Vanguard Funding LLC Reverse Professional Learning Series 2013
Reverse Mortgage Education
Preface
As people are continually living longer, they must plan financially to
make sure their money outlives them, instead of outliving their
money. As pension plans get cut down or eliminated and as other
expenses arise, seniors are now forced to look at other options
available to them.
Vanguard Funding LLC Reverse Professional Learning Series 2013
Preface
The ability for financial professionals to share the knowledge
of how a Reverse Mortgage can work in your client’s best
interest is invaluable This is one tool that many financial
professionals come back to time and time again as a tax-free
means of creating financial flexibility when other alternatives
are not available.
Vanguard Funding LLC presents this Professional Learning
Series for you to learn the nuances of this specific loan
program and for you to become familiar with our group of
professionals ready to serve you and your clients.
How To Use
Reverse Mortgages
As A Financial
Vanguard Funding LLC Reverse Professional Learning Series 2013
Mortgagee Letter 2013-27
Many of the examples used in today’s class come directly from
FHA Mortgagee Letter 2013-27.
You can find a copy of this Mortgage Letter at:
http://portal.hud.gov/hudportal/HUD?src=/program_offices/
administration/hudclips/letters/mortgagee
In addition you can find ALL Mortgagee Letters. Letter
2013-28 contains the new HECM Financial Assessment
Form that will be used starting Jan. 13
th
, 2013
Funding for Healthcare or Medical Treatment
Long term care is a big risk to most seniors'
financial planning for retirement.
•
While 42% of people over the age of 65 require or will require long
term health care, neither Medicare nor Medicare supplemental
insurance cover the costs of these services-either in your clients
home or in a nursing facility. Moreover, most seniors don't have
long term care insurance.
•
As a financial planner you could recommend that your clients
secure a Reverse Mortgage to help fund a long term care
insurance cost or other medical costs.
Vanguard Funding LLC Reverse Professional Learning Series 2013
You might consider using the proceeds from a Reverse Mortgage to
fund a life insurance product. This is a particularly useful if you
have built significant home equity. Funding a life insurance
policy with a Reverse Mortgage gives your client control over
the estate and assures the legacy left retains its value by:
•
Lowering the total estate value subject to taxes: The full value of the
home is subject to estate tax, but a Reverse Mortgage against the
property reduces its value-lowering applicable estate taxes. The heirs
will not owe as much estate tax upon the sale of the home. Furthermore,
when the life insurance policy pays the benefit to heirs, they receive the
benefit in tax-free dollars.
Other Asset Protection Strategies: Life Insurance
Vanguard Funding LLC Reverse Professional Learning Series 2013
Other Asset Protection Strategies: Life Insurance
•
When the property is sold, any equity over the loan amount
would be subject to taxes, but the remainder would still revert
to the heirs. However, the unknown nature of the future real
estate markets makes this a potentially risky scenario.
Purchasing a life insurance policy with Reverse Mortgage
funds provides greater control of the estate and legacy.
•
The Money from a Reverse Mortgage can also be used to buy
Vanguard Funding LLC Reverse Professional Learning Series 2013
If your client has equity in their home, you
as a financial planner can explore how a
Reverse Mortgage could be an important
component of the estate plan.
•
Take into account that many seniors draw from their
401k if in need of funds. Removing funds from a 401k
may equal high tax penalties in some cases.
•
Instead of using investments your client can use the tax
free equity in their home.
More Financial Protection Strategies
Vanguard Funding LLC Reverse Professional Learning Series 2013
Reverse Mortgage Myths and Truths
Closing Costs and Fees
Distribution of Proceeds
Interest Rates
HECM Property Types
HECM Loan Counseling
Home Equity Conversion Mortgage (HECM)
The Reverse Mortgage
Vanguard Funding LLC Reverse Professional Learning Series 2013
The Reverse Mortgage
Vanguard Funding LLC Reverse Professional Learning Series 2013
Company Overview
Vanguard Funding LLC are leaders in the
FHA refinance mortgage industry.
Vanguard Funding LLC Reverse Professional Learning Series 2013
A reverse mortgage enables older
homeowners to convert part of the
equity in their homes into tax-free
money without having to sell the
home, give up title, or take on a
new monthly mortgage payment.
The reverse mortgage is aptly
named because the payment
stream is “reversed.” Instead of
making monthly payments to a
lender, the lender makes payments
to the home owner.
Vanguard Funding LLC Reverse Professional Learning Series 2013
What Is A Reverse Mortgage?
Home Equity Conversion Mortgage (HECM)
•
All borrowers on title must be 62 or older.
•
The home must be an owner-occupied, 1-4 family
residence.
•
Any existing mortgage and liens must be paid off.
Vanguard Funding LLC Reverse Professional Learning Series 2013
HECM Benefits
•
Independence
•
No Monthly Mortgage Payments
•
Loan Proceeds
Are
Tax-Free
•
No Pre-Payment Penalty
•
Freedom and Flexibility
•
Peace of Mind
HECM REVERSE
Forward Mortgage
Income Verification
Currently
Required
Not
May Be Required
Employment
Verification
Not Required
May Be Required
Credit Worthiness
Not Required
Required
Monthly Mortgage
Vanguard Funding LLC Reverse Professional Learning Series 2013
HECM REVERSE
Forward Mortgage
Loan Purpose
Purchase / Refinance
Purchase/Refinance
During the loan
Receive payments from
lender
Make monthly payments
to lender
Closing Costs
Usually financed as part of
the initial loan balance
pocket for purchase and
Usually paid
out-of-financed for refinance
At Closing
Rising Debt
Falling Equity
Falling Debt
Rising Equity
At the End of the
Loan
Borrower owes balance, not to
exceed the value of the home
Borrower owes nothing
HECM REVERSE vs. Forward Mortgages
•
A branch of the Department of Housing and Urban
Development (HUD)
•
Doesn’t fund loans
•
Acts like an insurance agency for banks that make
loans that conform to its standards
•
The HECM is the only Reverse Mortgage insured
by the FHA
Vanguard Funding LLC Reverse Professional Learning Series 2013
FHA Mortgage Insurance safely allows a
lender to make a loan to a borrower
without fear of incurring a loss due to a
declining property value or a payout
exceeding the value of the home.
How Does FHA Benefit Lenders?
•
FHA insures borrowers against bank or lender
default. In the event of default, they will step in
and satisfy the terms of the loan.
•
FHA would continue to make payments to the
borrower as required.
•
Stability with a government backed loan!
Vanguard Funding LLC Reverse Professional Learning Series 2013
The home is the only asset which may be used to
payoff the loan.
The borrower can never owe more than the
appraised value of the home at the time of
repayment.
The HECM Is A Non-Recourse Loan
The non-recourse feature is provided
by payment of the mortgage
insurance premium.
This is charged both initially
at closing and monthly
to the borrower.
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Pay property taxes
•
Maintain homeowner’s insurance
•
Make necessary repairs in accordance with
the Repair Rider
•
Maintain the property
Failure to fulfill these responsibilities
could result in a Maturity Event
Borrower Responsibilities
•
A maturity event is an event that can result
in the mortgage being called due.
•
The borrower has six months following a
maturity event to repay the loan.
•
The lender may (at their discretion) grant
up to 2, three-month extensions.
Vanguard Funding LLC Reverse Professional Learning Series 2013
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
The borrower must receive counseling before the
application is submitted.
•
The lender can take the application but cannot
incur costs on the borrower’s behalf until a fully
executed counseling certificate is in the file.
•
There is a fee for counseling. It is currently $125.
HECM Loan Counseling
•
HUD-certified
•
Review the structure and function of the
reverse mortgage loan and other options
available to the borrower
Vanguard Funding LLC Reverse Professional Learning Series 2013
Eligible and Ineligible HECM Property Types
Property Type
Eligible
Ineligible
Single Family Residence
2-4 Units
The borrower must occupy one
of the units
Condos
Must meet FHA guidelines
Planned Unit Development
(PUD)
Manufactured Homes
Must meet FHA guidelines
Vanguard Funding LLC Reverse Professional Learning Series 2013
Property Type
Eligible
Ineligible
Mixed Use
Commercial usage to be less
than 25% of sq. footage
Mobile Homes
Commercial
Co-ops
Properties w/needed
repairs
Some restrictions may apply
Eligible and Ineligible HECM Property Types
•
Primary beneficiaries must be eligible borrowers
•
Must be revocable
•
Contingent beneficiaries cannot have any rights
to the property before the death of the primary
beneficiaries.
•
The beneficiaries must have the right to remain
in the home
Vanguard Funding LLC Reverse Professional Learning Series 2013
Interest Rates
A fixed rate mortgage has an interest rate
which remains constant throughout the life of
the loan. It offers a sense of certainty for the
borrower about how the loan will grow.
Vanguard Funding LLC Reverse Professional Learning Series 2013
An adjustable rate mortgage has an interest
rate which changes periodically with market
conditions. It transfers the risk and benefit of
market changes from the lender
to the borrower.
Interest Rates: Adjustable Rate Mortgages
Both the HECM Monthly and HECM Annual are
adjustable rate mortgages or ARMs. The name of the
ARM indicates the adjustment period.
The index represents the variable in an
Adjustable Rate Mortgage (ARM). We can
look at past performance of that index to have
a sense how it may perform in the future.
Vanguard Funding LLC Reverse Professional Learning Series 2013
The margin represents a fixed component of the
fully indexed rate. The margin will stay
constant throughout the life of the loan and
is added to the index at each scheduled
adjustment period to determine the fully
indexed rate.
Margin
The sum of the index
plus the margin is
known as the fully
indexed rate.
Each month the
borrower is
assessed interest
at the fully
indexed rate.
The 1 month
index =
2.50%
The margin
= 2.00%
+.50%
Fully
Indexed
Rate
= 3.00%
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Represents the start rate at closing
•
1 month rate plus an acceptable margin
•
Prevailing rate - cannot be locked
•
Established at closing
•
Changes monthly after closing
•
Lifetime cap is 5% above the start rate
Initial Interest Rate (IR)
•
Used for one purpose: to calculate how
much money the borrower will receive (PLL
- Principal Loan Limit)
•
The margin remains the same for the life of
the loan
•
10 year index rate
Vanguard Funding LLC Reverse Professional Learning Series 2013
The PLL is the amount of money the
borrower qualifies for. It is based
upon these 3 factors:
•
age of the youngest borrower
•
lesser of the current appraised value or HUD
203 b lending limit (MCA – Max Claim
Amount)
•
expected interest rate
Principal Loan Limit (PLL)
•
The EIR (Expected Interest Rate) goes
into effect on the date the borrower
signs the application
•
Lock period is 120 days from the date
the FHA Case # is assigned
•
Better of the EIR from application date
or closing date is used to determine the
PLL (Principal Loan Limit) at closing
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Lesser of the appraised value or HUD’s
203(b) Single Family Lending Limit
•
Currently max claim amounts are the same
throughout the United States at $625,500
Maximum Claim Amount (MCA)
State
203 (b)
Lending
Limit
Home Value
Maximum
Claim
Amount
New York
$ 625,500
$ 325,000
$ 325,000
New York
$ 625,500
$ 675,000
$ 625,500
Vanguard Funding LLC Reverse Professional Learning Series 2013
Expected Rate
Initial Rate
Index
10 Yr LIBOR
LIBOR plus
1 month
the margin
Affects
Benefit amount
borrower is
eligible for PLL
Growth of loan
balance
Established
application or
At loan
closing
Monthly
HECM Interest Rates
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Any necessary “set-asides” will be
established
•
Any liens against the property will be
paid off
•
All settlement charges will be paid
•
The remaining balance of the PLL will be
available for the borrower’s choice of
payment plan (within FHA Guidelines)
Principal Loan Limit Distribution
•
On a Reverse Mortgage, the lender is permitted
to charge a monthly servicing fee.
•
It is added to the loan balance every month for
the life of the loan.
•
In traditional mortgages, the servicing fee is
embedded in the rate so the borrower never sees
the actual cost.
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Portion of the available PLL
•
“Virtual” money: neither a closing cost,
nor an escrow
•
Not available to the borrower
The Servicing Fee Set Aside
Payment Plan Option
Description
Line of Credit
Borrower funds are available as needed upon written request. The
unused portion grows at the note rate plus ½%.
Tenure
Borrower receives fixed monthly payment for as long as they remain in
the home
Modified Tenure
Borrower receives a lower fixed monthly payment and a line of credit for
as long as they remain in the home
Term
Borrower receives fixed monthly payment for a fixed period or term. X
amount a month for Y months
Modified Term
Borrower receives a fixed monthly payment for a fixed period or term and
a line of credit for as long as they remain in the home
Lump Sum
Borrowers receive all “available” funds at closing.
Partial Lump Sum
Borrowers receive a portion of their available funds at closing. The
remaining funds are distributed as one of the other payment plan options.
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Only the unused or available portion will
continue to grow
•
LOC (Line of Credit) is the only structure that
gives the client access to growth
•
Once the client has used the LOC completely,
there will be no more growth and the line closes
•
Annual growth rate = the initial rate plus ½%
•
Monthly growth rate = Annual growth rate ÷ 12
Line of Credit Growth Rate
•
Required repairs are determined by the
Underwriter.
•
Funds for these repairs can be held in a credit line
created from the borrower’s available principal loan
limit (PLL).
•
The repair set aside funds will be released once a
compliance inspection report has been received by
the Repair Administrator.
Vanguard Funding LLC Reverse Professional Learning Series 2013
Q: What happens if the entire PLL is used up to cover the set
asides, pay all liens, and cover settlement charges?
A: If all available funds are disbursed at closing, the borrower
will forgo all benefit options other than not having to make a
mortgage payment
Principal Loan Limit
•
The amount used at settlement to pay:
–
liens
–
settlement charges
–
any initial advances to the borrower
•
The principal loan balance begins accruing
interest the day after the loan funds
Vanguard Funding LLC Reverse Professional Learning Series 2013
–
Accrued Interest
–
Servicing Fee Payments
–
Monthly MIP
–
Loan advances (Term or Tenure payments)
–
LOC draws
Once the PLB is established, the balance can
grow monthly due to the following factors:
Principal
Loan
Balance Growth
•
Should the borrower want to change how their
payment plan is structured (for example:
tenure to line of credit) after closing, they can
do so for a $20 administration fee.
•
The borrower can do this as often as they like.
Vanguard Funding LLC Reverse Professional Learning Series 2013
Closing Costs and Fees
HUD regulates the closing costs we are permitted
to charge the borrower.
•
Two main closing costs for Reverse Mortgages:
•
Origination Fee
•
Upfront Mortgage Insurance Premium (UFMIP)
•
Other fees: third party settlement charges
Vanguard Funding LLC Reverse Professional Learning Series 2013
To determine the Origination fee multiply
2% of the first $200,000 of the Maximum
Claim Amount and 1% of each additional
$100,000. The maximum allowable
Origination fee is $6,000 and the minimum
is $2,500.
Example: MCA = $300,000. 2% x $200,000
= $4,000. 1% x $100,000 = $1,000. Total
Origination = $5,000.
Origination Fee
Vanguard Funding LLC Reverse Professional Learning Series 2013
Upfront MIP
•
One time fee, charged at closing
Monthly MIP
•
1.25 % annual charge
•
assessed monthly to the PLB
MIP
Home
Value
HUD
Lending
Limit
MIP is .50% when
borrower takes
less than 60% cash
and 2.5% of the
Max Claim Amount
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Appraisal
•
Credit Report
•
Flood cert
•
Doc Prep
(where applicable)
•
Notary Fee
•
Repair Administration
Fee (if applicable)
•
Attorney’s Fees
•
Recording fees
•
Survey (FL & TX)
•
Pest Inspection
(if applicable)
•
Courier Fees
Other Closing Fees
Other Fees
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Insurance must be for the maximum claim amount
•
Two liens are created:
–
Lender
–
HUD
•
Each lien will be for 150% of the MCA
•
Second Lien to HUD allows them to easily step in and
continue making payments to the borrower in the event of
lender default
Title
•
Federal law provides a rescission period.
•
The borrower has the right to cancel the loan
without penalty within 3 business days of
closing, including Saturdays.
•
The loan proceeds are not paid to the borrower
until the end of the rescission period.
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
A borrower may prepay all or part of the outstanding
balance at any time without penalty.
•
Repayment in full will terminate the Loan Agreement.
•
The loan is repaid in this order:
•
Accrued MI (including the initial MIP)
•
Accrued service fees
•
Accrued Interest
•
The remaining PLB
Pre-Payment
Vanguard Funding LLC Reverse Professional Learning Series 2013
Myth Truth
You must make
monthly payments on
your Reverse
Mortgage
Payment of insurance, taxes, and general
upkeep of the home are the only
responsibilities of the homeowner. There
are never any monthly P&I payments.
You can’t get a
Reverse Mortgage
because your house
needs too many
repairs
A reverse mortgage is a great way to get
some needed home repairs without
increasing monthly payments. The
repairs needed to bring the home up to
FHA property standards are evaluated by
an FHA underwriter and can be paid for
by the proceeds of the Reverse Mortgage.
Myths and Truths
Myth Truth
The lender will own
your home
The borrower retains ownership of the home.
The lender does not take control of the title.
The lender’s interest is limited to the
outstanding balance.
Only “cash poor ”or
desperate senior
citizens can benefit
from the Reverse
Mortgage
Even though some seniors may have a
greater need than others for the cash or
monthly income, the Reverse Mortgage can
also be an excellent financial or estate
planning tool.
My children will be
responsible for the
repayment of the
Reverse Mortgage
The home is the only asset the lender can
pursue to repay the PLB. Repayment
amount can never exceed the home’s value
(at the time of repayment), except if the
Vanguard Funding LLC Reverse Professional Learning Series 2013
Medicare and Medicaid
How does a reverse Mortgage Impact
---Medicare
Medicaid
Vanguard Funding LLC Reverse Professional Learning Series 2013
Created September, 2013
HECM Changes
HUD Updates Loan Rules
•
To remedy this, HUD policy now requires that FHA-backed reverse
mortgages issued on or after August 4, 2014, allow the non-borrowing
spouse to remain in the home after the borrower dies (and the loan
repayment will be deferred) so long as:
•
the non-borrowing spouse is married to the borrower at the time of the
loan closing (and remains married to the borrower for the duration of the
borrower's lifetime)
•
their spousal status is disclosed at the time of the closing
•
the non-borrowing spouse is named in the loan documents
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
The U.S. Department of Housing and Urban Development has made
several changes to the Home Equity Conversion Mortgage (HECM)
program to strengthen the FHA Mutual Mortgage Insurance Fund
(MMIF or Fund) and protect the viability of the HECM program.
•
The changes affect the following requirements:
•
Initial disbursement limits
•
New Single Disbursement Lump Sum payment option
•
Initial mortgage insurance premiums
•
Initial mortgage insurance premium calculation for refinance
transactions
•
New Principal Limit factors
•
Financial assessment requirements
•
Funding requirements for the payment of property charges based on
the financial assessment.
Purpose
•
The 2009 housing and economic recession caused major mortgagor
changes that brought additional risks to the Mutual Mortgage
Insurance Fund (MMIF), and contributed to higher payouts of insurance
claims and increasing numbers of property charge defaults.
•
Mortgagors shifted from choosing adjustable interest rate mortgages to
fixed rate mortgages. Instead of receiving their payments over time, or
retaining them in a line of credit, they were now opting to draw all
funds at the time of loan closing.
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Effective for all case number assignments on or after September 30, 2013,
disbursements at loan closing, and within the first 12 months of closing,
CANNOT EXCEED THE GREATER OF:
•
60% of the Principal Limit, or…
•
Mandatory obligations plus 10% of the Principal Limit.
•
This pertains to ALL payment options, including lump sum, term, tenure,
line of credit, modified term and modified tenure.
•
Note: Borrowers with mandatory obligations in excess of 60% can still take
the additional 10%, as long as disbursements do not exceed the Net Principal
Limit or Principal Limit.
IMPORTANT: If the borrower takes more than 60% of the Principal Limit, the cost of MIP
increases significantly. If the disbursement is 60% or less, MIP is 0.50 of the Principal Limit.
It increases to 2.5% if the disbursement exceeds 60%.
Initial Disbursement Limits
•
Mandatory obligations and required disbursements reduce the amount of funds available to the
borrower during the “First 12-Month Disbursement Period.” Include the following items in
initial MIP calculations and the disbursement limit for the first 12 months:
•
Disbursement to mortgagor at closing.
•
Amount of mandatory obligations.
•
Repair set-aside.
•
Note: Set-asides are deducted from the Principal Limit, and they lower the Net Principal
Limit.
•
Tax payments due within 30 to 45 day of closing, per mortgagee specifications.
•
Note: If a new tax bill has not been issued, use the prior year’s amount plus 1.2%.
•
Tax and insurance scheduled for payment from the a set-aside or the HECM proceeds within
the first 12 months.
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Borrowers who select the lump sum disbursement method MUST take
the full lump sum at closing or they will not be able to draw it at a
future date. However, they are not required to take the full 10% out at
closing. No remaining disbursements will be available throughout the
lifetime of the loan.
•
The lump sum disbursement is limited to 60% of the Principal Limit,
or mandatory obligations plus 10% of the Principal Limit.
•
This option would most likely appeal to borrowers with higher
mandatory obligations.
•
Note: This pertains to both ARM and fixed rate loans.
Single Lump Sum Disbursements
•
Effective for all case number assignments on or after September 30,
2013, HECM Standard and HECM Saver initial mortgage insurance
pricing options will no longer be available.
•
HUD will charge an initial mortgage insurance premium (MIP)
of 0.50% of the Maximum Claim Amount (MCA) when the sum of
the mortgagor’s initial disbursement at closing, plus other
required or available disbursements during the First 12 Month
Disbursement, is 60% or less of the Principal Limit.
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Whenever the initial disbursement consists of the mandatory obligations
plus 10% of the Principal Limit, the borrower must advise the mortgagee of
what portion of the 10% he or she wants, and if the funds should be
disbursed at closing or during the First 12 Month Disbursement period.
•
Note: Borrowers receive more than 60% of the Principal Limit when they
request the full 10% and their mandatory obligations are 51% of Principal
Limit or more. If a borrower wishes to do this you MUST advise him or her
that the MIP rate increases from 0.50% to 2.5% of the Principal limit when
disbursements exceed 60% of the Principal Limit.
•
The mortgagee then calculates the initial MIP based on the amount of
funds the borrower elected to have available during the first 12 months.
•
The existing annual MIP rate of 1.25% will continue to be in effect for all
HECMs.
Mortgage Insurance Premium (MIP)
•
Maximum Claim Amount: $200,000
•
Principal Limit: $100,000
•
60% of Principal Limit: $60,000
•
Mandatory Obligations: $20,000
•
Repair Set-aside: $0
•
Cash to Mortgagor at Loan Closing: $20,000
•
Initial Disbursement Limit Amount: $60,000
•
Disbursement Amount at Closing: $40,000
•
Initial MIP (MCA multiplied by 0.50%): $1,000
Example 1: Initial Disbursement BELOW 60%
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Maximum Claim Amount: $200,000
•
Principal Limit: $100,000
•
60% of Principal Limit: $60,000
•
Mandatory Obligations: $70,000
•
Repair Set-aside: $1,000
•
Cash to Mortgagor at Loan Closing: $9,000
•
Initial Disbursement Limit Amount: $80,000
•
Disbursement Amount at Closing: $80,000
(includes set-asides and mandatory obligations)
•
Initial MIP (MCA multiplied by 2.50%): $5,000
Example 2: Initial Disbursement ABOVE 60%IMPORTANT: Mandatory obligations between 51% and 60% of the Principal Limit, plus the allowable 10% disbursement, place the disbursement above 60% of the Principal Limit. The higher MIP of 2.50% now applies. Borrowers may prefer to receive a disbursement amount lower than 10% so the MIP is lower.
Mortgage Insurance Premium (MIP)
•
Maximum Claim Amount: $450,000
•
Principal Limit: $200,000
•
60% of Principal Limit: $120,000
•
Mandatory Obligations: $17,000
•
Repair Set-aside: $33,000 (at loan closing or within the first 12 months)
•
Cash to Mortgagor at Loan Closing: $70,000
Initial Disbursement Limit Amount: $120,000 (includes $17,000
Example 3: Mandatory Obligations of 60% or LESS of the Principal Limit Note: On the Single Disbursement
Lump Sum Payment Option the mortgagor is limited to a single draw at loan closing for the $70,000 that exceeds the Mandatory Obligations and set-aside.
Vanguard Funding LLC Reverse Professional Learning Series 2013
•
Maximum Claim Amount: $625,500
•
Principal Limit: $200,000
•
60% of Principal Limit: $120,000
•
Mandatory Obligations: $140,000
•
Repair Set-aside: $13,000 (at loan closing or within the first 12 months)
•
10% of Principal Limit: $20,000
•
60% of Principal Limit: $120,000
•
Initial Disbursement Limit Amount: $120,000 (includes $140,000 mandatory
obligations, $13,000 repair set-aside and $7,000 to mortgagor)
•
Initial MIP (MCA multiplied by 2.50%): $5,000
Example 4: Mandatory Obligations of 60% or MORE of the Principal Limit
Mortgage Insurance Premium (MIP)
•
Effective for case numbers assigned on or after January 13, 2014,
mortgagees must complete a financial assessment of all prospective
borrowers before loan approval and loan closing. This pertains to all
HECM transaction types, including traditional, refinance, and
purchase.
•
Mortgagees must assess a potential mortgagor’s financial capacity and
willingness to comply with mortgage provisions due to an increasing
number of tax and hazard insurance defaults by borrowers.
Vanguard Funding LLC Reverse Professional Learning Series 2013
