Reverse Mortgage Guide

The market for FHA reverse mortgages — what the FHA calls Home Equity Conversion Mortgages or HECMs — is booming.

In the first 15 days of August, the FHA endorsed 4,481 HEMCs. To put this number in perspective it’s up 27.4 percent when compared with a year ago.

So far in fiscal 2007, the FHA program has originated 95,370 reverse mortgages to date. That’s up 45.5 percent when compared with a year ago.

The mortgage market may be slowing in general, but the HECM program is doing record business.

The usual idea with a reverse mortgage is to gain extra income or credit in addition to Social Security, savings, investments and other financial resources.
The Motley Fool has an interesting article which suggests that it’s smart (or “foolish” in the lingo of the site) to Beware Early Retirement Promises
Here’s a snippet — but take a […] read more

If you’re looking for one reason to go into the reverse mortgage business, here it is: No worries about borrower incomes.
I bring this up because in the world of “forward” mortgages lenders like to know how much you earn. Or, at least traditionally, they would like to know something about their borrowers and their borrowers’ […] read more

The necessity for reverse mortgages would be far less if people saved more. The grim reality is that as a country we have a negative savings rate according to the Bureau of Economic Analysis.
What this means is that year-after-year we pile up debt and borrow to secure various assets — three-year car loans now run […] read more

How much can a reverse lender charge for servicing a loan under the FHA HECM program?
The answer is not more than $30 a month — but only if the reverse loan has a fixed interest rate. If the interest rate is adjustable then there is no cap.
If you think about it, $30 a month is […] read more

How much do you need to retire?
The Deseret Morning News has a great column by Rodger L. Hardy with some interesting numbers. Quoting Scott C. Marsh, Hardy reports this is how much you need in terms of assets to produce a given income:
* 50-year-olds would need $2.3 million in assets, making $90,000 annually;
*40-year-olds would need […] read more

If you have to choose a real estate agent and you were age 50 and above, would it be Oprah Winfrey or Donald Trump?
When such a question was raised by ERA — a real estate network that includes more than 38,000 brokers and salespeople as well as some 3,000 offices nationwide — the results […] read more

There’s an interesting discussion of foreclosures at San Diego Predatory Lending.Com. Usually you don’t associate foreclosures with reverse mortgages, but we are each part of our community and what happens to the neighbors impacts us all.
In any case, the blog has an informed and insightful discussion of foreclosure options, options which raise two ideas.
First, some […] read more

When we think about home loans we’re usually talking about “forward” mortgages, loans where you get cash up front and then pay off the loan over a set term.
But what if you don’t want a forward mortgage? Suppose you’re age 62 or above and have no desire to pay $2,000 a month, or whatever, for […] read more

The meltdown on Wall Street this week has caused more than a few investors to consider new deposits in the Sealy Savings & Loan, something that otherwise looks like a nice, comfy mattress.
Do you notice how financial events for the past few weeks have been described as a “subprime” meltdown? If this is a subprime […] read more

Any one see a reverse mortgage worry here?
The National Association of Realtors reports that in the second quarter of 2007 home prices fell in 41 states, rose in six and were unchanged in one. Two states did not have sufficient data to report.
“Total state existing-home sales, including single-family and condo, were at a seasonally adjusted […] read more

Blogger Tim Paul raises an interesting point, the idea that many senior citizens are not attracted to reverse mortgages because of a variety of innate fears.
Paul writes in a blog entitled Reverse Mortgage Fears that there may be “intangible psychological fears that may prevent senior homeowners from stepping into a reverse mortgage. Being aware of […] read more

While some of the real estate marketplace looks busted and broke, the demand for FHA reverse mortgages is soaring. New figures from HUD show that in the last two weeks of July a total of 5,821 HECMs were originated — that’s up 52.8 percent over a year ago!
Since October 1st, HUD has churned out 90,889 […] read more

I saw something online and thought, gee a straight answer about reverse mortgages.
Financial Freedom, a reverse mortgage lender, has an interesting set of questions and answers regarding such loans.
One point they bring up is the importance of knowing how much a reverse mortgage actually costs.
The relevant question and answer looks like this:
“Q. What is “TALC” […] read more

Usually when we think about mortgage insurance we think about policies that benefit lenders when homes are foreclosed.
Private mortgage insurance (MI) as well as the FHA and VA programs are all examples of mortgage insurance and all will cover some or all lender losses in the event of default.
But with reverse mortgages the situation is […] read more

What happens to reverse mortgages if FHA reform becomes law?
As currently written, H.R. 1852 — the Expanding American Homeownership Act of 2007 — offers these major points:
First, the bill would eliminate the volume cap which is now in place. In other words, the FHA could make as many reverse mortgages as the marketplace demanded.
Second, FHA […] read more

Much of the attention given to reverse mortgages concerns the FHA HECM program. Given its popularity, the FHA program deserves a lot of public scrutiny, but there is another program which is also worth looking at, the Fannie Mae Home Keeper program.
Fannie Mae has an interesting description of the program on line (press here). Of […] read more

One of the benefits of a longer life may well be a lower interest cost.
Run the numbers for a FHA reverse mortgage — a home equity conversion mortgage (HECM) in government-speak — and the costs vary substantially with time.
Imagine that your home is worth $600,000, you get an initial advance of $30,000 and your remaining […] read more

While the FHA is having a good year with applications up 10.9 percent so far in the fiscal year (the year beginning October 1st), it’s strongest product is plainly the home equity conversion mortgage (HECM), what most humans call a reverse mortgage.
Figures from the FHA show that 4,642 HECMs were issued during the first 15 […] read more

The Motley Fool — long a source of interesting financial advice — has a brief article regarding reverse mortgages.
Entitled. Secrets of the Unmortgage, author John Rosevear makes three interesting points.
First, the longer you wait, the older you are, the more you can borrow.
This assumes that home equity increases over time, an assumption which is not justified in all geographic […] read more