Welcome to Best Reverse Mortgage.

Reverse mortgage counselors recently got the OK to increase their fees for providing services to senior citizens seeking guidance on Home Equity Conversion Mortgages (HECM). The Department of Housing and Urban Development (HUD) outlined the changes in a letter to reverse mortgage lenders and HUD-approved counselors.

HECM counseling fee structure

Previously the fee for reverse mortgage counseling was capped at $125 for each session. However, the letter states that the cost of providing HECM counseling has increased. Now counseling agencies can establish a fee structure as long as:

• It is reasonable and customary
• It does not exceed a level commensurate with the counseling services provided
• It is not being charged to pay for the same portion of or the entire service already funded with a HUD grant

Disclosure about fees

HECM counselors are required to disclose the fee structure to clients. If you seek counseling and are unable to pay, you must not be turned away. Reverse loan counselors who choose to charge should not collect a fee at the time of the counseling session if you have an income that is below 200 percent of the federal poverty level. The fee can be charged at the closing but you must be advised of the amount during the counseling session. You would need to provide documentation that your income falls below 200 percent of the poverty level. The documentation could include tax returns or Social Security pay stubs.

Counseling with a HUD-approved agency is required before you can apply for an HECM. The counseling session should include a comprehensive review of your finances. Counselors should help you understand reverse mortgage guidelines, as well as alternatives to borrowing money.

The CBS “Sunday Morning” show this week featured a story about how the city of Prichard, Ala., suddenly stopped paying pension checks to its retirees back in September 2009. None of the city’s retired municipal workers has received a check since then because the city says it simply does not have the money.

“You can’t draw blood from a turnip,” attorney Scott Williams, who represents the city of Prichard, told “Sunday Morning.” “All the colloquialisms you want to come up with, if the money’s not there, we can’t pay it.”

Not enough money

The retirees want to know what happened to the pensions they contributed to over the course of their careers. Many of these folks are now struggling to pay for basic living expenses and had expected the pensions to be their primary source of income. Unfortunately, this scenario could happen in other towns and cities.

Joshua Rauh, of Northwestern University’s Kellogg School of Management, told Sunday Morning, “Across the United States there is a difference of $3 trillion between the amount of money that we have promised public employees and the amount that has been set aside.”

If you are a current or former public employee who is concerned about whether or not you will receive your pension, it’s important to become as informed as possible about your situation. Find out whatever you can about your employer’s financial health. Also talk with a knowledgeable financial planner who can help you sort out your options.

Can a reverse loan help?

For some senior citizens staying at their current job or returning to the work force may be their best option to bring in more income. Other seniors may want to investigate whether or not a reverse mortgage can help them. Reverse loans are available to homeowners who are at least 62 years old. To qualify you will need to have enough home equity so that a portion of it can be borrowed against. Make an appointment with a reverse mortgage counselor to get more information about how borrowing money may or may not help you.

A new survey found that couples have different views about their finances and investing, and how the recession has impacted them. However, the PNC survey found that couples share concern about their kids’ future, and that a majority believe that the recession has changed the way their children will handle finances in the future and that they will have a tougher time financially.

Changing financial behaviors

The PNC Wealth Management Wealth and Values Survey found that 49 percent of women said they were planning their finances more carefully, compared with 39 percent of men. Also, 51 percent of men said nothing has changed, compared with 38 percent of women. More women (29 percent) than men (24 percent) said they were spending more time discussing finances they they used to.

Overall, women worry about finances more than men. Among the concerns women have are that the recession will continue (69 percent of women vs. 54 percent of men), not having enough money to support their lifestyle (46 percent vs. 40 percent), affording health care costs (47 percent vs. 40 percent) and not being able to support the lifestyle they want for three decades or more in retirement (45 percent vs. 34 percent).

Reverse mortgages and your finances

With many senior citizens living longer, having enough money to last during retirement is a real concern. Some seniors have decided to continue working to earn more money, while others have obtained reverse mortgages to supplement their income. A reverse loan can allow you to convert some of your home equity into cash. You must be at least 62, but the older you are the more money you usually qualify to borrow.

If you have serious concerns about how your finances are being impacted by the economy, take time to sit down with your spouse to talk about it. It’s important for couples to be on the same page financially so don’t put off getting a dialogue going.

If you’re looking forward to retirement the right age from a Social Security perspective varies. For those born in 1937 then full retirement benefits are available from the Social Security system at age 65 — but if you were born after 1960 then the benchmark date is your 67th birthday.

The full retirement dates are not set in stone and when to retire can be a complex question: If you start drawing benefits before your full retirement kicks in then you will get less than would otherwise be available for the rest of your life. If you defer retirement then you can more each month.

“As a general rule,” says the government, “early or late retirement will give you about the same total Social Security benefits over your lifetime. If you retire early, the monthly benefit amounts will be smaller to take into account the longer period you will receive them. If you retire late, you will get benefits for a shorter period of time but the monthly amounts will be larger to make up for the months when you did not receive anything.

“There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit is reduced. Each person’s situation is different, so remember that, if you delay your benefits until after full retirement age, you may be eligible for delayed retirement credits that would increase your monthly benefit.”

Increasingly, however, there is a growing sense that the full retirement date is about to change. The change will likely read more

Higher food and energy prices mean that many elderly people who are living on a fixed income may find themselves really struggling to pay their expenses ion the near future. Food and energy costs lifted producer prices in December, according to the U.S. Department of Labor. The whole sale price increases could eventually show up as higher retail prices for consumers. While a reverse mortgage could help some seniors supplement their retirement incomes, there are some things to keep in mind about using a loan for daily living expenses.

• You could outlive a reverse mortgage if you don’t budget the money carefully. A reverse mortgage counselor can go through the numbers involved with getting a reverse loan. Even though you’ve probably heard about some borrowers living it up on reverse mortgage proceeds, that’s probably not the case for most people who get a loan. Make sure you have a specific plan for how you would spend a reverse home mortgage before applying for one.
• Maybe you need to put yourself on a budget before turning to a reverse loan. A budget can help you know exactly what’s what with your finances so you can make informed choices when unexpected events or financial emergencies occur. If you need help putting together a budget, consider finding a financial planner who can work with you. If you have high balances on credit cards, a debt counselor may be able to help.
• The older you are when applying for a reverse loan, the more money you should receive. That’s because the amount of money you can borrow is based upon your age, current reverse mortgage rates and a home appraisal. Try to put off applying for a reverse mortgage for as long as you can so you can receive a higher payout.

A reverse loan is just one financial tool that may be able to help you. In addition to reviewing reverse mortgage guidelines, look for programs in your community that provide financial assistance to senior citizens.

Reverse mortgages appeal to many people because the proceeds can be used pretty much for any purpose. Some common reasons people get reverse loans are to pay medical bills, make home repairs and pay off debt. But if you already have a reverse mortgage it is important to understand how that can affect any plans to move to another home.

Renting out your home

Let’s say you already have a reverse home mortgage and plan to relocate to another state. You’d like buy another home in the new location and keep your current property and rent it for extra income. Unfortunately, reverse mortgage guidelines will not allow you to do this. You can only have a reverse mortgage on a home that is your principal residence, not an investment property. Once you move out, the reverse mortgage lender wants the loan repaid in full.

However, you can allow a renter to move in with you as long as the home is your principal residence. So you can let your relative live there and help with the household expenses as long as you remain in the home.

Selling your home

Reverse mortgage guidelines do allow you to buy a home with a Home Equity Conversion Mortgage (HECM) for Purchase. The program can help you buy a new home, as long as it will be your principal residence. You can purchase a one- to four-family unit with an HECM. The reverse mortgage cannot be used for co-ops, bed and breakfasts, boarding houses, or existing manufactured homes built before 1976. A reverse mortgage counselor can give you more information about the pros and cons of reverse mortgage loans.

Talking with a housing counselor can help you learn more about reverse mortgage guidelines. But a knowledgeable counselor should also be able to discuss alternatives to getting a reverse home mortgage. There are a variety of programs and services that may be available to help you.

Temporary assistance

Some programs offer temporary assistance to people experiencing extreme hardship. Among the types of temporary assistance that may be available to you is the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. You also may be eligible for help with utility bills if you have a low income. If you have prescriptions that are not covered by Medicare, there are programs that may offer additional help.

Help in your community

Other programs offering assistance may be available in your community. There may be special lowcost reverse mortgages, or other programs that help with home repairs or minor renovations. Doing needed repairs can make your home safer and more comfortable. Depending upon your income you also may be eligible for free help from an estate planner or tax preparer. Check with your state’s Department of Aging for referrals to local programss.

Considering a reverse loan

Some programs may only be available to senior citizens who qualify as low income. If you find that your current income makes you ineligible for certain programs, you may have the option of applying for a reverse loan. A reverse mortgage helps you convert some of your home equity to cash. There are several options for receiving the funds, including as a lump sum, a line of credit, through installments or a combination of those methods.

Talk with a housing counselor before applying for a reverse loan. You may be able to get help now without touching your home equity.

The Bank of America is leaving the reverse mortgage origination business.

This is an interesting decision given that FHA-insured reverse mortgages are fully insured so lenders cannot take a loss. As well, the newly-available HECM Saver product is positioned to increase demand for reverse mortgage products with a far-lower — almost nonexistent — up-front insurance fee.

Bank of America Home Loans says it entered the reverse mortgage business in 2006 and expanded its presence in 2007 following the acquisition of Reverse Mortgage of America in 2007 and Countrywide Financial Corporation in 2008.

“We made the strategic decision to exit the reverse business due to competing demands and priorities that require investments and resources be focused on other key areas of our business,” said Doug Jones, Consumer Sales and Institutional Mortgage Services executive for Bank of America Home Loans.

Bank of America Home Loans says it will continue to serve the needs of existing reverse mortgage customers and those with loans in process. “We fully understand the critical sensitivity of ensuring that our senior customers are provided with the same level of excellent customer service that we have provided in the past,” Jones said.

Marketplace Competition

The Bank of America plainly has the size and heft to be a major player with any financial product. It describes itself as “one of the world’s largest financial institutions” with some 57 million clients and 5,800 offices.

Will we now see other large and established lenders read more

The Orlando Sentinel recently wrote about how more than 30,000 homeowners are in “technical default” on a reverse mortgage and could end up losing their homes for not paying property taxes and homeowners insurance.

Florida has the highest number of defaults at almost 5,300, or 18 percent of the total for the U.S., according to nonprofit credit counselor CredAbility Group. The state has a reverse mortgage default rate of 8 percent, compared with 5 percent throughout the U.S.

Reverse loan guidelines

Reverse mortgages are often used by homeowners who need to supplement their income. They allow you to convert some of your home equity into cash. One of the most appealing aspects of reverse loans is that you don’t need to make monthly payments as you do with a regular mortgage.

Once you have a reverse loan you can remain in your home as long as you are able. However, while the risk of foreclosure is minimized because you don’t need to make monthly payments, it is still possible to lose your home by not paying property taxes and homeowners insurance premiums.

More counseling may be needed

If you find yourself struggling to make tax and insurance payments, talk with your reverse mortgage lender to work out a solution. Not addressing the problem is not a good option. You may also need to work with a counselor who can help work through problems with your budget that may be keeping you from making tax and insurance payments.

Reverse mortgages are designed to help senior citizens continue living in their homes independently. It is important to get accurate information before applying for a reverse loan, as well as if you already have borrowed money but are still having financial troubles.

Many senior citizens want to stay in their homes for as long as they can. But even if you own a home with no mortgage, it can be tough making ends meet on a fixed income. A reverse mortgage is one way to supplement retirement income to get the money you need for bills. But if you live alone it could also make sense to get a roommate to split some of the costs of living in your home.

Financial help

You can get a roommate whether or not you intend to get a reverse loan. But it’s important to determine exactly how a roommate could help your financial situation before having someone move in. You don’t want to end up worse off because of a housemate who doesn’t keep up his or her end of paying the bills. It’s important to do a credit check and sign a rental agreement to avoid problems later on. Even if you are letting a friend move in it’s a good idea to have a formal agreement.

Applying for a reverse mortgage

Having a roommate won’t affect your reverse mortgage application. The amount you can borrow depends upon your current age, home value and reverse mortgage rates. Only those who are listed on the deed to a home can actually apply for a reverse home mortgage. You must get reverse mortgage counseling before applying for a loan, and you can discuss how getting a roommate might help your finances during that session.

Giving up privacy

If you like your privacy and don’t want to have someone else in your home, getting a roommate may not be the best option for you. However, if you don’t mind sharing your home and see having a roommate as a way to have some companionship, a house-sharing arrangement could be a good move.

Don’t make the mistake of not comparing reverse loan rates and terms. While it may appear that all Home Equity Conversion Mortgage (HECM) products are basically the same, there may be some important differences when dealing with reverse mortgage lenders.

Customer service matters

It is important to choose a reverse mortgage lender that provides good customer service. Just because a lender offers reverse loans doesn’t mean that it will be responsive to your needs. You want to know that the reverse mortgage lender you choose will answer all your questions and give you appropriate assistance when you need it. Check out several large and small lenders to find one with the right level of service.

Referrals for reverse mortgage lenders

If you have family or friends who have gotten reverse mortgages, ask them about their experiences. Are they satisfied with their reverse mortgage? Do they feel that the lender took time to explain reverse mortgage guidelines and fees? Find out if their reverse mortgage lender spent a lot of time trying to push other financial products since that practice is considered disreputable.

Reverse loan fees and closing costs

When comparing reverse mortgage deals you may find differences in the fees and closing costs. You may be able to get a lender to waive or reduce certain fees. Also make sure that you are getting the best reverse mortgage rate that you can–reverse mortgage lenders differ in their rates and terms.

Reverse mortgage counseling

If you are not sure what questions you should ask lenders when shopping for a loan, a reverse mortgage counselor can help put together a checklist to guide you. Reverse loan counseling is required before you can actually apply for any HECM.

The image of a carefree retirement filled with hobbies, vacations and other leisure activities is becoming less realistic for many senior citizens. One in five workers over the age of 50 who have fully retired from a career is currently working for pay in a different “retirement job,” according to a recent report by the Families and Work Institute. That trend is expected to continue and about 75 percent of people 50 and older are expected to have retirement jobs in the future.

Working longer vs. getting a reverse mortgage

One of the main reasons people get a reverse loan is to supplement their retirement income. Many people who have retired from the work force find that their savings and retirement benefits just aren’t enough to live comfortably. While borrowing with a reverse home mortgage is one way to get the income you need, you may be better off continuing to work as long as you can.

Working part-time or full-time could give you enough income to pay for all your expenses without dipping into home equity. That could be a good choice if you are averse to taking on more debt, even if reverse loans don’t require monthly payments. Continuing to work as long as you are willing and able means that you can keep the income coming in and plan ahead for future retirement needs.

Enjoyment from your work

Having a job to go to everyday can also give you a sense of purpose. Many senior citizens who retire find themselves struggling with boredom when they don’t feel a sense of purpose. You may be fortunate to find a retirement job in a completely different field than you worked in before, giving you a chance to explore new interests.

Should HUD stop support for reverse mortgage programs?

This is not an idle question: Sen. Rand Paul (R-KY) has proposed the elimination of HUD. He wants to save $53 billion by reducing the HUD budget to zero.

If there is no HUD there then is no Home Equity Conversion Mortgage (HECM) backed with FHA insurance. There might be private programs, but nothing would fill the void left by the FHA reverse mortgage program which absolutely dominates the marketplace.

In Sen. Paul’s thinking, the elimination of a government program might not be a bad idea. It would reduce the budget — and remember that HUD has asked Congress for reverse mortgage subsidies. If reverse mortgages are such a good idea, then surely private competitors will emerge to fill the gap left by HUD — and if reverse mortgages are not a good idea then they will fade away, as should happen to products and services which are not appealing in a free market.

The chance of Sen. Paul’s bill passing as written is read more

HUD’s HECM Saver product was supposed to create new demand for reverse mortgages, to create something cheaper and therefore more attractive to seniors.

Alas, despite objectively better terms, the HECM Saver is going nowhere. Since October 1st just 259 HECM Saver loans have been originated.

HUD correctly notes that there were 165 Saver originations in January, a figure up 120 percent from the 75 originated in December. What’s not said is that Saver product represents 1 percent of all home equity conversion loans originated this year — or that the old, traditional HECMs continue to hold 99 percent of the market.

Why this should be is unclear.

With a Standard HECM the upfront mortgage insurance premium is equal to 2 percent of the property’s value. With the HECM Saver the up-front MIP is .1 percent. (The annual MIP is 1.25 percent of the outstanding loan balance for both products.)

“Despite the popularity of our HECM loan product, we have noted concerns that some senior citizens find that our fees are too high for them,” said FHA Commissioner David Stevens. “In response, we created HECM Saver which will provide seniors with a reverse mortgage option that significantly lowers costs by almost eliminating the upfront Mortgage Insurance Premium (MIP) that is required under the standard HECM option.”

In other words, there is a huge cost reduction available to seniors who choose the HECM Saver. Given the natural urge to find bargains, why do we not see more HECM Saver originations? read more

Home prices are still falling, which means that you may not be able to borrow as much money as you’d like with a reverse mortgage. Home prices in the fourth period of 2010 fell from a year earlier in all 28 major metropolitan areas tracked through the Wall Street Journal’s most recent quarterly survey.

Hard-hit markets hit again

Among the cities that experienced the the biggest declines in home values are Miami, Orlando, Atlanta and Chicago. Those cities had already experienced significant drops in property values. But even cities like Seattle and Portland, Oregon, which had held up pretty well during the housing downturn, saw home prices decline more.

No money, bad credit

The survey also shows that the inventory of homes on the market rose at the end of December to an average of 15 months’ supply. Many potential buyers are not purchasing homes because they believe housing prices may continue to fall or they cannot qualify for mortgages.

“There are just not a lot of renters with confidence, with a down payment, with good credit, and without a lot of additional debt,” John Burns, a home builder consultant in Irvine, Calif., told the Wall Street Journal.

Should you get a reverse loan?

Falling home prices may signal that this is not the time to apply for a reverse home mortgage. That’s because the amount of money you qualify to borrow depends on your home’s value, your age and interest rates. If home prices have been dragged down in your area because of foreclosures and weakness in the housing market, you may not receive enough of a payout to make borrowing worthwhile.

On the other hand, if you have a lot of equity and are afraid prices are going to continue to decline, it could make sense to tap your home equity now with a reverse loan. Discuss your financial situation with a housing counselor approved by the Department of Housing and Urban Development to get the tools you need to make the right decision.