Reverse mortgage

[IOBA]

How does a reverse mortgage look on a credit report?

How does a reverse mortgage affect the credit score? 

[IOBA]

Anyone have an idea?  Dallas Home Guy?

[BrianB_The_Loan_Professor]

Shouldnt have any negative impact but not sure if it will boost the score at all?

[IOBA]

I wasn't sure if it even showed up on credit reports.  Does it?

If it does, is it a debt?

My parents are considering it, but have no clue what it will do to their credit (help it or hurt it).  At this point, they can not afford a negative hit. 

[Anonymous]

A reverse morgtage (in most cases I have seen and I admit they are only a few) is more for people having some sort of finacial difficulty later in life and/or who did not plan for retirement well.  My only point in bringing that up (and I am not saying there are not other reason that could come up), is that if someone is in need of a reverse mortgage to stay afloat, and has a decent enough FICO to get a reverse mortgage (I could be wrong but I assume you still have to qualify), FICO score should not be an overriding concern.  If they have a bunch of equity and decent credit and just need more of a short term type help, maybe some sort o HELOC type thing that they can then pay off as they can.

Anyways, between the inquiry and the new credit line, they will likely see a small credit score drop.  It should recover in 6 months or so. 

[ShanetheMortgageMan]

It reports as a mortgage debt, and increases each month they get money.  It's a negative amortizing mortgage, so each month they get money the principal, and the compound interest on the principal is added.  It should affect scores just like any normal mortgage would, ding a few points at first then be higher 4-6 months later.

[IOBA]

Thanks Shane.

Would you send me a private email explaining how the whole reverse mortgage works.  My older family members did a reverse mortgage.  They understood that it cost them $5k.  They rec'd a lump sum.  Every yr they get some $ deposited in their acct.

When they die, kids pay off the mortgage when they sell the house.

[ShanetheMortgageMan]

With a reverse mortgage the mortgager has several options:

1.  Term (where they get a set amount of payments each month, for a set amount of time, 20 years is a typical term)

2.  Tenure (where they get a set amount of payments each month for the remainder of their life), this amount is less than the monthly amount in option 1

3.  Credit line (where you can set aside an amount of money as a line of credit which the borrower can draw on at any point)

4.  Upfront draw (a lump sum up front that they can receive at closing)

1 & 2 are mutually exclusive, but either can be mixed with 3 & 4, and 3 & 4 can be done together.

Just need the youngest borrowers birth date, zip code, home value and amount owed on the property to determine the options.  No minimum scores, qualifying debt to income ratio, or reserves are needed.  Just can't be in BK, however can be late on the mortgage and even in foreclosure (although can't be foreclosed on as obviously they wouldn't still own the home at that point).

[virgoprincess823]

Chiming in as a Reverse Mortgage processor for over 2 years and processing for 6 years, reverse mortgages DO NOT report on you credit as there is no payment being made and is NOT score driven. Credit is only pulled to verify liens, other mortgages listed and or possible judgments. Shane is correct it is a negative ammortizing loan. 

On another note, I just want to add...In regards to "why not just take out a HELOC when you have good FICO scores"? The question should be why would I ever put my elderly grandparent, aunt, mother, father into a 30 year mortgage making payments that they can't afford anymore, regardless of FICO.

I have helped a tremendous amount of people keep there homes who almost lost them due to foreclosure, I've helped seniors be able to now afford a comfortable living situation for themselves and not worry about how they're going to pay for their medicine, or groceries, etc. Some of them just want to take trips and buy a new cars, and fix up their homes with new decks and kitchens and bathrooms etc. It truly depends on one's situation, and whether or not they plan on leaving the home to their heirs. I see FICO's from low 400's to mid 800's everyday in my pipeline. But again, why make a 70 year old man start over with a 30 year mortgage or HELOC? When done correctly, taking out a reverse can be an altenative retirement plan, there is even a reverse purchase product. 

My dad has a reverse mortgage, he COULD afford his mortgage payment, but he was retiring and his pension will allow him to live comfortably without a mortgage payment. It was a decision we made as a family, he's happy as pie! When he passes away, me being the executor of his estate will either have to refinance and pay off his debt, or sell his condo and keep the profit. Should he ever go upside down, we'll pay what we can and HUD will pay the rest, thats why there MIP.

Unfortunately, there's a negative stigma with reverse mortgages but people really just need better education on how the product works, and if it works for their family...just my 2 cents! 

Message Edited by virgoprincess823 on 09-22-2009 03:23 PM

[IOBA]

I appreciate all the information.

I have one set of parents that did the reverse mortgage and are happy. I think they receive a few thousand dollars each year.  I've heard them refer to it as a separate bank account, like a line of credit, that they can draw on, that they don't have to pay back.  Honestly, I am not sure they, in their late 70's and 80's, understand it completely.   They made their decision.

The other set of parents (in their mid 70's) are paying on their mortgage.  They fell behind one payment and are struggling to get it, and the other fees paid.  They do not qualify for refinancing or any of the other help out there because their income is too low.  (They are three older people, ages between mid 70's and upper 90's with only social security as income.)  When things were better for me, I had offered to buy their house and let them live in it, rent free.  My mom said absolutely not.  She'd rather do a reverse mortgage than have me buy their house!

I think they are upside down now on their home.  If not upside down, darn close.  (A VERY sarcastic - Thanks Wells Fargo, for preying on senior citizens!  Giving them a mortgage that they had no hopes of ever qualifying for!  Much less be able to afford!)

With no, or little equity in their home, would they even qualify for a reverse mortgage?