Monday, 23 August 2010
Reverse Mortgage Part 7: Lender Conditions
When last we left off my tale of pursuing a HECM – an FHA-insured reverse mortgage - the appraiser had visited and I was awaiting his valuation of my home.
It is a nerve-wracking period. My broker and I had used the purchase price I paid in May to calculate an estimate of the loan amount and its costs. If the appraisal came in too low – a not unreasonable result in our volatile housing market - I might want to re-evaluate the terms of the loan I had selected and we would need to re-do the numbers.
The appraisal arrived ten days ago: almost to the dollar what I paid for it. They are so close, it is hardly worth noticing the difference. (Old woman wipes brow and issues a sigh of relief.)
My broker sent the papers I needed to read and sign here, initial there – a lot of them – and then he assembled the package for submission to the mortgage lender. A few days later, he emailed to say that the bank had approved the loan. (“Whew,” again.) Two giant hurdles leapt within one week's time.
It's not as easy as it sounds. Nothing ever is with large bureaucracies whose goal sometimes appears to be to fell an entire forest for one transaction.
There are conditions to the approval - a couple that are, to me, arbitrarily niggling; others are just how banks spend their time; and one that is flat out unreasonable.
• Certified closing statement from the sale of my Maine property. In other words, they want to know where I got the money to buy my new home. My copy won't do; it must be sent from the title company.
• Certified closing statement from the purchase of my Oregon property. I have no quibble with this one.
• Proof of residence in the Oregon apartment. I assume this means they suspect I'm lying about living here. They wanted the three most recent utility bills: fine.
• Flood certification. This was investigated when I bought the property, but now the bank is balking because the apartment designation in the legal description is a number and the identifier used by the postal service and condominium is a letter. Again, more paper.
• Condominium data. The bank wants to know how many apartment owners are delinquent in homeowner's association dues and what percentage of apartments are rented versus owner-occupied.
The condo management company charged $56 for this information. If they can't answer those two questions with three or four clicks of their keyboard, they aren't worth the money the condo is paying them. You can bet I will have something to say about that fee at the next condo meeting.
• Paper trail of where I got the money to purchase my apartment in Oregon. The settlement statement from my Maine sale covers the largest part of the purchase price, but not all. I'm unwilling to send copies of my (so-called) investment account to show the source the remaining funds, so we are working out a method that doesn't reveal my entire financial life which I'm unwilling to do.
• Letter from me explaining why I moved. This is intrusive and I don't think this is any of the bank's business, nor do they need it to approve a loan. I resent the question, but sent them a short, two sentence letter to move this process along.
These items together with the nearly one-inch thick application, including the 20-page appraiser's report, plus various checks of public records the lender itself orders seem excessive for what amounts to, in the world of too-big-to-fail banks, a loan the size of a flea secured by an apartment in an established condominium already approved for HECMs by the FHA. But one can also look at it this way:
Given the country-wide housing debacle and the bank's past history of handing out sub-prime mortgages without checking even applicant's income, the bank is being ultra-conservative now in its due diligence. I wonder why I think that's not really it. I don't recall anything near this complex in applications for past mortgages – pre-housing bubble.
The point you should take away from this, if you are pursuing a reverse mortgage, is to have all your paper ducks in a neat an tidy row for the lender. It's a pain in the ass tracking it all down.
And I still can't figure out what possible use it is to the bank to know the reason I moved. Nor what would be a negative answer that would sink the mortgage application. If there is no possible negative answer, there is no reason for the question.
The TGB Reverse Mortgage Series
Part 1: One Reason For a Reverse Mortgage
Part 2: The Basics
Part 3: Finding a Lender
Part 4: Do Not Fear HECMs
Part 5: The Mandatory Counseling Session
Part 6: The Home Appraisal
At The Elder Storytelling Place today, Ralph Lymburner: The Widower and the Worm Farm