Remarkable Mortgage

“You Just Gave Me Back My House.” part 2

Remarkable Mortgage Stories

Colorado Reverse Mortgage Stories By Mark Allen Schmidt

TPG fall on Hwy 24
Fall scene Notch Mountain view HWY 24 Colorado photo by Mark Allen Schmidt

"You Just Gave Me Back My House." part 2

Betty was in more trouble than I knew, and more trouble than even she knew.

Mark Allen Schmidt

“What do you think our chances are?” My broker friend asked.

“I think we have a good chance if we can show what we call an extenuating circumstance as the cause of late payments on the mountain home. Second, if we get a good appraisal, at least $435,000, we might make it,” I said.

Her Story Needed To Be Told

What I needed to do for Betty was to show how her husband’s sickness and death were directly related to the late payments on their mountain home. This may seem a bit petty on the part of HUD but from their perspective, they want to know that the HECM (home equity conversion mortgage) borrower will be able to meet their obligations to pay their taxes, hazard insurance and HOA payments (if they have an HOA). The way they decide that is by looking back at the last two years history of payments. (taxes – insurance – HOA).

“In its guidelines on determining extenuating circumstances, the Department of Housing and Urban Development notes that reverse mortgage lenders must make a “connection between the specific occurrence(s) and the measurable impact of the occurrence(s) on the mortgagor’s finances.”
From Reversemortgagedaily.com

I believed we had a strong case for extenuating circumstances that had affected her ability to make the payments on her mountain home. If I could show the underwriter the reason for the late payments was due to the loss of income she experienced and the massively increased expenses related to caring for her husband, we might just get this deal done for her. We wrote the LOE (letter of explanation) and submitted that to the underwriter.

RM house 51
Another Remarkable Colorado Home from the photos gallery photo by Mark Allen Schmidt

Many retired people can no longer qualify for a forward mortgage because they no longer have the income required.

How Much Income Do You Need For A Reverse Mortgage?

Earlier I mentioned two reasons Betty couldn’t qualify for a traditional (forward) refinance. One was her history of late payments on her mountain home; the other was her income. She would need about $2,500 more per month to qualify for a forward refinance. That was a deal breaker.

I asked her about her income.  She said, “I get about $1600 a month from Social Security and about. …” I stopped her right there.

“Betty, let’s see if you can meet the residual income required on your Social Security alone. If you do, it will make things much easier.”

“I could use some easy about now,” she said. We laughed.

The residual income required for a Reverse Mortgage is calculated on the monthly cost of living in the property, not on making a monthly mortgage payment on the property.

 

When I asked Betty about her income, she said she gets about $1600 per month from Social Security. I stopped her at that and said I thought that would be enough. Let me show you why she had enough monthly (residual) income to qualify for a Reverse Mortgage.

 

The residual or, ongoing income requirement for a Reverse Mortgage is based on the following factors:

 

  1. How many people live in the home: In Betty’s case, just she. Monthly income requirement = $500 (round number for our example).
  2. The square footage of her home (above grade; not the basement) monthly income requirement = .14 a square foot. Her home is 1500 square feet = $210
  3. Her HOA fees: Monthly cost = $0 (she doesn’t have an HOA).
  4. Her minimum monthly payment on all revolving debt (credit cards) installment debt (car or major purchases) and any other monthly payment obligations that show-up on her credit report. Monthly income requirement = $425.
  5. Her property taxes and homeowners insurance: monthly income requirement: $250.

The total of her monthly expenses came to: $1385

Her monthly income from Social Security is: $1600. She made it with $215 to spare. She has other income but it is easier for all of us if she can qualify on her SS income alone.

Residual income doesn’t itemize water, electricity, internet, natural gas, cable or other ongoing home-related costs. These costs are included in the 14 cents a square foot per month requirement

Betty had the income, now we needed to hear back from the underwriter about her extenuating circumstances.

Mark Allen Schmidt

Mark is the host of Remarkable Mortgage.com & author of The Remarkable Reverse Mortgage Stories
Mark is a Colorado Reverse Mortgage Secialist. NMLS 846014 CO 100037582
720-206-4539  Remarkablemortgage@gmail.com  AKA...The Prime Guy

Mark Allen Schmidt

Call or Text Mark

720-206-4539

remarkablemortgage@gmail.com

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