November 2013

Home Savers Program

A very small loan program to assist seniors in their ability to pay for their homeowners insurance and property taxes, has become available in the Washington DC area.   Non payment of these obligations by seniors, even after they have done a Reverse loan as in some cases has caused a foreclosure on the senior’s property in the county  where they live.

The Reverse loan requires the borrower to continue to pay taxes, keep the home insured and well maintained.   But sometimes this can be difficult for some seniors, so a program such as this one this is described in the following article, could be very beneficial for the homeowner.

“Local Program Offers Default Relief for Reverse Mortgage Borrowers
Posted By Jason Oliva On November 12, 2013 @ 6:54 pm In Counseling,News,Reverse Mortgage | No Comments

A micro-loan program in Montgomery County near Washington, D.C., offers reverse mortgage borrowers default relief through the help of a local counseling agency, The Washington Post reported [1] this week.

Focused on assisting reverse mortgage borrowers in meeting their tax and insurance requirements, Asian American Homeownership Counseling’s (AAHC) Home Savers program [2] offers an interest-free micro-loan of up to $4,000 for eligible residents living in Montgomery County, Maryland.

AAHC is a nonprofit organization approved by the Department of Housing and Urban Development that serves homeowners as well as condominium owners.

Under the Home Savers program, the $4,000 micro-loan must be repaid within two years, though extensions could be obtained depending on a borrower’s financial situation.

Reverse mortgage borrowers are required to attend to financial education orientations, one of which regarding money management and the other focusing on “thoroughly understanding credit,” the article writes.

There is also an income restriction for Home Savers, as the program is designed for homeowners making less than Montgomery County’s median area income. For a family of four, the median income is $107,000 and $79,000 for a family of two.

AAHC intends to expand the reach of Home Savers to neighboring areas such as Prince George County and Washington, D.C. through the use of grants.”

Written by Jason Oliva

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HUD Changes to Reverse Loans

Effective October 1st. initial changes to the federally insured mortgage have taken place.   The purpose of these changes to to be certain that the loan program will remain stable well into the future.   Undoubtedly, there will be modifications moving forward in the program.   But that would be based upon the effects of the initial changes.

I do have some concerns about it, as I feel that there will be seniors who could greatly benefit from the loan, but may be unable to qualify under the new guidelines.  Following is a summary of an article that was written in Kiplinger magazine.

Reverse Mortgage Changes Present New Hurdles, Safety Measures: Kiplinger
Posted By Elizabeth Ecker On October 28, 2013 @ 5:31 pm In News,Reverse Mortgage | 1 Comment

“New changes to the Department of Housing and Urban Development’s reverse mortgage program are presenting new hurdles to qualify, but should ultimately strengthen the Federal Housing Administration’s insurance fund, writes a Kiplinger article [1] this week that includes input from industry participants as well as AARP and financial advisor Michael Kitces.

Kiplinger explains the distinction between the old reverse mortgage product and the new one, as of October 1, that offers less of an upfront draw and two different mortgage insurance premiums based on the upfront amount. Borrowers will receive about 15% less as a result, Kiplinger writes.

“The changes were made to ensure the program is open for business tomorrow,” One Reverse Mortgage CEO Gregg Smith told the publication, which cited a recent $1.7 billion treasury draw made by FHA in order to shore up its insurance fund as a reason for the changes.

Forthcoming changes including the introduction of a financial assessment and mandatory set asides for some borrowers that will hold funds to pay for property tax and insurance will add an additional hurdle, Kiplinger writes.

“Because the set-aside may need to last for 20 years or more, the amount could be very large. For some, the proceeds may end up paying only loan expenses, taxes and insurance—but covering those costs could enable the senior to stay in the home,” Kiplinger writes based on input from Kitces. “And it would free up cash in a retiree’s budget to pay for other expenses.”

Some interested borrowers will be denied the loan as an option because they won’t pass the financial assessment, AARP’s Lori Trawinski told Kiplinger.

And while affluent borrowers will likely pass that assessment, the elimination of the Saver could be seen as a deterrent for those who are looking to use a reverse mortgage to extend the life of their investment portfolio, Kitces says.

“Spending a few more thousand dollars upfront isn’t a deal killer, but it takes a little value off the strategy,” he says.”

Written by Elizabeth Ecker [2]

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