August 2013

Financial Planners More Accepting of Reverse Loans

Historically Financial Planners have not been supportive of the use of a Reverse mortgage as part of retirement planning.   But that is beginning to change as many of them have attended seminars for C/E credits and been more exposed to the benefits that the program provides.

After attending some of these educational forums many Financial Planners have indicated that they have changed their minds about utilizing a Reverse mortgage as a way to protect their clients investments.

Following is an article from the Wall Street Journal that discusses this change in attitude.

Wall Street Journal: Reverse Mortgages Can Help A Wide Array of Retirees
Posted By Elizabeth Ecker On August 18, 2013 @ 4:59 pm In Reverse Mortgage |
“Reverse mortgage benefits can span a wide population of older Americans spanning both those trying to keep their homes, as well as “well-heeled retirees” seeking an investment buffer, the Wall Street Journal writes in an article [1] this week.

With the print headline “Reverse Mortgage Rethink,” the WSJ delves into academic research [2] on the Home Equity Conversion Mortgage Saver led by John Salter and Harold Evensky at Texas Tech that has effectively positioned the Saver loan as a safeguard against losses across other investments in a retiree’s portfolio.

“Retirement is really about cash flow,” Martin James, a certified public accountant in Mooresville, Ind., told the WSJ. “Even for a person who’s got their mortgage paid off, it’s nice to have a line of credit sitting there.”

No longer a loan of last resort, the article writes, financial planners today are taking a different approach to reverse mortgages, though there are changes in store expected later this year, following congressional approval of the Department of Housing and Urban Development toward altering the HECM program.

Citing the use of a reverse mortgage as a way to eliminate mortgage payments, save on withdrawing from retirement investments that are subject to tax and serving as a “bridge” to withdrawing on Social Security, the article includes two pieces of advice for those who are considering taking out a reverse mortgage: consult an expert and keep kids in the loop—especially because children of reverse mortgage borrowers are often at first uncertain of the idea.

“My first answer, when people ask how to approach the kids, is to ask them if they have an extra room in their house for their parents,” Salter told the WSJ.”

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Reverse Loan Changes, Part 2

Here is the remainder of the article discussing the pending changes to the HECM Reverse mortgage program.

“Officials have stated to Congress and the public that the desired changes [2] will shore up the FHA’s insurance fund for its HECM program and will also make the products safer and more sustainable for borrowers.

While additional program changes have been discussed, including a financial assessment of borrowers and a set aside for property tax and insurance payments, those changes are not expected to come in the first set of product changes, rather they are expected to be released in the coming months.

The new product will come with new mortgage insurance premiums that are dependent upon the amount that is drawn upfront and whether that amount falls under or exceeds a 60% threshold. Only borrowers with mandatory obligations will be able to exceed that threshold.

Details are expected from HUD some time before September 1. The agency has stated [3] it would like to implement the changes before October 1, 2013.”

Written by Elizabeth Ecker [4]

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Changes Coming to Reverse Loans

HUD is planning several changes to the federally insured Reverse mortgage program, otherwise known at the HECM.    The anticipated date for some of the initial changes will go into effect in October, but until there is an Mortgagee Letter released outlining all of the changes, it is not clear as to just exactly what these will be and how they could effect a senior applying for the loan.

However, if you or someone you know has been thinking about the possibility of using the loan, I would not hesitate to meet with someone that can provide you will correct information, so that you can make an educated and informed decision as to whether or not this would be of value to you or your parent(s).

As the pending changes become apparent and the details are released to the general public, there will be most likely a rush on the HUD approved counseling agencies to set up the required counseling appointment as part of the application process for a Reverse loan.   And if that should happen, it could take several weeks before one might be able to book the appointment and not meet the deadline before the changes to the loan program go into effect.

I will share the following article in two parts.

HUD to Combine Existing Reverse Mortgage Products
Posted By Elizabeth Ecker On August 19, 2013 @ 5:30 pm In Reverse Mortgage | 11 Comments

“The reverse mortgage industry and the Department of Housing and Urban Development are beginning to shed light on the changes that are in store for the Home Equity Conversion Mortgage program following approval for program change granted [1] by Congress this month.

HUD Deputy Assistant Secretary Charles Coulter explained the proposed changes, without providing full details which are still being worked on at HUD, in a recent conference call with the National Reverse Mortgage Lenders Association’s executive and policy committees.

HUD is planning to create a new reverse mortgage loan program, while discontinuing the two programs—the Standard and Saver—as they are currently offered, according those familiar with the details. The new loan will come with new principal limit factors that range somewhere between the current Saver and Standard programs, though details have not yet been released on exactly where on the scale the new PLFs will fall.”

Part (2) to Follow

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Will I Outlive My Money?

Although aging and health are large concerns for seniors, what is even a bigger worry is the possibility of running out of money.  And if they do, what would be the alternatives for them?

If they own a home, selling it and live off of the money they receive for the sale?   Or moving in with their adult children, which generally isn’t a good idea.   Or staying in their home and use the funds from a Reverse loan to maintain their life and independence?

Here is an article that was recently published, discussing this number 1 concern:

Seniors Rank Finances, Not Health, as Top Retirement Concern
Posted By Alyssa Gerace On August 12, 2013 @ 6:15 pm In News,Reverse Mortgage | No Comments

“Americans aged 60 and older are more likely to be concerned about the sufficiency of their finances rather than a deterioration in health, according to a recent national survey [1].

More than half of respondents (53%) say they are concerned about whether their savings and income will be sufficient to last them for the rest of their lives, while another 33% were not concerned, according to the 2013 United States of Aging Survey, conducted by the National Council on Aging, UnitedHealthcare, and USA Today.

Among retired seniors, 43% relied on Social Security as their primary source of retirement income. More than four in ten (41%) of non retired seniors planned to rely on Social Security in retirement.

Despite future fears, most respondents reported no difficulty in affording current expenses.

For 66% of respondents, it’s “easy” to pay monthly living expenses, and only 18% reported the need to reduce regular spending in 2012 in order to pay a monthly regular bill.

However, nearly two in ten (19%) said it was “difficult” to afford monthly living expenses, based on current income and savings.

Six in ten seniors believe their health will stay the same in the next 5-10 years, the survey said. Another 13% think their health will improve, while less than a quarter (23%) predict their health will worsen during that timeframe.

While seniors believed their health wouldn’t change much in the upcoming decade, many aren’t doing anything to manage existing conditions or maintain good health.

Nearly two in ten (18%) seniors reported having five or more chronic health conditions, while 65% reported having two or more. However, more than half (51%) haven’t set any specific goals to manage health in the past year, while 43% have taken no steps toward preventing falls.”

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Long-Term Care and the Future

I am providing a copy of an article that discusses the Commission on Long-Term Care and a report that they are preparing for Congress that will identify the areas of concern as people age.   How this will effect their quality of life, finances and family and how the nation needs to be prepared to meet the needs of an aging population.

AARP Stresses In-Home Options to Long-Term Care Commission
Posted By Elizabeth Ecker On August 6, 2013 @ 6:27 pm In News,Reverse Mortgage | 1 Comment

“Aging in place will be a critical component of long term care, AARP said in a statement to the Commission on Long-Term Care following a hearing of the commission last week.

Currently, the commission is working on a report to Congress that will lay plans for Long Term Care legislation, of which home care should be a component, AARP said.

“The Commission has a little over a month to vote on recommendations and the three hearings to date highlight the importance of expanding consumer choice of quality care options, increasing access to home and community-based services that would allow more people to stay in their homes and communities, and bolstering support for family caregivers,” said AARP Executive Vice President Nancy LeaMond.

AARP urged swift movement by the commission, with pressing long term care challenges facing the nation in its current state.

AARP hopes the Commission will use the short time it has left to offer real guidance to Congress on addressing the many challenges surrounding long-term care,” LeaMond said. “This is an opportunity to jump-start a national conversation that brings individuals, families, policymakers, businesses and other LTSS stakeholders together to pursue real change.”’

Written by Elizabeth Ecker [1]

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