Reverse Mortgage Guide

Patrick writes and says, “our California home is valued at approximately $1,000,000 but we owe $450,000 on it. What will a reverse mortgage do for us? I am turning 61 and my wife will be 60 in 5 months. I need input for planning purposes.”

I would make the following suggestion: Don’t plan yet.

The reason for delay is this: Significantly higher loan limits for FHA-insured reverse mortgages are being discussed on Capitol Hill — think in terms of $550,000 to almost $730,000.

With such limits you could retire your current loan and the monthly expense it represents. At 6 percent interest over 30 years, you would save $2,700 per month on principal and interest by paying off a $450,000 mortgage. Plus, with higher limits you could also have a significant line of credit or cash from closing.

As always with such questions, sit down with a knowledgeable advisor such as an attorney who specializes in elder law and review your situation before signing any paperwork.

The CongressDaily is reporting that Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee, wants to raise reverse mortgage loan limits to “almost $730,000.”
According to the publication, the reason Frank wants to raise the HECM loan limit is to collect more fees. Those fees would then be used to underwrite expected losses from […] read more

Over a period do years I have found that clients who have done their home work, need little or no assistance understanding why a reverse mortgage would work for them — or, in some cases, why it wouldn’t.
A number of clients have done their homework, but they still like to check with friends, family and […] read more

Back in January we reported that of roughly 375,000 FHA reverse mortgages which had been issued since HUD began the program, only 1,609 claims had been made against the reverse mortgage insurance plan.
That sure doesn’t sound like a lot of claims, but part of the reason for the low number is that most home equity […] read more

A few weeks ago my wife and I went to Florida to attend the 60th wedding anniversary of an aunt and uncle.
The honored couple are decent and honorable people who lead a good life. It was great to see that more than 100 friends and family members turned up to celebrate their big day.
Part of […] read more

Walter Updegrave, Money Magazine senior editor, has now written about reverse mortgages.
In his article, Reverse mortgages: Beware the come-ons, Updegrave says “reverse mortgages can help cash-strapped retirees generate extra money for living expenses, pay for home improvements, lower other debts or fund the occasional splurge.
“There’s also a downside to reverse mortgages’ growing popularity, however. Loan-origination […] read more

The Federal Deposit Insurance Corporation — the federal entity which insures bank accounts — has just issued a new publication entitled Money Tips for All Ages: Your Finances at Different Stages of Life.
The subjects covered include:
___Before You Retire: Getting Your Finances Ready for Your Golden Years
___After You Retire: Managing Your Expenses on a Fixed or […] read more

HUD has come out with a renewed set of guidelines regarding who can be paid for originating an FHA reverse mortgage — and who can’t.
According to the new mortgagee letter to lenders, HUD says the only people who can be paid for originating FHA-backed reverse mortgages are FHA-approved parties. However, the rules also allow payments […] read more

It was nearly two years ago that the Alliance for Retired Americans, a group with some 3 million members, wrote about reverse mortgages.
What’s interesting about what they wrote is that in the past two years real estate markets in many areas have gone from boom to bust and yet their analysis remains largely on track.
As […] read more

Last year both Fannie Mae and Freddie Mac, the big buyers of local mortgages, decided that falling real estate values required a change in the way they underwrite mortgages: In areas they identified as “declining” markets buyers would need an additional 5 percent down.
For reverse mortgage borrowers the new policy has been troubling. Why? Because […] read more

Our slowing economy is having an impact on seniors. “One in four affluent 60-year-olds are changing their retirement plans and 40 percent “downsizing” their lifestyles,” according to an April national survey from Bell Investment Advisors.
The survey used a random sample of opinions from 500 adults comprised of 250 men and 250 women who were born […] read more

For some time there has been considerable concern regarding the origination costs associated with HUD-insured reverse mortgages, fees which are “limited” to 2 percent of the property’s maximum claim amount.
“Generally,” says HUD, “the property value and the maximum claim amount will be the same because the maximum claim amount is the lesser of the appraised […] read more

For seniors in need there are alternatives to reverse mortgages, reports syndicated columnist Lew Sichelman, writing in the Chicago Tribune.
Sichelman says that seniors might want to look into “deferred-payment loans” from state and local governments to make home repairs, accessibility modifications and improvements to reduce energy usage.
Generally, says Sichelman, with DPLs “there are no origination […] read more

HUD has come out with new reverse mortgage regulations. The Department now says that “based on feedback from reverse mortgage counseling providers and cost data collected by HUD, HUD has determined that a HECM counseling fee of $125 per counseling session constitutes a reasonable and customary fee, and does not exceed a level so as […] read more

For too long, too many lenders have been enlisting advertising campaigns that have overstepped the boundaries of reasonableness and fairness. NRMLA — the National Reverse Mortgage Lenders Association — has now set the bar with its first ethics ruling regarding advertising standards for reverse mortgage lenders.
At its eastern regional meeting in Philadelphia, NRMLA issued guidelines […] read more

Reverse mortgage activity continues at a record pace.
HUD reports that as of mid-April it had received 73,840 home equity conversion mortgage (HECMs) applications so far in fiscal 2008, the accounting period that began October 1st. This compares with 59,913 reverse mortgages in the same period during FY 2007.
HUD to date has insured 59,413 HECMs, compared […] read more

Even the rich are getting stung by declining economic conditions, according to a new study by Bell Investment Advisors in Oakland.
Bell’s third annual Affluent Boomer Survey of 500, high-net-worth individuals who turn 60 this year found that:
___Almost 30 percent of affluent boomers say they feel more financial stress now than just six months ago.
___More than […] read more

When I got into this business six years ago, there was one proprietary (private brand) reverse mortgage program and three standard programs. These included the government-insured HECM, which came in two varieties: The monthly adjustable (with a margin of 150 basis points — 1.5 percent) and the annual adjustable (with a margin of 210 basis […] read more

The Santa Rose (CA) Press Democrat has a great story regarding how a reverse mortgage was used to save a home from foreclosure.
“Facing foreclosure on her Sebastopol home and Petaluma rentals,” Anna n-ha(cq) Millee used a reverse mortgage to pull cash out of the properties and pay off her lenders,” according to One borrower’s return […] read more

The Federal Reserve has now proposed new standards for credit cards, steps that should have been taken years ago.
As you check out the astonishingly-abusive practices which the Fed wants to end take a look at your credit cards. If there is any debt that ought to be paid off in full, it’s credit card debt. […] read more