WaPo: Qualifying for a Mortgage Difficult in Retirement

Even for seniors with impeccable credit scores and plenty stored in assets, purchasing or refinancing a home in retirement without regular employment income can be a challenge, a recent column in the Washington Post says.

In his column “Even retirees with sizable assets can find qualifying for a mortgage challenging,” Kenneth Harney writes that retired borrowers can be taken by surprise when they are faced with denials or delays when loan officers do not know how to handle their financial situations. Further, many loan officers are not aware of loan programs available that can serve as alternatives for this population.

“They might have hundreds of thousands of dollars stored away in individual retirement accounts or 401(k) plans and other investments, but for mortgage purposes, they don’t have enough monthly income to qualify for the loan they want,” he writes. “They look asset rich, income poor.”

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He advises anyone who finds themselves in this situation to proactively ask their loan officers about Fannie Mae and Freddie Mac programs that are available.

These programs basically offer different approaches to traditional income and asset requirements that can help those qualify when they are income poor. One program allows the lender to recharacterize assets from retirement accounts as qualified income, while the other allows the lender to use retirement-income account balances to function essentially as “imputed income,” the article notes.

These options are not without their drawbacks, however, he writes.

“The assets in some seniors’ investment or retirement accounts may not qualify if they’re derived from ineligible non-employment-related earnings, such as lottery or gambling winnings and other assets that do not give an indication of a borrower’s financial history,” he writes. “Another issue: Loan terms for seniors may be just 10 or 15 years. Monthly payments on such mortgages are higher than those with standard 30-year terms. Not all clients can afford them.”

Reverse mortgage originators have long touted reverse mortgages as solutions for seniors looking to refinance, tap home equity, or buy a new home with a Home Equity Conversion Mortgage for purchase — options that are not mentioned in the article.

Read the full story in the Washington Post

Written by Maggie Callahan

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  • I most definitely agree with the last paragraph! Reverse mortgages were not even mentioned as an option in the article, why?

    Asset rich with a reverse mortgage computes into income when qualifying. A reverse mortgage was a logical solution to mention in the article.

    We still have a product that is very useful and very much in demand for those who know about it. Our volume has dropped, no doubt about that.

    However, if we work hard and smart enough to reach those who will benefit, we will see success and increased volume!

    I have felt this way all along. We our in a great industry and we can do so much good for so many seniors, let us not let the HECM and the reverse mortgage fade away in the sunset!!

    At times I feel that we are doing just that!

    John A. Smaldone
    http://www.hanover-financial.com

    • John,

      Once again we see a low endorsement count for a month after 10/2/2017. The November 2018 endorsement count was posted early yesterday. It was over 17% below the endorsements for October 2018 and 10% lower than the last so called nadir of June 2018 at 2,838.

      The proof that we are far more optimistic than experts on our industry should be, began on 6/6/2018 when the first nadir was called on the April 2018 endorsement count came in at 3,345 but May 2018 came in at 3,359 — just 14 endorsements better. How does 14 endorsements provide much information about anything; it certainly does not prove that a downward trend has turned around so that our stat experts should be hyping “recovery.” The November 2018 count was over 24% lower than the count for April 2018. Is that what our industry now calls recovery? CLEARLY our optimists did. Optimism has a tendency to blind one to facts.

      Then came the called nadir for the June 2018 endorsements just because it was over 15% lower than the April 2018 count. Is there a pattern here? You bet there is. Then SIX months after April 2018 with no month having an endorsement count equaling it or exceeding it, some optimist gets the idea that this is a rocky recovery.

      So what will the “optimists” call a drop of 10% beyond the June 2018 endorsement count, “a slow recovery?” What we don’t need is more optimist names, just PRODUCTION of endorsements. It seems some like focusing on optimistic names than on increasing production.

      Some might want to say the November 2018 drop is a result of the new appraisal review. Really? Were even 1% of those endorsed HECMs assigned their HECM case numbers after 9/30/2018? It is extremely doubtful if the November 2018 endorsement count was even slightly influenced by appraisal review. We should first see that impact in the December 2018 endorsement count which impact some claim could be as high as an additional 15%. I can hardly imagine an endorsement count of 2,170 for a month in fiscal 2019 especially after our optimists told us that fiscal 2018 would have at least 100,000 endorsements if not 300,000.

      One thing seems clear, fiscal 2019 is shaping up to be one bad year for endorsements following another. Something that has not happened since fiscal year 2012 when two bad years for endorsements followed after the first such year.

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