to do so. It is my belief that the reverse mortgage program will prevail with changes and will eventually become so popular that FHA reverse mortgages will be a small portion of the market as the competition rises by private lenders. Retirees need funds to retire on. It only makes sense they will use these safe loans to tap into their equity for retirement.

If you have a question of this issue or on reverse mortgages in general, CALL Angella Conrard, Reverse Mortgage Advisor 866-949-7030 or log onto www.reverse-your-mortgage.com

History of Reverse Mortgages

FHA asks for subsidy

Reverse Mortgage Subsidy or Decrease in Proceeds