More than a year later, officials at Sun City West voted to change a key covenant that had caused residence to not be able to obtain a Reverse Mortgage. Since the fall of 2016, even though this language had been “on the books” since the mid-1990’s, residence haven’t been able to obtain an FHA loan. It all stems from a free-assumability language which prevents the approval of any FHA loan that would leave the government on the hook for potential costs in the event of a foreclosure. At Sun City West, buyers generally pay a one-time $3,500 set fee at the time of closing toward the maintenance of shared clubhouses, pools and other amenities.
But Sun City West (and other communities too in the area) asserted that the fee must still be paid in the case of foreclosures, which let FHA to start balking at insuring the loans in late 2016 – despite the fact that the free-assumability language had been on the books since the mid 1990’s.
Thanks to a task force changes have been made by Sun City West, and Traditions in Surprise, AZ also, adding an exemption to the rules regarding the mandatory asset preservation fee to their bylaws. A similar vote is expected this week at Sun City… hopefully they will follow suit.
Hoping this will now put an end to a 18-month moratorium on FHA insured reverse mortgages in these communities… a very good thing.