mortgage

For reverse mortgages, try smaller banks

MetLife Bank is now the top reverse mortgage lender in terms of dollar volume, according to the latest report by the U.S. Department of Housing and Urban Development on HECM loans. Other lenders active in the reverse mortgage arena include One Reverse Mortgage, a company owned by Quicken Loans; Urban Financial Group Inc.; Generation Mortgage Co.; and Genworth Financial Home Equity Access Inc.

Borrowers can also find many local mortgage brokers and local, small lenders who specialize in reverse mortgages. Referrals and the Internet are the easiest way to find them, but be wary of potential scams.

What if other lenders want out?

If anything, Wells Fargo and Bank of America's departure will serve as an incentive for other small lenders to get into the reverse mortgage business, says Peter Bell, president of the National Reverse Mortgage Lenders Association.

"The departure of the largest companies may broaden the number of lenders (offering reverse mortgages) in the long run," Bell says.

The biggest threat to the availability of this type of loan would be if HUD eliminated or reduced the program, or drastically changed the rules. A HUD spokesman says that is not the plan.

Biggest obstacle to obtain a reverse mortgage

As of now, the biggest impediment borrowers find when trying to get a reverse mortgage is not the lack of lenders willing to lend but the lack of equity in the home, says Morrie Shoob, CEO of Seniors Reverse Mortgage Solutions in Dublin, Calif.

"I had three calls yesterday from people wanting to see if they can do a reverse mortgage, and I couldn't help any of them because they were upside down," he says.

To qualify for a reverse mortgage, homeowners are required to have at least 30 percent to 40 percent equity in their homes, depending on their age, Shoob says. Credit and income requirements don't apply to reverse mortgages. Upfront costs are generally high, though they can be financed into the loan.

Lenders are allowed to charge up to $6,000 in origination fees under the HECM program, and the FHA charges a one-time upfront insurance premium of 2 percent of the value of the loan, plus an annual insurance premium of 0.5 percent of the mortgage balance.

FHA introduced a new product in October, called HECM Saver, a program with minimal closing costs. But the HECM Saver carries a slightly higher interest rate, and homeowners generally receive a smaller loan than they do in the standard HECM program.

All applicants are required to consult with a HUD counselor before they take out HECM loan. To find a counselor near you call (800) 569-4287.

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