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Smart Planning with HECM60


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Set Yourself Apart as a Reverse Mortgage Planner

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Set Yourself Apart as a Reverse Mortgage Planner

#1 Distribution limits. Your reverse mortgage borrowers with high existing mortgage balances will only be impacted by the lower Principal Limit Factors NOT the Distribution Limit. That’s right. HUD allows for those with mandatory obligations of a mortgage payoff that when combined with closing costs and required set asides to use  up to 100% of the gross principal limit. Here’s an example. Harry Homeowner qualifies for a Gross Principal Limit of $200,000 but has a mortgage payoff of $160,000, a repair set aside of $13,000 and closing costs of $5,000. That’s total mandatory obligations of $158,000 or 89% of the Principal Limit. That’s right, we broke through the 60% first year cap. #2 Cash at closing? Yes, it makes sense for those with access to funds to avoid not only the upfront 2.5% FHA Mortgage Insurance Premium but also younger borrowers who want to reduce the lifetime cost of the loan.


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  1. I am a newbie RM LO. I have a case where the mortgage payoff and closing costs put the client at about 65%. I know the appraisal is a huge factor here, but I was wondering about the either the client paying off a portion of her loan balance, or bringing cash to the closing. This was helpful.

  2. You mean mandatory obligations of $178,000, right?

    • Bob,

      Yes, thank you…mistake on my part when speaking but mandatory obligations should be $178,000 as shown on the video. Thanks again for watching!

  3. Great explanation, love to think outside the box! Please do one showing a Purchase transaction.

  4. Great presentation Shannon. Just to clarify, in example #1, yes they broke through the 60% distribution cap but they are paying the 2.50% UFMIP correct? And, if a fixed rate program, they cannot draw any funds in the future, is that correct? Thanks again for all you do to help us overcome these bumps in the RM road.

    • Beth,

      Thank you very much. In example #1 you are correct that the upfront MIP is 2.5% due to the fact they exceed the 60% first year distribution limit due to mandatory obligations. The fixed rate I didn’t address specifically but it does indeed lock the borrower out from any future line of credit or 2nd year remaining distribution. It’s a ‘one and done’ scenario most fitting for those with higher mandatory obligation payoffs and who wish to secure their rates.

  5. I used that exact strategy on Monday, and got the deal!

    • Tom,

      That’s fantastic! Thank you for letting us know that with planning and thinking outside the box all things are possible!

  6. I challenge you not to think outside the box, but to mentally “enlarge” the box. Sometimes when we think out of the box we short circuit some of the guidelines, rules and regulations.

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