Educational Module-6: The Reverse Mortgage Process

As with all mortgages, the prospective borrower exhibits some initial interest and motivation to find a new mortgage on their home. This may be to lower their current mortgage interest rate, get cash-out or to improve their financial situation via a Reverse Mortgage .

In this case, you are using under your own control and on your own time this Do-It-Yourself Reverse Mortgage™ website to learn more about Reverse Mortgages.

The next step in your Reverse Mortgage journey after completing these Educational Modules and the Reverse Mortgage Simulator™ is to interact with an NMLS licensed (and appropriate State licensed) Reverse Mortgage Loan Originator (RMLO), who will review your situation and prepare a Reverse Mortgage Proposal.

The Proposal document includes the borrower's requested Reverse Mortgage features, whether a HECM or proprietary loan format.

The Proposal includes industry standard (Government mandated) disclosures and content, a list of HUD approved counseling agencies as well as a Counseling Code.

The prospective borrower(s) are required to select, contact, arrange and pay for their counseling session without any involvement by the RMLO or the selected lender. This is part of the Government's structure to maintain the third-party arm's length separation from the RMLO and/or lender (see aggressive marketing and sales activities in the HECM Module).

The counseling session is usually via a 30-to-60-minute telephone call where the borrower(s) can include family members or trusted advisors. The standard HUD fee of $125.00 is to be paid by the borrower to the counseling agency. Many agencies charge more than the standard amount, which may be due to the agency's prices or for expediting the session. The borrowers are to select the agency they determine best fits their needs, by cost, timing or both.

Ahead of the counseling session the borrowers need to complete a simplistic budget showing their normal monthly income and expenses so that the counselor can equate that to the proposed Reverse Mortgage loan in the Proposal.

The experienced HUD trained and licensed counselor will access the very same Proposal via the internet using the Counseling Code so that all discussions are tied to the same Proposal in front of the borrower.

The counselor will review the primary reason for investigating a Reverse Mortgage, provide positives and negatives about Reverse Mortgages, determine if the borrower can understand the Reverse Mortgage presented in the Proposal (test their soundness of mind) and will review the borrower's income and expenses as it relates to the Proposal.

Once the session is completed successfully, a Counseling Certificate is issued to the borrower who then provides it to the RMLO (who provides it to the lender).

Depending on the State in which the borrower's home is located there may be a waiting period (cooling off period of up to seven days) mandated by the State after the borrower receives the Counseling Certificate before the formal application can be taken by the RMLO, the appraisal inspection visit can be scheduled and start to collect the required loan file documentation.

The next step is to order a HUD/FHA approved appraisal of the borrower's property by a licensed appraiser who will visit the property for the inspection step. The appraisal report (usually within a few days to a few weeks) will establish the current value of their home to be used in all the Reverse Mortgage calculations going forward.

Once the loan file creation activity is underway by the RMLO, the processor then prepares the file to be submitted to the lender's underwriting department.

The appraised value from the appraisal report merges with the loan file and the final adjustments will be made by the borrower, the RMLO and the Lender to finalize the loan for approval from the lender's underwriting department.

Once the loan is designated as clear to close, the final interest rate will be used in the loan documents which will be sent to the title and escrow company that had been set up by the lender, who will schedule the loan documents signing

Typically, a mobile notary will visit the borrower to have the loan document signed, which will be sent back to the lender for review. Once the signed loan documents are approved the lender will move to close the loan by funding it with the title and escrow company who will then record the Reverse Mortgage on the property's title at the county recorder's office. Once recorded the escrow company will distribute the escrow funds accordingly.

The normal timing of the origination of a Reverse Mortgage through the recording and closing the of the loan is 45 to 60 days. Depending on the circumstances, that time frame can be shortened to approximately 30 days or less.

45 – 60 days etc

|||||||The Reverse Mortgage loan process, regardless of HECM or proprietary, is very similar to traditional mortgage loan process with the exception of the of the required mandatory counseling where a third-party counseling agency will review the Reverse Mortgage program with the prospective borrower(s).

The final version of a specific Reverse Mortgage loan comes together when the Subject Property's current value is established via an appraisal, the borrower and the RMLO finalize the loan's features and terms, the lender's underwriters have approved the loan and designate it as clear to close which locks in the current interest rate, and the title and escrow company have approved it for title insurance.

The Reverse Mortgage loan's documentation is then signed an dated by the borrower, usually via a mobile Notary who visits the borrower,

From receipt of the Counselling Certificate to when the loan is closed, recorded and funded usually takes four (4) to six (6) weeks.