A Stimulus Package For Seniors

by Dennis Haber
March 25th, 2008

When the president signed the stimulus package, the pundits hailed the results as a life saver. Included therein was a tax break for business to invest in capital; an increase in the loan amounts FHA and government sponsored entities like Fannie Mae & Freddie Mac could offer; a provision for a 168 million dollar shot in the arm to the US economy.

In short the goal was to provide an economic full court press: tax breaks, pump money into the economy, increase loan sizes that would still fall into conforming loan amounts. A couple will receive $1200 gift from Uncle Sam.

However there is little chance that the economy will ever see this money, as most people, seniors included, will use the money to pay down debt.

I think more than a liquidity crisis, we have a psychological crisis. The banks and Wall Street do not like conventional or jumbo mortgages. It seems that no one trusts the quality of the underwriting nor the innovative mortgage programs that were created. No matter how much the Federal Reserve pumps money into the banking system, the banks are not eager to lend this money out as they have little confidence in the conventional mortgage lending system.

So the fundamental question becomes this: Where is a senior suppose to get funds for living their life? Because they are on fixed incomes, the easy-to-get mortgage commitments is a thing of the past. In fact, unless one can show income, assets and have credit in the 700s, the chances are not good that one will qualify for a conventional loan in today’s marketplace.

Therefore, the senior stimulus package remains the reverse mortgage. A senior, age 62 is not qualified using income, assets or credit score. It is enough if all owners have reached the magic age of 62 and own the home as their primary residence. No monthly mortgage payments are required. A major default headache (non-payment) is thereby removed.

However, without easily-available mortgage financing and reasonable guidelines for all borrowers, the value of homes in general will face a downward pressure. For seniors, this will mean less equity and thus access to less reverse mortgage financing because home values will fall below maximum “claim” amounts. The claim amount is the lesser of the FHA limit or the appraised value.

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.

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One Response to “A Stimulus Package For Seniors”

  1. Rogan McGillis Says:

    Dennis,

    You are exactly right about using the rebate to pay down debt. I know I plan on paying off a credi card with it and sadly I’m not sure what good it would do the economy if I spent it anyways as so much of what this country buys is made in China.

    And your also right about the difficulty of obtaining conventional financing right now. One of the lenders I use for forward loans is taking 45 days for underwriting and they are one of the major banks out there. It’s ugly.

    Once again, great article, I always look forward to reading your posts.

    Rogan McGillis
    http://www.reversemortgagecity.com