Reverse Mortgage Guide

Writing in the Washington Post, Martha Hamilton has some really good numbers regarding retirement. In her article, Low-Paid Means At Risk in Retirement, Hamilton says:

“Not everyone in the golden age of retirement is raking in the gold: In 2006, half of all Americans age 65 and older had annual incomes of less than $16,890, according to the Congressional Research Service. A quarter of all retirees depend on Social Security for 100 percent of their income.”

“Guess which workers most often choose not to put aside money for retirement,” asks Hamilton. “Lower-income workers often struggle just to meet the mortgage or pay the rent. Even if they do have money to save, the incentives are not as enticing for them as for higher-income workers, said Christian E. Weller, senior economist at the Center for American Progress. Because 401(k) plans reduce taxable income, a worker in top tax bracket gets 35 cents for every dollar saved. A lower-paid worker with a marginal tax rate of 10 percent gets 10 cents.

Hamilton reports that in 2001, “only 13.7 percent of workers who earned $20,000 or less participated in 401(k) plans, compared with 67.1 percent of workers who earned more than $100,000, according to an analysis by Munnell and Annika Sunden, authors of “Coming Up Short: The Challenge of 401(k) Plans,” published by Brookings Institution Press.”

Interestingly, Hamilton says poverty among seniors is actually declining.

“Although changes need to be made to Social Security, it’s important to recognize how it has succeeded in reducing poverty among the elderly. One in three people age 65 and older was in poverty in 1960, according to the Congressional Research Service. Today, it’s less than one in 10. Social Security replaces a higher percentage of lower earning workers’ incomes than it does for higher-paid workers, which is one of its strengths.”

The points made by Hamilton suggest that for many of those aged 62 and older a reverse mortgage could be an important source of additional cash. It would be better if this were not the case, if retirees had sufficient income and assets to support themselves without creating additional debt, but it’s better to have real estate equity than not.

For the complete article, which is both important and terrific, press here.

Here’s a reverse mortgage story with a good result.
Crain’s Detroit Business reports that “Vertical Lend, licensed to operate in 33 states and in the process of changing its name to World Alliance Financial, obtained $3.5 million in tax incentives in April from the Michigan Economic Growth Authority to locate a national office in Troy and […] read more

The Wall Street Journal has an interesting story regarding mortgage applications — and what happens to them in too many cases.
At first it may not seem like a big deal, but it turns out that mortgage applications are sometimes dumped like so much cat litter. Not shreded, just dumped.
Is there a problem with this? According […] read more

Here’s a basic contradiction. If you get a reverse mortgage it means you’re draining the equity from your property. This may or may not be an issue to you, but what about your heirs?
This gets into a philosophical question: Are you really responsible for leaving your kids a big inheritance? Some of us get a […] read more

How safe is your pension?
How safe is your pension if it’s bought out by a Wall Street firm or hedge fund?
The Washington Post has a great story on just this issue. The paper says “some financial services firms are trying to clear a regulatory path that would let them buy out pension plans, freeing employers […] read more

The news from southern California is not good. Nearly 900,000 people have been asked to leave their homes because of raging fires, a disaster that will displace large numbers of households and cost billions of dollars.
I don’t remember natural disasters of the scale seen in recent years. It seems difficult to imagine so many people […] read more

Business Week asks if the mortgage meltdown has finally peaked and comes up with a strong maybe.
For reverse mortgage borrowers, the current problems in the financial markets are difficult to ignore. Those above age 62 tend to have more assets than younger folks so anything which causes stock prices to drop is typically unwelcome. As […] read more

When last we wrote about Circle Lending in June, we were greatly pleased by the fact that they offered reverse mortgages, had an online reverse mortgage calculator that produced an amortization statement and had the lowest fee structure we’ve seen.
The catch was that Circle Lending made arrangements between family and friends, helping those with money […] read more

Is there a lot of risk to the FHA reverse mortgage program? A lot of risk as home values in many areas of the country go down? The FHA, after all, is nothing but an insurance program — an insurance programs by their nature should have a limited amount of risk.
The way the FHA reverse […] read more

I received a mailer from the American Association of Retired People yesterday, one that asks the association’s 39 million members “to push the federal government to make these pillars of retirement security more available and affordable for all Americans now and in the future.”
It would surely be good to know the details of precisely what […] read more

When it comes to legal matters I must confess to being old-fashioned. I think folks are best served by sitting down with an attorney to discuss their legal needs.
That said, the legal profession does a miserable job serving the general needs of consumers who have not been named in the wills of the rich and […] read more

The demand for FHA reverse mortgages — what the government calls home equity conversion mortgages (HECMs) — rose enormously during fiscal 2007, the period which ended September 30th.
Figures from HUD show that 107,558 reverse mortgages were originated in fiscal 2007 — that’s up 40.9 percent over fiscal 2006.
Reverse mortgage growth was a huge benefit to […] read more

A new and larger reverse mortgage mortgage product for homes worth as much as $2.5 million has been introduced by Lender Lead Solutions.
The company says that its “Equity Plus Advantage” allows seniors with higher home values to access greater amounts of their home equity than with traditional reverse mortgage loans.
“The Federal Housing Administration (FHA) sets […] read more

Do rich people need reverse mortgages? Maybe “need” is not quite the right word but you get the idea.
The Pittsburgh Post-Gazette has a great story that starts off with someone getting a reverse mortgage for a $21 million home, or as the article calls it, a mansion. It also mentions a lender who two provided […] read more

Is there a better way to manage retirement funds?
The Wall Street Journal is reporting that a number of mutual funds have now begun to enter the retirement finances arena. According to the paper, Fidelity Investments has started 11 Income Replacement Funds while the Vanguard Group says it will offer several Managed Payout funds.”Both companies have […] read more

Did you know that there is a nonprofit, apolitical Pensions Rights Center. Now more than 30 years old, the center specializes in protecting the retirement rights of those who have earned pensions from their many years of work.
According to GuideStar.org, a national database of nonprofit organizations, the Pensions Rights Center is “the country’s only consumer […] read more

Last month we reported the view of one reverse mortgage lender who believed HECM 100 loans were gradually being phased out, replaced by higher-cost HECM 150 financing.
Joffrey Long, a 30-year veteran of the mortgage industry and the President of Southwestern Mortgage in Granada Hills, CA, explained that the interest rates on FHA insured reverse mortgages […] read more

National Reverse Mortgage Lenders Association has just released its second-quarter study of senior housing. In a release, NRML reports that:
The value of homes owned by Americans age 62 and over increased slightly during the second quarter of 2007, but senior home equity declined slightly, according to the Reverse Mortgage Market Index.
Published quarterly National Reverse Mortgage […] read more

The The American Institute of Certified Public Accountants has an interesting public information collection at 360financialliteracy.org. Included in the collection are a number of items which involve reverse mortgages and related issues.
One particular item, Your Home as a Source of Dollars in Retirement, offers some advice of special interest:
“If your home is larger than you […] read more

If you need a reverse mortgage you might want to encourage your state to emulate what is being done in North Carolina.
While many states seem to allow reverse mortgages from any source and through any “consultant,” North Carolina as a different approach:
“The General Assembly,” says the state, “enacted the Reverse Mortgage Act in 1991 (General […] read more