Understanding How a Reverse Mortgage Can Keep You at Home Longer As You Age (Part 3)

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Elder Care Attorney

In our previous posting we discussed non-borrowing spouses. This is the third part of our discussion series.

Mortgage Seasoning

A new mortgage standard affects homeowners who wish to extinguish existing mortgage debt with an HECM. The new rule states: “Mortgagees may only permit the payoff of existing non-HECM liens using HECM proceeds if the liens have been in place longer than 12 months or resulted in less than $500 cash to the mortgagor, whether at closing or through cumulative draws (e.g., as with a Home Equity Line of Credit (HELOC)) prior to the date of the initial HECM loan application.” Now when contemplating a HECM, due diligence should include examining the age of all existing mortgages and liens on a title. Those clients with mortgage loans for HELOCs younger than one year old that cashed out more than $500 in equity will be barred from HECM eligibility until enough time has elapsed.

However, if the lender is a member of the National Reverse Mortgage Lenders Association (NRMLA), the trade association for the reverse mortgage lending industry, in addition to pe-existing “closing fee” and “net proceeds” tests, the existing HECM must now be in place a minimum of 18 months prior to being elig9ible for refinance. While recommended to all lenders, this is only enforceable by NRMLA within its membership.

To discuss your NJ Elder Care matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.