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Servicing Corner: Is a LOC Guaranteed to Be Available For Borrowers?

Servicing Corner: Is a LOC Guaranteed to Be Available For Borrowers?

Question: Is it okay to tell your clients that the Line of Credit is guaranteed and will always be available to them?
Answer: No, the line of credit is not guaranteed or always available to borrowers. Here’s why: While the line of credit is not reduced or frozen if the home value decreases, the funds from the line of credit may be frozen if:

  • The borrower hasn’t paid property charges, such as taxes, insurance or HOA dues/assessments. Funds would be taken from the LOC to cover these required expenses;
  • Required repairs are not completed;
  • The borrower is no longer living in the home as a primary residence, either because they moved or died.

In addition, line of credit funds are not available to non-borrowing spouses, only the borrower of record on the loan.

Published by

Darryl Hicks

Darryl Hicks is Vice President of Communications for the National Reverse Mortgage Lenders Association. In this capacity, Hicks writes for NRMLA's publications, manages the association's web sites and social media accounts, assists committees and the Board of Directors, and manages the Certified Reverse Mortgage Professional designation. Prior to joining NRMLA in 1999, Hicks spent three years in the Washington, D.C. bureau for National Mortgage News.