5. Loan Processing
The lender orders an appraisal by a professional appraisal firm. It is paid for by the homeowner. This determines the market value of the home. However, the final value is not established until the Loan Underwriter employed by the lender reviews the appraisal and approves it.
After receiving all pertinent information from the homeowner and obtaining other required items, the loan package is submitted to the Loan Underwriter for final approval. It generally takes anywhere from 1-5 days to underwrite a loan. Underwriting involves verifying all information and making sure the loan complies with all laws and regulations.
A conditional approval is provided with a final home value and any repairs or additional inspections required, as well as anything else the lender may need in order to issue a final approval, so the loan can close.
Your home is the collateral for a reverse mortgage and must be maintained to meet HUD standards. As part of the loan origination process, your lender will order an inspection of your home and the inspector will deliver a report indicating if repairs are required. If so, a portion of your loan will be set aside to pay for those repairs. It is your responsibility to hire a contractor to do the repairs. Once the repairs are completed, the contractor will sign a lien release form. Then the completed repairs will be inspected. At that point, the Servicer will disburse the funds from the set-aside to pay the contractor and return any remaining funds to your loan proceeds.
A borrower has one year from the closing date of the loan to complete the repairs. If repairs are not completed, loan payments will be suspended until they are completed or the Servicer may request that HUD deems the loan due and payable