Seniors over the age of 62 areholding $3.3 trillion in home equity

Excerpted from RiskSpan, a leading provider of analytical software and advisory services, "Today, seniors over the age of 62 are　holding $3.3 trillion in home equity. Over the next 10-20 years, even with modest to flat home price appreciation, we estimate that value could double due to the aging baby boomer demographic. Our current evaluations of U.S. census data show the population of seniors aged 62 and over is projected to grow from　its current level of 50 million to 83 million by 2030".

Some tips on working with seniors:

Be patient:

　 Many seniors have lived in their homes for more than twenty years. In that time, many changes have occurred in the industry.

Ask questions:

　 If you don't get all the information, you won't give the right advice or make the right decision.

Don't generalize about your senior client:

　Not all seniors are alike, nor do they have the same goals or wherewithal. Some are healthier, more alert and more active than others, and have vastly different financial needs.

Get the right information suited for his/her individual needs:

　Find proactive solutions. A senior's equity is often the only financial asset s/he has.

We are passionate about helping and educating seniors. Together we can make a difference.

To learn more about tips on working with seniors　or for answers to　your reverse mortgage questions, contact Rick Kellow at Cherry Creek Mortgage Company 414-303-7944

As reverse mortgages

 

have increased in popularity, so have the myths about these unique

loans. While there's better information available today, many seniors and their adult children

who are exploring reverse mortgages still encounter a host of misconceptions. Here's a look at

common myths and the facts:

1. The bank takes the house or the borrower can lose the house.

With a reverse mortgage, the borrower retains title throughout the life of the reverse mortgage. The borrower cannot, as

a result of the reverse mortgage, be forced out of the home as long as property taxes and insurance are paid and the home

is maintained in reasonable living condition. Once the borrower permanently moves out of the home, the loan must be

repaid. Most properties secured by reverse mortgages still have equity when a maturity event occurs; the borrower or heirs

can opt to sell the home to repay the loan and preserve this equity for the benefit of the borrower or his/her estate.

2. The home must be paid off or be debt-free to qualify.

Reverse mortgages convert home equity into cash. As long as there is sufficient equity in the property, the homeowner may

be eligible for a reverse mortgage. In fact, many seniors use a reverse mortgage to pay off an existing mortgage in order

to eliminate a required monthly mortgage payment.

3. When a reverse mortgage becomes due, the bank sells the home.

The borrower is in control of the home and retains title, not the bank or lender. While it's common for the borrower or heirs

to sell the home to repay the loan, it's a decision they make. They might instead refinance the home to repay the loan.

4. It's cheaper to move to a smaller house.

Seniors need to analyze their costs carefully before making this assumption. Selling a home and moving can be expensive.

The typical real estate commission of 6 percent, combined with moving expenses, can make finding a new home a serious

financial undertaking.

5.

Children want the home or don't feel comfortable with their parents obtaining a reverse mortgage.

Seniors should talk with their family about reverse mortgages. Often adult children are pleased their parents have a

financial solution available to help them live more independently and financially secure.

6.

The borrower could owe more than the house is worth.

Due to built-in safeguards, the borrower or his estate can never owe more than the value of the home upon repayment.

In addition, the HECM product are insured by the Federal Housing Administration.

7.

Reverse mortgage processes will impact Social Security and Medicare benefits.

Generally, a reverse mortgage will not affect regular Social Security payments or Medicare benefits, although some

Federal Supplemental Security Income of state programs may be impacted. Borrowers should speak with a financial

advisor or the appropriate agencies.

8.

There are restrictions on how the money is used.

Actually, there are no restrictions, and proceeds from the reverse mortgage can be used for any purpose - travel, to pay

off debt, make purchases or just live more comfortably.

9.

Once proceeds are received, taxes will need to be paid.

Since the proceeds are already the borrower's money, they are tax-free.

10. Reverse mortgages are only for seniors in need or for the "house rich, cash poor."

 

Mortgage Daily reported that Rates look to be going down to record lows...

Mortgage rates recently fell to their lowest levels on record. But potential moves discussed Thursday by a Federal Reserve Board governor could have new records on the horizon.

On Thursday, Oct. 6, Freddie Mac reported that the 30-year fixed-rate mortgage averaged 3.94 percent -- the lowest level ever recorded by the secondary lender.

Interest rates have since drifted higher.

But there is a good chance that they could head lower again if Fed Governor Daniel K. Tarullo has his way.

In a prepared speech for the World Leaders Forum at Columbia University in New York, Tarullo pointed to persistently high unemployment as the biggest problem facing an economic recovery.

He explained households built up debt that seemed manageable before the housing bubble burst. But as housing prices have since declined, that debt now appears burdensome.

"Without more effective efforts to address the manifold problems affecting the housing market, there is a good chance that the recovery will lack strong momentum for some time to come," Tarullo stated.

He countered arguments by some that Fed monetary policy has gone too far by noting that the Federal Open Market Committee is required by the Federal Reserve Act to promote the goals of maximum employment and stable prices.

Tarullo said that the large-scale purchase of additional mortgage-backed securities should be moved to the top of the list of priorities. He noted that similar moves in November 2008 and March 2009 provided support to mortgage lending and housing markets.

In addition to luring investors to bonds and equities, a large-scale MBS purchase program could put more downward pressure on mortgage rates -- making home purchases more affordable and freeing up disposable income for consumer spending through refinances.

Tarullo addressed concerns that a small segment of wealthy consumers with high credit scores would see most of the benefit from such a Fed move by calling for policy changes that would allow negative-equity borrowers to refinance.

While he acknowledged that an MBS repurchase program won't solve all housing market problems, "I believe that MBS purchases are worth considering as a monetary policy option precisely because they carry the promise of addressing the feature of the current aggregate demand shortfall that differs from typical recessions and recoveries."

Finally something to live in Wisconsin for... as reported by Mortgage News Daily...

Four cities in Wisconsin were among the locales with the highest credit scores. Texas, on the other hand, had four of the worst-ranking cities.

In Wausau, Wis., the average credit score is 789. That was the highest score of any city.

Wausau's standing was based on an analysis of a statistically relevant sampling of consumer credit data by Experian, which announced the report Tuesday.

Other Wisconsin cities to make the top-10 list were Madison, with a score of 785; Green Bay's 780 score; and La Crosse's score of 777.

Experian called Wisconsin residents "the nation's most fiscally responsible."

Consumers in No. 2 Minneapolis had an average score of 787. Minneapolis had the highest score of any city a year ago.

Cedar Rapids, Iowa, secured the fourth position on the list of cities that have the best credit, with a score of 781.

On the other side of the spectrum was Harlingen, Texas, where the score was 686 -- lower than any other city. Additional Texas cities to make the 10-worst scores were Corpus Christi, with a 702 score; Tyler, where the score was 710; and El Paso, which had a score of 710.

Jackson, Miss., had a score of 701, the second-worst of any city.

Louisiana sported two cities on the lowest-scoring list. Monroe and Shreveport tied for the No. 4 spot with scores of 706.

No. 8 on the worst list, Las Vegas, was highlighted for ranking among the bottom 10 regional credit scores for the past three years.

"Five out of 10 of the bottom markets have increased their credit scores and decreased debt since 2010," the report said. "However, average debt nationwide has only decreased by about 1 percent -- it is down about $200 to $24,542 -- indicating that those working to improve their debt-to-credit ratio are having difficulty making progress. A low debt-to-credit ratio is an important element of a high credit score."

Wells Fargo announced that they are exiting the reverse mortgage business, after more than 20 years of offering reverse mortgages.  While it may not have been the shot heard around the world, it is interesting that Wells Fargo is not alone.  Bank of America announced their exit from the reverse mortgage business in February of this year.  Even more interesting is that both occupied the #1 and #2 slots as the top volume reverse mortgage lenders in the country.

What will their exit mean for consumers?  By all accounts, the industry is still going strong.  A 2011 Harvard Housing Study predicted that the number of senior households will increase 35% by 2020.  With pension plans declining and uncertainty over the future of Social Security, home equity remains a major source of potential funding for retirement needs.

So if the market remains strong, why are top lenders exiting?  Wells Fargo cites unpredictable home values as a major factor in their decision.  Because reverse mortgages are designed to be repaid after the last borrower has either passed away or is no longer living in the home, it can be difficult to predict what the home’s value will be when it comes time for repayment.  Fortunately, one of the pros of reverse mortgage loans is that they are FHA insured.  Lenders are protected from an unanticipated loss in value at the time of sale and borrowers are protected from unanticipated lender insolvency.

In all, it is likely that consumers won’t see much impact.  While none of the four largest banks will offer reverse mortgages, a broad range of alternate lending options remain, including lenders who focus exclusively on reverse mortgage loans.

 

Within less than a year both Bank of America and now Wells Fargo have exited reverse mortgage market.  The reasons for the departures may have more to do with infrastructure set-ups, being able to achieve profitability, and getting in compliance with changing regulations from the Department of Housing and Urban Development (HUD) than with the product itself. In the past reverse mortgages received heavy criticism for high fees and aggressive sales tactics which may have pushed some seniors into opting for a reverse mortgage when they otherwise may not have.  The aura surrounding reverse mortgages has changed quite a bit as heavy regulation has been introduced along with the fact that social security, private pensions, and 401K’s are not sitting as strong as they have in the past. The bottom line is reverse mortgages are still a good option for seniors to consider in order to achieve  continued solvency.

If you’ve been turned down for a traditional home equity line of credit (HELOC), you may still be able to get the money you need by tapping into your home’s equity using a reverse mortgage.  While a HELOC may not be an option for you during these tight credit times, if you’re a homeowner aged 62 or over with sufficient equity in your home, it’s relatively easy to qualify for a reverse mortgage. 

Many reverse mortgage homeowners have turned their home equity into tax-free cash to help meet their needs and satisfy their wants.  There are several benefits a homeowner can take advantage of with a reverse mortgage, such as:

Eliminate Monthly Mortgage Payments

A reverse mortgage loan can eliminate your monthly mortgage loan payment and typically does not require loan payments until the homeowner moves out of the home for 12 consecutive months or passes away.  (Like all homeowners, you still are required to pay your real estate taxes, insurance and meet any other loan obligations.) By comparison, a HELOC must be repaid in monthly payments.

Income & Credit Requirements

Eligibility requirements for a reverse mortgage generally do not include a minimum income or credit score. By comparison, a HELOC requires stable income and a solid credit score.

Amount You Can Borrow

The amount you can borrow depends primarily on your age, the current interest rate, and the appraised value of your home, sales price or FHA’s mortgage limits, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you may borrow.

There is a vast amount of information available on reverse mortgages. When making a decision as big as this one, it is no wonder that many people do their homework. Researching reverse mortgages is good preparation for a required HECM counseling appointment.  FHA funds housing counseling agencies nationwide to provide borrowers with information on reverse mortgages through face-to-face or telephone sessions.

HECM counseling covers a range of topics that could affect your decision on whether or not a reverse mortgage is for you. Counseling sessions include discussions on how a reverse mortgage can impact your eligibility for federal and state programs, income tax consequences, impacts on your estate, what types of payments you will be making to other parties and most notably; the other options available to you. 

The most important thing that a HUD approved counselor can provide you with is unbiased information on whether or not a reverse mortgage is the right decision for you. The whole purpose of counseling is to educate and empower you in making the correct decision for your financial situation.  To find a HECM counselor near you call me at 414-303-7944.