Reverse Mortgage Guide

While must attention has been paid to the efforts of the Federal Reserve to lower short-term rates, mortgage rates have soared in the past two weeks.

Freddie Mac reported yesterday for the week ending Feb. 28th that 30-year fixed-rate mortgage averaged 6.24% with an average 0.5 point

That’s up 20 basis points from the week before, an increase of .2 percent in just seven days. (a basis point is equal to 1/100th of a percent).

To give some perspective regarding what is going, consider that about a month a go, on Jan. 24th, Freddie Mac said that same 30-year fixed-rate loan could be had for 5.48% with .4 points.

For all the chatter in Washington about helping homeowners with mortgage problems, the worst possible event is now unfolding. If mortgage interest rates continue rising then millions of ARMs will go into overdrive with stiffer payments looming in the future.

For those who are considering a reverse mortgage, you really need to consider that current interest rates are at the very low end of the scale when compared with rates during the past half century. If you’re thinking about a reverse loan, either fixed or adjustable, you surely remember when mortgage rates were in the 8 percent and 9 percent range — and you also remember when they were in the teens.

No one knows where rates will be in the future, but it’s not realistic to believe that they can stay at or around 6 percent eternally.

The Los Angeles Times has published an interesting article entitled Reverse mortgages provide more seniors with a safety net.
“With traditional home equity credit lines increasingly difficult to get in a time of declining home values and tight underwriting standards, eligible seniors older than 62 are finding that one benefit of reverse mortgages — other than […] read more

You probably know some of the reverse mortgage basics: All borrowers must be 62, own the home and have counseling before they can get a loan. Got it? Good. Now let’s test your reverse mortgage smart quotient by examining four fact patterns.
Case #1: Husband and wife are each 62. Both own the home. […] read more

The Palm Beach Post published an interesting letter from a reverse mortgage lender.
Jeffrey Melcer writes that “as a reverse mortgage broker, I feel compelled to comment on some of the points made in ‘Congress looks into reverse mortgages as abuses begin to occur,’ (Feb. 18, Business ). Demographics suggest that the reverse mortgage will have […] read more

While typically a reverse mortgage is done on a single-family detached residence, several other property types may be eligible. This little known fact can allow many more senior homeowners to reap the benefits of a reverse mortgage.
The important thing to remember is that no matter what type of property, in nearly every case it must […] read more

It’s a win for seniors — and other humans.
The Supreme Court has ruled unanimously that pension managers have a fiduciary obligation to follow lawful instructions from individual savers. The pension industry had argued that individuals could not sue pension managers.
The matter is important in terms of reverse mortgages because a successful pension plan can be […] read more

The National Reverse Mortgage Lenders Association has an updated code of ethics, a 10-page document that is worth reading. There is also a one-page digest version for distribution to consumers.
If I were king I would like to see these documents re-written. The issue is not limited to reverse mortgage lenders, rather the concern is […] read more

Speaking in Washington, Senator Herb Kohl (D-WI), Chairman of the Senate’s Special Committee on Aging said that “because foreclosure filings are public information, scammers target the already troubled homeowners, contacting them by phone or mail repeatedly with claims that they can help the homeowner stay in their home. These financial predators say that they […] read more

Once again seniors are blazing new financial trails — this time with reverse mortgages. Before I tackle the subject of reverse mortgages, join me on a brief journey back in time. You will discover that many of today’s seniors and/or their parents also pioneered the concept of the thirty-year loan.
In the early 1900’s it was […] read more

There are strict age requirements for reverse mortgages. The FHA/HECM (Home Equity Conversion Mortgage) program requires that each homeowner/borrower be at least 62 years of age. The question becomes, what happens if one party is 62 or older and the other is not of reverse mortgage age?
The RIGHT answer to this question depends upon the […] read more

A lot of attention is paid to national foreclosure rates, and properly so. That said, there are significant differences among major metro areas.
At first this does not seem like a reverse mortgage issue, but some an unknown number of senior homeowners the foreclosure numbers have great relevance: The reason? One way to stave off a […] read more

This is one question I get very often and it’s one that requires a bit of explanation. The most direct answer is that you can spend the money any way you want! It’s your money. However, let’s explore the ways that the funds can be taken, since that impacts the cash available and thus spending […] read more

IndyMac Bancorp, Inc., through its Financial Freedom subsidiary, is said to be one of the largest reverse mortgage originators in the country.
In a brutally-frank letter to shareholders, Michael W. Perry, the company’s Chairman and Chief Executive Officer, had several things to say which are of interest:
___”2007 was a terrible year for our industry, for Indymac […] read more

One of the big hurdles to reverse mortgage acceptance are the up-front fees, including with HUD-backed loans a bloated insurance premium and a generous origination fee.
These are real costs and there are strong arguments for their reduction. That said, there is another cost issue which does not emerge with much frequency that ought to be […] read more

Dennis has posted the precise wording from H.R. 5140, the stimulus bill. (See below)
“As you can see,” he says, “they kept out 255(g), the HECM’s. It sounds like they are waiting for the FHA Modernization Bill to increase the lending limit.”
The President is scheduled to sign the stimulus package today. It will raise conventional […] read more

HUD has asked Congress to remove proposed legislative language that would limit the cost of originating reverse mortgages.
In letters to Rep. Barney Frank (D-MA), chairman of the House Committee on Financial Services and Sen. Chris Dodd (D-CT), chairman of the Senate Committee on Banking, HUD says that Congress should not limit reverse mortgage origination fees […] read more

Newly-released figures from the National Reverse Mortgage Lenders Association (NRMLA) showed a decline in senior home values and home equity in the 3rd quarter of 2007. However, says the association, “when compared year-over-year, Americans age 62 and over still have a significant amount of wealth tied to their homes.”
“In the third quarter,” says NRMLA, “seniors […] read more

A confusing issue for seniors regards the matter of gifts — and possible federal penalties.
In general terms, under Medicaid states can “look back” as much as five years to see if gifts have been made. If the answer is yes, then Medicaid eligibility can be impacted.
Attorney Kim Boyer says “at the time of application, the […] read more

For many Americans, making that mortgage payment each month has become increasingly difficult. Whether due to a payment adjustment on a variable rate mortgage or other factors, mortgage delinquencies are on the rise. It’s no different for our senior homeowners. However, our seniors do have one weapon in their arsenal that’s not available to younger […] read more

Seniors with large homes who have been waiting for higher loan limits will be pleased to know that the Congress has effectively doubled the FHA loan limit, meaning that far-larger FHA reverse mortgages (HECMs) are about to become available.
The old FHA loan limit was $362,790 in the lower 48 states. The stimulus package passed by […] read more