New Regulations for Reverse Loans
An article that was recently published by Bankrate discussed the new regulatory changes to the FHA Reverse mortgage program for seniors and how these new regulations make this even a safer and more viable option for retirement planning.
Plus it also mentions the option to use a Reverse loan to purchase a property if a senior wants to “down size” from there current home that may be too large and costly for them, to something smaller.
Here is the second part of the summary of the article plus a link to the entire piece.
Bankrate: New Rules Make Reverse Mortgage Viable
October 23rd, 2014 | by Cassandra Dowell Published in News, Reverse Mortgage
“Another major change noted is when the Federal Housing Administration, or FHA, announced its HECM for Purchase Program, which enabled qualified seniors to downsize or relocate by using a reverse mortgage to purchase their new home, thereby saving on closing costs.
‘Given the use of actuarial tables in determining the loan amount, it’s going to be a smaller draw as a result,” Ramsey Alwin, vice president of economic security for the National Council on Aging, tells Bankrate. “That may squeeze out some of the individuals who are in crisis mode. But generally speaking, the new policies strengthen the product, protect the consumer and make it well-poised to be an important long-term financial planning tool, most likely for the more moderate- to higher-income population.’
However, concerns regarding reverse mortgages remain.
“There may be more predatory products created that are then attractive to the cash-poor, house-rich individual,” Alwin says. “We need to be vigilant about our consumer protections and consumer awareness for those individuals.”
Overall, the industry may see an uptick in reverse mortgages among finically savvy baby boomers, says Peter Bell, president of the National Reverse Mortgage Lenders Association.
“If instead you take a reverse mortgage as a standby line of credit — a standby cash reserve that enables your other assets to remain intact and continue to grow in value or generate income — you end up with a greater amount of wealth to fund longevity,” he says.
Click here for the entire article:
Reverse Mortgages Enhance Retirement Income
A recent article that was published in PlanAdviser discusses the importance of why a Reverse loan should be considered as a potential way to enhance retirement plans. The online newsletter is a resource for the Financial Planning profession and given that this was published in their trade “magazine”, speaks volumes of what has become a gradual acceptance of the FHA mortgage program for seniors.
It seems to me, that everyday more articles and media coverage are lauding the benefits of Reverse loans and there are less and less negative comments as they become more informed and educated about how the loans function. It’s been a long and sometimes very frustrating experience for me over the years, trying to get past that negative image but it feels as though a corner has been “turned” and I only see a very positive future for the loan program to assist many people moving into retirement.
I will repost a summery of the article and also provide a link to PlanAdviser to read it in it’s entirety.
PlanAdviser: Reverse Mortgages Critical to Retirement Income
Posted By Jason Oliva On October 14, 2014 @ 6:04 pm In News,Reverse Mortgage | No Comments
In yet another nod from the financial planning community, reverse mortgages have garnered some more attention for how they can provide a “critical” supplement to retirement income, according to a recent article  from PlanAdviser.
Though acknowledging that reverse mortgages are not for everyone, PlanAdviser notes that in certain scenarios, depending on suitability, reverse mortgages can give borrowers an “enhanced quality of life in retirement,” provided the loan is executed under the right circumstances, the borrowers stay healthy and remain in the house for a long time.
“A reverse mortgage makes sense for someone looking to leverage home equity for income in retirement,” said Steve Sass, program director at the Center for Retirement Research at Boston College, in the article. “Your home is typically your largest expense and asset. So if you need more income, a reverse mortgage is the place to look.”
But even considering the benefits of reverse mortgages, borrowers should be forewarned of potential scams and take the time to seek out the proper education to learn more about the loans, their requirements and associated costs.
“You need to understand the benefits and alternatives of the loan, as well as how to avoid scammers,” said Sass. “All of a sudden you have a lot of cash and there are scammers that want to sell to you. Not all retirees are as careful and as savvy as they should be.”
Click here for PlanAdviser:
Boston College Ebook on Reverse Loans
In the next section of the article an example is given how downsizing actually frees up income for other uses by living in a smaller home and reducing the overall housing expenses.
It also mentions the various payments options, at which any time the borrower can change as they wish. There are not prepayment penalties on a Reverse loan, so if for any reason the borrower wishes to put money back into the loan, they can and it will increase their line of credit.
Here is the next section of the article that summarizes the discussion in regards to the Boston College ebook. I will share the last part in a follow up post.
Boston College eBook Touts Retirement Benefits of Getting a Reverse Mortgage
Posted By Jason Oliva On September 16, 2014 @ 6:02 pm In HECM,News,Retirement,Reverse Mortgage
“For example, downsizing from a $250,000 house to a $150,000 property can increase a person’s yearly income by $3,000 after calculating the difference in prices, moving and selling costs and how they affect yearly income. Additionally, this downsizing scenario can also free up $3,250 in yearly income when factoring the new housing expenses (taxes, insurance, upkeep and utility bills) associated with the less expensive home.
But for those who don’t want to task themselves with relocating, that’s where a reverse mortgage can be beneficial, the ebook notes, detailing several key requirements to be eligible for the loan along with critical Home Equity Conversion Mortgage (HECM) guidelines.”