Reverse Mortgage Guide

Since August we have been writing about reverse mortgages as a foreclosure prevention tool for a limited number of distressed borrowers — those aged 62 and above with significant equity who want to dump toxic loans. The idea is basically to refinance an exploding ARM with a nice, friendly reverse mortgage that requires no monthly payments, ever.

Now other folks have begun to catch on….

“While no one tracks subprime mortgage holders by age,” says The Wall Street Journal, “the approximately 30 million Americans 65 and older who own their homes are routinely targeted by subprime lenders with refinancing deals, borrower advocates say. Given that the rescue plan recently proposed by the Bush administration and the mortgage industry doesn’t provide relief for individuals who can’t afford their current loan terms, reverse mortgages are currently one of the few tools available to help older homeowners facing foreclosure.” (See: A Way for Older Homeowners To Back Out of a Bind, December 26, 2007)

The problem, of course, is that relatively few people with troubled loans qualify for reverse or HECM mortgages. The problems typically age (too young) and equity (too little).

But for the limited number who do qualify, a reverse mortgage can be just the right loan product to get out of the financial jam of a lifetime.

A new law created by Congress will provide significant tax relief in situations where there has been the death of a spouse.
Under the old tax rule, a home had to be sold by December 31st in the year a spouse died to qualify for the $500,0000 residential capital gains write-off. If the property was sold […] read more

The Mortgage Bankers Association has come out with its first half origination figures for 2007. Here’s what they say regarding HECMs:
“From the Second Half of 2006 to the First Half of 2007, reverse mortgage dollar volume decreased 92.4 percent. FHA’s Home Equity Conversion Mortgages (HECMs) decreased by 92.4 percent and other reverse mortgages increased 13 […] read more

You have to wonder why the Federal Reserve wants to propose new consumer ptoections for borrowers — but not for senior citizens.
The new plan from the the Federal Reserve — as first reported here — specifically excludes reverse mortgages from the proposed consumer protections.
Now you might think, aha, those smart folks at the Federal Reserve, […] read more

Meg Burns, Director of the FHA’s Single Family Program Development program, had some interesting facts and statistics regarding reverse mortgages, data which gives us some perspective. Here are the significant items from her statement before the Senate’s Special Committee on Aging.
*HECMs continue to be at the forefront of the reverse mortgage industry, representing approximately 90 […] read more

Rep. Barney Frank (R-MA) is generally recognized as one of the smartest — and most insightful — people in Washington. Yesterday we reported that the new consumer protections suggested by the Federal Reserve were worthless for senior citizens because they specifically exclude reverse mortgages.
Now we have Rep. Frank, chairman of the House Financial Services Committee, […] read more

The proposed changes in to the Home Ownership and Equity Protection Act (HOEPA) are getting a lot of media attention because it is said that the proposed rules, if approved, will greatly level the field for borrowers.
“Our goal is to promote responsible mortgage lending, for the benefit of individual consumers and the economy,” said Federal […] read more

Below is the news release associated with the new 228-page AARP reverse mortgage study. The report was presented to the Senate’s Special Committee on Aging.
While the release presents a lot of information, the testimony from AARP’s representative, Donald Redfoot, is more interesting. For example, he says that a 74-year-old borrower with a $300,000 property is […] read more

It doesn’t take much to ruin one’s credit standing — and that’s one area where reverse mortgages can be very helpful.
I get a lot of email from people who have missed a payment by a few days. Such misses are a problem and are not a problem. To many credit card issuers, missing a payment […] read more

Speaking before the Senate’s Special Committee on Aging, Donald Redfoot with AARP’s Public Policy Institute, presented a 228-page reverse mortgage study to the Committee.
In his testimony, Redfoot said the survey found that “older homeowners were able to address a wide range of needs and desires with reverse mortgages. When borrowers were asked about the main […] read more

Question: Where can I obtain a reverse mortgage that won’t take everything I have worked for with my children having to pay the $17,000 and more in closing costs when I die.
I have a home worth $3,000,000 and only want a $200,000 loan to pay legal fees on trying to recover funds taken from my […] read more

Question: I am thinking of making a reverse mortgage on our house. How much less expensive has the new Ginnie Mae backed mortgages made this type of loan as opposed to six months ago? Also-has the age been lowered to 60 from 62?
Answer: Ginnie Mae is a federal agency which buys loans from local lenders, […] read more

The Credit Union National Association (CUNA) has some interesting numbers regarding retirement:
* Less than half of Americans have planned for retirement.
* Americans reaching age 65 can expect to live into their early 80s.
* After you retire, experts say you will need at least 70% of your preretirement income each year to sustain your current lifestyle. (Other […] read more

Notice something interesting about the latest foreclosure bailout plan from Washington? There’s no help for reverse mortgage borrowers.
The logic here is fairly simple: Reverse mortgage borrowers don’t have exploding ARMs, toxic loan terms, soaring monthly payments or prepayment penalties.
That’s a sweet arrangement compared with some of the “nontraditional” loan products now driving people into foreclosure […] read more

California has an interesting law on the books which would be useful in all states.
Just as doctors and hospitals are required to report suspected cases of child abuse, under California’s Financial Elder Abuse Reporting Act of 2005, bank, savings and loan, and credit union employees who suspect elder financial abuse are required to immediately notify […] read more

Let’s be clear, the new Bush plan to lower foreclosure levels is a sop to lenders, a voluntary effort that demands nothing and ignores the real needs of many borrowers. Like a balloon, the plan is thin, flighty and full of gas.
But, in an odd sort of way, reverse mortgage lending will get an unintended […] read more

How much can you get from your retirement plan? How much can you contribute?
The Pension Rights Center has a great chart that you need to see.
For example:
*The maximum annual benefit payable by a defined benefit pension plan in 2008 will be $185,000 — up from $170,000 in 2005.
*The maximum contribution to an IRA in 2008 […] read more

The news release below came from Standard & Poors, the big ratings organization.
What’s interesting is the difference between the sale value a big builder, Lennar, was able to receive for 11,000 homesites and the book value of these properties. S&P says it’s a 60 percent mark-down.
How does this impact reverse mortgages? Reverse loans are generally […] read more

The New York Times had a huge article in the Sunday business section regarding mobile McMansions, huge mobile homes — some costing as much $1.7 million — that seem to interest many retirees.
The article raised two issues:
First, can you get a reverse mortgage for a mobile McMansion? Oddly enough, the answer could be yes – if it becomes decidely less mobile. Under […] read more

A lot of experts — if there is such a thing — have now figured out that the foreclosure crisis is not merely a subprime issue, that it won’t end in 2007 and that it impacts financial markets worldwide.
In August I wrote about the use of reverse mortgages as a foreclosure prevention device. As the […] read more