Reverse Mortgage Information

Financial Tsunami Devastates Retirees

Reverse Mortgage — Wed, 04 Feb 2009 14:34:50 -0600

A recent publication in AARP Bulletin Today, entitled "Tough Times For Retirees," describes the stark reality that many older Americans are facing as they witness their retirement savings being swept away by the financial tsunami that has devastated Wall Street and Main Street.

Millions of retired Americans are facing the prospect of getting by without the savings cushion they thought would be there for them in their old age. We have just witnessed the worst stock market crash since the Great Depression, and many retirees were not prepared for such a catastrophic event.

One retiree that was profiled in the article said: "That in the three months between August 31 and November 30, 2008, the market downturn reduced the value of his investments by about 32 percent." He went on to say that "I'm devastated. That is all the money I have left in the whole world. I don't know what to do."

Not Just A Financial Trauma

For retirees like him the 2008 market meltdown has not just been a financial crisis but an emotional trauma as well. Older adults have described feelings of embarrassment due to the possibility they will not have enough money to make it in retirement. Some report that they will be forced to rely on their children for support, something they want to avoid because they hate the thought of burdening their families.

The stock market decline has not only harmed retirees, but millions of boomers that were on the verge of retirement. Many workers have decided not to retire as planned. An AARP survey of workers age 50 and over showed that 59 percent said they were likely to postpone retirement.

The number of dollars lost in the market decline has been mind-boggling. According to The Investment Company Institute, as of October 31, 2008, the assets of the 4,800 stock funds had declined by $2.59 Trillion. $2.39 Trillion was attributable to market-related losses. The other $195 Billion decline represented the amount that investors pulled out of the funds.

A Reverse Mortgage Could Help

If you find your situation to be similar to those outlined in the AARP Bulletin Today article, you may wish to consider tapping into home equity through the use of a reverse mortgage. A reverse mortgage can supplement your retirement income, allow you to remain living in your home as the owner, and never make a payment on the reverse mortgage loan as long as you live in the home.

Request a reverse mortgage loan quote today!

Top Ten List For Why Seniors Get A Reverse Mortgage Loan

Reverse Mortgage — Wed, 19 Nov 2008 19:09:54 -0600

OK, so this is not David Letterman's Top Ten List, but it is AARP's Top Ten List for why seniors are deciding to get an FHA insured HECM Reverse Mortgage loan.

So, here we go: Top 10 Reasons Seniors Get A Reverse Mortgage

Number 10. Investments, annuities, or long-term care insurance
Number 9. To financially assist family members
Number 8. Keep up with property taxes and insurance
Number 7. Health or disability
Number 6. Pay off non-mortgage debts
Number 5. To pay for unexpected emergencies
Number 4. To help pay for everyday expenses
Number 3. To improve the quality of life
Number 2. For home repairs or improvements

And the Number One Reason Seniors Get A Reverse Mortgage (drum roll please)

Number 1. To Pay Off An Existing Mortgage Balance

Regardless of whether the reason you might be looking into getting a reverse mortgage loan is on this list or not, actually makes no difference. A reverse mortgage loan can be used for any purpose you choose. After all the money you are accessing from your home through this mortgage vehicle is all ready your money. There are no restrictions on how you can use it.

If you would like to see how much money you are eligible to receive, feel free to request your free reverse mortgage loan quote today.

Using A Reverse Mortgage To Buy A House

Reverse Mortgage — Wed, 12 Nov 2008 18:06:43 -0600

The long awaited revisions to the FHA insured HECM reverse mortgage program include the ability for senior borrowers to use a HECM reverse mortgage in order to purchase a home.

Until the passage of the new addendum, the only way to purchase a home and still make use of a reverse mortgage was to complete two separate transactions. First you would have to purchase the new home with either all cash or qualify for a regular purchase money mortgage. After you closed on the purchase of the new home, you would then do a second transaction with a reverse mortgage lender in order to either eliminate the payments and pay off the other brand new mortgage that you just closed on, or to reimburse yourself for the cash that you had to lay out for the purchase.

With the passage of the new revisions, you can now do just one transaction. This not only simplifies and expedites the process, but it saves you from paying double closing costs on two mortgage transactions. The effective target date for purchase money HECM reverse mortgages to be available is January, 2009.

Here Is The Way It Works:

Senior homeowners qualify for a specific amount of money based upon the youngest borrower's age, the current interest rate, and the lower of either the appraised value or the purchase price of the property.

Here is an example of how the math would work for a senior couple that are both 72 years old, based on current interest rates.

Assume that the purchase price and the appraised value for the new home are both $300,000. On a monthly HECM reverse mortgage loan this couple would be eligible for a $186,790.00. Their required contribution to the transaction would be $113,210.00.

For this same example let's assume that this couple is downsizing to a smaller single level home in a retirement community. They have sold their large two-story family home where they raised their kids and lived for the last 25 years. The sale price of the family home was $425,000.00 and they had a mortgage balance of $75,000.00 on that home. After real estate sale costs and paying off the existing mortgage balance they netted $320,250.00. After making the down payment on the new purchase of $113,210.00 this couple pockets $207,040.00 from the sale of their previous home and have ZERO house payment on the new home in the retirement community. They have freed up the accumulated equity in the large family home in a lump sum and moved into a new smaller home, mortgage free. Wow! What a way to enjoy retirement. No house payment and a big chunk of extra cash to boot.

The Eligibility Requirements Are:

Homeowners must occupy their new home within 60 days of closing the transaction, and the new home must be their primary residence.

Newly constructed homes must be fully completed and have a final certificate of occupancy from the appropriate local authority.

Flipping of properties is prohibited. Which means that only current owners of record may sell properties that will be financed using FHA HECM reverse mortgages. Any resale of a property may not occur 90 or fewer days from the last sale.

The down payment requirement or cash to close must be verified and cannot be borrowed funds. The borrower's funds must be from cash on hand or cash from a sale or liquidation of the borrower's assets. Borrower's may not obtain a bridge loan or "gap" financing to meet the down payment requirements.

HUD reverse mortgage counseling specific to home purchase reverse mortgages, must be completed prior to an application for loan approval.

There is no three day right of rescission period for reverse mortgage borrowers for purchase transactions.

Properties that do not qualify for a HECM purchase reverse mortgage loan are:

Cooperative Units

New construction residences where a Certificate of Occupancy or its equivalent has not been issued by the appropriate local authority.

Boarding houses

Bed and Breakfast Establishments

Existing manufactured homes built before June 15,1976 and

Existing manufactured homes built after June 15,1976 that fail to conform to the Manufactured Home Construction Safety Standards, as evidenced by affixed certification labels and or lack of HUD approved permanent foundation requirements.

If you would like to learn more about the HECM for home purchase, please feel free to call our offices at, 1-888-269-1098 or visit our website to request a personalized summary and quote.

Reverse Mortgages Get Second Look Due To Scant Increase For Social Security Benefits

Reverse Mortgage — Wed, 05 Nov 2008 12:33:53 -0600

Social Security benefits will be increased in January 2009 for 50 million people. The increase will be 5.8 percent and will be the largest increase since 1982 when Social Security benefits increased 7.4 percent. The 2009 increase will be more than double the raise that retirees received in 2008, which was 2.3 percent.

At first blush that sounds exciting, until you realize that what that equates to for the average retiree is a paltry $63.00 per month. Yearly benefit changes are based upon the amount the Consumer Price Index (PCI) increases from July through September from one year to the next. Unfortunately, the problem with using the CPI is that most consumers do not believe that the CPI accurately reflects the prices they are paying for crucial necessities like energy, food or medical care. This disbelief is particularly strong among those living on a fixed income.

Some argue that if the Producer Price Index (PPI) was used for the measurement for Social Security benefits increases, it would be more reflective of the "real world" for retirees. The PPI measures wholesale inflation. (Wholesale inflation tends to lead retail inflation.) The Producer Price Index (PPI) in June of 2008 set a 27 year record with a 9.2 percent increase in inflation over a twelve month period. The last time inflation was this high was the same year that Treasury yields exceeded 15%, and 30 year mortgage rates exceeded 16%.

Retirees Battered on Several Fronts

$63.00 extra per month seems woefully inadequate for millions of retirees that have been battered on several fronts this year. Not only have they seen huge increases in energy and food costs, but many have been assaulted by reeling stock market declines as well as plummeting home values.

The Congressional Budget Office estimated that Americans' retirement plans have lost as much as $2 Trillion over the last 15 months, which represents more than 20 percent of their value, due to the upheaval on Wall Street. Real estate prices have dropped nationally by 20.29 percent. In some of the previously "hot" markets, like California, Nevada, Arizona and Florida the decreases have been even more severe.

More Are Turning To Reverse Mortgages For Help

Retirees worried about their decimated savings and stock market assets are turning in greater numbers to the idea of using a reverse mortgage to stabilize their cash flow and supplement retirement income. Luckily, the greater demand for reverse mortgage loans coincides with new regulations for FHA insured HECM reverse mortgages. The HECM reverse mortgage loan now has a higher National loan limit of $417,000. This is up from the previous loan limits that ranged from $200,160 to a high of $362,790 depending on what county the property was located in. Not only does the single National loan limit simplify the product but it allows approximately 30 percent more seniors to qualify and others to be eligible for even more money than they would have been with the lower loan limits.

If you are one of the many retirees that feel a personal disconnect between what the government says the inflation rate is and what your "real world" experiences are every time you go to the grocery store, the gas station or pay your utility or medical bills, then don't feel alone. The indexes that have been chosen are by design and unfortunately, will never be reflective of the "real world." Even with the conservative index that the government pegs the increase in benefits to, the system is still on target for being inadequately funded by the end of 2011.

It is essential that we all take charge of our own destiny in retirement. If you thought you planned well and are now realizing that you could be short on money and long on time, you may have to take a look at tapping into home equity even though you thought you would never have to touch it and it would be left in your estate for your heirs.

Home equity does not have to be a sacred cow, never to be tapped into. Most adult children would rather see their parents live comfortably during retirement rather than sacrifice lifestyle in order to leave them a home that they don't want or need.

Ask for a personal reverse mortgage quote today, and find out how much money you are eligible to receive from the equity in your home.

Seniors Turn To Reverse Mortgages Due To Lost Dividend Income & Stock Market Plunge

Reverse Mortgage — Sun, 12 Oct 2008 19:46:48 -0500

The unprecedented plunge of the U.S. stock market during the past week has unnerved every American regardless of age, or economic status. Anxiety is running high. No one seems to know what shoe will drop next. Each attempt by the Federal Reserve, the Secretary of the Treasury, the Congress, the coordinated interest rate cuts from the United States and other nations have not inspired the confidence needed to restore the paralyzed credit markets and get the cash flowing back into the banks and the economy.

Most of the talking heads on the financial news channels and most print reporters have been afraid to use the terms, "depression," "crash," or even admit that we are all ready in a recession. Some news organizations and investors have hesitated to use these words to describe Wall Street's terrifying sell off because they are afraid of causing panic.

However, by the end of the market close on Friday, October 10th, some notable statements were surfacing among analysts that were brave enough to speak frankly.

Is It A Crash?

A crash is commonly defined as a 20 percent decline in a single day or several days. The drop over the seven days ending Thursday, October 9, 2008 lopped 20.9 percent off the Dow Jones industrial average. On Friday, October 10th, after wildly whipsawing over 1000 points, finally settled down 128 points, or 1.5 percent for the day. For the eight day period the cumulative loss was 22 percent.

Howard Silverblatt, senior index analyst at Standard & Poor's, said "This quick, this amount, in these few days, obviously is a crash. The crash deals with the speed as well as the intensity of it."

CNBC host Dylan Ratigan was among those uttering the word "crash" on Thursday, calling the decline, "a cascading crash." The Wall Street Journal, the most influential publication in the financial world, hedged somewhat on Friday's front page, saying the scary drop over the past several days "amounts to a slow-motion crash."

Bob Doll, chief investment officer of BlackRock, Inc., the largest publicly traded U.S. money manager, being interviewed by CNBC anchor, Maria Bartiromo responded to her question about whether he thought this is a crash, replied: "Yeah, I guess we have to call it that, Maria. That's a lot of percents in a short period of time. We're down a bunch, and it's been relentless."

Johnathan Wald, senior vice president for business news at CNBC, said on Friday, "Anytime you do the math, when the Dow is down that much over a period of days, it's a crash. It's a word we don't like to use very often because nobody likes to see it, but when it happens, you can't avoid it."

How This Affects Seniors In Particular

If you are a senior currently in retirement or someone on the verge of retiring and have money in the stock market, pension funds and or 401K plans, you have been slamed by sharp losses in those portfolios. The total loss in the Dow over the last 12 months has been about 40 percent. Depending on your own personal diversification, your losses may be more or less than 40 percent. A top congressional budget analyst said that pension plans have lost as much as 2 Trillion dollars over the last 15 months.

Dividends which many retirees rely heavily upon for income, will be sharply lower starting right now and in the near term future. The latest quarterly statements have shocked many seniors who thought they had planned well and put in place a solid retirement strategy that would last them their lifetime. For some, the shock of seeing their lives suddenly altered regardless of careful planning is devastating.

Home Equity: A Partial Solution

Tapping home equity through the use of a reverse mortgage might become an option exercised for many who never thought they would consider using this type of financial instrument before. One of the payment options offered through a reverse mortgage allows for steady tax-free monthly supplemental income that can help offset stock market losses and keep a senior's household budget steady and manageable.

If you think a reverse mortgage might be right for your situation, you should consider looking into it sooner rather than later. A perfect storm has been brewing for quite some time now, and could get worse. What I mean by that is that home values across the entire country have been in a steady downward spiral, while market pressure has been affecting interest rates in an upward direction.

Reverse mortgage benefits are largely based upon the current market value of your home and the current interest rates. Consequently, you will receive less money from the equity in your home if housing values continue to decline and interest rates climb.

Seniors that closed a reverse mortgage a couple of years ago at the top of the housing market bubble, are sitting very pretty right now. Their monthly benefits or line of credit were locked in based upon the market value of their homes at the time they closed and the interest rates that were in effect at that time as well.

Sitting on the fence and doing nothing based upon fear and uncertainty is probably not the best decision if you are a person that feels that a reverse mortgage might benefit you.

Another thing to keep in mind is that if you get a reverse mortgage and your home increases in value in the future, you can always choose to refinance your reverse mortgage in order to access more funds at a later time. In the meanwhile, locking in a value and interest rate today, could be a lifesaver during this unprecedented economic meltdown.

Find out how much money you are eligible for by requesting a personalized reverse mortgage quote here.

AARP Says Mortgage Crisis Takes Toll On Older Americans

Reverse Mortgage — Tue, 07 Oct 2008 21:16:10 -0500

AARP purchased a random sample of 2.5 million people from the credit reporting agency, Experian. Of that sample, approximately 1 million are age 50 or older. The objective for AARP was to determine the impact of the mortgage crisis on older homeowners.

The sample data covered a six month period from July through December 31, 2007. The data did not include historical data and does not shed light on what has happened since December, 2007.

Americans age 50 and over hold about 41 percent of all first mortgages. The data showed that more than 684,000 homeowners aged 50 and over were either delinquent in mortgage payments or actually in foreclosure at the end of 2007. This number represented 28 percent of the total delinquencies nationwide for that period.

The foreclosure rate among first mortgage holders age 50 and older in this sample is 0.24 percent. This compares to a rate of 0.50 percent among Americans under the age of 50, and to a nationwide average of 0.39 percent.

Foreclosure rates are higher for African-American and Hispanic homeowners than for Caucasian homeowners, in all age brackets. Among mortgage holders age 50 and over, African American and Hispanic borrowers both have foreclosure rates of 0.51 percent, compared to a rate of 0.19 percent for Caucasians. So while the elderly generally have lower foreclosure rates than younger households, rates among elderly minorities are quite high.

Subprime Loans

Having a subprime loan is associated with higher rates of delinquencies and foreclosures for all age groups, however, the negative impact of subprime lending appears to fall disproportionately on borrowers over the age of 50. Older borrowers of subprime first mortgages are 17 times more likely to be in foreclosure than older borrowers of prime loans.

High loan to value loans were prevelant among subprime loan offers. Consequently, as home values have fallen dramatically in many housing markets, the incentive to default has increased. When the owner's equity position is either at zero percent or negative, borrower's options for selling or refinancing out of a toxic subprime loan becomes nearly impossible. For Americans over the age of 50, a loan-to-value ratio that exceeds 100% is associated with a foreclosure rate that is roughly double that of the national average for all other borrowers.

The Foreclosure Impact

The impact of a foreclosure is often more significant for older households because the owners have less time and ability to recover from the financial losses associated with a foreclosure. This problem is likely to grow over time, because homeowners increasingly are carrying mortgage debt into their retirement years. By 2007, 53 percent of all owners with a head of household age 50 or older had a mortgage, up from 34 percent two decades ago.

*The above data was published in a recent report by AARP Public Policy Institute and written by Alison Shelton.

FHA/HECM Reverse Mortgage Loan Limit Increased To $417,000.

Reverse Mortgage — Thu, 02 Oct 2008 15:44:52 -0500

The long awaited announcement from HUD regarding what the national loan limit will be for federally insured HECM reverse mortgages, was finally announced this morning. The new loan limit will be $417,000. and will be the same throughout the country. Previously, every county was subject to different lending limits.

This is welcome news for not only the industry as a whole but for seniors that may have been a little bit short of equity to qualify previously. The national HECM loan limit simplifies the program for lenders as well as borrowers. The new limit of $417,000. is expected to become effective on November 1, 2008. Since it usually takes about 30 days to process and close a reverse mortgage, it is not too early to begin your application if you are interested and will now benefit from the revised lending limit.

An example of how a senior borrower may benefit from the loan limit increase is illustrated by this profile of a homeowner that previously did not qualify but now does.

Estimated Home Value: $290,000.
First Mortgage Balance: $139,000.
Borrower's Age: 69
Location: South Carolina

Previously this borrower did not have enough equity to qualify for a reverse mortgage. With the old lending limit in South Carolina of $220,160. this borrower would have had an equity shortfall of over $20,000.

Today this borrower is eligible to pay off the entire first mortgage balance of $139,000. plus have access to an additional $36,870., which can be taken as a lump sum, a line of credit, monthly supplemental income or a combination of these options.

*The above illustration is based upon the borrower obtaining the monthly adjustable HECM reverse mortgage loan at today's initial interest rate.

Not all of the online calculators have been updated yet, so if you would like to find out if the new lending limit will help you to qualify or offer you a higher benefit amount, please feel free to request a free reverse mortgage quote here.

Market Chaos & Reverse Mortgages

Reverse Mortgage — Tue, 23 Sep 2008 18:27:31 -0500

We are witnessing an historic calamity in our financial markets that is unprecedented since the stock market crash in 1929, which was followed by the great depression.

The total affects of this meltdown are completely unknown to us as regular American taxpayers, and even more frightening, they are unknown to those "running the show" right now too. It's anybody's guess as to what all of the ramifications will be and how truly expensive it will be for us and for future generations.

Now Might Be The Time

If you have been looking into a reverse mortgage, but now you are second guessing yourself about whether this is a wise time to be making any financial decisions, here are some thoughts to consider.

Since the federal take-over of Fannie Mae and Freddie Mac, interest rates have actually come down. It's hard to say how long they will stay down or if they could possibly go even lower in the short term. However, with the proposed 700 billion dollar bailout being tacked on to our all ready massive national debt, it is highly likely that interest rates will have to go up in the future and inflation will rear its' ugly head.

As the government prints money and continues to spend like drunken sailors, the value of the dollar loses ground to other currencies. For example, not so long ago the Euro was worth less than a dollar. Today it takes $1.45 to buy 1 Euro.

Yesterday oil prices had its' largest one day increase ($16.00/barrel) in history. The reason oil prices have been soaring is because the oil producers require more dollars because currently the dollar has less purchasing power. In other words, the dollar is "worth less" than it was in the past.

The Affect of Inflation

In terms of all types of mortgages, inflation means higher interest rates. Higher interest rates for reverse mortgages in particular, means that you as a senior homeowner will have less money available to access through a reverse mortgage, because the accumulating interest will be charged at a higher rate going forward.
Additionally, as home values tumble across the entire country, your eligible loan amount also decreases. Less equity, means less cash to you from a reverse mortgage.

So if you think a reverse mortgage will benefit you, now is the time to take a serious look at whether you should act quickly while interest rates are low and home values possibly have not hit bottom yet. You may kick yourself later, if you wait.

Defining Non-Recourse With Regard to Reverse Mortgages

Reverse Mortgage — Tue, 16 Sep 2008 11:46:58 -0500

HECM reverse mortgages, insured by FHA and backed by HUD are the most widely used reverse mortgages in the U.S. It is estimated that 85 to 90% of all the reverse mortgages originated are HECM reverse mortgages. (Home Equity Conversion Mortgage.)

The reasons for the popularity of HECM reverse mortgages are many. However, the purpose of this article is to define one of the major reasons for their attractiveness to consumers.

With Wall Street in turmoil from lack of regulation and financial titans like Bear Stearns and Lehman Brothers falling like domino chips, people are generally unnerved and seeking safety. Fear of anything financial or mortgage related is paralyzing people that might be in need of a mortgage product today.

If you are a senior homeowner thinking about obtaining a reverse mortgage in today's market, there is a safety feature built into FHA insured HECM reverse mortgages that is called "non-recourse." The term non-recourse, means that you or your heirs are not personally liable to the lender at the time your HECM reverse mortgage is paid off.

The House Stands Alone For The Debt

In its' most simple definition; your house stands alone for the debt. This means that at the time of repayment of the reverse mortgage plus interest, if your home cannot be sold or refinanced for the total amount owed on the loan, you, your estate or your heirs cannot be required to pay off any shortfall that may exist. The lender does not have "recourse" to anything other than your home. Not your other assets, not your income, or that of your heirs or estate.

Even if you live to age 112, and have received monthly loan advances throughout your lifetime, and your home declines in value between now and then, and the total amount of money that you have received plus interest from your HECM reverse mortgage is greater than the amount your house can be sold for, you or your heirs can still never owe the lender more than the value of your home. The pay off amount to the lender is limited by the net proceeds from the sale of your home.

At a time when home values are declining in most areas across the country and the economy is suffering from toxic lending practices and unregulated financial markets, it can be reassuring to have the "non-recourse" provision included as one of the safeguards for HECM reverse mortgages.

Click here to read about additional safeguards for HECM reverse mortgages.

Can The Lender Make Me Sell or Move If I Have a Reverse Mortgage?

Reverse Mortgage — Tue, 09 Sep 2008 13:18:45 -0500

You can never be forced from your home or required to sell your home if you have an FHA insured HECM reverse mortgage loan. A question that comes up frequently from folks that are considering a reverse mortgage is:

"If I live long enough to use up all the equity in my home, will I be forced to sell my home and pay off the reverse mortgage lender?"

The answer to this question is an unequivocal "NO."

As long as you continue living in your home as your primary residence, keep it properly maintained and pay your real estate taxes, you will never be forced from you home. If you live so long that all your equity has been paid out to you, or if your property value drops after the loan is in place, it is not your problem.

HECM reverse mortgages are non-recourse loans, which means that the house stands alone for the debt. When you take out a HECM reverse mortgage, one of the closing costs is the FHA insurance premium. The insurance fund is used to pay the difference to the lender, in the event of a shortfall at the time that you do leave your home permanently or sell. You or your estate are NEVER responsible for any shortfall at the end of the loan term.

HECM Reverse Mortgages Become Due:

* When the last borrower passes away.
* The borrower sells the home.
* The last borrower leaves the home for 12 consecutive months.
* The home is not properly maintained.
* Real estate taxes or property insurance are not paid.

A couple of the most attractive attributes of a HECM reverse mortgage loan is the guarantee of a payment free mortgage for as long as you live in your home.

If you elect the tenure income stream, you are guaranteed a fixed amount of money being paid to you on a monthly basis for as long as you live in your home. NO MATTER WHAT! This loan has the full faith and credit of HUD and FHA standing behind it.

Read more about additional safeguards for HECM reverse mortgage loans.

Does Hospitalization Cause a Reverse Mortgage Payoff?

Reverse Mortgage — Wed, 27 Aug 2008 13:40:48 -0500

One of the questions that I have been asked time and time again from folks considering a reverse mortgage loan is: "What happens if I have a reverse mortgage and I am hospitalized or have to go to a nursing home before I die?"

This question is usually asked by someone who all ready understands that in order to have a reverse mortgage loan the home must be occupied as a primary residence. Consequently, the question about having to leave the home for health reasons, either temporarily or permanently, is an understandable question that comes up during the information gathering stage for many prospective reverse mortgage borrowers.

The requirements for paying off an FHA insured HECM reverse mortgage loan are that the reverse mortgage must be repaid when the last homeowner leaves the property for 12 consecutive months, the last surviving homeowner dies, or the home is sold.

Therefore, if the last homeowner is hospitalized or goes to a nursing home for less than 12 months, but is able to return to the home as their permanent residence within a years' time, the reverse mortgage loan does NOT have to be paid off.

Click here to find out more about a reverse mortgage.

Or request a free reverse mortgage loan quote.

As Nest Eggs Shrink and Home Values Plummet Fewer Are Able To Retire

Reverse Mortgage — Tue, 26 Aug 2008 16:46:47 -0500

According to a recent AARP survey, one in four respondents 45 and older are planning to work much longer. One third of them, cited falling home values and shrinking investments as the main reasons.

U.S. labor statistics show that 16 percent of Americans over the age of 65 were still working last year, compared to 11 percent two decades ago.

Meanwhile, nest eggs are shrinking. Nationwide, the average American worker's 401(k) balance dropped to $64,000, down 7.5%, according to an August report by Fidelity Investments. Interestingly enough, the same report pointed out that the drop would have been closer to the market's average loss of 22%, except for the fact that many workers increased their average contributions by 7 percent, to $3,500. through the first half of this year.

At the same time, energy costs went up 30 percent, and gasoline prices were up 14.4 percent, according to federal figures. Couple these statistics with a just released U.S. National Home Price Index report showing a 15.4% drop in home values, the steepest national decline ever reported, and you have the recipe for why so many 60 something folks are unable to retire.

Budgets are blown out by the basics of everyday living; utilities, gasoline, and groceries not to mention, rising health care costs. Consequently, many retirement age Americans are postponing retirement indefinitely.

Falling Home Prices Are Hurting Reverse Mortgage Borrowers

Reverse Mortgage — Tue, 19 Aug 2008 17:37:23 -0500

It's ironic that the recently passed housing rescue bill included the long overdue provision to increase the maximum loan amount for FHA insured HECM Reverse Mortgages. The reason I say "ironic" is that it happens to coincide with unprecedented declines in home values across the country.

Zillow, the popular on-line real estate valuation website, just released results of a housing report where they looked at 165 metropolitan areas and found that 29% of the homes purchased in 2003 have negative equity. And even worse, 45% of homes purchased in 2006 at the peak of the market, have negative equity even if they put 10% down on the purchase.

At first blush, if you're a senior homeowner and have owned your home for a long time, negative equity is not your problem. However, if you are a candidate for a reverse mortgage now or in the near future, your home value plays a significant role in determining how much money you will be eligible to receive from a reverse mortgage. The greater your equity position, the greater your loan benefit amount can be.

To illustrate the point, let's look at a 70 year old Broward County, Florida resident with a free and clear home:

In 2006 the home in Florida appraised for $325,000. This borrower would be eligible for approximately $223,900. from the equity in the home through a HECM monthly adjustable reverse mortgage.

However, like many areas of the country, Florida real estate has declined substantially since 2006. For our illustration purposes, let's say that this home has declined 25% in value since 2006. Today the home appraises for $243,750. Again just for this illustration, we are assuming the same 70 year old person living in Broward County, Florida. The maximum loan amount from a HECM monthly adjustable reverse mortgage today is approximately, $167,900.

That's a whopping $56,000. less that this borrower has available to supplement retirement needs from the equity in the home.

Obviously, it's good that the new lending limits have finally been increased for government insured reverse mortgages. It's just unfortunate that it didn't happen a few years ago when Congress first started their terminal debate over the issue. If it weren't for the chaos with Fannie Mae and Freddie Mac in conjunction with bank failures, hedge fund collapses and the overall mortgage meltdown, that caused the emergency housing bill to speed through Congress, the reverse mortgage provisions would probably still be sitting on the desks of Washington lawmakers.

It could be quite a while before the higher loan limits actually help the majority of senior homeowners.

Use this on-line Reverse Mortgage Calculator to see how much money you might be eligible for today.

Housing Bill Offers Reverse Mortgage Improvements

Reverse Mortgage — Mon, 11 Aug 2008 17:47:37 -0500

The Housing and Economic Recovery Act of 2008 provides good news for consumers interested in tapping home equity through the use of an FHA insured HECM reverse mortgage. The changes that pertain to reverse mortgages have been languishing in Congress for more than two years. Thankfully, they were finally included in a bill that had almost 100% chance of passing.

It is anticipated that some of the amendments will take place as early as October 1st, 2008 and others will be implemented in January, 2009. The likely changes to be made in October are:

1.) Uniform National Lending Limit
Under the new law, the loan limit nationally will be increased to $417,000. However, that limit may be increased to $625,000. in high housing cost areas of the country. The new uniform loan limit is welcome news. Prior to the passage of this bill each county throughout the country had different loan limits. They ranged from $200,160. to $362,790.

2.) Cross Selling of Financial Products - Prohibited
The new housing bill includes a provision to prohibit lenders from requiring borrowers to purchase insurance, annuities or other similar products as a condition for a reverse mortgage. The new law also restricts lenders who are originating reverse mortgages from working with, employing or providing incentives to other professionals that attempt to sell seniors other financial products as part of the reverse mortgage application process. This provision has been included in the new law because of concerns that seniors have been inappropriately, and sometimes even fraudulently, sold additional financial products with the money received from obtaining a reverse mortgage loan.

The Financial Industry Regulatory Authority (FINRA,) has issued several warnings in the past about reverse mortgages. They have cautioned seniors about doing business with financial professionals that want them to obtain a reverse mortgage in order to purchase an investment product, such as an annuity or long term care insurance.

3.) Origination Fees - Reduced
A reduction in loan origination fees is another part of the Housing and Recovery Act that will take place in October. The origination fee will be limited to 2% of the first $200,000. and 1% of any amount over $200,000. not to exceed a total maximum origination fee of $6,000.

Further study into the costs associated with reverse mortgages is to be conducted by HUD during the next several months. It will be interesting to see if they consider a reduction in the MMI (Mutual Mortgage Insurance) premium that HUD charges for each reverse mortgage loan that it insures. Currently the mortgage insurance premium is 2% of the home value or the loan limit whichever is less. This fee, after October 1st will, in many cases, be a larger expense to borrowers than the loan origination fee.

With all the criticism about high fees for reverse mortgages, I would hope that HUD takes a serious look at their own cost impact for what is an invaluable tool for many senior citizens. If HUD really wants to give seniors access to more of their home equity, cutting the insurance premium in tandem with the mandate to lower origination fees would seem like an appropriate tactic.