Exam (elaborations)
CH 21 REVERSE MORTGAGES
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CH 21 REVERSE MORTGAGES
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CH 21 REVERSE MORTGAGESQ621:7,6What6is6a6reverse6mortgage?6-6ans--
The6AARP6succinctly6defines6a6reverse6mortgage6as6"a6home6loan6that6gives6cash6adva
nces6to6a6homeowner,6requires6no6repayment6until6a6future6time,6and6is6capped6by6the6v
alue6of6the6home6when6the6loan6is6repaid."
Commercial6reverse6mortgages6may6be6"federally6insured,"6so6that6the6payments6are6gu
aranteed6by6the6Federal6Housing6Administration6(FHA).
Q621:8,6Who6is6eligible6for6a6reverse6mortgage?6-6ans--
First,6to6get6a6reverse6mortgage,6you6must6own6a6home.
For6the6federally6insured6Home6Equity6Conversion6Mortgage6(HECM),6the6home6must6b
e6a6single-family,6owner-occupied6two-four6family,6or6FHA-
approved6condominium6or6planned6unit6development.Reverse6mortgages6are6not6prese
ntly6available6for6co-ops6or6mobile6homes.
Second,6all6commercially6available6mortgages6require6that6all6borrowers6be6626or6older.
BUT6if6Mom6has6a6life6use6and6Son6a6remainder,6Mom6can6get6a6reverse6mortgage6if6So
n6consents,6but6on6Mom's6death,6the6mortgage6must6be6repaid,6which6will6likely6mean6se
lling6the6home.
The6property6must6be6"home"—
the6borrower6cannot6be6living6permanently6outside6the6home6at6the6time6of6closing.6This6
creates6a6Catch-
226if6proceeds6of6a6reverse6mortgage6would6enable6the6nursing6home6resident6to6return6
home.
Q621:9,6Can6the6homeowner's6agent6under6a6power6of6attorney6get6the6reverse6mortgag
e6for6the6homeowner?6-6ans--
That6depends.6Under6new6HUD6regulations,6the6person6holding6the6power6of6attorney6ca
n6only6go6through6the6counseling6process6and6sign6the6mortgage6documents6if6the6home
owner6is6not6legally6competent.
Lenders6may6require6that6a6doctor6certifies6that6the6borrower6is6not6legally6competent6an
d6may6ask6the6doctor6to6state6that6the6"incapacity"6began6after6the6date6the6power6of6atto
rney6was6signed.
Q621:10,6Do6reverse6mortgages6have6income6or6credit6requirements?6-6ans--
Since62015,6borrowers6must6undergo6a6"financial6assessment"6process6that6reviews6the6
past6history6of6defaults,6the6likely6proceeds6of6the6reverse6mortgage,6and6the6borrower's6
other6resources,6to6help6assure6that6the6borrower6will6be6able6to6pay6taxes6and6insuranc
e6premiums6during6the6period6of6the6reverse6mortgage.
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