Reverse Mortgages California Blog

Reverse Mortgage Referral Fees No More

Luke Helm (www.Reverse-Mortgage-Info.net) — Wed, 24 Sep 2008 11:03:48 -0500

Bank of America has announced that it will no longer accept reverse mortgage applications containing a broker advisor agreement in response to the new law called the National Housing Act (HR 3221). I suspect that other reverse mortgage lenders are likely to interpret the new law in the same way and follow suit. This means that non-FHA approved brokers will no longer be able to receive the common 25% "application assistance fee" (read: referral fee) on the FHA reverse mortgage.

The good news is that this same bill will increase the FHA 203(B) (HECM reverse mortgage) lending limit. This means that senior homeowners, whose homes are currently worth more than the lending limit for their area, will likely see an increase in the amount of money available to them under the FHA HECM reverse mortgage. The specific increases for each county are still under review with HUD.

Luke
Senior Reverse Mortgages

Reverse Mortgage Interest Rates This Week

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 22 Jul 2008 17:48:05 -0500

Rates are still very low on the government-backed FHA reverse mortgage.

FHA Reverse Mortgage - Home Equity Conversion Mortgage (HECM)
3.71% based on the One Year CMT index plus a margin of 1.5%.
The fixed rate HECM is at 6.18% to 6.85%

Jumbo Reverse Mortgages:
Variable Rate Jumbo Reverse Mortgage: 5.96%
Fixed Rate Jumbo Reverse Mortgage: 9.125%

Fannie Mae Home Keeper Reverse Mortgage is at 5.875%

Disclaimer: Of course, interest rates do not include closing costs which vary. A reverse mortgage quote will provide the details like closing costs and the Total Annual Loan Cost. I specialize in California Reverse Mortgages.

Jumbo Reverse Mortgages Versus FHA

Luke Helm (www.Reverse-Mortgage-Info.net) — Thu, 17 Jul 2008 15:44:33 -0500

Seniors with high value homes may qualify for more money with a Jumbo Reverse Mortgage program. The two main types of reverse mortgages are: FHA conforming and non-conforming, the latter commonly known as a Jumbo Reverse Mortgage. An FHA conforming reverse mortgage carries a loan limit of $362,790 in most high-cost counties (although it can vary), whereas a Jumbo Reverse Mortgages generally have loan limits in the millions. An FHA conforming loan limit is the maximum amount of home value that the FHA will recognize in calculating the amount of money that they will lend on the home. Therefore, Jumbos are considered by senior homeowners when the value of their home exceeds the FHA conforming loan limit because they can obtain a larger loan this way.

Jumbo Versus Conforming

Although the Jumbo does not have a loan limit, the FHA reverse mortgage (known as the Home Equity Conversion Mortgage or HECM) offers a much greater percentage of the home's first $362,790 in value. This means that the Conforming reverse mortgage is still the better choice until the home value far exceeds the FHA conforming limit. But if a home's value exceeds the loan limit by a significant amount, the Jumbo can usually offer a larger amount of money. Seniors with high home values- those exceeding the $362,790 limit (or the FHA HECM limit for their county) should definitely explore all of their options.

For Example

A 70 year old with a home that is worth $400,000 in Orange County, California might qualify for $225,000 under the FHA reverse mortgage, while the Jumbo program would only offer $160,000. This shows how Jumbo Reverse Mortgages are much more conservative in the percentage of the value of the home that they will offer. But when the home value is very high, this more conservative lending percentage (known in the industry as "loan-to-value" ratio) will overtake the FHA reverse mortgage. If the 72 year olds home is worth $700,000 for example, then they might qualify for $280,000, which is $55,000 more than the FHA reverse mortgage would offer.

When a Jumbo Reverse Mortgage Makes Sense

Once home value is above the conforming loan limit for the county, the amount of money available under the Jumbo Reverse Mortgage increases, while the FHA program does not change. As a general rule, Jumbos begin to make financial sense when the home is worth at least $200,000 more than the FHA reverse mortgage limit for the county, but there are exceptions for both higher and lower values.

Get a Quote

The loan scenarios above are not an offer to lend and are intended only to illustrate the potential differences between the Jumbo Reverse Mortgage and the FHA reverse mortgage. The examples given may not apply to your particular circumstances. I suggest that you request an FHA or Jumbo Reverse Mortgage quote.

Luke
External Blog: http://reversemortgagescalifornia.activerain.com/

Current Reverse Mortgage Interest Rates

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 15 Jul 2008 15:31:43 -0500

Here are reverse mortgage interest rates for July 15th, 2008.

Jumbo Reverse Mortgages:
Variable Rate Jumbo Reverse Mortgage: 5.97%
Fixed Rate Jumbo Reverse Mortgage: 8.750%

FHA Reverse Mortgage - Home Equity Conversion Mortgage (HECM)
3.75% based on the One Year CMT index plus a margin of 1.5%.
The fixed rate HECM is at 6.18% to 6.45% (depending on the bank)

Fannie Mae Home Keeper Reverse Mortgage is at 5.875%

Luke
New external blog: http://reversemortgagescalifornia.activerain.com/

Disclaimer: Interest rates do not include closing costs which vary. A reverse mortgage quote will provide the details like closing costs and the Total Annual Loan Cost. I specialize in California Reverse Mortgages.

Reverse Mortgage Interest Rates This Week

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 08 Jul 2008 14:57:29 -0500

Reverse mortgage interest rates are down slightly this week. Here they are for the most common reverse mortgage programs.

Home Equity Conversion Mortgage (HECM) FHA Reverse Mortgage:
The HECM rate is down this week to 3.85%. Index is the One Year CMT index plus a margin of 1.5%.
The fixed rate HECM is at 6.18% to 6.60% (depending on the bank)

Fannie Mae Home Keeper Reverse Mortgage is at 5.875%

Non-FHA Jumbo Reverse Mortgages:
Variable Rate Jumbo Reverse Mortgage: 5.96%
Fixed Rate Jumbo Reverse Mortgage: 8.875%

Luke
New external blog: http://reversemortgagescalifornia.activerain.com/

Disclaimer: Of course, interest rates do not include closing costs which vary. A reverse mortgage quote will provide the details like closing costs and the Total Annual Loan Cost.

Current Reverse Mortgage Interest Rates

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 01 Jul 2008 15:04:34 -0500

Happy Tuesday everyone! That means it's time for my weekly reverse mortgage interest rate update.

Jumbo Reverse Mortgages (Non-FHA):

Variable Rate Jumbo Reverse Mortgage: 5.95%

Fixed Rate Jumbo Reverse Mortgage: 8.750%

Countrywide or Bank of America Jumbo: Suspended for Brokers

Financial Freedom Cash Account Advantage Reverse Mortgage: Suspended

FHA Reverse Mortgages (Home Equity Conversion Mortgage or ‘HECM')

The HECM rate is down this week to 3.96%. This is based on the One Year CMT index plus a margin of 1.5%.

The fixed rate HECM is at 6.43% to 6.92% (depending on the bank)

Fannie Mae Reverse Mortgage

Home Keeper is at 6.0%

Luke Helm
Reverse Mortgage Professional
Reverse Mortgage Info
New outside blog: http://reversemortgagescalifornia.activerain.com/

Disclaimer: Of course, interest rates do not include closing costs which vary. A reverse mortgage quote will provide the details like closing costs and the Total Annual Loan Cost.

Reverse Mortgages in California's Southland

Luke Helm (www.Reverse-Mortgage-Info.net) — Fri, 27 Jun 2008 19:00:43 -0500

From uninsured medical bills, to prescription drugs, to home maintenance and even at home care, social security income alone often cannot cover all of a seniors' expenses. Many Southern California seniors have found a solution to affording the high cost of living in our region with a Reverse Mortgage. And in addition to helping with daily necessities, some Californians are having a little fun with the money from their reverse mortgage. Many seniors are now using this payment-free home loan to take advantage of their home equity to enjoy a higher standard of living.

Seniors' Home Equity in Southern California

Generally, the longer the senior has owned their home, the better. Southern California Seniors who have owned their home for more than 10 years have probably seen a large increase in their home equity as real estate values have increased. Despite a declining housing market, most long-term residents of Southern California still have plenty of home equity to support a reverse mortgage. And fortunately for homeowners, the lender (or FHA) assumes the risk of further drops in value once the reverse mortgage is obtained, so further home price depreciation will not affect the loan or amount of money available. This factor makes now an excellent time to apply for a reverse mortgage, before a senior is disqualified for a reverse mortgage due to further declines in home prices.

Reverse Mortgage Options

The average reverse mortgage for seniors in Southern California enables them to tap into over $200,000 of their home equity. And the more equity they have, generally the more reverse mortgage funds are available. Once the loan closes, there are numerous ways of taking the money out: as a lump sum to put in the bank, a line of credit to tap into at any time, an automatic month check or any combination of these options. There is always the option to repay the money early, which in most cases, increases the amount available for the future. Rather than being stuck with the inflexibility of a traditional mortgage, the Southern California senior's reverse mortgage can be customized to meet their specific needs and goals.

Luke Helm
Reverse Mortgage Specialist
New "outside blog" at http://reversemortgagescalifornia.activerain.com/

HECM Reverse Mortgage Limits: Open Letter to My Senators

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 24 Jun 2008 12:38:11 -0500

I just faxed the following letter to Diane Feinstein and Barbara Boxer (California State Senators), concerning a senate bill being debated today:

"Tens of thousands of senior homeowners in California need the FHA-insured HECMs to help them maintain their ability to continue living independently in their own homes. But the FHA loan limits have been far too low for too long and are thus incapable of helping thousands of seniors who live in high-cost areas of the state.

Due to the housing market in California, and lack of jumbo reverse mortgage lenders (Bank of America and Indy Mac Bank have recently suspended their programs), seniors have more debt than the amount they can borrow from a HECM based on today's lower loan limits, so an increase is necessary.

As a reverse mortgage loan officer, I personally know 4 different households who will face foreclosure if the FHA HECM limit is only increased to the proposed $417,000.

The HECM program should be amended to allow senior homeowners to obtain HECMs based upon the same higher loan limit that would be allowed for other FHA loans under the pending legislation.

Please call Sen. Richard Shelby from Alabama, as well as Sen. Chris Dodd, the Democratic chairman of the committee, and tell them we must see a $625,500 maximum loan limit for HECM included in the bill that is brought to the floor."

Reverse Mortgage Interest Rates This Week

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 24 Jun 2008 11:49:43 -0500

The following is an interest rate update on reverse mortgage programs.

FHA Reverse Mortgages (Home Equity Conversion Mortgage or ‘HECM')

The HECM rate is at 4.07%. This is based on the One Year CMT index at 2.57% plus a margin of 1.5%.

The fixed rate HECM is at 6.30% to 6.68% (depending on the bank)

Non-FHA Jumbo Reverse Mortgages:

Financial Freedom Cash Account Advantage Reverse Mortgage: Suspended

Bank of America / Countrywide Jumbo: Suspended

Fixed Rate Jumbo Reverse Mortgage: 8.875%

Variable Rate Jumbo Reverse Mortgage: 6.65%

Of course, interest rates do not include closing costs which vary. A reverse mortgage quote will provide the details like closing costs and the Total Annual Loan Cost.

My blog: http://www.activerain.com/blogs/reversemortgagescalifornia

Jumbo Reverse Mortgage Pulled by Financial Freedom

Luke Helm (www.Reverse-Mortgage-Info.net) — Wed, 18 Jun 2008 18:03:47 -0500

First Bank of America pulled their jumbo reverse mortgage product and now it's the 800 pound gorilla of the industry, Financial Freedom. The company, a division of Indy Mac Bank, just announced that the last day they will accept applications for their program called the Cash Account is June 30th.

Fortunately, there are still several jumbo reverse mortgage programs available in the marketplace. So seniors with high-value homes need not despair! At least for now . . .

Will more heads (or programs) roll? Probably. Stay tuned!

California Reverse Mortgage Interest Rates Increase

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 17 Jun 2008 13:48:32 -0500

The rates have gone up this week, probably in response the recent bond market changes. Here are today's interest rates for the top reverse mortgage programs:

FHA Reverse Mortgages:

The HECM, which is the FHA Home Equity Conversion Mortgage rate is 4.01% (Index is the 1 Year CMT at 2.51% plus a margin of 1.5%)

The fixed rate HECM is at 6.81% to 7.00% (depending on the bank)

Jumbo Reverse Mortgages (Non-FHA):

Financial Freedom Cash Account Advantage Reverse Mortgage: 7.010% (Index is 6 month LIBOR at 3.51% plus margin of 3.5%)

Fixed Rate Jumbo Reverse Mortgage: 9.00% (available on home values up to $10,000,000)

A reverse mortgage quote will provide the details like the Total Annual Loan Cost (which is like an APR). The interest rates above do not include closing costs which vary.

Today's Reverse Mortgage Interest Rates in California

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 10 Jun 2008 13:52:49 -0500

It is Tuesday, June 10^th which means it's time for a reverse mortgage interest rate update.

FHA Reverse Mortgages:

HECM, which is the FHA Home Equity Conversion Mortgage rate is 3.64% (Index is the 1 Year CMT at 2.14% plus a margin of 1.5%)

The fixed rate HECM is at 6.56% to 6.83% (depending on the lender)

Jumbo Reverse Mortgages:

Financial Freedom Cash Account Advantage Reverse Mortgage: 6.72% (Index is 6 month LIBOR at 3.22% plus margin of 3.5%)

Fixed Rate Jumbo Reverse Mortgage: 8.625% (available on home values up to $10,000,000)

Get a reverse mortgage quote for the details and Total Annual Loan Cost (like an APR) as these interest rates do not include closing costs which vary.

Florida Reverse Mortgages

Luke Helm (www.Reverse-Mortgage-Info.net) — Fri, 06 Jun 2008 18:39:26 -0500

Reverse mortgages in Florida have become increasingly popular over the past 5 years as seniors have discovered what a viable option they are to secure a more financially comfortable retirement. A few worthy reasons seniors across the state have adopted reverse mortgage programs include paying off existing mortgage debt to rid themselves of their mortgage payment; to create a monthly stream of income that enables them to afford a more comfortable lifestyle; to make improvements to their home or basic maintenance with a lump sum of cash. There are endless uses for the additional funds a senior receives from a reverse mortgage.

Having only minimal qualifying requirements makes the reverse mortgages in Florida relatively easy to obtain. Ample equity in their home is the only essential ingredient to qualify. Income or other assets and credit scores are not considered when qualifying. But because of this years' decline in Florida real estate, seniors in some parts of the state have found that having adequate equity in their homes is not as certain as it used to be. As the real estate market in Florida is now clearly declining, the amount of home equity that seniors have is shrinking, making it more difficult for many to obtain a reverse mortgage. But not all parts of the state have been impacted to the same degree.

Miami Reverse Mortgages

One of the hardest-hit markets in Florida, Miami has seen home values drop by as much as 25% in some communities. Seniors are more likely to qualify for only $150,000 on their current home value of $300,000, where they once could qualify for a $200,000 reverse mortgage on the same home, valued at $400,000. On average, home values have declined 18% in the greater Miami area. As if declining values were not bad enough, Miami County is now widely-recognized as a "declining market". At this point, automatic reduction on loan amounts of 5-6% for jumbo programs in Miami are common for most Florida reverse mortgage lenders. However, FHA reverse mortgage programs remain the most common and are not subject to these additional automatic cuts.

Tampa Reverse Mortgages

The Tampa real estate market however, is doing better than Miami's. With an average home price decline of 9% year over year, versus Miami's 18% decline, seniors in the Tampa have retained more home equity. However, one major jumbo reverse mortgage lender has announced a automatic 6% cut to loan amounts in Tampa, since they consider the area is a declining market. Fortunately, FHA reverse mortgages remain the top choice.

Jacksonville Reverse Mortgages

Unlike most of Florida, Jacksonville has managed to altogether avoid the "declining market" stigma. With the strongest real estate market in Florida, perhaps owing to a strong job center, the median home price has declined 6% in the greater metropolitan area of Jacksonville. Jumbo reverse mortgage lenders have not announced automatic loan amount reductions. Still, the market has seen some declines, making it a good time to take advantage of the reverse mortgage and use the equity while you still have it. Seniors hope their Jacksonville real estate market will remain strong relative to the Tampa or Miami markets.

Interest Rates on Reverse Mortgages

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 03 Jun 2008 12:26:08 -0500

It is Tuesday, June 3^rd and the day that major lenders update their reverse mortgage interest rates. Here they are for the top programs:

FHA Home Equity Conversion Mortgage (HECM) rate is unchanged this week at: 3.66% (Index is the 1 Year CMT at 2.16% plus a margin of 1.5%)

The FHA Fixed rate HECM Reverse Mortgage: 6.31% to 6.55% (depending on the bank)

Financial Freedom Cash Account Advantage Reverse Mortgage: 6.66% (Index is 6 month LIBOR at 3.16% plus margin of 3.5%)

The rates listed above are not APR's and do not include closing costs. Contact us for a reverse mortgage quote.

Reverse Mortgages Interest Rates

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 27 May 2008 12:34:51 -0500

Happy Tuesday! It's reverse mortgage interest rate update day, so the following are the latest for the most common reverse mortgage programs:

FHA Home Equity Conversion Mortgage (HECM) rate is unchanged this week at: 3.57% (Index is the 1 Year CMT at 2.07% plus a margin of 1.5%)

The FHA Fixed rate HECM Reverse Mortgage: 6.31% to 6.45% (depending on the bank)

Bank of America Independence Plan Reverse Mortgage: Suspended

Financial Freedom Cash Account Advantage Reverse Mortgage: 6.64% (Index is 6 month LIBOR at 3.14% plus margin of 3.5%)

For a reverse mortgage quote, please contact us or your lender. Interest rates are not an APR because they do not account for closing costs.

Reverse Mortgage Interest Rates

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 20 May 2008 13:32:32 -0500

It's Tuesday! And that means it's time for our weekly reverse mortgage interest rate update. Here are the current rates for the top reverse mortgage programs:

FHA Home Equity Conversion Mortgage (HECM) rate: 3.57% (Index is the 1 Year CMT at 2.07% plus a margin of 1.5%)

FHA Fixed rate HECM Reverse Mortgage: 6.06% to 6.40% (depending on the bank)

Financial Freedom Cash Account Advantage Reverse Mortgage: 6.39% (Index is 6 month LIBOR at 2.89% plus margin of 3.5%)

Bank of America Independence Plan Reverse Mortgage: Suspended

These rates are not an APR as they do not include closing costs. Please contact your lender for a reverse mortgage quote.

Reverse Mortgages Interest Rates

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 06 May 2008 12:11:56 -0500

Reverse mortgage interest rates for the most popular programs, current as of today:

FHA Home Equity Conversion Mortgage (HECM) rate: 3.43% (Index is the 1 Year CMT at 1.93% plus a margin of 1.5%)

FHA Fixed rate HECM Reverse Mortgage: 6.7% to 6.81% (depending on the bank)

Bank of America Independence Plan Reverse Mortgage: Suspended

Financial Freedom Cash Account Advantage Reverse Mortgage: 6.37% (Index is 6 month LIBOR at 2.87% plus margin of 3.5%)

Interest rates are not an APR (do not include closing costs). Please get a reverse mortgage quote for details.

Reverse Mortgage California – Loan of Last Resort?

Luke Helm (www.Reverse-Mortgage-Info.net) — Mon, 05 May 2008 15:10:54 -0500

As if our industry needs any more cautionary opinions about reverse mortgages, here is a recent news story that says the programs should be a last resort, not a "ticket to the resort". Such statements toward this relatively new program are still made with some frequency. Of course the writer was given their opinion, not stating a fact - everyone is entitled to their opinion. The following is mine.

If a reverse mortgage is a loan of last resort, then that must mean that it is a poor choice and seniors should stay away from it. But I say that the decision depends on what you're trying to accomplish. I think the question to ask yourself is whether or not the tradeoff is worth it to you, since the reverse mortgage allows you to use a portion of your home equity. This means you will have less equity in the future than if you did not get a reverse mortgage. You need to figure out if you will have enough left over for your purposes if you might sell your home, take the money and move. Another consideration is if it is important to you that your heirs get the maximum amount of money possible. If either of these are the case, then the reverse mortgage may not be for you.

But, using some of the equity with a reverse mortgage may be a good choice for those seniors who will stay in their homes for the foreseeable future. They may have heirs who will be just fine with the home equity that is left over - the reverse mortgage rarely allows you to use all of it anyway. Ask for a for the Amortization Table when you get a reverse mortgage quote to see how much equity will remain in the future.

Evaluating these tradeoffs may help you weigh the benefits of a reverse mortgage. The main issue to determine is if the extra cash you would get and the guarantee of no payments is worth it to you.

Reverse Mortgage Loans or the Option ARM for Seniors

Luke Helm (www.Reverse-Mortgage-Info.net) — Wed, 30 Apr 2008 13:06:38 -0500

There are two surprisingly similar home mortgage options that seniors can consider to tap into their home equity: the reverse mortgage and the option ARM. The option-ARM has been frequently used by seniors to take cash out of their home equity since monthly payment amounts are much less than those of the traditional mortgages for the same loan amount. Another popular solution is the reverse mortgage which is designed for a similar purpose, but requires no monthly principal or interest payments. So given these loans' similar function to access home equity, the question becomes, which loan is better the option ARM or reverse mortgages for seniors?

To start, a definition of each type of loan will be helpful. The reverse mortgage is a home loan that allows people over the age of 62 to pull out some of their home equity to use for any purpose that they want. The loan may be kept until the homeowner(s) either sells the home or permanently moves out. An aspect of this mortgage that is very appealing for many seniors is it does not require any monthly mortgage payment whatsoever for the life of the loan. A reverse mortgage is similar in many ways to a line of credit in that there is a credit limit and the ability to pull cash out and put it back in. But it is different in that the borrower does not pay the monthly interest that accrues. The lender cannot require any payments from the homeowner for as long as they live in the home, but instead the interest is added to the principal balance of the loan. At the end, the lender collects the total amount that it has lent to the borrower, which includes principal plus interest.

The option ARM is similar to the reverse mortgage in that it allows a homeowner (of any age) to pull out a lump sum of equity (no credit lines available), while only taking on a relatively small mortgage payment. The option Arm is known by any number of names, such as "pick-a-payment", "pay-option mortgage", "deferred-interest loan", or "negative amortization loan", among others. The mortgage payment is paid monthly and interest is usually between 2% and 5% annually of the loan balance (take 2% to 5% and divide by 12). However, that payment does not equal the interest rate on the loan, which may be 6% to 12%. For example, if the interest rate is 8% and the payment is 5% (a common scenario), then the interest that is not being paid is 3% (8% minus 5%). Similar to a reverse mortgage, the lender allows that 3% of unpaid interest to be added to the principal balance of the loan, to be repaid at a later date. Thus, the loan balance grows over time, even though payments are being made. But the loan balance is not allowed to grow indefinitely. Once it reaches 110% to 115% of the original loan balance (depending on the lender), a full mortgage payment must be made.

In considering each of these options, it is essential to take into account the seniors' individual situation. The option ARM would be a poor choice if the senior does not have an abundance of income and wants to stay in their home for many years to come. It would be like a ticking time bomb - it is only a matter of time before the low monthly mortgage payment would be replaced by a large monthly payment. In this particular case, the reverse mortgage if preferable because it carries the guarantee of no mortgage payments for as long as the homeowner lives in the home.

In order to qualify for the reverse mortgage, no set income, assets (other than home equity) or minimum credit score is required, making it much easier to qualify for than the option ARM. The option ARM does require those items, even if they only must be "stated" on the forms by the borrower. But be warned: despite what an eager loan officer might say, if "stating" a certain amount of income or assets means "lying", such an action can potentially carry the consequences of loan-fraud.

For most homeowners, the option ARM will cost far more than a reverse mortgage. Even though the closing costs are usually comparable, the interest rates on option ARMs are about 1% higher on average. Far more costly is the fact that you must cash out all the money at once from an option ARM rather than being able to take it out of a line of credit on an as-needed basis. The line of credit aspect of the reverse mortgage saves money by allowing you to keep the mortgage balance lower for a longer period of time, so that the interest accrues against a smaller loan balance.

Obviously, seniors should look before they leap into an option ARM. That loan is really designed for working people who are willing to trade some of their equity for the privilege of freeing up some monthly cash flow for a period of time. But for a senior, a reverse mortgage is a far better choice in most cases.

Reverse Mortgage Loan Rates – Libor Increasing

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 29 Apr 2008 15:25:22 -0500

The LIBOR index, a commonly used benchmark for the cost of money for lenders, has increased by almost 1% over the last month, pushing up the reverse mortgage interest rates for Libor-based products.

Here's reverse mortgage interest rates as of today:

HECM Reverse Mortgage rate: 3.38% (Index is the 1 Year CMT at 1.88% plus a margin of 1.5%)

Fixed rate Reverse Mortgage - HECM: 6.67% to 6.81% (depending on the bank)

Bank of America Independence Plan 360 jumbo reverse mortgage and Independence Plan 210 jumbo reverse mortgage: Suspended. See yesterday's post.

Cash Account Advantage jumbo reverse mortgage: 6.58% (Index is 6 month LIBOR at 3.08% [rounded] plus margin of 3.5%)

These rates are do not constitute an APR and do not include closing costs. Please contact your lender for a reverse mortgage quote.

Bank of America Reverse Mortgage Jumbo Program Suspended

Luke Helm (www.Reverse-Mortgage-Info.net) — Mon, 28 Apr 2008 14:01:58 -0500

First it was Countrywide, and now its parent, Bank of America has officially suspended their jumbo reverse mortgage program.

The leading jumbo reverse mortgage lender emailed its lending partners today with the announcement. It appears that nationwide declining property values and the resultant lack of investor interest in mortgages has killed the program, at least until secondary market conditions improve.

Fortunately, Financial Freedom has made no such announcement regarding their jumbo reverse mortgage product. And there are still a few other smaller players offer their proprietary reverse mortgage programs. Of course, Fannie Mae is still funding the FHA Home Equity Conversion Mortgage (HECM), but theses conforming loan amounts are limited by the home value cap of $362,790 in most high-value counties.

This development will hurt the California reverse mortgages market because there are thousands seniors who own homes whose values exceed the FHA HECM limit. And when a leading reverse mortgage lender such as Bank of America shuts down their program, it means that others are likely to follow suit.

Reverse Mortgages or Pay-Option Mortgage – What’s the Best Loan for Seniors?

Luke Helm (www.Reverse-Mortgage-Info.net) — Wed, 23 Apr 2008 15:05:12 -0500

The reverse mortgage and the pay-option mortgage are two surprisingly similar home mortgage options that are both worth considering by senior homeowners wishing to tap into their home equity. Many seniors in recent years have used the option-ARM to access cash from their home equity, which results in far lower monthly payments for the same loan amount than those of the traditional 30 years fixed rate mortgages. Others have opted for a reverse mortgage to accomplish the same goal of accessing their home equity, but without the requirement of any monthly principle or interest payments. Given these loans' similar function to access home equity with a low or no payment burden, which loan is better for seniors?

A good place to start this discussion is with a definition of each type of loan. A reverse mortgage is a home loan for people over the age of 62 that enables them pull out some of their home equity as cash. This money can be used for any purpose that they want. A defining element of this mortgage for seniors is that it never requires a monthly mortgage payment for the life of the loan. The loan may be kept until the homeowner(s) either sell the home or permanently move out. Essentially, a reverse mortgage is similar to a line of credit, in that it has a credit limit and the ability to take cash out and put it back in. The senior does not pay the monthly interest that accrues, but instead the interest gets added to the principle balance. The lender actually cannot ask the homeowner for any payments for as long as they live in the home. When the home is sold or the loan is refinanced, the total amount borrowed (principle plus interest), is repaid to the lender.

Now for a definition of the pay-option mortgage. You may hear of it referred to by a number of different names, such as "option ARM", "pick-a-payment", "negative amortization loan", or "deferred-interest loan" among others. The pay-option mortgage has no age requirements so a homeowner of any age may take out this loan. Like the reverse mortgage, a homeowner may pull out a lump sum of equity (no credit lines), while taking on only a relatively small mortgage payment. You can usually expect a mortgage payment between 2% and 5% annually of the loan balance, but paid monthly (take 2% to 5% and divide by 12). However, that payment does not equal the interest rate on the loan, which may be 6% to 12%. For example, if the payment is 5% and the interest rate is 8% (a common scenario), then the interest that is not being paid is 3% (8% minus 5%). Similar to a reverse mortgage, the lender allows that 3% of unpaid interest to be added to the principle balance of the loan, and repaid at a later date. Thus, even though payments are being made, the loan balance grows over time. But the loan balance is not allowed to grow indefinitely. Once it reaches 110% to 115% of the original loan balance (depending on the lender), a full mortgage payment must be made.

There are several factors to consider when comparing the reverse mortgage to the pay-option mortgage. If the senior intends to live in their home for many years to come but does not have an abundance of income, then the pay-option mortgage would be a poor choice. It would be like waiting for a bomb - it is only a matter of time until the low monthly mortgage payment would be replaced by a much bigger monthly payment. In this scenario, the reverse mortgage would be a better choice since it carries the guarantee of no mortgage payments for as long as the homeowner lives in the home.

The pay-option mortgage is more difficult to qualify for than the reverse mortgage because it requires documentation of good income, assets (other than home equity) and credit score. The reverse mortgage does not require any of those items. Caution: An overly eager broker might point out that your pay-option mortgage only requires these items to be "stated" on the forms by the borrower. If in your case "stating" ample amounts of income or assets means "lying", despite what your broker might say, such an action carries potential loan-fraud consequences.

In most cases, a reverse mortgage will cost far less than a pay-option mortgage. Although the closing costs will probably be similar amounts, the interest rates for pay-option mortgages are 1% to 3% higher. More important, is the fact that you must take all the money immediately as one lump sum with the pay-option mortgage rather than taking it out when you need it, as in the case with a reverse mortgage credit line arrangement. Having a line of credit allows the loan interest to accrue against a smaller balance, because you are keeping the mortgage balance lower for a longer period of time. The only offsetting factor in favor of the pay-option mortgage is that a portion of the interest is being paid each month.

Seniors are well advised to consider a reverse mortgage before committing to an pay-option mortgage. The pay-option mortgage tends to best serve working people who need to free up some monthly cash flow for a period of time and are willing to trade some of their equity for that privilege. But in most cases, reverse mortgages for seniors are a far better long-term choice.

Reverse Mortgage Interest Rates - Current

Luke Helm (www.Reverse-Mortgage-Info.net) — Tue, 22 Apr 2008 15:30:43 -0500

Rates have jumped this week for the fixed rate HECM (0.3%) on the LIBOR-based programs (0.33%)

The following are today's reverse mortgage interest rates for the most popular reverse mortgage products:

HECM Reverse Mortgage rate: 3.17% (Index is the 1 Year CMT at 1.67% plus a margin of 1.5%)

Fixed rate Reverse Mortgage - HECM: 6.30% to 6.81% (depending on the lender)

Independence Plan 360 jumbo reverse mortgage: 6.62125% (Index is the 6 month LIBOR at 3.02125 plus a margin of 3.6%)

Independence Plan 210 jumbo reverse mortgage: 5.12125% (Index is 6 month LIBOR at 3.02125 plus a margin of 2.10%)

Cash Account Advantage jumbo reverse mortgage: 6.52% (Index is 6 month LIBOR at 3.02% [rounded] plus margin of 3.5%)

These rates are do not constitute an APR and do not include closing costs. Please contact your lender for a reverse mortgage quote.

Reverse Mortgages California: Growing in Popularity

Luke Helm (www.Reverse-Mortgage-Info.net) — Mon, 21 Apr 2008 11:17:08 -0500

To be a senior homeowner in California is, for the most part, fortunate. As we all know, many seniors who have owned a home in California for a long time have seen massive increases in their home equity. Their employer pensions may have been cut, their social security alone may not be what they hoped, and stock market investments may have faltered, but the value of their homes is very often two or three times more than what they paid for it.

Until the reverse mortgage, a huge pile of home equity did not do the senior a lot of good. Most seniors found the only two ways of tapping into it to be unattractive: sell their beloved home and move somewhere unfamiliar or take out a new mortgage against their home saddling themselves with monthly payments.

For most seniors their home is not only a possession, but important to their sense of security, comfort and pride - to give it up just to have money to live on often seems wrong to them. Cashing out some of their home equity with a new mortgage seems to be a risky proposition for most seniors, at best. What happens when they run out of money and can no longer afford the mortgage payments? Their options are few and unwelcome: sell the home or be foreclosed upon.

Now consider the arrival of the reverse mortgage in California. The name may initially sound scary to some seniors, but when investigated, many find it to be the perfect solution. Without selling their home or taking on a mortgage payment, the reverse mortgage allows seniors to receive a portion of their home equity in cash. This enables the senior to continue living in their own their home, have the cash they need to live on, and all without any new debt payments. For these reasons, the reverse mortgage can be a much better solution than selling their home or obtaining a new traditional mortgage.

As the need for additional retirement money has grown among the California senior population, the popularity of reverse mortgages in California has increased by 658% from 2003 to 2006. However, the moderation of recent statistics suggests that an educational challenge still remains. Many seniors are under the false impression that obtaining a reverse mortgage means that they will lose some control over their home or that the lender will take their home at some point in the future. They often feel that there are somehow jeopardizing their home by taking on a reverse mortgage. Fortunately, nothing could be further from the truth.

On the contrary, the California reverse mortgage lender must guarantee to the senior that they will not have to make a mortgage payment for as long as they live in their home. The senior is guaranteed security in their home by having the money from a reverse mortgage to use for any purpose. With minimal obligations on the senior's part, the lender cannot do anything to affect their continued home ownership and occupancy. As seniors learn how these facts contribute to their sense of security, comfort and independence, the popularity of the reverse mortgage in California and other states will continue to grow.

Countrywide Jumbo Reverse Mortgage Folds

Luke Helm (www.Reverse-Mortgage-Info.net) — Thu, 17 Apr 2008 13:25:45 -0500

In the world of reverse mortgages, there are basically two types of programs. Government-backed reverse mortgages and jumbo reverse mortgages, also known as proprietary reverse mortgages. The latter are so called because they are designed and funded by individual banks. Given their conservative loan to value ratios, they generally only make financial sense when used on a home whose value far exceeds the FHA limits.

The past two years has seen many new proprietary reverse mortgage programs enter the marketplace. Countrywide bank entered the fray last year, offering both the government-backed reverse mortgages and their own jumbo reverse mortgage. But earlier this week, they eliminated their jumbo program. Their decision must have been driven by investor sentiment in their stock and of course, mortgage-backed securities in general. Loan volume was probably not the issue since Countrywide rocketed up the ranks to become the top lender for reverse mortgage loan volume for the month of March.

They will probably continue to offer the FHA Reverse Mortgage, known as the Home Equity Conversion Mortgage or "HECM". (Don't you love the LONG names the government has to give everything?) The HECM is sold to Fannie Mae, though the lender usually retains the servicing, so there is no lack of funds available for the program.

The loss of Countrywide's program to California reverse mortgages will be felt across the state. Limiting choices to fewer programs means that the exisiting programs will be in greater demand, likely resulting in less favorable terms. Still, there remains ample choices for California seniors seeking a reverse mortgage.

I'll continue to report developments in the reverse mortgage business here on this blog. Thanks for stopping by!