Assisting Seniors to Live Life on Their Terms

While this doesn’t have anything to do with Reverse loans, I thought  at the time when this was shared with me, that it was a very creative idea to reduce unsecured debt and reduce or eliminate credit card payments each month.

I was at a local community street fair a couple of weeks about and talked with Summer O’Neil who was representing Lockheed Federal Credit Union.  She explained to me how a person can not only get very low interest rates on autos but how they can use any equity they may have in their car to pay off credit cards, which we all know have very high rates.

So could it could be  a nice solution for many people that have too much credit card debt but have equity in their car to leverage and pay off that debt.   Of course, anyone reading this who just happens to be 62 years of age or older may want to use funds from a Reverse mortgage for the same purpose, plus with a Reverse loan, the proceeds would be significantly larger and they would not have a monthly payment.

Here is what Summer explained to me:

“Our auto loan rates for new or used  are as low as 2.99% for 60-66 months .  We can pull cash out from the  equity of the vehicle to payoff other debts such as unsecured credit cards or personal loans with no rate increase. There are some guide lines on the miles on the car and Fico score. 

 The credit score  would have to be 730 or above for up to 90% Loan to value including any current balances owed on the vehicle. The other option we talked about is  share secured loan. This is a type of loan where your savings account here with Lockheed FCU would be the collateral for a loan with an interest rate of 2.25%. There is no income proof/job or credit score/history requirements because your savings is the secured collateral. 

Your savings account will earn 0.25%  so that gives you a net rate of 2.00% paid on this loan. The max term for any dollar amount is 60 months or 5 years.  The benefits are that you can save your money the way you might be doing now as well as pay the lowest loan interest with a fixed payment and rate of 2.00%  As you make payments your secured funds will be available by the amount of each payment minus the interest paid.

We have other options like this that will allow you to have a CD secured loan and make 0 payments for 18 months. Some times Investors like these types of option or people getting lump sums of money in the future.”

If you would like to speak with her for more information, here is Summer’s contact information:

818-565-2735

soneil@lfcu.com

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 The Los Angeles Times recently published an article about DPL’s that is interesting but not thorough in that it doesn’t explain the parameters and the  differences between the two loan programs.  If anyone is going to consider one over the other it is important to know how they compare to one another.   Here is what is important to know when researching the details of the two mortgages.

1.  DPL’S are usually offered by states or cities.

2. But how the funds are used from the loan are restricted.   Typically they can be used to pay taxes or special assessments, home repairs or energy efficient improvements and not for cost of living expenses.

3. The amount of the money will vary from state to state or city and it will be considerably less than a person could receive from a Reverse loan.

If a senior does not need additional money for living expenses and is comfortable with the amount the money that they receive through Social Security and possibly a pension but needs money for those situations that a DPL loan could provide, then it might be a good choice.   But in the end  a Reverse mortgage is far superior, more funds, flexibility and no restrictions on how the money can be spent.
 

L.A. Times on Reverse Mortgage Alternatives
May 2nd, 2011  |  by Elizabeth Ecker Published in News, Reverse Mortgage  |  4 Comments

The L.A. Times published an article this week covering some alternatives to taking out a reverse mortgage loan. The article, titled, “Elder homeowners might want to consider reverse mortgage alternatives,” offers options it calls alternatives to reverse mortgages including deferred payment loans (DPLs), property tax deferral (PTD) loans and Supplemental Security Income (SSI) benefits, and outlines several housing options.
The article doesn’t address pros and/or cons of reverse mortgages, instead it offers additional options.
“Reverse mortgages may very well be a good choice for some seniors who need to tap into equity they have in their homes,” the article states, before outlining the alternatives. “But there are other options elder owners might also want to consider.”
For DPLs, the L.A. Times writes, generally there are no origination fees and insurance premiums and closing costs are low, as are interest rates. As for a PTD loan, the article states, “Generally, it provides annual advances that can be used only to pay your property taxes or a portion thereof.

 But no repayment is required for as long as you live in the house.” They are only available in some areas, however. For SSI benefits, the article explains, seniors may be eligible if their liquid resources total less than $3,000 for a couple or $2,000 for an individual.
For those who don’t qualify for a reverse mortgage or for whom reverse mortgages proceeds are not sufficient, the article suggests three housing alternatives: accessory apartments, ECHO cottages and sharing arrangements.
Written by Elizabeth Ecker

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I am providing a copy of a short article that was recently published in the Chicago Tribune newspaper about the perception that reverse loans are a “last resort” for a senior who is short on  money to pay for their monthly cost of living expenses.   I have and continue to feel that, that term is insulting because it’s implies that the loan program is something dreadful and is the worst thing that a senior could do to themselves when in fact it can make the difference between living on the streets or remaining in their home.

However, the writer concedes that with the changes that have taken place over the years to the government program, there is more oversight and regulation in place to protect the Seniors best interests, plus they have become more affordable as well.  And in many instances they have made the difference for a Seniors ability to survive and remain in their home and not rely upon their adult children for assistance.

Here’s the article:
A Chicago Tribune Q&A, “New Reverse Mortgage Opens Option for Seniors,” addresses reverse mortgages as a retirement option, and cites the Saver as a new choice for seniors considering a reverse mortgage.

“The question poses the financial problem of many seniors who are ”brick rich and cash poor,” and cites a case of an elderly widow with a $400,000 home she owned free and clear, but whose income was so low, she could not afford $2 Meals on Wheels payments.

“If reverse mortgages had been in existence then, it would certainly not have been a last resort. ‘Godsend’ would be more like it,” the question states. “She could have lived like a queen (albeit a modest one) for the rest of her life tax-free.”

While the author of the answer still says reverse mortgages are a “last resort,” he further says that new laws and the new FHA product are slowly changing his mind.’

‘Last year Congress increased the loan limits on reverse mortgages to $625,000′ he writes. ‘Additionally, the FHA announced a new version of the old reverse mortgage, the HECM (home equity conversion mortgage) Saver program. Although this new product does not allow homeowners to take as much money under the program as with the older version, the upfront closing costs are considerably lower. If you are 62 or older and have a house that is free and clear, or only has a small mortgage, you may be a candidate for this program.’ ”

A reverse loan is government insured and is a very safe option for any senior to considering using it to increase their cash flow and continue to own their property.   Within the last several years more variations of the program have become available including a fixed rate making them just that more attractive as an option for money.

Anyone who is seeking information or is considering using one as part of their financial plan, should set an appointment for the counseling provided by HUD approved counselors and learn about the benefits of the program and let go of the misconceptions and negativity.

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I am going to share a report from Clear Capital that was recently published about the difficulties the housing market continues to experience.  And it seems that what is partially responsible for the continuing trend, is due to the West Coast’s inability to see any kind of recovery.

For seniors who may have a mortgage on their property and may be considering applying for a Reverse loan, I would encourge them not to wait any longer.   If they continue to lose equity they may find themselves unable to qualify for a Reverse loan and will have to continue making their mortgage payment each month and wait for housing values to increase sometime in the future.

Here is the article in it’s entirety:

U.S. Home Prices Continue Slight Decline as West Region Drags Nation Down According to the Clear Capital™ HDI Market Report
“While national home prices have appreciated 4.2% since early 2009, the West region is poised to double dip by the end of Q1 2011 if trends continue.
TRUCKEE, CA – March 10, 2011 – Clear Capital (www.clearcapital.com) released its monthly Home Data Index™ (HDI) Market Report, and reports a quarter-over-quarter national price change of -1.4 percent.

The HDI Market Report provides the most current (through February 2011), granular and relevant analysis of how local markets performed compared to the national trend in home prices.

Report highlights include:
· National home prices continue to drift downward, largely due to the West’s quarter-over-quarter declines (-4.5%) that could lead the region into double dip territory as soon as next month.
· National home prices are up 4.2% from two years ago, yet the gains of other positive market indicators have yet to extend to the greater housing market.

“Despite distressed inventory pressure and traditional winter inactivity, current trends are continuing to show a softening of price declines,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital.

“The 3.9 percent quarterly decline we observed in December has given way to moderating declines with the national price index now down only 1.4 percent, suggesting a leveling of prices is on track for spring.”
“From a larger perspective, prices are still up 4.2 percent off of the absolute lows of the housing crash, a sign that long term gains can be realized amidst the volatile behavior of the last two years,” added Villacorta. “Yet, when comparing this growth to other economic indicators over the same time period, it is clear that the housing market still has a long way to go toward a sustained recovery.”

Clear Capital – Elizabeth Ecker

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