When John Dugan, comptroller of the currency, warned a few weeks back that reverse mortgages pose significant risks to consumers, it touched off a big debate. Dugan said that although reverse mortgage loans do have some benefits, they also have some of the same characteristics of the riskiest subprime mortgages. He called for more oversight to make sure homeowners are being protected.

Reverse Mortgage Provides Cash Now
Reverse mortgages allow homeowners aged 62 and up to tap into their home equity. Benefits of these loans include homeowners not having to repay the money until they leave their home and being able to receive the funds in a lump sum or in installments. Also, the money can be used for any purpose.

Dugan’s concerns about reverse mortgages include:

—The fact that some lenders aggressively market investment, insurance, or annuities to seniors who apply for reverse home loans
—Misleading marketing claims by some lenders
—The lack of escrows for tax and insurance payments; not paying these fees can result in foreclosure.

Are Reverse Mortgages Too Complex?
Since Dugan aired his concerns, lawmakers, lenders, and others have weighed in with their concerns. Some say reverse mortgages are too complex and could be costly for seniors. “You may borrow $100,000 and 10 years later owe $200,000,” Sen. Claire McCaskill of the U.S. Senate Special Committee on Aging said at a field hearing this week. Others say reverse mortgage fraud is a growing concern, including inflated home appraisals.

Reverse Mortgages Can Help Seniors
But Jeff Lewis, chairman of Generation Mortage, of Atlanta, told the Chicago Tribune, “The whole purpose of our program is to make loans to seniors who don’t fit into the traditional market. Pointing that out as a harbinger of doom is ludicrous. Without [reverse mortgages], if people couldn’t get to the money in their house, they’d just have to sell them.

There certainly are pros and cons to reverse mortgages. Take the time to compare reverse mortgage quotes from several lenders to determine if this loan product is right for you.

Reverse Review magazine has an interesting article that examines whether or not reverse mortgages will help baby boomers answer President Barack Obama’s call to community service. Obama has called for Americans to get more involved with serving their communities. A new website, Serve.gov, has even been launched to connect Americans with volunteer opportunities. So exactly how can reverse mortgage loans contribute to senior volunteerism rates?

Fewer Bills, Less Stress
Reverse mortgage loans allow people to cash in the equity in their home, leaving them with more income for their expenses and no monthly housing payments. Some seniors on a fixed income are forced to take jobs to pay their bills, whether they want to work or not. Having income from a reverse mortgage means homeowners can have a financial cushion, so they may be in a better position to devote some of their spare time to community service. read more

Hundreds of thousands of seniors are having a difficult time because of the financial crisis. More than 600,000 seniors are delinquent or in foreclosure, according to AARP. For some seniors, a reverse mortgage could help them keep their homes and weather the economic storm.

Your Personal Bailout
AARP found that 25.5 million people over 50 have a mortgage, and many of them are on fixed incomes, making it difficult for them to catch up on missed payments. Even if you’re still making mortgage payments you could qualify for a reverse mortgage loan if your home equity is significant. If you already own ar home free and clear but have seen your retirement nest egg dwindle because of the financial crisis, a reverse mortgage could be the thing that allows you to continue living comfortably.

Why Use a Reverse Mortgage?
Not everyone has the same financial situation. But many people who take out reverse mortgage loans do so because they’ve encountered huge medical bills or other unexpected expenses. Other people use the cash from their reverse mortgage to pay for long-term care insurance. It’s not a good idea to take out a reverse home loan to pay for your kid’s college education.

Is a Reverse Mortgage Right for You?
So how do you know whether a reverse mortgage is a smart move in today’s economy? Ask yourself a few questions:
—Are you behind on mortgage payments but have a lot of equity in your home?
—Do you own your home free and clear but are struggling with medical or other large bills?
—Are you struggling with tax payments even though you own your home outright?
—Are you at risk of filing for bankruptcy or foreclosure?

Getting a reverse home loan is one possible solution to your financial woes. But it’s important to consider all the unique details of your situation before jumping into a reverse mortgage. Taking out a reverse home loan could cut into the amount of inheritance you wish to pass on to your kids. Also, over time the amount of equity you have in your home will fall. And last, even if you get a reverse mortgage, you’ll still need to budget your money wisely.

So you’ve decided to get a reverse mortgage but aren’t sure how you should take your cash. A big question many people have is whether it makes sense to take one big withdrawal or stretch out the payments. Let’s look at your options for getting paid.

Big Chunk of Money
A lump-sum payout would allow you to get all of your money right away. This could be good if you are responsible with large sums of money. It could also be useful if you plan to downsize to a smaller home and don’t want monthly mortgage payments. However, if you aren’t very good at handling large amounts of money, you may want to choose a different payment option. read more

Thinking of getting a reverse mortgage? It might be a good time to shop around to make sure you have adequate homeowner’s insurance, too. It’s good to compare different policies to find the best deal, especially if you’ve had the same coverage for many years.

When you tap into the equity in your house with a reverse mortgage loan, you won’t have to repay it until you leave you home. But if you don’t keep up with your homeowner’s insurance payments, you could be required to repay the loan early. That’s because your home will serve as collateral for a reverse mortgage loan. Mortgage lenders want to know that if they invest in your home by offering you a reverse mortgage it will be covered by insurance in case of a fire or accident.

Make sure the policy has replacement cost coverage. If your home were damaged or destroyed in a disaster, replacement coverage would pay for repairing or rebuilding it with similar materials.

In many cases, the amount of insurance you need will be less than the appraised value of your property. That’s because the appraised value includes the land, and only the structures on your property need to be insured with replacement cost coverage.

If your home is in a flood zone you also will be required to get a flood insurance policy when you get a reverse mortgage loan. Even if you own your home outright and don’t currently have a flood insurance policy you’ll be required to get on in a flood zone. The National Flood Insurance Program offers coverage for building property up to $250,000 and personal property up to $100,000.

Are there situations where it makes more sense for a homeowner to refinance their home rather than get a reverse mortgage? That depends upon the borrower’s financial situation and stage of life. Let’s take a look at how these mortgage loans differ.

Converting Home Equity to Cash
A reverse mortgage allows you to cash in on the equity built up in your home over the years. The older you are, the more money you’ll be able to get. You’ll receive the money as a lump sum, regular payments, line of credit, or combination of the above methods. The loan won’t have to be repaid until you leave your home or die. read more

You’ve probably heard a lot about how reverse mortgages can benefit seniors. But if you’re still on the fence about going this route, here are some frequently asked questions to help determine if a reverse mortgage is a smart move.

Q. I’m only 62. Is a reverse mortgage loan a good idea at my age?
A. Reverse mortgages are available to people who are 62 and up. But generally, the older you are, the more money a mortgage lender will be willing to lend you. So if you don’t really need the money right now, it may make sense to hold off on getting a reverse mortgage for several more years. Also, the younger you are when you receive a reverse mortgage, the more likely you’ll outlive the loan and need to find another source of income.
read more

It’s tough to watch your retirement portfolio shrink, especially if you were counting on that money soon. Like many Americans, you may be forced to completely change your plans for retirement and find a new source of income. A reverse mortgage is one way to bring in some extra money and stay in your home.

The volume of reverse mortgages rose 24% in March from the previous month, according the federal government. That’s partly because so many homeowners are house rich and cash poor.
read more

Demand for reverse mortgages is strong as many seniors are finding themselves looking for new sources of income to help manage their expenses. One of the biggest selling points for obtaining a reverse mortgage is that it doesn’t have to be repaid until you’re no longer living in your home. But what happens if you get such a mortgage and must leave your home sooner than you expected?

A reverse mortgage is like a home-equity loan that doesn’t have to be repaid until the borrower leaves their home. The homeowner can receive a lump sum payout or get regular payments over a period of time. People who aren’t sure they’ll stay in their home for the long term may want to elect to receive regular payments to preserve some of the equity in their home longer. read more

The process for getting a reverse mortgage doesn’t have to be complicated if you know what to expect. Here are the steps involved in finding and qualifying for a reverse mortgage.

1. Do as much research as possible before contacting a mortgage lender. AARP has excellent resources to help you learn about reverse mortgages. Use a reverse mortgage calculator to get an idea of what type of loan you might qualify for. If you have friends or family who have used reverse mortgages, ask them about their experiences and whether or not they can recommend a reputable lender.

2. Find a mortgage lender through the National Reverse Mortgage Lenders Association (NRMLA), which has listings of lenders in every state. You should always check out a reverse mortgage lender’s reputation to make sure they don’t have a long list of complaints. You can contact your state attorney general’s office or the Better Business Bureau to check out lenders.

3. You must get counseling before applying for a reverse mortgage from a HUD-approved counselor or national counseling agency such as AARP or the National Foundation for Credit Counseling. You can receive counseling over the phone or in person.

4. Apply for a mortgage loan and provide any relevant documents. Your lender should give you an estimate of the total cost of obtaining a loan as required under the Truth in Lending Act.

5. Get your home appraised. Your lender will order the appraisal to make sure it meets Federal Housing Administration guidelines. You’ll be responsible for making any necessary repairs that are required.

6. During the underwriting period your lender will finalize all details of the mortgage, including payment options. Underwriting may take a couple months.

7. Close on the loan. At the closing the interest rate for your reverse mortgage will be calculated and you’ll sign all the paperwork. The Truth in Lending Act gives you the right of rescission, or three business days after closing on your loan to cancel the deal with no questions asked.

You’ll receive the loan funds after the right of rescission period has ended. Depending upon the payment plan you chose, the money will be paid as a lump sum, installments, or with a combintion of both. Any existing debt on your home will be paid off and a lien will be placed on your house.

If you’re a senior looking to downsize, a reverse mortgage could help. The Home Equity Conversion Mortgage (HECM) for Purchase could help you buy a new home and avoid making monthly mortgage payments. Here’s how it works.

Moving to a New Home

The HECM program is targeted at people 62 and up who want to sell their current home and use a reverse mortgage to downsize to a less expensive home. It can also be helpful for seniors who want to sell their current home and relocate to be closer to family or find a home that is better suited to their physical needs. read more

President Barack Obama wants homeowners to refinance their mortgages to help the economy. Should you? Here are some things to consider as you decide whether refinancing your home makes sense at this time.

Obama recently discussed at a press conference how Americans could benefit from lower mortgage interest rates. The average mortgage interest rate on a 30-year fixed mortgage is 4.78%. “The main message we want to send today is there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates. That is money in their pocket,” Obama said.

There were about 5.4 million homeowners who are at least one month late with their mortgage payments or in foreclosure at the end of 2008, according to the Lawrence Journal-World & News. About half of homeowners with subprime mortgages are struggling to make payments.

If you are among those struggling, a mortgage refinance could help you get back on track with your payments. But even if you’re currently making mortgage payments on time, refinancing could help improve your overall cash flow. Also, refinancing an adjustable rate mortgage could allow you to get a loan with fixed payments.

The government has set up the Making Home Affordable program to help homeowners who have mortgages guaranteed by Freddie Mac and Fannie Mae. But even if you don’t qualify for these programs, it could pay to shop around to see if you qualify for a mortgage refinance. Bank of America and Wells Fargo are among the private banks that have announced programs to help homeowners refinance.

But keep in mind that mortgage lenders are more likely to work with you if you have a steady income and good credit. Also, having a steady payment history on your current mortgage and other bills will work in your favor.

If you think refinancing could help you weather today’s mortgage climate, seek out reputable lenders today. However, if you are over 62 and don’t think it makes sense to refinance your mortgage but still need help, you may want to shop around for a reverse mortgage deal. A reverse mortgage is a loan against your home that will allow you to tap into the equity you’ve built up.

You may have seen offers for free wheelchairs, scooters, walkers, or other medical equipment. But be careful about signing up for one of these offers, because it could be a scam to defraud Medicare.

The scam basically involves creating fake medical equipment companies then finding people to sign up to receive free equipment. In some cases real medical equipment suppliers are involved in the scheme. Once the person signs up for the free supplies, the fraudsters bill the patient’s insurance company and keep the money. read more

Bank fees are taking a bigger chunk out of many people’s checking and savings accounts these days. But the Federal Reserve is considering a proposal that would give customers the right to decline overdraft protection for ATM withdrawals or debit card purchases. If the rules change, customers would have to opt-in to allow overdraft protection.

Overdraft fees vary from bank to bank, but tend to run about $10 to $38, according to Boston.com. So if you make several purchases the same day, you could be hit with a fee for each transaction. read more

Many senior citizens are jumping at the chance to obtain a reverse mortgage to tap into their home equity. The National Reverse Mortgage Lenders Association says more than 112,000 reverse mortgages were sold in 2008. And a study by AARP found that most seniors who took out a reverse mortgage were glad they did. But before you sign up for this type of program, it’s important to know exactly why you think you need a reverse mortgage.

If you’re 62 or older, a reverse mortgage can allow you to tap into your home equity tax free. Reverse mortgages don’t require a good credit score. In fact, borrowers with blemished credit pay the same rate as those with perfect credit. Depending upon the program you could receive a lump sum, a line of credit, or monthly payments. Also, the money won’t have to be repaid until you sell your home, stop living in it, or die.

Reverse mortgages do come with fees. HUD’s HECM also comes with mortgage insurance. While these fees aren’t as high as those associated with selling your home, they are substantial. In general, you can minimize the effect of up-front costs if you stay in the home a long time. If leaving an unencumbered home to your heirs is important, keep in mind that a reverse mortgage can deplete the equity from the home.

Here are some questions AARP recommends you consider before signing up for a reverse mortgage:

—Why do you want a reverse mortgage? Do you need to money to help pay your monthly bills or are you looking to make a major purchase, such as a vacation or car? In general it’s not advisable to use long-term financing for short term items.
—Can you afford the reverse mortgage fees?
—Do you have enough equity in your home for a reverse mortgage? The troubled housing market has seen many people stripped of much of the equity in their homes.
—Is there another way you can borrow the money you need, such as a home equity line, which might actually cost less in the long run? For smaller amounts, home equity loans are preferable.
–How is your credit rating and income? If you have credit problems or insufficient income, a reverse mortgage may be the cheapest (or only!) option available to you because there is no credit qualifying and you don’t make any payments.
–How long will you be in your home? If you plan on a two-year jaunt around the word, a reverse mortgage is not for you. Ditto if you have serious health issues. More than one senior has returned home after a few months in a hospital to find their home in foreclosure. Just make sure you understand what the lender means by “occupying” the home before you sign.

If you believe feel that a reverse mortgage is right for your situation, make sure you understand exactly how it will work. Choose a reputable lender who doesn’t try to cross-sell other products such as annuities. Getting quotes from several lenders and learn how to compare the disclosures.