Reverse Mortgage Guide

Reverse mortgages are truly like diamonds in the rough. At first glance, they may not look like much. However, their special features give rise to surprising benefits. These benefits make it a thing of beauty.

An unprocessed diamond, after all, does not look like the finished product we know it to be. Charcoal, graphite and diamond are allotropes of carbon. To the untrained eye, a diamond specimen found in the earth, would be mistaken as a piece of trumpery. Once cleaned up, it too becomes a thing of beauty.

Similarly, the reverse mortgage is usually not seen in its pristine form because it has been sullied by unyielding Babel promulgated by those who do not understand the program.

Today, it is easy to equate all mortgages with the demotic label “bad”. Well all mortgages are not bad. Many mortgages are quite good. The media conflates the two. Wall street conflates the two. Government conflates the two. It is a drastic mistake to take the position that all mortgages are bad. Certainly the one mortgage program that does not deserve this moniker is the reverse mortgage. Granted, it may not be perfect, but it is by no means “bad”.

A reverse mortgage lets seniors sleep at night. Worry over financial matters is the paramount reason seasons cannot sleep. Worrying about things will not make them better. Wishing that circumstances change would not make things better. Action is what is needed. When our seniors take action they can make things better. When a senior acts he/she becomes A Champion Tomorrow.

A reverse mortgage makes our seniors champions. They become winners because they changed their lives. The reverse mortgage will enable those borrowers to convert equity into cash. A reverse mortgage will allow seniors to access the funds in a variety of ways. A reverse mortgage will allow borrowers to even change how these funds are accessed.

A reverse mortgage is easy to get provided the owner/borrower(s) are 62 and are using the home as their primary residence. A reverse mortgage can overcome the financial tsunami that has opened wounds between parent & adult children.

Although over $2 billion a month is spent by adult children on their parents, many do not have the financial wherewithal to simultaneously care for their immediate family and parents. Thus the intervention of the reverse mortgage allows the parents to reclaim their independence and dignity without the need to go to their children for financial aid.

Attorney Dennis Haber is the author of the just-published, ground-breaking book, Piggy Bank Your Home: Tap Into The Power Of A Reverse Mortgage.

The figures for the first half of HUD’s fiscal year are now available and they show substantial reverse mortgage activity.

According to HUD’s report, during the first six months of the fiscal year (in the world of government accounting, the fiscal year starts October 1st), the Department had received 762,266 single family program applications (up almost 150 percent from 2007), including 73,709 HECM applications.

On the approval side of the ledger, the FHA endorsed 351,615 forward mortgages as well as 55,218 reverse mortgages.

What these figures show is that the FHA program is enjoying huge demand because many toxic loans are no longer available. Also, investors want the safety of mortgage-backed securities which include loans made with sane underwriting standards.

In addition, of course, it looks as though the reverse mortgage program is going to have another banner year. Last year there were 108,287 reverse mortgages endorsed by HUD, this year we already have 55,218 even though higher loan limits have not been available to reverse mortgage borrowers.

(Source: FHA)

While maximum single-family FHA loan limits have been doubled for 2008, that has not been the case with FHA reverse mortgages. They remain stuck at 2007 levels, not good news for many households in high-cost areas that would like to access more equity than is now possible.

Writing in the St. Paul Pioneer Press, Lori Swanson, Minnesota’s attorney general, said on Sunday that “in 2006 President Bush signed the Deficit Reduction Act. One major change in the law was to limit the equity a Medicaid recipient can have in his or her homestead. At the urging of the financial industry, Section 6014 of the law actually encourages senior citizens to take out reverse mortgages, which in many cases are costly and unnecessary.”

Swanson also said “with an estimated $4.3 trillion in home equity held by Americans age 62 and older, this is an attractive market niche for lenders.

“The products are suitable for some borrowers, but national senior advocacy groups have reported an increase in seniors who are pitched reverse mortgages that are too expensive or not suitable.

“They also report seniors being duped into taking out a reverse mortgage merely to put the proceeds into an investment like a long-term deferred annuity, where the cost of the mortgage outweighs any investment gains on the new investment. The winner in those cases: the agent, the mortgage company and the insurance company. The loser: the senior citizen.”

Swanson says that the FBI has now noticed a “a spike in reverse mortgage fraud, both as to excessive fees and abusive marketing practices.”

As we say, one solution to the problem of inappropriate or plain wrong reverse mortgages is to get proper counseling. To us this means prospective reverse mortgage borrowers should sit down with an attorney who specializes in elder law before signing any paperwork.

For the full story, please see: Suitable for some, a bad deal for others — borrower, beware, April 27, 2008.

Sen Claire McCaskill(D-MO), the author of S. 2490 — the Reverse Mortgage Proceeds Protection Act — a bill that would end the “marketing or sale of an annuity as a condition of obtaining any home equity conversion mortgage” — has asked Missouri Attorney General Jay Nixon to look into the way reverse mortgages are marketed in her home state, specifically alleged claims that reverse mortgages are a “new government program” and that they are a government “benefit” or “entitlement.”

The release by McCaskill, posted in part below, raises two points:

First, what’s not good for potential mortgage borrowers in Missouri, if that’s the case, is unlikely to be good for reverse mortgage borrowers anywhere.

Second, if allegedly unfair claims are being sent through the mails than perhaps postal inspectors are the right folks to examine the matter.

McCaskill Asks Nixon to Investigate Inappropriate Marketing of Reverse Mortgages to Missouri Seniors

WASHINGTON, D.C. – When your parents or grandparents were just starting out they proudly worked hard, saved-up and bought a home. But today, they are older, money sometimes is tight and they have become a prime targets for aggressive and misleading marketing tactics, including recent mailers to Missouri seniors promoting reverse mortgages, a so-called “new government program.”

According to the mailer, this “program” will allow them to get cash from their home’s equity to pay bills, make repairs on their home, and enhance their lifestyle. What the advertisement doesn’t tell seniors is that reverse mortgages are extremely expensive loans and reverse mortgage salespeople have been known to take advantage of trusting seniors. Today, U.S. Senator Claire McCaskill asked Missouri Attorney General Jay Nixon to investigate abusive marketing tactics that are being used to mislead seniors into signing over the equity on the only valuable asset they own – their home.

McCaskill first heard directly from those negatively affected by reverse mortgages in a Senate Special Committee on Aging hearing she chaired in December. Since that time, McCaskill has introduced a bill and successfully passed an amendment through the Senate to address the issue. However, she believes that the state can play a role in protecting seniors as well, which led her to request that Nixon look into a recent mail advertisement sent to elderly residents in Missouri that contains misleading information.

“Reverse mortgages may be a good choice for some, but I don’t want to hear another story about a senior who was pressured or misled into signing up for one, only to see their financial situation worsen as a result,” McCaskill said. “We’re working toward changing the law permanently, but changing laws takes time and we need to act now to prevent more seniors from being taken advantage of. We’ve got to attack this issue not just at the federal level, but also at the state level as well.”

Specifically, McCaskill contends that the mailer inaccurately depicts the sale of reverse mortgages as a government benefit. While the Department of Housing and Urban Development does insure reverse mortgages through the Home Equity Conversion Mortgage (HECM) program, reverse mortgages are not a government entitlement like Social Security or Medicare. In reality, the reverse mortgage industry faces little government scrutiny in the way it markets loans to senior citizens, leaving seniors unprotected from those using predatory tactics.

In Congress, McCaskill continues to push for a legislative fix to help protect seniors. With legislation advancing through the Senate, Congresswoman Barbara Lee (D-CA) has introduced a similar bill in the House of Representatives.

Do you know your pension benefits?

Not what you’re “supposed” to get, but what you will actually get — especially if your employer has not fully funded the plan?

The Pension Rights Center says that the Labor Department is considering a better form to explain pension benefits — or the declining availability thereof.

You can see the form by going to:

http://www.pensionrights.org/policy/regulations/model-notice.pdf

Is this form clear to you? Does it make sense?

Companies can use eight language options to explain the looming impoverished their workers are about to experience.

If you find that proposed form is unclear regarding cutbacks and reductions, voice your opinion. There’s a clever online form you can use at this address:

http://capwiz.com/pensionrights/issues/alert/?alertid=11266671&type=CU

Why is this important? People depend on promised pension benefits as part of their retirement funding, along with Social Security, investments and — in some cases — reverse mortgage dollars. If you get less than expected your lifestyle will decline, and regardless of the polite language in a government form that’s a lousy situation.

The Office of Federal Housing Enterprise Oversight reports that “U.S. home prices rose approximately 0.6 percent on a seasonally-adjusted basis between January and February, according to OFHEO’s new monthly House Price Index. For the 12 months ending in February, U.S. prices fell 2.4 percent. Since its peak in April 2007, the index is down 3.1 percent.”

However, a careful look at the numbers from OFHEO — the government agency that overs Fannie Mae and Freddie Mac — shows there are significant differences in regional housing markets.

Between January and February, for example:

Home prices were up in the Pacific region (.3%), West North Central (1.3 percent), West South Center (.7 percent), East North Center (1.2%), New England (2.2%) and the Middle Atlantic (.1 percent). Prices fell in the Mountain region (-.6 percent) and the South Atlantic area (-.2 percent).

This is very good news, not because the numbers show huge price increase but because prices at least held in most areas. For those looking for a sign, any sign, of good news this is about as good as it has been in recent months.

Alternatively, if we compare the numbers from February 2007 through February 2008, the picture is different. There were price gains only in the West Central South area (2.3%) and the East South Central region (.6 percent) while the Middle Atlantic showed no change. On the down size we have the Pacific region (-9.2 percent), Mountain (-2.4 percent), West North Central (-1.5 percent), East North Central (-2.3 percent), New England (-1.3 percent) and South Atlantic (-3.7 percent)

These numbers are important to reverse mortgage borrowers because higher prices mean more equity and thus an ability obtain larger loan packages.

As always, for specifics speak with a reverse mortgage lender in your community.

Clearly reverse mortgages are changing the lives of seniors all across this country. The numbers tell a rather compelling story. Of all the reverse mortgages that have closed since 1990 (the year these loans started to close), Ninety -two percent have closed since 2000. Sixty percent of all these loans have closed in the last 28 months. These are astounding numbers. There have been about 394,000 reverse loans that have closed.

While Wall Street has its proverbial head buried in the sand, other institutions, with strong balanced sheets, are moving into this nascent industry.

___Genworth has purchased Liberty Reverse Mortgage;

___Metlife Bank is in the process of purchasing Everbank (which purchased Bank of New York’s reverse mortgage platform);

___Generation Mortgage, funded by the Guggenheim family, purchased two regional originators;

___Bank of America purchased Seattle Mortgage; and,

___KFC Bank, a Belgian Bank purchased World Alliance.

While the FHA Modernization Bill languishes in conference committee, the needs of our seniors are being ignored. This bill, among other things, will lower closing costs by capping the origination fee. AARP in their seminal study of the reverse mortgage industry, concluded that the number one impediment to the growth of the industry is the high costs to obtain same.

An amendment may be added to the bill that would increase the maximum claim amount to $550,000. This could mean that our elders who live in high costs areas, would be able to tap into more of their equity. The origination fee would be capped at $6000. (If there was no cap, the origination fee would be $11,0000

Enough of the rhetoric. Our seniors need action. And they need our protection. Call your Senator and Congressperson to demand that they vote on this bill today. A list of congressional email addresses and phone numbers can be found at: USA.gov.

Attorney Dennis Haber is the author of the just-published, ground-breaking book, Piggy Bank Your Home: Tap Into The Power Of A Reverse Mortgage.

Why do people get a reverse mortgage? According to the Consumer Credit Counseling Service of Greater Atlanta, the #1 reason is because the homeowner’s budget is too tight.

It may be that the results of a survey of 213 reverse mortgage borrowers taken by the group apply to Atlanta area but not elsewhere. That said, the results are interesting:

When asked the question, “What prompted you to obtain a reverse mortgage loan?” the responses were:

___Budget too tight — 19%

___Need more liquid assets on hand –- 16%

___Need equity to pay for ordinary expenses –- 15%

___Home repairs and maintenance –- 15%

___Provide care for dependents, pay medical bills –- 8%

___Pay property taxes and homeowner’s insurance –- 7.23%

___Falling behind on monthly payments –- 6.25%

The survey was conducted in January by Consumer Credit Counseling Service of Greater Atlanta, Inc., a credit counseling agency that provides reverse mortgage counseling. The homeowners average 74 years old and have lived in their homes an average of 18.5 years. The average purchase price of their homes was $95,554 and the respondents said that the current value of their homes was approximately $221,997.

“We expect the demand for reverse mortgages to grow significantly as baby boomers reach retirement and need funds to meet daily expenses,” said Sue Hunt, manager of reverse mortgage counseling for CCCS. “It is important for homeowners to educate themselves about reverse mortgages. Credit counseling can help them understand how these loans work.”

While 79.4 percent of the respondents are retired, 10.5 percent work part-time jobs, nearly 5 percent work full-time and another 5 percent said they were looking for a job.

Most reverse mortgage lenders require homeowners to obtain counseling prior to receiving the loan. To qualify for a reverse mortgage, a person should have a significant amount of equity in their home and the home must be in reasonably good condition.

Although income and credit history are not considered in securing a reverse mortgage, CCCS believes it is critical for homeowners to review their entire financial situation during counseling. Reverse mortgage clients need to develop effective budgeting skills to meet periodic expenses, such as property taxes and homeowners insurance.

CCCS of Greater Atlanta serves clients in all 50 states and has 18 offices in four states. It is the headquarters for the CredAbility Network, a family of agencies serving consumers in north Georgia, south Florida, middle Mississippi and east Tennessee as well as nationally via telephone and Internet.

CCCS is accredited by the Council on Accreditation and is a member of the Better Business Bureau and the National Foundation for Credit Counseling (NFCC). Governed by a community–based board of directors, CCCS is funded by creditors, clients, contributors and grants from foundations, businesses and government agencies. Service is available at offices throughout metro–Atlanta and north Georgia in English, Spanish and American Sign Language. CCCS offers around the–clock help by phone at 1–800–251–CCCS or at its Web sites, www.cccsinc.org and cccsenespanol.org.

Kiplinger Magazine, an excellent financial resource, has a brief reverse mortgage item in the May issue entitled “How to Size Up a Reverse Mortgage.”

Essentially the article advocates running all the numbers before selecting a reverse mortgage product. Toward that end it points to the reverse mortgage calculator at Golden Gateway Financial.

Fill in a few blanks and the calculator then produces results for several lenders. Both FHA and non-FHA products are compared, but all are adjustable-rate products.

You can then press the “learn more” button for each loan choice. A new screen comes up which allows you to adjust the terms — maybe you want $50,000 up front, perhaps you want $1,000 per month, maybe you want a monthly income for life, etc.

Press “finish” and another screen comes up. It shows the cash received up front, loan fees, interest and insurance. Also, the page projects future values.

This is a much better approach then many of the reverse mortgage calculators online — forms which show how much you can borrow but not the costs for insurance, interest or fees.

Still, there’s more to be done.

For instance, future appreciation should be clearly shown for what is: a guess. We don’t know what the rate of appreciation will be — or if there will be any appreciation. Property values could decline over time in some markets. (Think of Japan, a country with a strong economy where the stock market and real estate prices peaked in 1989.)

In the same way the monthly payments and loan sizes can be compared on one page, why not also show fees, insurance and interest costs on the same page?

Also, the ability to get an amortization statement for each loan option would be valuable.

As always, if someone has a calculator that’s as good or better, please let us know.

Lillie writes and asks:

“Why does it take five months or more to get this “Bill” finished. Why does our goverment always help the “Seniors”. Who can we contact to get this moving before I die… 90 years young and want this. born April 14,1918″

Happy birthday Lillie! How great to be 90, to follow legislation and to use the Internet.

The real answer to your question is that legislation can sometimes zip through the legislative process — just look at the economic stimulus package. But such speed is rare. Why? Well, one reason is a single sentence or paragraph can create a huge industry. Or doom one.

But more importantly, it’s generally not a good idea to speed legislation through the system. There’s a reason for hearings, mark-ups, conferences, debates and disputes — they moderate some of the extreme ideas that otherwise would whiz through the Congress and the White House.

Go back to the economic stimulus package. It was started by President Bush and roared through Congress with bipartisan support. After all, how could any politician refuse a cash distribution to taxpayers in an election year?

But the $162 billion or so that the package will cost is being paid with borrowed money. It won’t stop foreclosures, improve the value of the dollar, reduce the cost or gasoline or do much of anything else. Borrowed money merely pushes down the value of the dollar because it’s inflationary — if a dollar buys less you need more dollars to buy a standard package of goods and services.

You can contact your senators and representatives to make your views known. Names and contact information can be found at USA.gov.

The latest figures from HUD continue to show strong reverse mortgage demand.

For March, the Department reports that 12,204 applications for home equity conversion mortgages (HECMs) — HUD’s term for reverse mortgages.

During the same period, 9,663 reverse mortgages were actually insured by HUD.

So far in fiscal 2008 — the period that began October 1st — HUD has had 73,709 reverse mortgages applications, up 34 percent from 55,150 applications during the same period last year. However, it has endorsed 55,218 reverse loans so far this year, up only 4.1 percent over 2007.

Given the huge increase in applications it would not be surprising to see a far-larger number of HUD endorsements next month — assuming acceptance levels remain steady.

Also, given the apparent use of reverse mortgages as a device to lower monthly costs and pay off toxic loans, it would not be surprising to see even more applications during the next few months when compared with 2007.

Dennis writes and offers this comment:

“I can tell you from my own experience that the slow down is coming from the fall in the value of homes. The phone is ringing with many homeowners interested but many homeowners do not have enough equity left in their homes to do a reverse mortgage.”

This observation raises an interesting point: The trend in real estate financing during the past few years has been to buy and borrow to the hilt. The result is that many “owners” have little equity in their homes and a growing percentage have none.

The result is that when it becomes possible to refinance, neither the cash nor the equity are available to get a better loan with a lower rate or superior terms. For those who want reverse mortgages, there can also be a problem with insufficient equity.

If there is any good news here it is that some portion of those 62 and older have owned their homes for many years and have significant equity even if local prices are down. In effect, equity equals opportunity, whether someone wants to finance or refinance with a forward loan or a reverse mortgage product.

Okay, so today is April 15th, tax day. Yuck. Sorry. I didn’t do it.

Turning to the world of real estate news, the foreclosure numbers for March are up — again. According to RealtyTrac.com, “foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 234,685 properties nationwide during the month, a 5 percent increase from the previous month and a 57 percent increase from March 2007.”

These numbers mean that one in every 538 U.S. households received a foreclosure filing during the month.

If you’ll recall, for the past year or so various sages, economists and columnists have said we are near the bottom of the real estate market – and then the next month or the next quarter looks even worse.

Wachovia disclosed yesterday a massive write-down, in large measure to be better positioned for the future. This is both smart and realistic, an effort, says the bank, to “fortify our balance sheet against continued instability in the housing and capital markets.”

If the Nation’s fourth-largest bank is preparing for a rough year, what about the rest of us? Now is the time to pay down bills, pay off credit cards, reduce monthly expenses and live much within our means.

For several months there have been persistent media reports regarding borrowers who have had home equity lines of credit (HELOCs) cut off by lenders — these are credit lines for which borrowers paid fees up-front, lines that in many cases were obtained for use in the event of an emergency need for cash.

As one example, MSNBC has reported that Countrywide suspended further credit advances to 122,000 HELOC borrowers. (See: Home equity loans drying up for some, March 24, 2008.)

The logic behind such suspensions — as discussed here in March — is that lenders are worried about falling equity and do not want to allow further credit advances when property values have declined.

What I have NOT found is a case where a reverse mortgage borrower has had a line of credit suspended or limited.

If it turns out to be true that no reverse mortgage line of credit has been suspended then that would be good news on a number of levels.

First, lenders and HUD would be seen as honoring their commitments.

Second, reverse mortgage lenders would have a legitimate marketplace advantage to promote.

Third, borrowers would have assured access to funds as needed, a significant advantage in today’s financial world.

As in all cases, reverse mortgages should always be considered with care and with the advice of independent professionals, such as attorneys who specialize in elder law.

AARP has come out with a statement regarding the “Foreclosure Prevention Act of 2008.”

It’s remarkable that AARP — a big power in Washington — has had so little success with reverse mortgage legislation. Provisions to lower reverse mortgage costs and to enhance borrower protections are routinely lost in the legislative process.

As an example, S. 2490: Reverse Mortgage Proceeds Protection Act, was introduced in December by Sen. Claire McCaskill (D-MO). The legislation would “prohibit authorized lenders of home equity conversion mortgages from requiring seniors to purchase an annuity with the proceeds of a reverse mortgage, and to provide other consumer protections to reverse mortgage borrowers.”

Why is it so hard to get such legislation passed? Who is helped — and who is hurt — by the McCaskill proposal?

“AARP,” says the statement issued yesterday by David Sloane, AARP Senior Vice President, “is disappointed the legislation failed to include needed provisions that would help prevent foreclosures. While we appreciate the inclusion of the reverse mortgage provisions of the FHA Modernization Act, we hope this bill is the down payment on a broader overall effort to protect millions of American families from the crashing housing market.

“AARP has been working with Congressional leadership to modernize the Federal Housing Administration and expand access to government-backed reverse mortgages, while limiting the high fees charged. We are grateful for the broad bipartisan support on these provisions that will help older homeowners tap into the equity in their homes in order to pay for necessities like long-term care needs, home repairs, and emergencies.

“However, we are now looking to leaders in the House of Representatives, as well as further efforts in the Senate, to provide help that would allow millions of families prevent foreclosure on their homes. We will work with leaders in both chambers on a broader bipartisan package that will include common sense solutions, like extending bankruptcy protections – already available on yachts and vacation homes – to also include a family’s primary home. These protections are needed to help homeowners remain in their homes while they work out payment schedules.

“Congress showed us earlier this year that it can overcome partisan obstacles to directly help Americans feeling the pressure of the tightening economy. We are hopeful they can come together again to help families stay in their homes and protect their financial security.”

A friend of ours, about age 60, just had a terrible accident. He apparently tripped in his own house, broke his leg and hip and the result was five hours of surgery.

Our friend was lucky, at least in a financial sense. He has insurance. Without insurance the cost of his treatment would bankrupt most households.

We need a better system. We need to assure that no one is bankrupted or foreclosed because of a freak accident.

For millions of people we have a healthcare system which offers the promise of treatment and care in exchange for a lifetime of poverty. Given that the need for medical treatment is inevitable, such an equation is immoral.

Other countries have adopted systems which assure universal medical care. Are such programs perfect? Of course not. Are they better than our system, a system which maximizes costs, minimizes benefits and excludes millions? Of course.

As a start, we need to make sure that everyone has needed and appropriate vaccinations. For those who worry about costs, a not unfair concern, it is much cheaper to provide preventive care than to pay for diseases and conditions later in life. We need to provide major medical coverage for everyone. And we need to include dental and eye care for the obvious reason that teeth and vision are important.

Long ago I had an insurance policy which had a $5,000 deductible. In effect, it covered nothing — except a major health event. Such a policy, if universally available, would be a start.

The point is made that people often get reverse mortgages to provide for medical care. If we had a decent health coverage, such a need would not exist.

Our friend will require months to heal. But at least when the process is complete he will not be impoverished. Everyone should be so fortunate.

U.S. seniors have stashed away retirement assets worth $15 billion, according to a new study by Watson Wyatt, a major consulting firm.

This is a huge number, larger than the gross domestic product.

“In the United States,” said Watson Wyatt, “most retirement plan assets (59 percent) are invested in equities, while less than a quarter (23 percent) are in bonds and 17 percent in alternative assets, which include hedge funds, private equity, real estate, commodities and infrastructure. While the amount in equities has remained relatively stable over the last 10 years, the portion in alternatives has grown (from 9 percent in 1997) and the share in bonds has declined (from 33 percent in 1997).”

“The move to alternatives is helping pension plan sponsors get more out of their assets while reducing overall risk,” said Mark Ruloff, director of asset allocation at Watson Wyatt. “However, employers need to closely monitor these investments through appropriate governance strategies. This is crucial to ensuring that fees associated with these investments don’t eat too deeply into returns.”

According to the report, “the makeup of U.S. retirement assets has changed considerably over the last 10 years. The share of assets in defined contribution plans, such as 401(k)s, and individual retirement accounts has increased, from 47 percent to 56 percent with defined benefit assets diminishing accordingly.”

The Global Pension Assets Study analyzes retirement assets in the United States, Australia, Canada, France, Germany, Hong Kong, Ireland, Japan, Netherlands, Switzerland and the United Kingdom. More information about the study can be found at http://www.watsonwyatt.com/globalpensionassets.

Watson Wyatt (NYSE:WW) (NASDAQ:WW) has 7,000 associates in 32 countries and is located on the Web at http://www.watsonwyatt.com/.

My late father was a CPA to almost age 90, someone who could do complex math problems in his head with remarkable accuracy.

I think even he would be pleased with the development of electronic tax forms, pieces of computerized magic that allow you to navigate the tax system with great accuracy.

The good news is that a number of companies have online forms that can be completed for free. All of these sites limit the income of those who are allowed to use such programming — however the income limits differ. Allowable incomes range from $30,000 to $54,000.

Also, not all sites provide forms for all states and some have age restrictions.

The IRS lists various sites and services that offer such free forms.

HUD has issued the mortgagee letter before regarding fixed-rate reverse mortgages. Essentially, it clarifies rules already in place, however for borrowers and counselors it provides basic guidelines regarding the home equity conversion mortgage (HECM) program.

This is the kind of simple, easy-to-understand stuff, that really should be distributed more widely.

——————————

This Mortgagee Letter provides guidance to FHA-approved lenders choosing to offer a fixed interest rate Home Equity Conversion Mortgage (HECM). Specifically, this Mortgagee Letter clarifies and reminds lenders that:

*Fixed interest rate HECMs may be open or closed-ended credit;

*The expected average mortgage interest rate used to calculate the principal limit on a fixed interest rate HECM and the HECM Note rate must be identical;

*The monthly servicing fee for a fixed interest rate HECM can be up to $30.00; and

*HECM borrowers can change payment plan options during the term of the mortgage as long as the mortgage balance is less than the principal limit.

Open-Ended/Closed-Ended Credit

Fixed interest rate HECMs may be either open or closed-ended credit. The Note and Loan Agreement must reflect whether the HECM is open or closed-ended credit. FHA also reminds lenders that they are permitted to make the necessary and appropriate modifications to HECM legal documents to ensure compliance with FHA requirements as well as other Federal, State and local laws.

Fixed Mortgage Interest Rate

Lenders offering fixed interest rate HECMs are reminded that the “expected average mortgage interest rate” used to determine the principal limit must be the same as the HECM note interest rate and set simultaneously. For example, if a lender offers a line-of-credit payment plan with an interest rate of seven percent (7%) fixed then the interest rate (i.e., the “expected average mortgage interest rate”) used to calculate the principal limit, and the HECM note rate must both be set at seven percent (7%).

Monthly Servicing Fee and Post Closing Changes

The allowable monthly servicing fee for fixed interest rate HECMs can be up to $30.00, if the cost has not already been included in the borrower’s Note interest rate. Lenders may not charge any other fee for servicing responsibilities associated with the mortgage unless the charge has been authorized by the Secretary. For example, lenders may charge up to $20.00 for post-closing payment plan changes.

Borrowers may not change from a fixed interest rate payment plan to an adjustable interest rate payment plan unless they elect to refinance their existing mortgage.

In wake of the annual report issued last week by the Social Security and Medicare Trustees, a grassroots advocacy organization predicts a shaky financial future for retiring Americans unless someone in our nation’s capital takes action before it is too late.

“The only shocking thing about the Social Security Trustees report is the glaring lack of congressional action to shore up America’s retirement program before it collapses,” said Michelle Plasari, President, RetireSafe.

“Everyone knows Social Security and Medicare were never designed to withstand the weight of retiring baby boomers in the midst of a shrinking worker pool. Experts have warned year after year that Social Security cannot sustain itself in the face of this looming situation. Now in just 9 short years Social Security will pay out more than it receives in revenue. It’s like a levee waiting to break and everyone is ignoring the warnings. This week, the Trustees sent a dire warning to older Americans - be prepared for benefit cuts of up to 20%. What’s Congress waiting for to take action?”

RetireSafe calls for a champion to take the lead in preventing the collapse of Social Security and Medicare. “In a time where our seniors are struggling to make ends meet, Presidential candidates or members of Congress should step up and do the right thing - guarantee the benefits of today’s seniors and explore the options for giving younger workers more choices and control over their retirement future. RetireSafe and its 400,000 supporters nationwide are looking for leaders that will heed the warnings and act NOW,” said Plasari.

RetireSafe is a grassroots advocacy organization made up of almost 400,000 senior citizens promoting dynamic solutions to America’s retirement security challenges. RetireSafe is dedicated to preserving and enhancing the options, benefits and lives of older Americans. To learn more visit www.retiresafe.org.