I’m sitting here, thinking about the new lending limit of $417,000 that HUD has decided to use for Reverse mortgages.   The problem  with it, is that it’s not high enough to help all of the Senior community.   Yes, it’s better than before, but it’s not helping those Seniors who are stuck with payments on large loan balances.

I have found, that most Seniors, if they have a mortgage, the balance is usually pretty small.   But unfortunately there are many of them that took advantage of the lower interest rates the last few years and the “No proof of income” requirement and took out loans that they would have never been able to qualify for, much less be able to make the payment that would be required.

I have a situation right now, where my client is so over encumbered, that she would have to bring in $30,000 to complete a Reverse Mortgage.   Of course she is approved for the loan but due to her youngish age, the amount of funds from the Reverse loan ( It’s calculated on her age), can’t cover all that she currently owes on two mortgages that she has.

If only HUD had decided to use the larger figure of $625,000 that they were considering for the new lending limit, I would be able to help my client.   She’s disabled, on SSI and using the funds from a traditional line of credit to make her two mortgage payments and has no other money.

She’s heading for a foreclosure if I am unable to negotiate with the lender to reduce the payoffs so that we can complete her Reverse loan.  And I’m pretty upset about this and very angry at “those” who put her into this position.

Another example of greed and stupidy of the lending industry.   It’s hurting the Seniors, too.

I am a member of a group of professionals that work with Seniors, called Focus on Seniors and we meet every other month to share lunch and hear a guest speaker on a topic that usually concerns aging.   We met yesterday at Cypress Gardens, a Senior community in Ventura, CA and our speaker was George Compton, Col. USA (Ret.).

He’s a decorated Viet Nam Veteran and has many accomplishments, which he would be too embarrassed to mention, but in spite of his humbleness, he’s an amazing man.   At this time, he is the Veterans Service Officer for the County of Ventura and he is totally engaged in reaching out to the Veterans and their families, helping them with problems and questions about their benefits.

He spoke about many of the benefits yesterday and it’s really surprising how many Veterans and their families don’t understand how much is available to them. I”m not sure where the disconnect happens but it’s vital that Veterans know about all of the programs that they qualify for because they are missing out on some wonderful benefits that they deserve and they should be using them.  

George has made it his mission to reach them and make sure that they are taking advantage of their benefits that they are entitled to.  Not only are many of them spending money on medical bills that could be covered under some of the programs offered for Veterans, but there’s even college tuition funds for their children, depending on certain criteria.

The variety of benefits is quite large and far too much for me to go into here, but If you are a Veteran or a family member of a Veteran, I’m going to encourage you to contact your local counties Veterans Service Officer.   You are quite possibly spending unnecessary money for medical services and you may also be able to take advantage of other benefits that could save you money and you need to know about this.

On another note, the figures for the origination of Reverse Loans are up for this fiscal year that ended in Sept.   Per NRMLA, the figures stand at $112,100 HECM’s that have closed and funded.  Most of the growth in the industry has occurred in the last 18 months or so and when you look back into the early years of Reverse loans, the figures were very, very small (43,131 in 2005).

The HECM (Home Equity Conversion Mortgage, offered by FHA) has surpassed the figures for the previous fiscal year and I’m sure that, that’s due to the current economic conditions which is particularly hard on the Senor community.  Gradually, Seniors are over coming their fears about the loan and starting to be a bit more open to it’s use and this is represented in these latest figures as well.

With the higher lending limits set by HUD and more people becoming educated about Reverse loans and their benefits, plus the Boomers coming up through the ranks, it’s just a matter of time when it will be routine to have a Reverse mortgage as part of a retirement plan.

Seniors who have done a Reverse loan in the past, can now take advantage of not only being older (The one time it’s advantageous to be “old”) since they did their loan, but with the higher lending limits and lower interest rates, they are in the position to refinance their original loan and receive more money.

If they refinance, they will still have the same closing costs as they did before, but the MIP (Mortgage Ins. Premium) will be prorated from the original amount.   This means, that they won’t be paying the full amount for the insurance once again.

Because there has been so much turmoil in the secondary market for mortgages, it has resulted in some changes in the variety of Reverse loan programs that used to be available.   The trend seems to be moving away from those that are tied to the Treasury Bill and leaning to the LIBOR index for the Home Equity Conversion Mortgage , otherwise known at the HECM.

And in the last few months we have seen the Reverse Jumbo loans disappear as equity in homes has declined.  Previously these loans were a good option for the Senior who’s property value exceeded the local HUD lending limit and they allowed the applicant to receive more money than they could through the FHA loan.

Now that is no longer the case but the good news is that with the new HUD lending limit at $417,000, loans can still be done and help Seniors who are struggling under the current financial environment.

I recently participated in a Senior event in Ventura and was quite surprised how many people came up to my table (usually they avoid me) and shared with me, that they had a Reverse Mortgage and how happy they were with their decision.

I was quite surprised, because I have found that most Seniors won’t even make eye contact with me, as though I’m so sort of evil person.   It is very difficult and the biggest obstacle to get around, in that so many Seniors continue to be afraid of the loan and remain ignorant of it’s value to them.

The current financial disaster is hurting all of us but unfortunately it is hitting the Senior community the hardest. Too many of them are finding themselves without adequate funds to get through each month and are very frightened as to whether or not they will be able to survive financially and they don’t know what to do about it.

And who is going to help them?   Their children?  Probably not, because they are either losing their jobs and homes and finding out that their on 401K is disappearing and growing smaller each month.   They aren’t in the position to help their parents.

Mom and Dad are on their own.

And then I  “sigh”.   If only more of them were willing to talk to a professional Reverse loan consultant, get past the fear and find out how the loan can give them peace of mind and free them from the anxiety that they are suffering from at this time.

Those of us in the Reverse Mortgage industry have been waiting for quite some time for the new lending limits that would apply to Reverse loans.   When the stimulus package was signed by Pres. Bush, the news media failed to address that within that package was the Home Modernization Bill that directly effected Reverse loans by reducing the origination fee and increasing the amount of money that a Senior can receive by using a Reverse Mortgage.

There was discussion as to what the new national lending limit would be; $417,000, $625,500 or possibly the lower one being the “floor” whereas the higher figure would apply to major metropolitan areas.   My feeling was, due to the nature of declining home values, that HUD council would be conservative in their approach and play it safe by using the smaller amount.

And, I was right.   The new lending limit throughout the United States, is $417,000.   This was announced by FHA Commissioner Brian Montgomery on Oct. 2nd. and that the effective date would be November 1st. but is not to be considered a “set deadline”.

Borrowers who have already started their loan application as of October, will receive the benefit of the new, higher lending limits, because their loan will be closing after November 1st.   It will be necessary to print out new loan disclosures for them to sign, which will reflect the new and improved figures, etc., but that should be all that would be required from the borrower.

All of this is very good news for the Senior community.   Due to the current economic difficulties, Seniors are struggling more than ever each month with their financial obligations.   This will also relieve any stress that the children of Seniors are experiencing as well, as so many of them are assisting their parents financially and finding it very difficult.

The rush will be on for those who have been waiting to apply for the Reverse Mortgage and counseling is still required by HUD.  I suspect that the agencies handling the counseling will be inundated with requests, so don’t hesitate to move forward with your loan application and enjoy having peace of mind.

It’s all good!