Friday, February 23, 2018
Business

The Nation's Housing: For seniors, a break on mortgages

WASHINGTON — Top credit officials at Freddie Mac, the giant federally controlled mortgage investment company, said last week that a "little known" policy revision now allows seniors and others to use certain retirement account balances to supplement their incomes for underwriting purposes without actually tapping those balances or drawing down cash.

Freddie's revised rule is aimed at the tidal waves of baby boomers heading into retirement status. Many of these seniors have seen their monthly incomes — heavily dependent on Social Security and limited pension plan payouts — plummet after retirement. Yet on paper, they look fairly comfortable. They've got growing IRA and 401(k) retirement account balances, swelled by recent stock market gains. They often have solid equity in their homes, good credit scores and at least modest savings.

But if these same people apply for a refinancing or a new mortgage to buy a home, suddenly they're told they don't look so great. They often can't qualify under the "debt-to-income" standards required for today's post-recession underwriting.

Freddie Mac — and Fannie Mae, with a similar option for seniors — offers them an extra boost on qualifying income if their financial assets permit. Take this hypothetical example provided by Freddie Mac credit officials: Say you'd like a new, low-interest mortgage but your debt-to-income ratio doesn't make the grade. You do have $800,000 sitting in a retirement account that you haven't touched yet and that could be accessed by you with no IRS penalty.

Under the federal mortgage investors' policy change on qualifying income standards, your monthly income could actually be higher for underwriting purposes than it appears to be at first glance.

Under Freddie's guidelines, the loan officer could use your $800,000 in untapped retirement assets as follows: First the lender essentially discounts the $800,000 to take into account possible market swings that could reduce what you actually have available. Freddie Mac requires them to multiply your retirement fund assets by 70 percent to arrive at a conservative number. This brings your retirement funds — for underwriting purposes — to $560,000.

Next, the underwriter divides the discounted fund balance by 360 to arrive at what is in effect 30 years' worth of monthly drawdowns from the fund — in this case, $1,556 ($560,000/360 equals $1,556). The lender then can add the $1,556 to your current Social Security, pension and other verified qualifying income to compute your debt ratio.

You may never have to draw down even a dollar from your retirement funding to pay the mortgage, but the fact that you have easily accessible financial assets available to do so allows the change to the underwriting equation.

The computations can get a little complex, and there are some technical rules and definitions that lenders are required to follow. For example, if you are already pulling down dollars from a retirement account, procedures are a little different.

The bottom line: If a debt-ratio problem is preventing you from getting a new, low-interest-rate mortgage, and you've got a substantial untapped retirement fund that might help qualify you on income, don't settle for a rejection. You may have more income — at least for underwriting purposes — than you thought.

Comments
Citi to refund $330 Million to credit card customers it overcharged

Citi to refund $330 Million to credit card customers it overcharged

Citigroup is preparing to issue $330 million in refunds after the bank discovered it had overcharged nearly 2 million credit card customers on their annual interest rates, a spokeswoman said Friday.The bank, which has about 150 million credit card ac...
Updated: 10 minutes ago
Edward Peachey demands severance from CareerSource before stepping down

Edward Peachey demands severance from CareerSource before stepping down

Edward Peachey, the leader of Pinellas and Hillsborough career centers under multiple investigations over the way they report job placement figures, says he has no intention of stepping down unless he is paid a severance.In a letter from his attorney...
Updated: 12 minutes ago
Girl Scouts camp sold to member of Tampa’s Lykes family

Girl Scouts camp sold to member of Tampa’s Lykes family

ODESSA — The 63-year-old lakeside summer camp had no air conditioning or electricity. Cabin floors were often covered in grime, and cobwebs clung to the windows.But under new ownership, the 18.6 acres of Florida woods known as Camp Scoutcrest to memb...
Updated: 1 hour ago
BB&T cites ‘technical issue’ in outage affecting customers

BB&T cites ‘technical issue’ in outage affecting customers

Millions of BB&T customers were unable to access their accounts after a service outage which the bank blames on an equipment malfunction. The Winston-Salem, North Carolina-based bank posted a statement on its Twitter page saying the problem persiste...
Updated: 2 hours ago
Tampa Downtown Partnership gets initial city okay to expand north

Tampa Downtown Partnership gets initial city okay to expand north

TAMPA — The Downtowner may be heading to Tampa Heights — but not until Oct. 1.That’s because the nonprofit Tampa Downtown Partnership this week won initial City Council approval to expand into Tampa Heights."Tampa Heights is becoming an important gat...
Updated: 2 hours ago
Realtors are ‘every 10 feet’ in Florida but more want in the business

Realtors are ‘every 10 feet’ in Florida but more want in the business

ST. PETERSBURG — Tired of working as a yacht captain, Pancho Jiminez decided to get into real estate even though he knows it’s a highly competitive field in Florida."Realtors are every 10 feet around here," he says.Nonetheless, Jiminez is among 30 st...
Updated: 3 hours ago
Winn-Dixie sells 8 stores after report says owner could close 200 locations

Winn-Dixie sells 8 stores after report says owner could close 200 locations

A week after Bloomberg reported that Southeastern Grocers — the Jacksonville retailer that owns Winn-Dixie and other chains — could be closing up to 200 stores, the company announced it was selling off eight of its Louisiana locations.Texas’ Brooksh...
Updated: 4 hours ago
Long awaited Clearwater Beach garage bleeds money in its first year

Long awaited Clearwater Beach garage bleeds money in its first year

CLEARWATER —City leaders discussed building a parking structure on north Clearwater Beach for more than 15 years before the seven-story Pelican Walk Parking Garage finally opened at the start of 2017.The city paid $11.3 million to own 450 of the deve...
Updated: 7 hours ago
Q&A: New Tampa Electric CEO Nancy Tower outlines safety plan

Q&A: New Tampa Electric CEO Nancy Tower outlines safety plan

TAMPA — Nancy Tower was in junior high when she first came to Tampa Bay from Canada to vacation with her family. Now, she returns here in a more permanent capacity — as Tampa Electric Co.’s new CEO.Tower was appointed to Tampa Electric’s top spot fol...
Published: 02/23/18
Oldsmar has a flea market, waterfront and parks... but really wants a downtown

Oldsmar has a flea market, waterfront and parks... but really wants a downtown

OLDSMAR — Wanted: One vibrant downtown. Contact: City of Oldsmar.Perhaps best known for its enormous flea market, Oldsmar sits at the top of Old Tampa Bay near the Pinellas-Hillsborough county line. On the one hand, it’s a convenient location for peo...
Published: 02/23/18