Reverse Mortgage Guide

There is an interesting discussion regarding reverse mortgages at AllFinancialMatters.com discussing whether or not reverse mortgages will be the next subprime debacle.

The central worry is that as more reverse mortgages are issued that they, like other loans, will be packaged and securitized. As JLP writes “I don’t know about you but this concerns me. Isn’t the packaging of mortgages and selling them to investors one of the reasons we got into the subprime mess? Could the same thing happen to the reverse mortgage market? I can imagine that as demand from brokerage firms and investment banks for reverse mortgages increases, standards will be lowered, and we’ll see all sorts of shady practices take place.”

My sense is that reverse mortgages are actually more secure than most other forms of mortgage financing. Why?

First, the overwhelming majority of reverse mortgages are insured by HUD under the HECM program.

Second, as with any FHA program, certain standards must be met. There is little traction in the marketplace for private-sector reverse mortgage products to this point, products which might have the “nontraditional” and risky standards which are behind much of the current mortgage meltdown.

Third, HUD is collecting hefty insurance fees — up front.

I hope I’m right….

The full discussion can be found at: http://allfinancialmatters.com/2007/11/13/reverse-mortgages-the-next-subprime-mess/#comment-199459.

Joe Miramonti offers an interesting discussion of reverse mortgage fees and such, to wit:
“The fees most people find objectionable are the upfront costs to get the loan done,” says Joe. “On a convention HECM product, this is consumed primarily by 2 components; 1) Mortgage Insurance which is 2% of the loan amount and 2) Orginiation […] read more

Does it make sense to borrow from retirement savings to pay off current debts?
Chicago Tribune financial columnist Gail Marks-Jarvis points out that “under federal law, people are allowed to borrow from their 401(k), but the intent is to let you borrow only for the short term. You are expected to pay the money back, and […] read more

Reverse mortgages and healthcare go together like peas in a pod for a very simple reason: To pay off medical bills homeowners often take out reverse mortgages.
Now the New York Times reports the following:
“WASHINGTON — The Equal Employment Opportunity Commission said Wednesday that employers could reduce or eliminate health benefits for retirees when they turn […] read more

“There are still trillions of dollars of home equity that haven’t been spent yet and much of it will be spent in 2007. Unfortunately, much of this will be in the form of reverse mortgages for senior citizens in order to make ends meet,” says Tim Iacono on his blog, The Mess That Greenspan Made.
Tim […] read more

Business is booming at HUD. In the first two weeks of December the federal department received 19,342 FHA mortgages applications and of this number 6,027 — nearly one-third — were from reverse mortgage borrowers.
During the period 28,810 loans were endorsed (insured) by HUD and of this number 4,073 were HECMs. (It’s possible for there to […] read more