Saver reverse mortgage shows modest gain

by Peter G. Miller
March 23rd, 2011

Things were supposed to be better in February. The FHA Saver reverse mortgage product was supposed to gain traction with time and to some extent this has happened. But given the huge advantage of the program — an up-front mortgage insurance premium of just .1 percent versus the 2.0 percent for the regular FHA-insured reverse mortgage product — the latest production figures are hardly exceptional.

To start in February HUD endorsed 6,904 standard reverse mortgages. This is down 1.7 percent from last year, just about a rounding error and not evidence of a trend.

As to the HECM Saver, there were 296 such loans endorsed by HUD versus 165 in January. That’s an increase of 79.4 percent.

The catch, of course, is that it’s possible to have huge percentage increases when you’re dealing with small numbers.

Another way to view the Saver product is to say that in February there were a total of 7,200 reverse mortgage originations. Of these, 4.11 percent were Saver HECMs.

There are, I suspect, several parts to the Saver mystery.

First, reverse mortgages in general continue to read more

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Your reverse mortgage checklist

by Francine Huff
March 16th, 2011

Your financial situation may not be the same today as it was last year or even last month. So if you are at least 62 years old and are trying to plan for retirement, use the following checklist when considering reverse mortgages.

  1. Take a comprehensive look at your entire financial situation before making any big decisions. That means scrutinizing your budget to see where you may be able to change spending habits to keep more of your income. You can get help with this from a financial planner who specializes in retirement issues.
  2. Set up an appointment with a reverse mortgage counselor if you want to convert home equity to cash. The majority of reverse mortgages in the U.S. are through the Home Equity Conversion Mortgage (HECM) program, so counseling from an agency approved by the Department of Housing and Urban Development (HUD) is required. The counselors must pass an HECM exam approved by HUD.
  3. Make sure you’ve exhausted all other alternatives to borrowing money. There may be programs in your community aimed at helping senior citizens with housing costs, food, home repairs and other services. Ask around at your local center on aging, community centers, churches and other organizations.
  4. Decide ahead of time what reverse mortgage proceeds will be used for. Many retirees use the money to pay for property taxes, medical care, prescriptions and home repairs, among other things. There aren’t too many restrictions on what the money can be used for, and you can even purchase another home to live in as long as it will be your principal residence.

Reverse mortgage guidelines

Get all the facts about reverse mortgage guidelines before filling out an application. Too many people have made the mistake of thinking a reverse loan would solve all their problems without really investigating whether or not borrowing money was right for their situation.

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Bankruptcy and reverse mortgages

by Francine Huff
March 15th, 2011

Maybe you got a reverse mortgage a while back and are still struggling with mounds of debt. If you’ve exhausted all your options for getting things under control, you may be contemplating a bankruptcy. Here’s what you need to know about how a bankruptcy filing affects a reverse loan.

Using reverse mortgages

Reverse mortgages allow people aged 62 and up to convert some home equity into cash. The money can be taken as a lump sum, through installments, or as a line of credit. Reverse loans are designed to help senior citizens supplement their income, but some borrowers may still find themselves accumulating even more debt above and beyond reverse loans.

What about foreclosure?

Filing for bankruptcy doesn’t automatically mean that you’ll lose your house through foreclosure if you have a reverse mortgage. But the property is an asset, and might be liquidated in a Chapter 7 filing to help pay off debt. According to David M. Siegel, an Illinois bankruptcy attorney, “A trustee in a Chapter 7 bankruptcy case can liquidate real estate secured by a reverse mortgage if there is available equity above and beyond what a debtor can protect as exempt.”

Repaying a reverse loan

Generally, a Chapter 13 bankruptcy filing involves setting up some type of repayment plan for debt. Reverse mortgage debt may be structured so that interest and monthly payments are more affordable. Under the United States Bankruptcy Code repayment plans can last up to five years, so if reverse mortgage debt is involved it would have to be paid off in that time. Obviously, it can get quite complicated trying to work out a repayment plan for a senior who is on a fixed income. Consult with a qualified bankruptcy attorney who can guide you through the process.

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Addressing concerns of reverse mortgage heirs

by Francine Huff
March 14th, 2011

Are your kids against you getting a reverse mortgage? Deciding to draw down the equity in your home with a reverse loan can cause a lot of concern among your adult kids. Although the decision to apply for a Home Equity Conversion Mortgage (HECM) is ultimately yours, that doesn’t mean your kids won’t have a lot to say about it. Here are points to discuss with your kids about getting a reverse loan.

  1. Who pays back the loan after you die? For the most part, reverse mortgage heirs have not been liable for paying back the loan. The loan usually gets paid when the mortgage lender sells it, and any remaining equity goes to heirs. But recently, AARP flied a lawsuit against the Department of Housing and Urban Development over changes to the HECM program that has led to reverse mortgage heirs facing eviction and foreclosure if they don’t repay reverse loans, even if the payoff is higher than their home’s value.
  2. What do you plan to do with all that money? If you are of sound mind and can make your own financial decisions, that really isn’t anyone else’s’ business. However, if you rely on your kids for some financial support or other types of assistance, it seems like a legitimate question for them to ask.
  3. Where are you getting your information about reverse loans? It may make sense to have your son or daughter attend the mandatory reverse mortgage counseling session. The counselor will review reverse mortgage guidelines and give you alternatives to borrowing money, such as programs that may be available in your community.

Reverse mortgage discussion

Some older homeowners have had success with reverse loans, while others find that borrowing money is not the right choice. It’s never a bad idea to discuss major financial decisions with trusted heirs who can help you make the right choice. But in the end whether or not to apply for a reverse mortgage should be about helping your financial situation, not making other people happy.

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AARP sues HUD over reverse loan changes

by Francine Huff
March 10th, 2011

AARP is suing the U.S. government over the effect of changes made to its reverse mortgage program. A lawsuit was filed this week in U.S. District Court for the District of Columbia seeking an injunction prohibiting the Department of Housing and Urban Development (HUD) from foreclosing on surviving spouses.

Reverse mortgage heirs and eviction

The suit was filed by AARP Litigation Foundation and law firm Mehri and Skalet PLLC on behalf of three plaintiffs. The plaintiffs are surviving spouses who who say that changes in the reverse loan program allow reverse mortgage lenders to inititate foreclosure and eviction proceedings against them.

According to a statement from AARP:

The case will have broad national implications, because the outcome will determine whether spouses will be able to stay in homes that are now “underwater” as a result of the housing downturn, a possibility that reverse mortgage borrowers have always paid insurance premiums to protect against.

Paying off reverse loans

Prior to 2008 HUD rules stated that borrowers and their heirs would never owe more than a home was worth when repaying a reverse loan. But changes in the rules that year stated that reverse mortgage heirs, including surviving spouses, must pay the full balance of the mortgage in order to keep the home, even if that amount exceeds the value of the property.

Hurting senior citizens

“Rather than protecting borrowers, HUD retroactively changed the terms of the loans to make these elderly borrowers’ spouses and heirs pay more to keep their home than an unrelated purchaser would have to pay to purchase the property,” Steven A. Skalet, of Mehri & Skalet PLLC said in a statement. “This is shameful and we intend to make HUD honor the representations and promises they made to borrowers when they signed up for these government-insured loans.”

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Will reverse mortgages die on Capitol Hill?

by Peter G. Miller
March 9th, 2011

Congress is on the warpath. It’s wants to get rid of allegedly failed and excessive housing programs and already two programs have bitten the dust with initial votes. The question, of course, is could the same fate await reverse mortgages?

The House Financial Services Committee has already votes to pass H.R. 830, The FHA Refinance Program Termination Act and H.R. 836, the Emergency Mortgage Relief Program Termination Act.

The first bill gets rid of HUD’s short-refi program. This is not a big deal as only 44 FHA loans have been originated under this concept.

The second bill, H.R. 836, provides temporary help for people who typically have lost their jobs. As the Committee explains:

“The Emergency Homeowner Relief Program provides loans to unemployed borrowers for a period of 12 months, with a possible 12 month extension. These loans increase the amount of the borrower’s indebtedness, so a borrower who is unable to pay back either the original amount of principal or the additional loans made under the program will be worse off in the long run. Those borrowers derive no benefit from the program, and the government will suffer losses from their eventual defaults.

“The Obama Administration, in its FY 2012 budget proposal, estimates the program to have an almost 98 percent subsidy rate. This means for every $1 spent, the government will lose 98 cents. Also, HUD regulations set up a process where the bridge loan can be forgiven over a five-year period. This is not a loan program, but another government grant program.”

The idea that emergency help for unemployed borrowers makes them “worse off” is nonsense. What it really means is that while someone is looking for a job they do not lose their home. It’s just a guess, but such individuals are probably elated to have government help.

Reverse Mortgages

The oddity of these actions is that the first one is financially unimpressive while the second is simply abusive; it kicks people who are already down. Given such thinking, you have to wonder when the clever cost-cutters on Capitol Hill will turn their attention to reverse mortgages pros and cons. read more

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More educated Americans stay in workforce longer

by Francine Huff
March 8th, 2011

The more education people have, the longer they remain in the work force, according to the Employee Benefit Research Institute (EBRI). In 2009, 63.1 percent of Americans 55 and older with graduate or professional degrees were in the labor force, compared with 22.4 percent of those who did not have high school diplomas. Does that mean that people who had less education are more likely to need to tap home equity with a reverse loan during retirement?

Paying for retirement

Whether you have a lot of education or not, paying for retirement can be challenging. On average, people with more education earn more money over the course of a lifetime and may have more opportunities to build a retirement savings than people with lower wages. But as the economic crisis has shown, having a higher income doesn’t always translate into good fiscal habits. So it’s likely that senior homeowners of all income and educational levels will find themselves considering reverse mortgages if they continue to struggle financially.

Overall, the participation of people aged 55 and up in the workforce was at 40.2 percent in 2010, the highest recorded level since 1975. Many senior citizens believe that they must continue working as long as they are physically able in order to pay for all their expenses. If you are nearing retirement age it may make sense to stay at your job if you can. Doing so could allow you to save more money and enjoy a more secure retirement.

Reverse mortgages during retirement

If working longer is not an option, there are some alternatives you can consider, such as reverse mortgages. There are pros and cons to reverse mortgages so take time to learn as much as you can about them. To apply for a Home Equity Conversion Mortgage (HECM) you must meet with a reverse loan counselor who can review reverse mortgage guidelines.

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Mortgage market collapse has impacted reverse loan industry, says report

by Francine Huff
March 7th, 2011

There have been some major changes in the reverse mortgage industry since the collapse of the mortgage market in 2008-09, according to a recent report from the AARP Public Policy Institute. The report says that some of the changes have the potential to create more choices for consumers, but that the choices are more complicated and reverse mortgages are more expensive.

Funding HECMs

Among the changes that have occurred is an absence of funding by Fannie Mae. The agency purchased most Home Equity Conversion Mortgages (HECMs) until 2006. After the mortgage market collapsed the costs jumped and by 2010 Fannie Mae said it would stop purchasing reverse loans.

Now, mortgage-backed securities purchased by Ginnie Mae, an arm of the Department of Housing and Urban Development (HUD), have become the primary way HECMs are funded. Most Ginnie Mae reverse mortgages have fixed interest rates and require borrowers to withdraw the full loan limit at closing. Those loans may be more expensive for homeowners who don’t really need the full amount at closing since the interest rates are higher and interest begins to accumulate right after closing.

Reverse mortgage age declines

Another change in the market is that the average age of borrowers applying for reverse mortgages has declined. The average borrower age fell to 72.9 years in 2010 from 76.7 years in 1990. The report says the declining age of borrowers is worrisome because of the possible impact on long-term financial security. Also, borrowers were more likely to be part of a couple than single, with 37 percent of reverse loans going to couples in 2010, compared with 26.1 percent in 1990.

Reverse mortgage guidelines

Not all seniors should apply for reverse mortgages, but a housing counselor can help you determine if a loan is right for you. A reverse loan counselor can review the most current reverse mortgage guidelines and other programs that might be help you with financial planning.

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Reverse mortgage can help in high-cost states

by Francine Huff
March 3rd, 2011

A new survey by AARP found that many senior citizens in New Jersey are struggling financially. AARP polled 400 New Jerseyans over 50 and found that about two-thirds said they don’t have enough resouces or information to stay healthy. Also, about 75 percent said they worry about Social Security and Medicare benefits. New Jersey is one of the most expensive states to live in, so benefits that are received don’t go as far as in states with lower costs of living.

Living on a small income

“It shouldn’t be surprising that there’s real palpable fear out there because seniors are suffering,” Douglas Johnston, legislative director for AARP-NJ, said in an article at NJ.com. “I frankly don’t know how they do it. The median amount Social Security recipients get per year is $10,400. How do you live on $10,400 anywhere, especially an expensive state like New Jersey?”

Can a reverse loan help?

The survey also found that 84 percent of people said they would prefer to receive long-term care at home or in an assisted-living facility, rather than at a nursing home. Whether you remain at home or move to an assisted-living facility, you’ll need enough cash to last through your golden years. If you live in a high-cost state like New Jersey, you may be wondering if a reverse loan can help supplement your retirement income.

Reverse mortgage guidelines

A reverse mortgage could allow you to convert some home equity into cash. You must be at least 62 years old and own a home. You might qualify for a reverse loan even if you’re still paying off a mortgage loan. A reverse mortgage counselor can discuss all the reverse mortgage guidelines and help determine if borrowing money is prudent.

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Reverse mortgages and your retirement lifestyle

by Francine Huff
March 1st, 2011

What type of retirement lifestyle do you hope to have? Many of today’s seniors live very active lifestyles that involve a focus on physical fitness, travel and enjoying hobbies. While not having to work a 9-to-5 can allow you spend more time doing activities you enjoy, being on a limited income can put a crimp in your plans. Some senior citizens have chosen to supplement their retirement incomes with reverse mortgages to improve their quality of life. Should you?

Reverse mortgage taps home equity

You must be a homeowner and have enough home equity to convert some of it to cash to get a reverse loan. But how comfortable are you with tapping home equity? It may be tough to give up the security of having a house that is paid in full or knowing that you will pay off a mortgage in a just a few years. You’ll need to consider your own comfort level with swapping equity for cash.

No more monthly mortgage payments

You may be more likely to give up home equity if you are struggling to make payments on a home loan. Borrowing with a reverse home mortgage allows you to stop making monthly payments and puts money in your pocket. The proceeds from a reverse loan can be used for most purposes, so you have control over how you spend it.

Get all the facts about reverse mortgages

It is a big deal to convert home equity into cash no matter what your financial situation is. That’s why the Home Equity Conversion Mortgage (HECM) program requires that you meet with a reverse mortgage counselor before applying to borrow money. The counselor can review reverse mortgage guidelines and analyze your finances to determine the pros and cons of borrowing with a reverse mortgage.

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