Mister VA's Mortgage News

Reverse Mortgage for Purchases

A newcomer to the Home Equity Conversion Mortgage or HECM, HUD's version of the reverse mortgage, is the purchase program.  With the fixed rate option providing more funds now, this can be a great way to buy a home.  For those relocating, the proceeds of the sale of one home can provide the amount needed to put down on a new home.  Without having to income or credit qualify.  Or having to worry about a monthly payment.

A recent example of a $200,000 home purchase would require a 62 year old to have $78,000 down, a 72 year old to put down $75,000 and an 80 year old would put down $60,000.  The trick is the timing.  Rates are subject to change and until it is ready to close, the amount needed could vary due to changes in rates.  Especially if seniors are downsizing, the sale of one home could allow for the use of the HECM for a reduced down payment from a cash purchase and it preserves some liquid assets that can be used for investments or living expenses.

The nationwide loan limit is $625,000 for the balance of the year.  It could revert to $417,000 after the first of the year.  So, if you are looking at a high cost area, now would be a good time to make the move.

When Can I Close?

Sometimes, it goes down to the wire.  Last minute changes or conditions to satisfy. Someone else's closing that affects yours.  Delays are sometimes unavoidable.  But, some of them can be avoided.  And that is where a good loan officer comes in.  Having a locked loan in plenty of time for closing can eliminate last minute disclosure issues brought about by recent changes in the laws regarding the Truth In Lending Act [TILA].  An accurate Truth In Lending Disclosure if any changes have occurred [and they do if your rate is not locked] must be sent out several days before closing.  Early disclosures need 7 days advance notice & any changes in the TILA disclosure must be disclosed 3 business days before closing.

It may mean short lock periods of less than 15 days are now history.  Shorter lock periods have more favorable terms.  So, being sure your loan is locked in plenty of time has become more important for loans applied for after July 29, 2009.  And if there are title problems to be cleared or if another transaction has delays that affect yours, you really need to be aware of them.  With rate volatility, any laxness on your part can cost you money.  And maybe even qualifying.

If you are closing on Friday and your loan is not locked today [Monday] for another TILA disclosure to be sent out, you may not be closing on Friday. Making sure you are ready to close is largely the responsibility of the Loan Officer.  However, you can be your own best friend by being diligent.  And asking questions.  And not taking things for granted.  These are different times.  And they call for more attention to detail by everybody.

A Different Emphasis: Taylor Bean and First State Bank

Two closures and two different story lines.  One makes huge headlines, while the other barely gets a margin story amongst all of the business highlights.  One details and chronicles all of the wrongdoings and alleged wrongdoings.  The other barely mentions problems and in passing indicates the bank will re-open under new ownership and a new name.  Both are in the State of Florida.  One has a companion story about a renegade mortgage lender which really was a resurrection of a story from some time ago.  The other, well,  you get the idea.  I guess the question is "why?"  Why does the story of First State Bank get hardly any airplay?  Of course, Taylor Bean is a national story, but here in Florida, this is big news with respect to the bank.  [To be fair, troubled Colonial Bank has gotten a lot of coverage].

 One of the noticeable banks along the stretch of 4th Street North in St Petersburg, First State will have a new name on Monday and it will  open with a new sign in place and the depositors largely will have been clueless about the local Sarasota-based bank even having had issues.  Taylor Bean's closure affects thousands of people.  Those who closed loans and did not receive funding chief among them.  Also the thousands of employees and clients of their wholesale operation--many of whom are small community banks--and potential clients whose access to some programs is now in jeopardy.

I am not going to go into all of the details surrounding the reasons that led to the failure of Taylor Bean as it has been well-chronicled elsewhere.  And I am unable to go into the details surrounding the failure of the bank because it has NOT been well-chronicled elsewhere.  It does add fuel to the fire, however, in the raging battle against the mortgage broker in the public eye.  There have been some problem mortgage brokers in the whole mess we find ourselves in and many of them have moved on into such fields as loan modification, credit repair and foreclosure rescue.  Which leaves the industry with mostly honest hardworking brokers who have their clients' best interests at heart while finding the best mortgage product available.

It is curious, however, that many of the other participants in the mortgage meltdown have largely escaped the media & legislative onslaught that rages against mortgage brokers.  There are common threads in failed loans.  And the tools are there to find them.  Appraisers, Realtors, Lenders, Banks, Builders, Consumers, Loan Officers [retail, wholesale AND broker], Securitizers [secondary market folks like Fannie, Freddie, the late Bear Stearns etc] and others all played a role.  Underwriters, too, played a role as they are the people who actually approve the loans.  But, it is less glamorous to go after the bad guys than it is to make a public statement or policy that will ultimately harm the consumer.  Some good things such as Loan Officer registries have come out of all of this, but there is a lot more bad.  And that will take some time to bear out.