The Condo Catch-22 & Nine HECM Changes


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Spot Condo Approval Catch & 9 Recommended HECM Changes

Despite the positive development in Condo approvals for HECM loans, there’s one catch when it comes to spot approvals that have gone largely unnoticed. Plus: the GAO recommends 9 changes to the HECM program…

 

8 comments

Neil Sweren October 7, 2019 at 6:05 am

Like this format!

Reply
Debbie Labriola October 7, 2019 at 6:17 am

Shannon,

Firstly, I hope you are feeling better. Great idea, performing a live broadcast from your home office and I thoroughly enjoyed your delivery. Your podcasts are informative and entertaining. Thank you for always sharing your reverse mortgage news reporting with us – Excellent work!

Best regards,
Deb Labriola
Longbridge Financial, LLC

Reply
Joyce A Handy October 7, 2019 at 6:36 am

Format was fine and interesting; however, I could not see the top of the page as you were speaking … it was cutoff.

Reply
Steven Kule October 8, 2019 at 5:16 am

On the condo spot approval blog from yesterday, you mentioned the two items that could be a problem. The second criteria was about financial assessment. Can the proceeds from the reverse mortgage be dissipated to supplement the income factors?

Reply
Shannon Hicks October 8, 2019 at 7:39 am

Unfortunately, the rule as it stands today prohibits any compensating factors to meet income guidelines. HUD gave us spot-approvals but then took away the means to qualify for those who would have met the standards in a single-family property.

Reply
Kevin October 8, 2019 at 8:39 am

I don’t think asset dissipation is a compensating factor. It shouldn’t matter. It’s an actual form of income.Still shaking my head on these two things. Who sits around and thinks up these things?

Reply
The Cynic October 12, 2019 at 1:03 am

Kevin,

Comparing income to cash inflow is simple to visualize using a Venn diagram. Cash inflow would be a larger circle but the two insect at two points.

Lying inside the cash inflow circle but outside the income circle would be things like proceeds from stock transactions that result in loss or even those that result in gain. Remember that return of capital and even gains are not incomer even though they are cash inflow. Life insurance proceeds are all cash inflow BUT part of the proceeds could be income from dividends. Rarely are proceeds from loans income but they are all cash inflow.

Salary, commissions, interest income, and pension income are cash inflow and income. Dividends are always cash inflow but not always income.

The Mortgagee Letter (ML) makes financial assessment even more controversial and complex. While many reasons can be given for the ML, it is strange that FHA did not provide any reason for this change.

Reply
Melinda Hipp October 11, 2019 at 8:40 am

Kevin, I know, I was shaking my head at first thinking “is that REALLY what they meant to say”, but condos are EXPENSIVE and the Condo dues by themselves are hard to overcome many times. I have one potential client who makes $868 a month and her condo dues have gone up to $600!.

Reply

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