Reverse Mortgage Guide

The New York Times has an amazing story that impacts seniors, the reason why Medicare produces fewer benefits than it should.

The concept is very simple: Until July 1st, tomorrow, Medicare has not been allowed to seek competitive bids for medical equipment and drugs. The result is what any normal, sentient being would expect: Gross overcharges.

For example, a walker for which Medicare pays $110 is sold by Wal-Mart for $59.92, according to the paper.

The excess profits collected by equipment and drug makers means there are fewer dollars available in the system for additional services, care, equipment and pharmaceuticals. In effect, the public is being screwed twice — once by paying inflated prices and then again by not having other services available which could be financed with a market-based bidding system.

The Times, in High Medicare Costs, Courtesy of Congress (June 25, 2008), also explains that the open bidding system which starts tomorrow is already under attack and may be repealed!

As the Times reports:

“Now, would you like to guess how the equipment makers feel about this?

“Right.

“With the changeover looming, they have increased their contributions to Congress. They have also started publicly claiming that competitive bidding will, among other things, deprive some patients of oxygen equipment they need.

“The industry seems to be having some success, too. On Tuesday, the House overwhelmingly passed a sprawling Medicare bill that would throw out the initial bidding results. Pete Stark and John Dingell, two Democratic committee chairmen, and John Boehner, the House Republican leader, all pushed for the provision. The Senate will soon take up a similar bill.”

Do your part. Contact your representative or senator.

The full story from the Times can be found at: High Medicare Costs, Courtesy of Congress

Ever wonder how much you can get each month with Social Security?

The answer is online with the Social Security Quick Calculator.

Just enter your birthday and your current income (no one asks for your name or number) and the calculator shows how much you would get per month in today’s dollars — or, if you like, inflated dollars. The amounts show what happens if you retire now, if you retire with full benefits and if you retire at age 70.

There is a value to the calculator and it is this: Could you live on the amount available from Social Security? If not, where do you get the extra dollars that you’ll need for everyday living?

When you look at the numbers from Social Security you can understand why demand for reverse mortgages is going to increase.

According to the New York Times, “retirees are increasingly using mortgages as a financial tool — and not simply as a last resort to pay for health care emergencies and the like.

“Indeed, there is nothing to stop people from using the loan proceeds for vacations or cars or whatever they want. Millions just may do that someday, which makes reverse mortgages a real wild card. Their growth certainly raises the likelihood that large portions of family homesteads in America will end up belonging to banks, not heirs.” (See: 8 Reasons You Should Not Expect an Inheritance, June 21, 2008)

This sounds logical, but in practice very few homes have reverse mortgages now. As to the future, reverse mortgage financing will surely become more common, but much of the housing stock owned by seniors is likely to remain unencumbered.

Why?

The National Association of Reverse Mortgages Lenders (NARML) says in the last quarter of 2007 that seniors held real estate equity worth $4.22 trillion. That’s a huge amount of value and having spent a lifetime getting rid of mortgages a lot of seniors are simply not inclined to take out another.

Yes, some seniors will need a reverse mortgage to stave off foreclosure. Others will need reverse loans to access cash. Some will get reverse mortgages to put children and grandchildren through college or pay medical bills.

But many seniors — having spent a lifetime avoiding mortgage debt — will not be easily swayed to encumber their homes in their later years.

To date there have been roughly 390,000 reverse mortgages insured by the FHA since 1989 and a far-smaller number issued by private-sector sources. At the same time, NARML says there are 13.2 million households that qualify for reverse mortgage financing.

Those 390,000 HECMs are just a small portion of 13.2 million potential borrowers, but the real relationship is different. To get the right comparison you need to measure all reverse mortgages issued against all households that would have qualified since 1989.

Will the number of reverse mortgages increase? Absolutely. Will large portions of the senior population opt for a reverse mortgage? It’s just speculation but the answer here is: not likely.

Our sister site, FHALoanPros.com, has posted the following bulletin:

FHA modernization has passed the Senate by a vote of 83-9.

The legislation, among other features, would allow the FHA to insure up to $300 billion in new financing to help homeowners with toxic loans who face foreclosure.

However, the bill is not a give-away — borrowers would face stiff fees to enter the program and would lose a share of any profits when the property is sold. Lenders would lose on every refinanced loan.

The “Housing and Economic Recovery Act of 2008″ was strongly supported by both Senator Chris Dodd (D-CT) and Senator Richard Shelby (R-AL), respectively the chairman and ranking member of the Senate Committee on Banking, Housing and Urban Affairs.

Alternatively, the White House threatened to veto the measure, a threat without substance in the face of yesterday’s lopsided and bipartisan vote.

Passage with strong bipartisan support has been predicted here for several obvious reasons:

First, the foreclosure crisis is getting worse not better.

Second, Republican senators up for re-election did not want to be seen as opposing help for those facing foreclosure.

Third, Mr. Bush is a lame-duck president who has achieved Nixon-like levels of public dislike.

The Senate and House measures, which differ, must now be unified into a single bill by a conference committee. On Capitol Hill the idea is to see if this can be done before the July 4th recess, a tight schedule.

Voting against the measure were Senators Jon Kyl (R-AZ), Mike Crapo (R-ID), Jim Bunning (R-KY), David Vitter (R-LA), Chris Bond (R-MO), John Ensign (R-NV), Jim Demint (R-SC), John Barrasso (R-WY) and Mike Enzi (R-WY). Given the steep foreclosure levels in Nevada, the vote by John Ensign is particularly remarkable.

With regard to the presidential campaign, neither Sen. McCain nor Sen. Obama were present for the vote.

Reuters has an interesting story about the REX program, an equity-sharing arrangement which is an alternative to a reverse mortgage.

According to Tapping home equity for no-debt cash, the REX approach worked like this for one couple: “It gave them $117,000 in cash to spend however they wanted, and they owe no payments until they sell the house. At that time, they’ll owe Rex & Co. the $117,000 plus half of the appreciation in their home’s worth between the time they signed the agreement and the time they sell the house. If the house goes down in value, Rex & Co. will eat half of that loss as well.”

The suspicion here is that we will see more equity sharing programs such as REX and EquityKey — but only if home values again begin to rise.

To make equity-sharing work the lender must be able to make a profit. With an equity-sharing arrangement where the lender advances money against an interest in future appreciation there must, in fact, be future appreciation.

One could argue that lenders should make equity-sharing deals when home values are down because they could capture additional appreciation as prices rise. The big assumption here is that prices will actually increase.

The problem is that there is risk in the marketplace. Consider that the Nikkei — a measure of 225 leading Japanese stocks — stood at 13,743.85 yesterday. On December 29, 1989 the Nikkei reached 38,915.

For the full Reuters story, see: Tapping home equity for no-debt cash

While much of the mortgage industry mopes along, FHA is having a banner year.

Figures just released by HUD show that in the first quarter of 2008 the FHA received 464,600 mortgage applications for one-to-four-unit properties — that’s up 182 percent over last year.

A total of 237,800 loans were endorsed — an increase of 97 percent.

There is a substantial difference between the number of applications received and the number of loans actually insured — 226,800 applications for the quarter. It’s likely that some portion of this total is represented by application received during the quarter but not yet processed.

As to reverse mortgages, the latest HUD numbers show that as of mid-June a total of 78,490 HECMs were insured, a gain of just 3.9 percent over the past year.

Why the big gains for FHA loans generally but not for reverse mortgages?

The answer concerns how the program has evolved: According to HUD more than 50 percent of all reverse mortgages insured under the FHA program were originated in the 24 months before March 2008.

There were 37,790 HECMs issued in 2004, 43,081 in 2005, 76,282 in 2006 and 107,367 in 2007. Given that the program has had roughly 390,000 loans going back to 1989, it would be unreasonable to expect a huge percentage increase this year.

In effect, the HECM program is maturing.

As mentioned earlier, the Center for Responsible Lending has come out with a report regarding unjustified bank fees for seniors.

“The new report,” says the Center, “shows that overdrafts triggered by debit card use hit people at or approaching retirement age hard even though they use plastic less than younger debt-card holders. The cost -– $1.65 in fees for every $1 advanced –- reinforces CRL’s previous research, which found that overdraft fees are disproportionate to the amount advanced to cover a purchase: Unauthorized overdrafts cost Americans $17.5 billion in fees for $15.8 billion advanced.”

More remarkable, USA Today has an article which explains that not only do banks charge for overdrafts, they charge multiple times:

“In April, Washington Mutual raised its overdraft fee in most states to $34 from $32. Also this year, the bank increased the number of times a day that a customer can be hit with this fee, from five to seven. Washington Mutual spokesman Gary Kishner says the bank raises fees partly due to ‘competitive factors.’”

“This year, Bank of America raised the fee charged on the first day a customer overdraws to $25 from $20. The bank also raised the number of times a customer can be hit with this fee per day to seven from five. And it’s told customers that most signature debit-card transactions will reduce their balances that same day and be subject to fees if there isn’t enough money in the account. Before, consumers often avoided this fee if they deposited money before a purchase cleared.”

For the full story in USA Today, see: Banks raise penalty fees for customers’ overdrafts.

Here’s an idea: Consider a community bank. Also, get an overdraft protection line for your checking account.

And while you’re at it, complain to your senator or representative. For contact information, press here.

EquityKey is offering a shared equity program for seniors in New York, New Jersey and Connecticut.

The nub of the arrangement is this:

“The EquityKey Real Estate Option gives property owners the opportunity to receive typically 10 to 15 percent of the assessed value of their property as an upfront cash payment in return for selling 50 percent of its future appreciation to EquityKey. The sale of this Real Estate Option does not dilute the owner’s current equity. Unlike a reverse mortgage or other home equity debt product, the EquityKey payment does not accrue interest and does not need to be repaid as long as the homeowner abides by the EquityKey option agreement.”

Since existing equity is untouched by this approach, I had a thought….

Could someone have both a reverse mortgage and an equity-sharing arrangement?

In commercial real estate and with mortgage securities it is not unusual to sell of portions of the income stream. And, of course, many homes have first and second mortgages. Why not have the same concept with senior homes?

Example, Smith has a $750,000 home and gets a $250,000 reverse mortgage. In addition, Smith gets a $112,500 shared equity loan (15 percent of the property’s current value) in exchange for a half interest in the future appreciation of the property.

For borrowers the result would be a significant cash increase. But would there be enough equity for lenders?

As is always the case with reverse mortgage products, borrowers should review their options and speak with an independent counselor such as an attorney who specializes in elder law before signing any paperwork.

The Housing and Economic Recovery Act of 2008 proposed by Senators Chris Dodd (D-CT) and Richard Shelby (R-AL), respectively the Chairman and Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs, is now being sent to the Senate floor for consideration.

For reverse mortgage borrowers, if passed two big items in the 537-page legislation stand out.

First, the FHA loan limit would be increased to $625,000.

Second, the loan origination fee for reverse mortgages insured by HUD would be reduced from 2 percent to 1.5 percent.

While a higher FHA loan limit has value and a reduction in origination costs should be cheered, what about lowering reverse mortgage insurance premiums?

In essence, the government is telling private-sector lenders to lower their costs for FHA-insured reverse mortgages, but HECM borrowers would still face massive insurance costs.

Believing as we do that what’s good for the goose is good for the gander, what about those HUD fees? Is there any independent, non-HUD study which can say if reverse mortgage losses justify current HUD insurance premiums?

Later today the Center for Responsible Lending will release a new research report which looks at how “unauthorized bank and credit union overdraft fees hurt older Americans, especially those who rely mostly on a monthly Social Security check.”

We usually think of financial issues for seniors in terms of interest rates, product fees and upfront costs. In this maze of assorted charges there should never be “unauthorized” fees.

One way to protect yourself is to bank online — with caution. Thus you may want to have online access to checking and savings accounts, but without the option to electronically withdraw money or pay bills from home.

With accounts set up this way you can always check balances, deposits, withdrawals and fees without leaving home. At the same time, if someone gains access to your online account they cannot withdraw a dime because extractions are not permitted.

My wife (a former banker) and I like this approach because it allows us to carefully monitor account activity. And sure enough, every so often something turns up which strikes us as odd or unusual, something worth asking about.

As to paying bills, the checks are in the mail.

When it comes to reverse mortgages there are times when lenders can say “show me the money” — and times when they can’t.

The usual rules prevent lenders from charging any fees related to reverse-mortgage financing before borrowers receive counseling. That means:

___No FHA case number can be assigned (because there is no FHA loan to process at this point)

___No fees for reverse-mortgage applications

___No fees for appraisals

___No fees for credit reports

___No fees for title searches

For seniors, of course, several questions emerge:

What fees — if any — can be charged prior to counseling or as a result of counseling?

Where can you get independent counseling that meets your needs?

How is the counselor or counseling service compensated?

In considering counseling services, remember the goal for seniors is not “free” services, the goal is to get the best counseling possible given your particular circumstances. If that means you need to pay a counselor such as an attorney who specializes in elder law or a fee-only financial planner, that’s fair and that’s fine.

HUD has come out with new “guidance” for reverse mortgage counselors. The problem, it seems, is that in the flight to financial sanity too many borrowers are taking out fixed-rate reverse mortgages.

HUD says “there are several risk factors that make a fixed rate HECM a poor choice for many seniors.”

Yes, fixed-rates may now be higher than initial adjustable-rate interest levels TODAY. But what about down the line? Just ask the folks with interest-only and option ARMs if they made a wise or inexpensive financial choice.

Yes, the amount available with a fixed-rate HECM may be lower than a loan with an adjustable-rate. What does this tell you? It says the program needs to be reconfigured.

HUD says “over these long horizons, managing interest rate risk by choosing a fixed rate mortgage may be much less important than maximizing upfront proceeds and obtaining a lower initial loan rate.” Less important to whom? The borrower? The borrower’s heirs? The lender?

HUD says “borrowers with a closed-end loan will not be able to prepay the loan and draw any additional funds.” Does HUD mean that a borrower cannot refinance a fixed-rate HECM? Given that home equity loans are routinely adjustable, you have to wonder why the HECM program was set up this way. Who, exactly, benefits?

Yes, a senior who uses reverse mortgage proceeds to purchase an annuity is likely to get hosed. But this is true whether the HECM interest rate is fixed or adjustable. HUD should support proposed legislation to prohibit the use of reverse mortgage funds for the purchase of annuities.

Hopefully reverse mortgage counselors will mention with equal zeal that adjustable-rate mortgages can potentially result in far-higher costs than fixed-rate loans, leaving less for estates and heirs.

HUD’s comments are below:

Guidance on HECM Counseling for All Housing Counseling Agencies Approved to Provide HECM Counseling:

It has come to HUD’s attention that many consumers are now choosing the fixed-rate HECM. Given that this product is not always the best option for seniors, HUD will now require that HECM counselors highlight the risks related to fixed rate HECMs to their clients during a counseling session. There are several risk factors that make a fixed rate HECM a poor choice for many seniors. Clients should be aware of the following risks and considerations when opting for a fixed rate over a floating rate HECM:

1. Rate Comparison: Fixed-rate HECMs often have loan rates considerably higher than the current adjustable rate HECM. The client’s total interest cost over the life of the loan may be considerably higher for a fixed-rate vs. an adjustable-rate HECM.

2. Proceeds Comparison: Because fixed-rate HECMs generally will have higher rates, the current amount of proceeds available from a fixed rate HECM may be lower than the proceeds available from an adjustable rate HECM.

3. Reverse versus Traditional Mortgages: Borrowers should carefully evaluate the reasons for selecting a fixed rate HECM. In a conventional mortgage, borrowers tend to prefer fixed rates due to the certainty of the monthly payment to be made. In a reverse mortgage, borrowers remain in their homes while enjoying the use of their reverse mortgage proceeds and are not required to make payments. Over these many years of home tenancy, home equity goes down as the debt balance goes up. Over these long horizons, managing interest rate risk by choosing a fixed rate mortgage may be much less important than maximizing upfront proceeds and obtaining a lower initial loan rate.

4. Disadvantage of closed-end credit: Borrowers desiring a fixed-rate HECM will receive a closed-end loan. Borrowers with a closed-end loan will not be able to prepay the loan and draw any additional funds.

5. Disadvantage of drawing all funds. If a borrower chooses to draw all of their funds to qualify for a lower fixed interest rate, this action may not be to their benefit. Drawing the entire loan balance at closing exposes the borrower to a number of risks, including the risk that the interest payment on the HECM loan would be greater than the interest paid by an alternative investment vehicle (e.g. interest bearing savings account). Other investment vehicles like deferred annuities do not allow the owner of the annuity to access funds for a certain length of time. So if a senior uses the HECM loan proceeds to purchase a deferred annuity, their access to these funds may be restricted for a significant period of time unless the senior pays an early withdrawal penalty. While a deferred annuity may be a reasonable option for some seniors given their specific situation, counselors should help clients understand the risks of drawing down all funds to invest in alternative investment vehicles. In addition, should a consumer need additional cash flow in the future, no additional proceeds will be available.

It is now difficult or impossible to get a reverse mortgage in the state of Washington.

According to a report in The Olympian, “as of today, some Washington brokers will not be able to offer reverse mortgages, in which senior citizens can draw down the equity in their houses in monthly payments.”

The problem, says the Olympic, WA paper, is that “by all accounts, the ban is unintentional. Legislators voted unanimously this year to move unregulated mortgage brokers under the scrutiny of the Department of Financial Services.

“But by making those businesses subject to the Consumer Loan Act effective today, they ban them from offering the reverse-mortgage style of loan.”

Because the prohibition is in the form of a law and not a regulation, the matter will have to be resolved by the state legislature. When that will happen is unclear, but state residents are advised to contact state lawmakers. You can reach state lawmakers by using this contact page.

For the full story, see: Popular type of mortgage victim of new broker law.

IndyMac Bank, the parent of Financial Freedom, a major reverse mortgage lender, reports that reverse mortgage originations reached $315 million in May. That’s down 10% from April.

A company chart shows that Financial Freedom for the month of May originated loans worth $222.81 million and jumbo reverse mortgages valued at $92.64 million, a total of $315.45 million. That’s down 29.5 percent from a year ago. In May 2007 Financial Freedom originated loans worth $447.66 million.

Interestingly, HUD reported that for the period from May 16-31 it originated 3,963 HECMs — home equity conversion mortgages in HUD-speak.

In the first half of the month HUD originated 5,149 reverse mortgages — meaning that production fell 23 percent in the second half of the month.

Since October 1st, the start of the fiscal year, HUD has approved 91,264 HECM, a strong total.

However, the May figures raise a question: Is the steam going out of reverse mortgage demand? If so, why?

It may be that seniors are waiting for higher reverse mortgage loan limits. With bigger loan amounts such financing would be very much more interesting to a larger number of homeowners.

Or, seniors could be waiting for FHA modernization, Democratic legislation which if passed would lower and cap origination fees.

Stay tuned — let’s see what happens in June.

A good number of people suggest that reverse mortgages are just too darn expensive. While I would love to see the total costs come down, I do not see that happening in the near future. While, the origination fee will come down if FHA modernization is passed in Washington, someone has to convince FHA/HUD to also lower the mortgage insurance premiums on these loans, and not just the origination fees paid to lenders.

Having said this, I think that the real cost of obtaining the reverse mortgage is what one has to give up to get it. Economists like to talk about “opportunity costs”. How expensive is “too” expensive? Is the magic number $18,000, or $15,000 or $9,000 or $5,000? Where should the line be drawn? (This also depends upon value and how much a senior can withdraw.)

I think the focus has to be on other available options. Too many professionals in various fields say to their senior clients, “Do not get a reverse mortgage because it’s too expensive.” When a client tells me this, I ask, “Well what other options did this person come up with”?

Typically the answer is “none”.

I then go through the options with the client. Selling? Moving in with family? Assisted living? Downsizing? REX or Equity Choice?

Another way to look at this is as follows: If you were gravely ill and there was one doctor that could cure you, would you go to that doctor? If that doctor was expensive would you still go to that doctor? I think that the answer would be “yes” in both instances.

Well, reverse mortgages make sense for many people. It is the cure for the financial ills that many are facing. I encourage everyone to stop looking at costs of reverse mortgages without also looking at the costs of alternative options.

Likewise, there are some who look only at positive reverse mortgage features and say, “this is for me”. This is also a mistake. The only way to evaluate the program is to look at all the positives along with all the negatives, see what your alternatives are and then make a determination.

Sometimes you will find that a reverse mortgage is a good option given the realistic choices available. Sometimes it will not be a good choice. Whatever result you find, protect your interests by considering alternative solutions for your financial situation to see which one works best. And get professional help to make the job easier and the result better.

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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.

If you’re a senior and have financial difficulties, which is better: A short-sale or a reverse mortgage?

With a short-sale you sell your home at a discount — and the lender accepts less than the full mortgage balance to make the deal work.

The only reason a lender will agree to take a loss with a short sale is that it believes it will have even bigger costs if the property is foreclosed.

But why should a lender take any loss? If the value of the property goes up the lender does not get a share of the profits so why should the lender take a loss if the value of a home declines?

In terms of credit, a reverse mortgage can allow you to pay off the existing mortgage on your home — and as a result eliminate a huge monthly payment. That’s good for your cashflow and also good for your credit standing because a reverse mortgage is not a negative item.

Also, of course, with a reverse mortgage you get to stay in your home while with a short-sale the property is sold and you must rent it back or move elsewhere.
Fair Isaac Corporation — developer of the most widely-used credit scoring systems — explains that for purposes of credit reporting a short-sale is no different from a foreclosure. Few events, of course, are more damaging to credit scores than a foreclosure.

Here’s what the company says at its MyFico.com website:

Are the alternatives to foreclosure any better as far as my FICO score is concerned?

“The common alternatives to foreclosure, such as short sales, and deeds-in-lieu of foreclosure are all “not paid as agreed” accounts, and considered the same by your FICO® score. This is not to say that these may not be better options for you from a financial perspective, just that they will be considered no better or worse for your FICO score.

“If you are considering bankruptcy as an alternative to foreclosure, that may have a greater impact to your FICO score. While a foreclosure is a single account that you default on, declaring bankruptcy has the opportunity to affect multiple accounts and therefore has potential to have a greater negative impact on your FICO score.”

It was in December 1989 that the Japanese stock market, the Nikkei, reached 38,915. Japan was seen as the economic power of the future, the country to emulate, the country that was buying our companies and best real estate.

Last week the Nikkei was at 14,489.44.

With home prices falling in most areas across the U.S., the great hope is that what we are seeing is a short-term decline, something that will quickly end and then home values will rebound.

It would be comforting to suggest that predictions in this area have been helpful, but that has hardly been the case. A succession of the “worst is over” comments have proved terribly wrong, and the moment when the economy will turn around gets pushed back further and further each month.

The experience with the Nikkei — and the corollary experience with Japanese property values — shows that long-term declines are not the stuff of fiction. Unlike the U.S., Japan had and has a strong currency, a good economy and excellent private savings.

One reason to consider a reverse mortgage is to get cash now, to buy more real estate while there is a buyers market — and to then sell the property when, hopefully, home values rise.

This is a strategy which would have made sense in many previous down markets in the U.S. — but as they say on Wall Street, past performance does not guarantee future results.

Until we know what those future results might be, we should all hope that the economic example of Japan does not loom in our future.

For decades Ed McMahon has been a popular presence on national television, most notably because of his work with Johnny Carson and Star Search. Now age 85, it has been widely reported that McMahon is behind on his $4.8 million mortgage and owes some $644,000 in back payments.

Foreclosure looms for McMahon.

The McMahon home in California has been for sale for two years at a price of $6.25 million, a figure which suggests that McMahon has substantial equity.

Appearing on the Larry King Show, McMahon and his wife, Pam, were remarkably gracious, blaming no one for their problems but themselves.

You look at this and think: Ed has equity and is old enough to qualify for a reverse mortgage.

I’ve never heard of a $5.444 million reverse mortgage ($4.8 million + $644,000), but why not? If the numbers are right, Ed could pay off his current mortgage and live in his home.

McMahon, after all, likely wants no more than anyone else, the ability to stay where he has spent much of his life.

If someone as successful as McMahon can run into financial trouble in his advanced years, it can happen to anyone — reason enough to wish him well and to remember the words of the Phil Ochs’ song, “there but for fortune go you or I.”

For some time there has been an effort to raise the loan limit for FHA-insured reverse mortgages, or home equity conversion mortgages (HECMs).

The logic behind such an increase is plain: Seniors would like to have the option of getting as much equity from their homes as possible. Also, in many high-cost areas the FHA limit is far below typical home values.

But now a new factor has begun to emerge which will surely complicate the loan limit debate: Put very simply, with each passing month borrowers have less equity because local home prices are diving.

The National Association of Realtors reports that “the national median existing-home price2 for all housing types was $202,300 in April, which is 8.0 percent below a year ago when the median was $219,900.”

In many markets the value declines are substantially worse.

In California — where about 1/10th of us live — the California Association of Realtors says that “home sales increased 2.5 percent in April in California compared with the same period a year ago, while the median price of an existing home fell 32 percent.”

The median price of an existing, single-family detached home in California during April 2008 was $403,870, a 32 percent decrease from the revised $594,110 median for April 2007, C.A.R. reported.

This is a serious matter. While folks debate loan-limit philosophies, seniors hoping to capture equity from long-held properties are losing opportunities everyday  to finance, refinance and sell.

We usually think of reverse mortgages in terms of the U.S. marketplace, but they also have reverse mortgages overseas.

For those who say that reverse mortgages are too complex to explain, you need to take a look at Sorted.org.nz. The site has exceptional information regarding various financial issues, including costs for New Zealand reverse mortgages.

One of the more interesting items on the site is a reverse mortgage calculator. This calculator is important because it plainly shows loan costs and not just loan pay-out amounts (or, as they are technically called, “the good stuff”).

Try the calculator and you get back a matrix which shows results for five, 10, 15 and 20 years. You plainly see the fees paid, interest costs, the projected property value and any remaining equity.

It would be great if we had similar calculators online for U.S. reverse mortgage products. Such calculators would give borrowers a chance to see costs up front, in private and without the need to register with anyone or to make an appointment.

I think a like calculator in the U.S. would be good for borrowers — and very good for lenders seeking to help members of the public make the best possible choices.