Renting Your Home Might Be Best Option

Homeowners have a few options open to them if they are underwater. That means homeowners have a higher mortgage on their home than the appraised value. Two options combined may be your best solution.

Recently, 2.5 million Americans returned to a profitable status leaving only 4.5 million that remain underwater on their home, according to CoreLogic September 2013. Great news unless you are still underwater. The DU Refi-Plus for Fannie Mae-backed loans and the Freddie Mac open access programs are the programs available from lenders like me to lower the mortgage rate even if you owe more than the appraisal value of the property. Even if you have been told you don’t qualify, recent changes to the program may have changed your status.

Homeowners who are underwater but have to move for some reason might be unsure of what they can do. For example, homeowners might have to find a bigger space or have a new job in another location. Homeowners in this situation might believe that the only option to them is to put the home up for a short sale. The problem is that after the short sale the homeowner will need to wait one to four years before they can qualify to purchase a home.

It may be possible to find a reputable tenant and rent the home. This option may lower or even eliminate the debt of the current mortgage payment. The money acquired in rent will change the debt-to-income ratio, probably allowing a new purchase. As a loan officer, I can work with real estate agents or property management companies to assure everything is done to recognized underwriting standards.

The new lower mortgage payment combined with the income of the tenant will make it easier to purchase a new home. While this idea is not new, the way I approach the problem is uncommon. I believe in helping my customers as much as possible. I want to help them move on with their life and possibly create a source of income for them.

FHA Changes Reverse Mortgage Program

The Federal Housing Administration is reducing the risks associated with reverse mortgages, and I am staying abreast of the changes.

In recent years, FHA's Home Equity Conversion Mortgage portfolio has changed in demographics and borrower preferences that added significant risks to the Mutual Mortgage Insurance Fund. These changes included borrowers shifting from selecting adjustable rate mortgages with access to a line of credit or modified tenure/term payment options to selecting fixed-rate mortgages where the borrower draws down all available funds at the time of closing. Younger borrowers with more debt and stagnant home prices also have contributed to the risks.

FHA published two mortgagee letters that note policy changes. They are intended to support financial soundness of HECM program. The agency outlines changes to initial mortgage insurance premiums and principal limit factors, restrictions on the amount of funds senior borrowers may draw down at closing and during the first year following closing, requirements for a financial assessment for all HECM borrowers to ensure they have the capacity and willingness to meet their financial obligations and the terms of their reverse mortgages, and requirements that borrowers set aside a portion of the loan proceeds at closing for the payment of property taxes and insurance.

I am happy to answer questions regarding the FHA changes to the reverse mortgage program. The lender has thoroughly researched the changes and is ready to help its customers understand the HECM program. I will provide customers with expertise on which mortgage product is right for each person.

According to the FHA, an increasing number of tax and hazard insurance defaults by those holding mortgages have heightened the need for a financial assessment of a potential customer’s financial capacity and willingness to comply with mortgage provisions.

Effective Jan. 13, 2014, lenders must complete a financial assessment of all prospective customers prior to approval and closing. The financial assessment also is used to determine under what conditions the prospective borrower meets FHA eligibility criteria.

Visit www.fha.gov for information about reverse mortgages and changes to the program.