Reverse Mortgage Guide

With so many people falling behind on their bill payments, people who receive Social Security may be wondering if their creditors will come after them by garnishing their wages. The good news is that Social Security benefits are protected from being seized by most creditors such as mortgage lenders, credit card companies, and auto lenders. The bad news is that if you owe the U.S. government money, your Social Security payments can be garnished. Money can also be seized if you owe child support or alimony.

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We usually think of reverse mortgages as a form of refinancing, something used to extract equity from a home which has been owned for many years and secures little if any debt.

But you can also use a reverse mortgage to purchase real estate: In basic terms you first qualify for a reverse mortgage, you then pick a property and at closing the title is assigned to the lender. At the end of the day you get a home with no required monthly payments for principal or interest, the lender gets a secured property and HUD gets insurance premiums.

As the FHA explains:

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If you or someone you know is dealing with a home foreclosure, that doesn’t mean you can’t vote in the presidential election next week. With nearly 2 million homes in foreclosure, that means a significant number of voters may be unsure about how to cast their ballots. Ohio has had about 99,000 foreclosure filings this year, and Nevada has had about 68,000, according to Parade magazine. Both are key states in the election. This could also affect renters if they lose their apartments because of landlord foreclosures.

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With all the news of bank losses, bank failures and bank screw-ups it’s hardly unnatural to wonder just how your bank fares in the safe-and-secure department.

For reverse mortgage borrowers or those considering a reverse mortgage the level of concern can range from “no worries” to “oh my.” Here are some situations to consider:

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How much will you need for retirement?

This is important stuff because with good planning you can determine well in advance whether or not you are likely to need a reverse mortgage.

You can get a good idea with the calculator available on Choose to Save.

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People who receive Social Security can expect their benefits to increase 5.8% next year. The Social Security Administration said the Cost-of-Living Adjustment (COLA) is the largest since 1982. With the increase, the average monthly payment to retirees will rise to $1,153 from $1,090.

However, despite the increase, many seniors may still have a tough time making ends meet. The cost of Medicare Part B premiums, which are deducted from Social Security benefits, tends to rise faster than the COLA, so the net benefit won’t keep pace with inflation, according to a brief written by Alicia Munnell and Dan Muldoon of the Center for Retirement Research at Boston College.

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Given the tumult in the securities markets it seems appropriate to ask if investment firms should have any special programs for seniors. And the answer, according to the Securities & Exchange Commission, is yes.

What might you expect from investment firms? Here are some of the suggestions from the SEC:

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Consumer bankruptcy filings rose 29% in September from a year earlier, according to the American Bankruptcy Institute. High levels of debt, heating costs, and falling home values are among the factors contributing to the rise in U.S bankruptcy filings. While Americans of all ages are finding themselves heading into bankruptcy court, it seems that the older people get, the more likely they’ll end up taking this route.

According to an article in the Wall Street Journal, people over 65 became twice as likely to file for bankruptcy. People over 55 accounted for 22% of bankruptcy filings in 2007, up from 8% in 1971. Those figures came from a study conducted by the Consumer Bankruptcy Project, which examined bankruptcy filings from 1991 to 2007. The main culprits that lead to bankruptcy among older people are jobs and medical costs. But don’t think that all those people who cited medical costs as a reason for bankruptcy didn’t have health insurance. Many of them do, but are forced to pay high premiums, deductibles, and other out-of-pocket costs that they just can’t afford.

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During the past week we have had the opportunity to host a couple in their mid-80s, people who well remember the Depression era — and don’t want to repeat it.

Rather than a reverse mortgage, they took a different approach to senior home financing: They sold the home they had owned for some 40 years, took half the money and bought a replacement property. They then invested the remaining cash in short-term, FDIC-insured certificates of deposit (CDs).
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What would the presidential candidates do with retiree pension funds?

The answer is not entirely clear, but some changes do stand out according to The Washington Post.

Both candidates agree that mandatory withdrawals from retirement accounts must end.
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Foreclosure filings rose 27% in August from a year earlier, according to RealtyTrac. The frequent reports about Americans losing their homes have made many homeowners desperate to find a way to avoid becoming another foreclosure statistic. Knowing that some people will do anything to keep their home has resulted in a variety of mortgage scams. Here are three types of mortgage fraud that Scambusters says have picked up steam around the country.

1. Equity stripping occurs when a con artist tricks a homeowner into giving them title to their home. Why would a homeowner do this? Because they’ve been told they can stay in their home as a renter then buy back the house after all of their financial issues have been resolved. The scammer takes out any equity left in the home and in the end the homeowner can’t afford to buy back the house.

2. In some cases fraudsters present themselves as someone who will help a homeowner by negotiating with their lenders. If you fall for this scheme you’ll be charged a lot of high fees for supposed efforts to contact lenders. Generally, your “rescuer” will also advise you not to answer any notices or phone calls from your creditors. Most people don’t realize they’ve been scammed until they’re in a deeper financial mess than before.

3. Bait and switch tactics focus on getting you to sign documents that give ownership of your home to scammers. They claim to be housing counselors who will help you obtain a new loan to fix all your financial woes. Of course the homeowner ends up signing away title to their property.

If you’re among the many Americans struggling to keep your home, avoid trusting strangers who offer to help you. If a stranger calls you on the phone or knocks on your door offering a deal, decline their help. If you do seek assistance from a legitimate organization to save your home, don’t sign any documents until you have an attorney review them.

You’re probably aware that scam artists regularly target senior citizens. And while you’re probably being more diligent about guarding your personal information to avoid being a victim of identity theft, keep in mind that some of these scammers are looking to tug on your heartstrings.

Paying for Prizes
People who are deaf and hard of hearing, and groups that work with them, are being targeted by con artists, according to the AARP Bulletin Today. One such scam involves sending emails that claim the recipient is the winner of a “lottery for the deaf” that is supposedly sponsored by the National Association for the Deaf (NAD), which is a legitimate organization. The emails say the prize is $50,000 but can’t be paid out until the winner sends a check for $1,500 to cover taxes and fees.

Of course the NAD isn’t affiliated with this scheme, and no legitimate lottery is going to request money in order for you to collect a prize. Keep in mind that when you pay taxes on anything—including sweepstakes and lottery winnings–the money goes directly to the government, not to some third party.

Skip the Surveys
Another scam involves emails from people claiming to be soliciting donations or taking surveys for organizations that work with the hard of hearing. The real purpose of these emails is to scam people out of money or get their personal financial information.

The best way to avoid being scammed is to never respond to unsolicited emails (or phone calls) requesting money or personal information no matter how much they touch your emotions. If you want to donate to an organization for the deaf or any other group, contact them directly. Investigate the background of charities you want to give to at the BBB Wise Giving Alliance. Also, never send money to anyone you don’t know or didn’t initiate contact with in the first place.

While cruising the Internet I came across an interesting reverse mortgage opportunity for lenders: Yes folks, step right up and meet an FHA reverse mortgage that pays a 4% commission to lenders.

Huh? Wait a minute. Didn’t the FHA Reform bill passed on Capitol Hill during the summer limit lender fees for FHA loans? Didn’t the new standards go into effect as of October 1st?

Yes and yes.
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There’s a new deal with reverse mortgage counseling. HUD has dumped lender-funded counselors in favor of counselors underwritten by HUD itself.

There is much to recommend the new policy. Conflicts under the old plan were obvious and overt, hopefully the new system will be better.

As HUD explains, “Section 2122 of the “Housing and Economic Recovery Act of 2008″ (HERA) (Pub. L. No. 110-289), enacted July 30, 2008, requires that the HECM mortgage must be executed by a mortgagor who received adequate counseling from an independent third party that is not either directly or indirectly associated or compensated by a party involved in 1) originating or servicing the mortgage; 2) funding the loan underlying the mortgage; or 3) the sale of annuities, investments, long-term care insurance, or any other type of financial or insurance product.”
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Just because you’re over 50 doesn’t mean your time in the working world has to wind down. Whether you’re one of the 2.2 million people who’ve lost their jobs in the past year, are bored with your position, or just want to move up, your years of job experience, talents, and any specialized knowledge you have will be an asset whether you choose to stay in the same field or transition to a new career. Here are five tips that will help you look for a new job.

1. Dust off that resume. If you’ve been in she same job for 10, 15, 20 years, or more, you’re resume is probably sorely out of date. When writing your resume focus on your most recent duties and give pertinent details instead of trying to include every job you ever had. Highlight areas that show your stuff, such as if you held a position with a lot of responsibility, increased sales, hired and trained employees, or oversaw large projects.

2. Work those connections. More than likely you’ve built up a network of people you’ve worked with over the years who might be able to assist with your job search. Former colleagues, clients, or other business associates may have the inside track on any hiring going on at their company or other tips that can help your search.

3. Don’t overlook professional associations, clubs, or alumni groups. Attending some of these meetings may give you insight into what’s happening in the field you want to be in, as well as contacts. Most colleges and universities have alumni groups that offer help with job searches.

4. Use your state employment office or local job search agencies. Your state agency may have training and job counseling, as well as help with resumes. Check the listings in your local newspaper for free workshops at other organizations in your area.

5. Go back to school. You may need to learn some new skills to be competitive in today’s job market. While earning a degree could open some new doors, in many cases earning a certificate or just taking classes to learn a new skill may be enough. If you aren’t tech savvy, consider taking some computer classes to make yourself more marketable.

Don’t let your age hold you back from finding a job you can enjoy and excel at.

The final figures are in for 2008 and it was a record year for FHA-backed reverse mortgages. That said, program growth was muted and mild, a far cry from the FHA program in general.

The way the government works is that it computes budgets and activities on the basis of “fiscal” years, periods which run from October 1st of one year until September 30th of the next. We now have final figures for fiscal 2008 and the results for FHA reverse mortgages — what HUD calls home equity conversion mortgages or HECMs — look like this:

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If you’ve been planning to retire in the next few years the $2 trillion loss in retirement savings over the past 15 months may make you want to scream. The beating that retirement funds have taken has many people wondering what the heck they’ve been working for all these years if they can’t enjoy the fruits of their labor. You have every right to be upset. But try to stay calm and take some steps to minimize the damage to your overall finances.

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If you are now a senior you have had a lifetime to accumulate assets, assets which you surely do not want reduced as the result of some lunatic banking decision.

One piece of good news in the midst the current mortgage meltdown is that FHA reverse mortgages remain secure because they are fully backed by HUD — if your lender implodes, explodes, shrinks or goes poof HUD will provide any cash which you are due under a reverse mortgage agreement.

Another piece of good news is this: Deposit insurance coverage has been increased.

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The National Reverse Mortgage Lenders Association says that the Department of Housing and Urban Development (HUD) has approved a single national loan limit of $417,000 for federally insured Home Equity Conversion Mortgages (HECM).

Previously, says NRMLA, “the HECM program assigned different lending limits by county ranging from $200,160 in rural areas to $362,790 in the highest home value areas.”

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The Securities & Exchange Commission is out with a new report which says that seniors have big money — at least as a group.

“Baby boomers today control more than $13 trillion in household investable assets, or over 50% of total U.S. household investment assets. Projections also show that nearly one in every six Americans will be 65 or older by the year 2020. Given the increasing number of investors who will need advice and guidance, financial services firms are actively developing new products and seeking to provide financial advice and services to investors as they prepare for and reach retirement.”

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