Condos HECM Qualified?
Basics September 24th, 2009
Effective November 1, 2009 HUD has changed the rules with respect to condo eligibility for the Home Equity Conversion Mortgage (HECM) program – the most popular reverse mortgage product for seniors. After that date only FHA approved condominuims will qualify. No more “spot” approvals are permitted on projects that do not already have FHA approval.
Spot Removal
Previously, the “spot” approval process allowed underwriters to approve individual units rather than an entire complex. Approving an entire complex is a cost prohibitive process these days… and unlikely to be undertaken by any condo association. The expense is burdensome. Many associations actually have no reserves at all and, therefore, could not qualify even if they wanted to.
After November 1st, seniors who own condos in non-FHA approved buildings will no longer be able to qualify for the HECM. In fact, no FHA loan will be available on these non-approved units and values will probably fall as a result. Ask your loan officer if your condo project is on the FHA approved list. If it’s not, you won’t be able to do a HECM… HUD’s most popular reverse mortgage program… after November 1st. You need to act right now to get the loan approved before the deadline.
If you plan to buy a condo, whether as a vacation home or as a new primary residence, you want to know if the project is FHA approved. Lack of FHA certification could impact future value and sales price of your new unit.
Given HUD’s recent announcement that Principal Limits will be reduced effective October 1st and this elimination of the spot approval process, it should be obvious that the HECM program is being tightened up. Some believe it is being strangled…
UPDATE: HUD has announced that implementation of the new rules regarding spot approval has been delayed to December 7, 2009
UPDATE UPDATE: HUD changed the implementation date again – to February 1, 2010
Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant
October 30th, 2009 at 5:19 pm
Excellent work! Those dudes at your competition (you know who) don’t have a clue! Keep it up!
January 12th, 2012 at 7:59 pm
I am so disappointed that I can’t get a reverse mortgage. I live in a condo and this association is not registered. They would never spend the money. I know two people who have had reverse mortgages for years and are very happy with it; one has a townhouse and one has a house. No wonder this country is in such bad shape. Why do you bother advertising? None of it is true!
January 13th, 2012 at 10:45 am
Ms. LaPoff,
Thank you for your comments. I understand your disappointment but disagree with your conclusion that “None of it is true!” It is fact that reverse mortgages on condos have become exceptionally difficult to complete… but some are still getting done. As I often advise, you need to spend time and effort searching for a very experienced reverse mortgage specialist. This means somebody who has at least 5 years direct experience doing HECM loans (only!). There are a lot of people out there “doing reverse mortgages” but there are few who are true experts with direct experience. A dedicated professional will come to your home to interview you for starters. If you are dealing with people over the phone, you are just wasting your time. If you want to provide your address and contact info, I am happy to provide a reference in your area.