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The Reversing Trend

By Valerie Thelen, Staff Writer

(Page 4 of 4)

Next, a homeowner must complete the mandatory counseling already discussed. Those who’ve made it past Steps 1 and 2 and still are considering a reverse mortgage can find a HUD-approved counseling agency. Counseling can be completed in person or by phone. The association lists several counseling sites on their Web site that the homeowner can contact.

The application is the fourth step in the reverse mortgage process. If, after counseling, a homeowner decides that a reverse mortgage is a good fit for them, they must fill out a loan application and select a payment plan. At that time, the lender tells the homeowner the total cost of the loan and the homeowner provides pertinent information on their residence, such as deeds, etc.

The processing of the application is next, in which the lender orders an appraisal of the home and makes sure it meets FHA guidelines.

The lender then proceeds with underwriting the loan, which can take four to eight weeks for final approval. Then, as with a traditional mortgage, there is a closing date. And, also as with a traditional mortgage, many papers must be signed by the homeowner.

The final two steps are disbursement and repayment. The homeowner has three business days after the closing date to cancel the loan. After that, it’s a done deal. The funds are disbursed as agreed upon, any existing debt is paid off and a new lien is put on the home. No payments are made until the end of the loan, when the homeowner ceases to live in the property.

Senior Protection

There are many safeguards in place today to protect seniors enrolled in a reverse mortgage. These are mandated by the FHA and help keep families out of a big financial risk.

One of them is the counseling, already discussed. Next is the standard and capped interest rates, limitation on fees, advance disclosure of the loan cost, and no maturity date. The latter means that the loan cannot come due during the homeowner’s lifetime. They have a lifetime right to occupy the home.

The loan can be repaid at any time without any penalties, and in no event will the loan be more than the value of the home.

 Reverse mortgages are complicated and full of new terms and guidelines. It’s important that anyone considering this route learn all they can and see if it is the best fit for them or their loved one.


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