Reverse Mortgage Guide

Applying for economic stimulus payments will now be easier for more than 20 million Americans who normally don’t have to file a tax return thanks to the development of a new, user-friendly online tool developed jointly by AARP Tax-Aide and the National Council on Aging.

People can access the tool either through NCOA’s BenefitsCheckUp(R) at www.BenefitsCheckUp.org/ or through AARP’s web site at www.AARP.org/stimulus.

“It’s important for people to have easy to understand instructions about who’s eligible for the stimulus payment and the ability to fill out the 1040A form,” said Stuart Spector, NCOA Senior Vice President. “NCOA worked hard to advance the economic stimulus legislation and this joint effort with AARP Tax-Aide produced an effective, smart tool to make it a reality for those in need.”

The Stimulus Payment tool makes available in one place on the Internet, simple, easy-to-understand instructions coupled with the ability to complete and print the IRS 1040A form, with personalized instructions on where to mail it. The Stimulus payment tool will make it easy for stimulus payment filers, and trusted intermediaries, family members and caregivers that aid them, to take the necessary actions to get the stimulus payment that they are entitled to under the law.

“AARP is dedicated to making sure people have the information and resources they need to receive their stimulus payments,” said Tom Nelson, AARP’s Chief Operating Officer. “Developing this on-line tool with NCOA enables the thousands of AARP volunteers, community groups and trusted individuals to help older Americans securely receive their stimulus payments. This tool is an incredibly straightforward way to help every person who is eligible for a payment get one.”

NCOA encourages people who are filing their 1040A forms for the Economic Stimulus to also take some time to find out if they are eligible for other benefit programs by using BenefitsCheckUp. BenefitsCheckUp is a Web site that can help people aged 55 and over and some younger people with Medicare find and get the benefits they are eligible for. NCOA’s research shows that many seniors are not aware of these programs or believe that they are not eligible for them. BenefitsCheckUp makes it easy for seniors, their families or caregivers to complete a questionnaire that only takes a few minutes, is free, and answers are always private.

Richard E. Byrd, IRS Commissioner for Wage and Investment, joined NCOA and AARP Thursday in Washington to announce “Super Saturday,” intended to help people throughout the country get help filing for payments scheduled for Saturday, March 29. Approximately 320 IRS offices will be open on Super Saturday to prepare the simple Form 1040A for people who are filing a return solely to receive their stimulus payment, along with IRS partners such as AARP, United Way of America and dozens of other trusted, community-based organizations.

“We don’t want any Americans to miss out on their economic stimulus payment. For millions of Americans, filing a tax return is not routine. Their income is either too low or not taxable. But this year, filing a 2007 tax return is the only way to receive an economic stimulus payment. Super Saturday is one way the IRS and its partners are working to ensure everyone eligible receives a stimulus payment,” said IRS Commissioner Doug Shulman.

April 15th is almost here, reason enough to mention taxes.

This year, perhaps more than most, it’s wise to file a tax return even if no tax is due. The reason? Rebates from the economic stimulus package requires recipients to file a tax return to get anywhere from $300 to $1,200 or more.

“Millions of retirees, disabled veterans and low-wage workers who usually are exempt from filing a tax return must do so this year in order to receive a stimulus payment,” says the government.

“Generally,” says the IRS, “people must have a valid Social Security number, have at least $3,000 in qualified income and not be a dependent or eligible to be a dependent on someone else’s return.”

Go to http://www.irs.gov/app/espc/. This is an online calculator which will allow you to figure the size of your rebate check.

For more information, go to the IRS page at:

http://www.irs.gov/newsroom/article/0,,id=177937,00.html

Confusion reigns supreme when one talks about reverse mortgages. So much has been written about this program that myth melds into fact and fact conflates myth. Where does truth start and falsehood end? Why can’t the media get it right?

The answer to these two seminal questions has its genesis in humankind’s penchant to fear that which is new.

Throughout the annals of history, those things that were at first feared, or at least misunderstood, have often turned out to be mans’ best friend. The germ theory of disease is one such obvious example. In the mid-1800s a Hungarian physician demonstrated that disease could be drastically reduced by enforcing appropriate hand-washing behavior by medical care-givers. The germ theory of disease had not yet been developed. This doctor lectured publicly about his findings. Predictably he received a frigid reception from the medical community His observations went against the current scientific opinion of the time. It took another 17 years until scientific opinion changed.

When FHA introduced the long-term loan in 1935, this type of financing went against the way mortgages were then obtained. Accordingly, this new type of financing flew in the face of the 5-year renewable balloon note, the “term” financing common at the time. The financial community was against it. Only with the passage of some time did the opinion of those pundits change.

In the late 80’s the government once again created a new type of financing program. It was a program where one could obtain a loan that did not require monthly mortgage payments. In fact, the borrower could receive money each month. “Crazy”, other pundits would declare. “It is a trick, a scam”, people were told. “Beware”, the word went out. Fear permeated every corner of the land. But, truth be told, it is a fear based in ignorance.

Too many of us simply do not understand money/financing basics: Most of us do not know how to make it, spend it, grow it, save it or how to keep it. We learn nothing about credit or about its impact on our lives. So it can be said that, here in America, we are often quite ignorant about things relating to money.

Such things are not taught in the schools. Yet, once we become adults, society expects us to suddenly have wisdom about money, credit and the like.

Will Rogers once said that “all of us are ignorant……just on different subjects”. After reading this article the reader will no longer be ignorant about the hard-to-understand, difficult-to=digest, easy-to-get confused topic of reverse mortgages. I will cover the basics in capsule form. The goal is to overcome the fear.

A reverse mortgage is a special and different kind of loan that’s easy to get if you are at least 62 years of age and own your own home, condo (PUD) or co-op (only in New York). It converts a portion of the value of the home into cash. The pool of money that is thus created can be received by the senior homeowner(s) in a variety of ways. Also there is no requirement that monthly mortgage payments be made, nor is there any personal liability attached to the loan.

The most popular program is the government insured FHA/HECM (Home Equity Conversion Mortgage). It represents over 90% of all reverse mortgages obtained. The other non-government insured reverse mortgages are called “proprietary” programs. This article will focus primarily on the FHA program.

The amount of money that can be created from a reverse mortgage is usually dependent upon the following:

1. The age of the youngest borrower.

2. The value of the home (up to a certain limit for some programs).

3. The interest rate (for some programs).

The pool of money that’s created can be received in a variety of ways. The options that may be available include a lump sum, partial lump sum, monthly payment, line of credit or a combination of same.

As above noted, one of the key things that sets a reverse mortgage apart from any other kind of loan is that its a non-recourse loan. There is no personal liability to the borrower, their estate or to their heirs providing the property is sold in an arms-length transaction.

Here is how this concept works. Let us assume for a moment that the amount that ultimately becomes due is greater than the value of the home. When the house is sold by the estate, it nets — lets say — $300,000. Let us also assume that the amount due on the loan is $400,000. The difference of $100,000 does not become a liability. You will not find this feature with typical “forward” loans.

Another key thing that makes reverse mortgages special and different is that monthly mortgage payments are not required. Interest and servicing fees accrue over time. This means as with any negative amortization loan, that the amount that becomes due will be always increasing because mortgage payments are not required.

This kind of loan is changing the lives of older Americans because it is easy to get, no monthly mortgage payments are required to be made, there is no personal liability, and the funds can be obtained in a bunch of ways. It is totally different from the typical loan that we are used to talking about.

These differences are daunting because they are not familiar. Yet these differences are enabling an older generation to remain in the home that they love. Remove the fear, and the differences will no longer be disquieting.

Reverse mortgages work well for many qualified property owners but not for everyone. If you think a reverse mortgage might be appropriate in your situation, be certain to get independent advice before signing any paperwork. Speak with a knowledgeable source, such as an attorney who specializes in elder law.

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.