Assisting Seniors to Live Life on Their Terms

In the previous post, I mentioned how difficult it has been for me to speak with Financial planners or Advisors about Reverse Mortgages.   As I noted before, even though I was a member of their trade association, NAIFA & supported a local chapter, they would not give me an opportunity to educated them on how the FHA Reverse loan program could benefit their senior clients and frankly, increase their professional image.

Everyone was polite but not interested in what I had to share.

That is finally beginning to change and I’m quite relieved about it, because if a senior or the adult child of a senior is relying on a Financial Advisors guidance in this decision, sadly they may discourage them from considering the Reverse loan as a resource for additional tax-free income.

Here is the remaining article from Reverse Mortgage Daily:

FINANCIAL PLANNERS CONSIDER REVERSE MORTGAGES NOW BEFORE INDUSTRY CHANGES

“While reverse mortgages are most commonly taken out by low- to middle-income seniors, they’re growing in appeal among other demographics, too, said one certified financial planner, noting a trend of more affluent people using the product as a planning tool to fund long-term care and supplemental life insurance.

“Their investments have taken a big hit, and if they have needs that have to be addressed, they’re looking to their house to fund it,” said Dennis Loxton, regional vice president of the reverse mortgage division of First Century Bank in Gainesville, Ga., in the article.

The exits of big-name lenders such as Wells Fargo and Bank of America also makes the future of the program unclear, it continues, going on to mention several industry lawsuits including deceptive marketing charges and allegations of illegal foreclosure procedures against spouses of deceased borrowers.

“While these headwinds are unlikely to cause the reverse mortgage industry to disappear, in the short run they will probably have a negative impact,” says Financial Planner, going on to predict the possibility of consolidation among bigger players, tighter underwriting standards, and higher fees.

The article also explains how the program works and runs through the pros and cons of reverse mortgages.”

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Over the past ten years since I have been specialized in the FHA Reverse loan program, I have done my best to educated Financial planners about the benefits to the senior clients or to their clients who have senior parents.

They have been, very, very resistant to the idea, due to a total lack of understanding about the loan and they have cultivated a bias against it due to a lack of education about how it works the pros, the cons and how it could elevate their image to their clients as a “trusted advisor”.

It seems that this is all about to change.  Following is an article from Reverse Mortgage Daily that I will share in two parts.

Financial Planners Consider Reverse Mortgages Now Before Industry Changes

“Despite some industry headwinds, now may be just the right time for financial advisors to recommend reverse mortgages to clients to help fund retirement and lock in home values and claim amounts, says a recent article by the online industry website Financial Planning.
If a reverse mortgage makes sense for a financial planner’s clients, it’s a good idea to look into them soon, and for several reasons, Financial Planning advises.

These reasons include the possibility that the Department of Housing and Urban Development (HUD) could decrease loan limits at the end of 2011 from $625,500 to $417,000. Also, an FHA-insured reverse mortgage is a way to lock in a home’s current value and protect its equity, as housing prices in some parts of the country continue to decline.
And, for pre-retirees who have lost their jobs and are struggling to find work in a weak economy, the loan could be a “financial lifeline,” says the article.”

I will provide the rest of this article in tomorrow’s post.

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 Here is the remaining part of the article that discusses the continuation of the current HUD Lending Limits and their extension through 2012.  This is certainly very good news for the Real Estate market and any first time home buyers who would like to apply for an FHA loan.   Plus it is HUD Kespecially good news for seniors who will be able to take advantage of the higher limits when apply for a Reverse mortgage.

“The loan limits for the HECM program were raised from $417,000 to $625,500 in February 2009 and were extended last year. They were previously scheduled to expire on October 1.

Many in the reverse mortgage industry have speculated as to the negative impact a return to the previous, lower loan limit would have in areas with high-valued homes.

The loan limits could still change at the end of the calendar year 2011.  Prior to the emergency loan limits, HUD would routinely adjust loan limits on a calendar basis.

“The only reason we adjusted our loan limits [last week] is because of a statutory expiration date at the end of the fiscal year,” said Brian Sullivan, HUD spokesperson in an email to RMD.”"

View ML 2011-29.

Written by Elizabeth Ecker

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HUD has decided to extend the current lending limit of $625,250 for Reverse mortgages into the next fiscal year and that is very good news for everyone.   There has been a debate about reducing the limit to the previous  figure which was at $417,000 due to declining market conditions and if that had happened it would have had serious consequences for seniors and the Reverse loan industry.

If this had indeed occurred it would have been a serious blow to the senior community making it impossible for some to take advantage of the federal loan program because of the lower cap.   Appraised values would have been capped at $417,000 instead of the current lending limit and if a senior  has a large mortgage that needs  to be paid off and depending on how much they could qualify for  from a Reverse loan, they may not be able to do it and  that would mean they would have to continue making mortgage payments that they may not be able to afford and put them at risk for  foreclosure.

It is with a huge sigh of relief, to know that for at least another year we have the ability to continue to originate loans for seniors who need the higher lending limit to pay off  large mortgages they may have on their property and eliminate their loan payment.  And for the time being the higher limits will remain available but this could change next year and that’s why it’s important for seniors to explore this option now and not continue to wait and see what happens.

Following is an article that discusses this good news:

HUD  Extends $625,250  HECM Loan Limit Through 2011

“The mortgage loan limit and max claim amount for for HECM loans will remain unchanged through December 31, according to a mortgagee letter issued today by the Department of Housing and Urban Development. ML 2011-29 specifies that the HECM loan limit of $625,500 will remain for all areas, including high-cost areas such as Alaska, Guam and the U.S. Virgin Islands.

“We’re glad to see FHA take this interim step. It eliminates uncertainty for loan applicants who might have been concerned about not getting their loans before the limits possibly dropped,” Peter Bell, National Reverse Mortgage Lenders Association president told RMD in an email. “Now, we need to focus on persuading HUD and/or Congress to retain this limit beyond calendar 2011.”

For forward mortgages, HUD states that the Federal Housing Administration will implement new single-family loan limits on October 1, which will reduce forward loan limits in the highest cost areas in the U.S., and will maintain current loan limits in most parts of the country.”

Part II on 8/27/11

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