Reverse Mortgages are becoming popular in America. The U.S. Department of Housing and Urban Development (HUD) created one of the first. HUD’s Reverse Mortgage is a federally-insured private loan, and it’s a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, and more. You can receive free information about reverse mortgages by calling AARP at: 1-800-209-8085, toll-free. Since your home is probably your largest single investment, it’s smart to know more about reverse mortgages, and decide if one is right for you!

1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD’s reverse mortgage provides these benefits, and it is federally-insured as well.

2. Can I qualify for a HUD reverse mortgage?

To be eligible for a HUD reverse mortgage, HUD’s Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.

3. Can I apply if I didn’t buy my present house with FHA mortgage insurance?

Yes. It doesn’t matter if you didn’t buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.

4. What types of homes are eligible?

Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program.

5. What’s the difference between a reverse mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”

6. Can the lender take my home away if I outlive the loan?

No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value.

7. Will I still have an estate that I can leave to my heirs?

When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD’s reverse mortgage loan. This debt will never be passed along to the estate or heirs.

8. How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

9. Should I use an estate planning service to find a reverse mortgage?

I’ve been contacted by a firm that will give me the name of a lender for a “small percentage” of the loan? HUD does NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! HUD provides this information without cost, and HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. Call 1-800-569-4287, toll-free, for the name and location of a HUD-approved housing counseling agency near you.

10. How do I receive my payments?

You have five options:

* Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
* Term – equal monthly payments for a fixed period of months selected.
* Line of Credit – unscheduled payments or in installments, at times and in amounts of borrower’s choosing until the line of credit is exhausted.
* Modified Tenure – combination of line of credit with monthly payments for as long as the borrower remains in the home.
* Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by the borrower.

Source: http://www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm

Reverse Mortgage

Senior Mobile Home OwnersHere is a great solution for Seniors who own manufactured/mobile homes and are having financial difficulty, looking for way to combat the increasing cost of living, or for those who would just like to have some additional resources to enjoy retirement, the Reverse Mortgage is a product that could be an advantage.

A Reverse Mortgage is a loan that is guaranteed by the FHA for manufactured homes, but is different from a standard equity line in that:

* The age of the youngest borrower must be at least 62 or above.

* There is never a monthly payment as long as you live in the home. The loan is repaid from the proceeds of the sale of the manufactured or mobile home, or through other means, but only when the home is no longer the primary residence of the homeowner. Heirs or beneficiaries are never responsible for the loan.

* There are no income, medical, or credit requirements.

For manufactured homes, the borrower is required to have their home on a permanent foundation system. The requirements can vary state by state. For instance, in California, in addition to meeting the HUD PERMANENT FOUNDATION GUIDE FOR MANUFACTURED HOMES, 1996 and being certified by an engineer, the home must also have a recorded 433A, showing that the home also meets the State requirements. On The Level www.onthelevelcontractors.com can assist both in the retrofit and engineer’s certification process nationwide with some exceptions.

OnTheLevel, specializes in servicing, repairing and upgrading manufactured home foundations as well as expediting engineer’s certifications for FHA-insured loans. From the recalibration of the home’s existing structural support units to more comprehensive foundation retrofitting when enhanced design criteria are needed to meet wind, seismic, weight and snow load requirements to satisfy either the building department or lending requirements, OnTheLevel offers turn-key solutions.

Have you been sticking your nose up at the manufactured home borrower? Like it or not, with the increasing popularity of the Reverse Mortgage loan product for the mature borrower, loan officers and processors are dealing with more and more manufactured homes in their portfolios. It makes sense when one realizes that seniors have chosen to congregate in the manufactured home park setting as a retirement oasis, offering the amenities of security, recreation and a sense of community. The concentration of an active senior population in a close-knit living atmosphere naturally lends itself well to word-of-mouth advertising for the Reverse Mortgage industry. And now with the recent passage of H.R. 3221 , the housing stimulus bill signed into law on by President Bush, you can count on the numbers of manufactured home loans increasing.Why? Thousands and thousands of manufactured homeowners have been disenfranchised from the FHA-insured loan process by a fluke in the statute and manner in which their community was legally constructed. If the description on land and title documents state a manufactured home is in a condominium manufactured home community, these borrowers have been ostracized from the Reverse Mortgage opportunity. By organizing the park development under the condominium aegis, regulators interpreted that a resident’s ownership was confined to airspace only when residents protested that they clearly owned their individual deeded plots. The narrow legal interpretation of a manufactured home situated in communities classified as condos ironically excluded some of the highest quality senior developments. These parks often boast of vibrant recreational facilities, in some cases golf courses and a strong management or homeowner’s association with an overseeing architectural committee. Because of the commanding oversight presence, the price of admission to such a development in turn creates a strong pride of ownership; expectation of upkeep and a more robust sales market keeps appraisal values localized and current.

Fortunately, in addition to all the other more-loudly trumpeted issues in the bill, less well known is the fact that the passage of H.R. 3221 has now eliminated the manufactured home condo discrimination. The inclusion of manufactured housing as a component of the bill was largely due to the grassroots efforts of manufactured home residents themselves who actively cajoled their legislators with letter-writing campaigns and petitions, pleas to AARP, or they even joined lobbying groups to show their support, virtually demanding that they be able to receive the benefits of a Reverse Mortgage. In many cases, these seniors are already Reverse Mortgage devotees since they had friends in neighboring manufactured home communities with acceptable designations for FHA insurance: Planned Unit Developments (PUDS) and Subdivisions. Knowing that this is a unique case where demand for the product precedes the opportunity for access, I don’t think I exaggerate when I say “Katy, bar the doors!”

The point is if you haven’t dipped your feet in the manufactured home Reverse Mortgage pool of loans, you should think about sticking your toes in sooner rather than later. The good news is you have some time to school yourself on the unique properties of manufactured home loans and to tighten the logistics within your processing department. According to Daniel Mooney (Underwriter ?HECM Coordinator? Processing & Underwriting Division? Santa Ana Homeownership Center,?Federal Housing Administration) “while the new statute allows for FHA to promulgate regulatory changes and policy revisions that will enable us to insure loans secured by manufactured homes located in condominiums, said new policies have not been enacted/promulgated. I would anticipate a period of several months (as in six to nine) before FHA is actually able to institute policies and procedures relevant to the issue at hand”. Knowing you have a window of time before all the gears are running, you can acclimate yourself to the water conditions. In my book, this is the best time to get your feet wet and set up some in house policies. One of the reasons many brokers and processors bemoan the manufactured home loan is that it comes with its own set of obstacles. Lack of proper information and a disorganized processing strategy often creates dissention between the borrower and the lender and the lender comes out the loser, looking unprofessional and unknowledgeable. If you follow a few ground rules and recognize that the community camaraderie can provide the service –oriented loan officer with a wealth of referral leads, it may be worth the extra time to troubleshoot some of the idiosyncrasies of the manufactured home.

When you go to research a piece of real estate, you can usually access it by address, assessor’s parcel number, legal description or all of the above. However, even if a manufactured home sits on a piece of realty and shares the features of the real property, it is still distinguished by its HUD label (an affixed HUD Seal (tag/label) located on the outside of the home. Many people ask, if the home is on real property and is being assessed as real property, then why would a HUD tag be of continuing importance? Even when a manufactured home is converted to real property, it doesn’t remove the fact that the home is still a manufactured home. The provenance of any HUD home and its factory design and engineering requirements are traceable through the individual HUD label. For appraisal and lending purposes, code should follow code so appraisers and engineers certifying a home for a manufactured home loan need to specifically identify the HUD numbers in their reports. Additionally, building departments utilize the HUD label as the format for the permit process because it allows the home to preempt the local building codes. If for any reason the labels are missing, appraisers will often reject the property and refuse to proceed until documentation is provided, building departments will refuse to issue certain and in some states a manufactured home may not be re-sold if missing a label and an engineer should not proceed with a HUD foundation without being able to prove that the home itself is in fact a HUD home.

Certain criteria are absolutes to follow for an FHA-insured loan on a manufactured home loan. These are:

1. The manufactured must be a HUD home, which means it must be manufactured after June 15, 1976. If there are metal plates at the rear of the home that begin with a three Alpha letters like CAL, ARZ, ORE, that’s usually a good sign. If the HUD label is missing, usually a label verification letter from the Institute for Building Technology and Safety (IBTS) www.ibts.com Which will give the provenance of the home will suffice.
2. The manufactured home must be classified and taxed as real estate. A long-term lease may also be acceptable in certain instances. States vary on how the real estate classification is accomplished so this is another important aspect to understand.
3. The axles and tongues must be removed from the chassis.
4. The manufactured home must have an adequate perimeter enclosure with appropriate ventilation.
5. Must have a floor area of not less than 400 square feet
6. Built and remains on a permanent chassis.
7. The finished grade elevation beneath the manufactured home shall be at or above the 100-year return frequency flood elevation.
8. The home must sit on a permanent foundation and must have a professional engineer certify that the foundation meets the PERMANENT FOUNDATION GUIDE TO MANUFACTURED HOMES (PFGMH) HUD-7584, dated September 1996.

If the loan officer or processor has never previously expedited a manufactured home transaction, this last requirement can upset the whole apple cart. By not anticipating this, the 11th hour underwriting condition will give a processor fits trying to find a qualified engineer that understands manufactured housing. Potentially there is an even worse scenario. Occasionally the engineer makes the determination that the foundation will not meet the HUD guidelines and a repair or retrofit will be required. If the loan officer or borrower is unprepared for this possibility, angst and ill will often occur between he/she and the borrower. “Why didn’t anyone tell me? They’re supposed to be the experts!” is a recurring outcry. For the manufactured home processing newbie, don’t be fooled by the appraisal report, which nine times out of ten stipulates that the home is on a permanent foundation. Unfortunately, the appraiser often makes a determination about “permanence” strictly on the basis that the tires and axles have been removed or some other vague set of standards, not on the basis of the foundation attachment.

The reason for the engineering certification requirement is to establish a national standard of uniformity amidst inconsistent state installation standards. While manufactured homes enjoy the benefit of the HUD standardized preemptive structural, plumbing, and electrical standards that need to be met before leaving the factory, installation standards vary from county to county, state to state. So the home can be designed for stringent seismic, wind and roof load expectations, but the home may be set up just like the old trailers of yester year, depending on area designation. Foundation systems are typically subject for review by the local code authorities and are often tailored to the site, soil, wind, flood, seismic and snow conditions of the individual county or state. Additionally, manufactured homes are unique in that they are the only type of residential dwelling that can be classified as either person (chattel) or real property. In some states, the type of foundation supporting the manufactured home determines the distinction between personal and real property. Since the individual jurisdictional requirements vary significantly, the Engineer Certification Letter helps to provide an oversight standard. This is generally an underwriting requirement for all FHA insured loans, which also include Reverse Mortgages.

If an existing home is already on a foundation, an engineer can provide a certification attesting to the fact that the home meets the guidelines. If it does not meet the HUD guidelines, there are a variety of proprietary or approved engineered foundation systems that can be retrofitted in combination with the existing structural components. As in any industry, one size does not fit all in the engineering landscape and engineers that specialize in the manufactured home industry and the HUD inspection specifications are a rare breed. Because there are a vast array of proprietary products that have been introduced into the national marketplace, an engineer’s knowledge about these patented systems is also an additional benefit since these have all been pre-engineered and stamped delineating all of the system specifications.

This also means if the foundation does not meet the FHA-insured criteria for a permanent foundation, the engineer does not need to re-invent the wheel with a repair recommendation—there are a plethora of products available for the retrofit contractor that may satisfy the engineer’s requirements. However, even though proprietary systems almost always carry engineering approvals, approvals vary state by state and some building departments may not approve their design concepts. Therefore finding the right combination of an engineer and contracting team that understands the FHA lending process, the building permit process and the available proprietary retrofit systems AND that can work within the timeline of your loan lock timeline can be a bit of a balancing act.

There’s no time like the present to take a plunge! The manufactured housing industry may just be the next great niche market.

About Janis Arendsen: Janis Arendsen is owner of On The Level, a contracting company specializing in the inspection, servicing and retrofitting of manufactured housing foundations and works in conjunction with Pacific Consulting Engineers that provides engineer’s certifications on foundations. Refer to www.onthelevelcontractors.com for more information.

With the increasing popularity of the Reverse Mortgage loan product for those homeowners 62 and older, loan processors are dealing more and more with manufactured homes in their portfolios. Many seniors have chosen the manufactured home communities as a retirement refuge and the community and recreational atmosphere lend itself well to word-of-mouth referrals and the spreading the news about Reverse Mortgage benefits. However, the manufactured home loan presents a new set of criteria for the loan officer and loan processor as well as the borrower so be prepared ahead of time.

Certain criteria are absolutes:

1. The manufactured must be a HUD home, which means it must be manufactured after June 15, 1976. If there are metal plates at the rear of the home that begin with a three Alpha letters like CAL, ARZ, ORE, that’s usually a good sign. If the HUD label is missing, usually a label verification letter from the Institute for Building Technology and Safety (IBTS) which will give the provenance of the home will suffice.
2. The manufactured home is classified and taxed as real estate. A long term lease may also be acceptable in certain instances.
3. The axles and tongues must be removed.
4. The manufactured home must have an adequate perimeter enclosure with appropriate ventilation.
5. Must have a floor area of not less than 400 square feet
6. Built and remains on a permanent chassis
7. The finished grade elevation beneath the manufactured home shall be at or above the 100 year return frequency flood elevation.
8. The home must sit on a permanent foundation.

AND

All foundation systems, new and existing, must meet the guidelines published in the Permanent Foundations Guide for Manufactured Housing, (HUD-7584), dated September 1996. A certification attesting to compliance with this handbook must be obtained from a licensed professional engineer and included in the insuring file.

This last requirement can throw the loan processor into a quandary if they have never expedited a manufactured home transaction previously because this request will often show up at the 11th hour of loan closing. Nine times out of ten the appraisal report will show that the home is on a foundation system so the processor or loan officer won’t have alarm bells off of worry going off when they receive this condition. Unfortunately, the appraiser often simply determines “permanence” strictly on the basis that the tires and axles have been removed or some other vague set of standards, not on the basis of the foundation attachment.

The reason for this requirement is to establish a national standard of consistency amidst inconsistent state installation standards. While manufactured homes have standardized preemptive structural, plumbing, and electrical standards that need to be met before leaving the factory, installation standards vary from county to county, state to state. Additionally, manufactured homes are unique in that they can either be titled either as personal property (chattel) or real property. In some states the distinction between personal and real property is determined by the type of foundation and underpinnings that support the home. Since the individual jurisdictional requirements vary signficantly, the Engineer Certification Letter helps to provide a standard for excellence. This is generally an underwriting requirement for all FHA insured loans, which also include Reverse Mortgages.

If an existing home is already on a foundation, an engineer can provide a certification attesting to the fact that the home meets the guidelines. If it does not meet the HUD guidelines, there are a variety of proprietary or approved engineered foundation systems that can be retrofitted in combination with the existing structural components. As in any industry, one size does not fit all in the engineering landscape and engineers that specialize in the manufactured home industry and the HUD inspection specifications are even rarer still. Because there are a vast array of proprietary products that have been introduced into the national marketplace, knowledge about these systems is also an additional benefit since these have all been pre-engineered and stamped delineating all of the system specifications. This also means if the foundation does not meet the FHA-insured criteria for a permanent foundation, the engineer does not need to re-invent the wheel with a repair recommendation—there are a plethora of products available for the retrofit contractor. Therefore finding the right combination of an engineer and contracting team that understands the FHA lending process so the engineering certification does not impair the loan lock timeline, is familiar with the availability of proprietary systems that can resolve the repair issues if they are necessary and are able to liaison with both lender and borrower to provide turn-key solutions.

On The Level www.onthelevelcontractors and Pacific Consulting Engineers collectively team to comprehensively resolve FHA-insured loan certification and foundation repair issues for the manufactured home borrower and lender.

What’s the deal on the FHA Modernization Bill or the FHA Expanding Homeownership Bill that is supposed to help manufactured home owners?

Speculated to have been packaged, sealed and signed by the President during the first quarter of 2008, the long-awaited, long promised FHA Expanding Homeownership/Modernization bill is still being tossed around in two different versions, one in the Senate and one in the house and many think it is still slow in coming, if ever. The reason this impacts many manufactured home owners is that many homes that will be newly cleared to qualify for FHA-insured loans are located in manufactured home parks and communities. Also since a large number of parks are predominately senior communities, the FHA-insured Reverse Mortgage product holds increasing appeal to them in their retirement years. A Reverse Mortgage is a loan against a home that is not payable until the homeowner dies, sells the home or permanently moves out. Reverse Mortgages allow homeowners age 62 and older to turn the equity in their home into cash without having to move or make a monthly mortgage payment. One of its benefits to the retiree is there is no minimum credit or income requirement to qualify for a reverse mortgage—just the appraisal value of the home. Since the majority of the reverse mortgage loans are FHA insured, this bill directly impacts a large number of manufactured home owners that live in parks.

Why can’t many manufactured home owners currently qualify for Reverse Mortgages or other FHA loans? Many parks and communities began as a land lease or rental park where the residents owned their manufactured home, but paid monthly space rent. As residents in land lease parks sought to have greater control in their communities, they negotiated with the park owner to purchase their respective spot and the park was converted to resident ownership. One of the most popular methods for park purchase was using a condominium conversion plan. Even though the homes are on individual plots, the mere description of them as a condo has disqualified them from certain types of loans. This is confusing for most lenders and borrowers alike since FHA will insure homes in approved condominium projects and manufactured homes that are in parks that have been installed on a permanent foundation system in Planned Unit Developments or a subdivision, but currently excluded are all manufactured homes located in a condo community. Thousands and thousands of borrowers are restricted simply because the legal description on their title specifies “Condominium”. Either of the bills cited above would remove the exclusion and this has been much heralded by homeowners and lenders alike. While there seemed to be enthusiasm on both sides of the aisle and even the President, both bills seem to be at a complete standstill and maybe will be abandoned altogether.

Many people that live in a condo park don’t even know they are classified as such. Drag out your grant deed or your title insurance and read the full legal description. If it mentions condo or percentages of ownership, you probably live in a manufactured home condominium project. And the cautionary tale for those residents in a condo park is this—please be careful if a lender promises they can get you a Reverse Mortgage loan. It is not likely they can perform unless they are dealing with private money. An FHA-insured loan will probably collapse at the underwriting stage. If you decide to pursue the process, make sure the lender will pick up expenses of the appraisal and the engineering certification. Another cost to avoid unless your loan is clinched is to pay to put your home on a permanent foundation. This may cost thousands of dollars and if your loan is declined, you may be left with this additional expense.