Making Changes to Reverse Mortgages

Traditional mortgages, borrowers, and lenders are still feeling the financial crunch that was the result of the financial crisis. Along with the traditional, the Federal Housing Administration (FHA) is also feeling the pinch with its reverse mortgage program, and as a result, the Department of Housing and Urban Development (HUD) has established guideline that make the program more restrictive by reducing the borrowing limits and increasing the insurance premiums.

The new changes will take effect on September 30, 2013. The changes include:

  • Consolidation of the HECM Saver and HECM Standard loans into one loan
  • An adjustment of the upfront Mortgage Insurance Premium (MIP) to 0.50%
  • The borrower is only allowed to access up to 60% of the principal limit at closing or within the first year.
    • The exception is if they have “mandatory obligations” which could include closing costs, existing liens being refinances, delinquent Federal debt or other debt amounts that exceed 60% of the principal. The cap is moved to meet the mandatory obligations plus 10%.
    • If the borrower will be assessed an additional 2% upfront MIP if more than 60% of the Principal limit is meet at closing or during the first year.

There are additional changes that take effect January 13, 2014. This will require borrowers to undergo an mandatory financial assessment to determine if they are capable of maintaining the property tax and insurance payments with their other income. If they are unable to meet the obligations then the payments will be drawn from the reverse mortgage and placed in an escrow account.

With the new regulations, the goal is to reduce the number of people using reverse mortgage who are already financially distressed, and prevent them from defaulting on the loan and foreclosing on the property anyways.


It’s Tax Season: Here’s Some Write-Offs You Should Know About

Yes, it’s the New Year, which means it’s time to gather your W-2’s and start preparing your tax return. Yes, you’ve got until April to file, but why not start getting your information together now? And a big part of these documents you should be gathering are write-offs. You should already be well aware that you can write-off charitable contributions, money you gave to church and mortgage interest, but here’s a look at some other things that you can write-off to enhance your tax return or minimize what you owe to the IRS.

Student Loan Interest: If you’re still paying off student loans, you can claim the interest paid on them as a write-off.

Business Expenses: Have you purchased items for work that haven’t been covered by your company? Perhaps calendars, electronics, a cell phone, etc.? Write the expenses off on your taxes. As long as your company didn’t buy them for you, that’s an eligible write-off.

Home Business Grant: Do you work out of your home? Then you’re likely eligible for a home business grant, where you can write-off things like energy and utility bills, Internet costs, phone bills, ink cartridges and the costs of any new office equipment on your taxes.

Job Hunting Costs: As our country still lingers from its economic recession, the reality is that many Americans are still looking for work. And with job hunting comes travel expenses, mailing costs, food and room (in the case of overnight trips) and cab fares. Don’t let the opportunity to write these expenses off pass you by should you qualify.

Relocation Costs: Did you get a job within 50 miles of your original address that requires you to move? If you’re not given a relocation allowance by your new employer, these expenses can be written off on your tax return. This includes moving expenses, parking expenses, tolls, etc.

Child Care: You should already be aware of the fact that you can claim your children as a dependent for a tax credit, but did you know that you can also claim up to 35 percent of what you pay for child care services – that is, if you have your children in child care while you’re working? You can – and it’s an opportunity you shouldn’t be passing up. Child care is expensive – don’t be shy about recouping some of the costs.

While tax season for most is anything but fun, utilizing write-offs and deductions to the fullest extent can put money back into your pocket. Now we’re talking fun!

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.