Assisting Seniors to Live Life on Their Terms

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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If you are considering using  a Reverse loan to increase your monthly cash-flow or to pay off an existing mortgage and your property is a condominium, there is the possibility that you may not be eligible for the federal loan program.

Many condominiums are not approved for FHA loans and the Reverse mortgage happens to be one of their programs.   If you live in a Condominium project, it’s important to find out if your’s is approved with them before you apply for the loan & save yourself a lot of aggravation and time.

The  quickest way to find out, is to ask your HOA  about it and if it is determined that it’s not approved, then you will not be able to get a Reverse mortgage.  And if the HOA wants to persue the approval process, it’s up to them to  provide the necessary documentation in order to be put on a list of approved projects.

This could be a very lengthy process and take many months to complete.   It’s unfortunate that many Condos are not approved and that is leaving many seniors in a very difficult situation when they need additional funds each month to meet their expenses and now an option has been taken away from them

Prior to a year ago, we as Reverse loan professionals, could by pass this problem by having the HOA complete a “Condo Cert” form and with that, we could move forward on originating a loan without any difficulties.

But we are no longer able to utilize this option for the projects that are not approved and there are no other solutions to this issue at this time.

This means that it’s up to you, if you own a Condo to check with your HOA and verify that they are approved with FHA.   And if they are, then there’s nothing to prevent you from applying for the mortgage and enjoying the peace of mind that comes with having some financial security.

We in the Reverse Mortgage industry are very frustrated by this new ruling, as many senors live in Condos but now will not be eligible for the loan.

There’s nothing that we can do about it and personally I am angry with this decision, as I have talked to any number of seniors who could benefit from the loan but will not be allowed to use it unless something changes in the future.

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In the course of the nine years I have been a Reverse Loan Consultant, there have been many changes in the HUD program from simply one loan to several different options.   In the last couple of years, we have seen a Fixed rate become available as well as a reduction in the costs of the loan to the borrower.

The new “Saver” program cuts the costs considerably and gives the senior an option of either a Fixed rate or a Line of Credit.   And there is also an opportunity to use funds from a Reverse mortgage to purchase a home without having to qualify on income or credit.

Here’s a recent update on the volume of business in the Reverse loan industry:

“Reverse mortgage applications increased to 8,149 units during February, up 10.2% from the previous month according to data from the Federal Housing Administration.

While application volumes may not be as high as some would like, it’s up 22.7% from the same period last year.

During February, the seasonally adjusted annual rate for total applications rose 15.6% to an estimated 1,676,800. The actual count of applications was 114,215—9.8% over January which was seriously affected by very bad weather, said the agency. Of the total number of applications, 67,990 were purchase transactions; 38,076 were refinances; and 8,149 were for reverse mortgages.

In February, lenders endorsed 6,904 HECM units with a total max claim amount of $6.904 billion, up 6.8% from January. Of all the endorsements, 6,092 were traditional reverse mortgages, and 117 were for the HECM for purchase. HECM Saver volume continued to increase, reaching 296 units during the month, an increase of 79.4%.

Overall, FHA endorsed 88,269 mortgages with a maximum claim amount of $16.8 billion in February. This included 46,899 purchase money mortgages and 34,466 refinanced transactions.

For the purchase loans, three out of every four mortgages were for first-time home buyers, according to FHA.

With respect to the refinanced mortgage transactions, 16,459 were prior FHA cases and 18,009 were conventional mortgages converting to FHA.”

Reverse Mortgage Daily

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