March 2012

Free Reverse Loan Counseling

Effective April 1st., Money Management International or MMI, will be offering free HUD counseling for seniors that wish to apply for a Reverse Mortgage.   The funds are only temporary and could be quickly exhausted by the demand for their services.

Here is an article that provides additional information for this opportunity.
MMI To Reintroduce Free Reverse Mortgage Counseling on April 1

March 28th, 2012 | by Elizabeth Ecker Published in Counseling, News, Reverse Mortgage

As a result of newly awarded grant funding from the Department of Housing and Urban Development and an additional private grant, housing and credit counseling agency Money Management International will reintroduce free reverse mortgage counseling beginning April 1.

The counseling will be available free of charge by phone and in person across the 20-plus states in which it operates.
“We are delighted to reintroduce free counseling,” said Daniel Fenton, MMI’s Senior Housing Director. “Thanks to generous private support and HUD efforts to get their grants out quickly, we can remove the financial burden of a counseling fee for seniors.”

Prior to the new funding being made available, MMI charged a fee for the counseling after funding for the program was cut from the HUD budget. The new funding and the much shorter time frame for making grants available led to the shift away from that fee.

“Counseling in an environment with no HUD subsidies forced us to really focus on the cost effectiveness of the counseling process,” Fenton said. “The changes we have made mean that we can deliver more than 4,400 sessions free of charge before October 1.”

Wait times are expected to remain very short, MMI says.

Once funds are exhausted, MMI will reconsider the pricing, but anticipates the counseling industry overall to be able to support free counseling until October 1, when new government funding is expected to become available.

Other counseling agencies such as CredAbility, GreenPath and National Counsel on Aging have also said they will be able to offer free reverse mortgage counseling as a result of the funding, which totaled $4 million specifically for reverse mortgage counseling.

Written by Elizabeth Ecker




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AB 2010 CA Mandatory Face-To-Face Counseling

In the sincere desire to protect seniors from predatory lending, a new Bill has been proposed in Sacramento that will require seniors to meet personally at the office of a HUD approved agency to complete their counseling, prior to applying for the federally regulated Reverse loan.

HUD requires seniors who are applying for a Reverse loan to complete counseling through an approved counseling agency in order to determine if the federal loan program is a viable solution and if it will provide them benefit in lieu of selling their home. The process is done over the telephone and takes approximately one hour to complete as the counselor proceeds through a uniform procedure, answering the client’s questions and determining whether or not they may qualify for other government programs.

AB 2010 is a new Bill that has been introduced in Sacramento that would mandate face-to-face counseling on all senior reverse mortgage loan applicants without exception or regard to a senior’s particular situation. This will create an unnecessary hardship, as many are unable to drive to appointments and will end up creating delays and additional hardship for a senior and most likely, the cost of the counseling fee will increase as well.

The “intent” of this Bill is sincere, as it’s looking out for the “seniors” but is a redundancy in the extreme. There are already a multitude of laws and disclosures in place to protect them from financial abuse and this will only create a burden and another hurdle for them to over come.

Just my 2 Cents. I hope it does not get passed.


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Financial Planners & Reverse Loans

There continues to be a misunderstanding in the Financial Planning industry about the effectiveness and the benefits of using funds from a Reverse loan to protect a client’s principal from running out of funds.

I thought the following article was quite informative based upon an analysis to see what the probability of retained equity and investment principal would be in the future if a person also utilized a Reverse loan as part of their retirement strategy.

Financial Planners: Reverse Mortgage Traditional Use is All Wrong
February 27th, 2012 | by Elizabeth Ecker Published in News, Reverse Mortgage | 4 Comments

“Two researchers proved through analysis published in February that a reverse mortgage credit line can lead to “substantially greater cash flow survival probabilities” for people who are planning for retirement.

Published in the Journal of Financial Planning, Barry Sacks, Ph.D. and Stephen Sacks, Ph.D. detail three strategies for using home equity in the form of a reverse mortgage credit line to increase the safe maximum initial rate of retirement income withdrawals.

Examining a last resort strategy; a credit line strategy used after other investments have shown negative returns; and drawing upon the reverse mortgage credit line first, before other forms of investment, Sacks and Sacks find that the retiree’s portfolio plus home equity net worth after 30 years is about twice as likely to be greater when one of the latter two strategies is used.

‘“The conventional wisdom holds that home equity, drawn upon in the form of a reverse mortgage (discussed below) or similar product, should be used as a last resort, only if and when the account is exhausted,” the authors write. “This is a rather passive approach.  We show that the probability of cash flow survival is substantially enhanced by reversing the conventional wisdom.”’

The reverse mortgage is not necessarily the best option for everyone, they write, but for those who do decide to take a reverse mortgage, the research shows how it can best benefit them in retirement. The use of a credit line planned in advance is far more beneficial than the “last resort” strategy, they find.”
View the full reverse mortgage analysis.
Written by Elizabeth Ecker


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