Can we start a reverse mortgage while someone is in the process of foreclosure?
Yes, it is possible however there are some requirements which must be met for the HECM program based on credit qualifications. If someone who applies for a Reverse mortgage has derogatory credit history or did not pay their taxes, HOI or HOA on time, a Life Expectancy Set Aside (LESA) may be required. However, the borrower must provide a detailed explanation for all derogatory credit history with supporting documentation. If the Underwriter determines the borrower had extenuating circumstances based on the borrower’s explanation and supporting documentation a LESA may not be required. A LESA is somewhat like an escrow account in the forward world (except the amount is established upfront instead of monthly, and a Set Aside amount is established by the Servicer). The LESA calculation is based on the amount to pay taxes and HOI for a specific amount of time based on the borrowers’ age.