August 2016

Reverse Loans Offer a Solution to Seniors

This is the final post on a rather long article that discusses a recent report that was published by the Department of Housing and Urban Development that expressed concern about the amount of housing debt seniors are carrying.

Some made the decision in the last few years to either do a traditional mortgage and take some money out at the close of escrow or they applied for a LOC from their bank because they needed additional money for their monthly expenses.

The problem with this idea is that eventually they run out of that “cash” and still have a mortgage payment each month when a much better option would have been for them to apply for a Reverse loan.

Here is the remainder of the article that was written by Jason Oliva.

“The Home Equity Conversion Mortgage (HECM) enables homeowners age 62 and older to convert their home equity into tangible funds that can be used to pay a variety of living expenses, including paying off existing mortgage debt.

But although HECMs have undergone substantial changes in recent years that have made them safer products for borrowers, not many eligible homeowners are aware of these new updates, let alone know how a reverse mortgage could supplement their retirement.

“The HECM program currently serves a relatively small number of older homeowners, but many more households could potentially benefit from the program,” HUD writes. “Although FHA endorsed fewer than 1 million HECM loans between 1989 and 2015, HECM may be an effective option for some seniors looking to access their home equity.”’


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Seniors with Mortgage Payments

In my previous post I discussed the serious issue of the number of seniors in the United States who still have a mortgage on their home and may have difficulties paying for it.

If they are still employed, the may not be able to afford to retire because of their mortgage payment that they are obligated to pay each month.

Certainly a Reverse loan is the better option, since the homeowner is not required to make any payments and it will allow them to manage their retirement savings to last longer if they are  not drawing down on their funds.

Here is the second part of the article that summarizes a report that was published recently by HUD’s Office of Policy Development and Research.

Written by Jason Oliva

“The implications of carrying housing debt into retirement years are severe. Not only may these homeowners have to postpone retirement or make difficult decisions regarding lifestyle spending on food, medical care and other expenses, but carrying debt also weakens their ability to draw on home equity to supplement their income as they age.

Refinancing options and reverse mortgages, HUD writes, may be appropriate for some older homeowners with mortgage debt, and financial counseling and assistance programs can provide help to those facing financial hardship.

“Older homeowners might draw on their home’s equity to fund modifications that allow them to age in place, help pay for their children’s or grandchildren’s education, or pay medical expenses—and as long as they have the resources to make loan payments, they can reasonably carry mortgage debt,” HUD writes.”

I will share the reminder of the article in my next Post.

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Seniors and Housing Debt

Although the amount of equity that is retained by American seniors exceeds 5 Trillion dollars, there are many who will not be able to retire because they are burdened with a mortgage payment.

Unfortunately, some seniors applied for Lines-of-Credit or did a traditional refinance on their property and took a lot of funds out at the close of escrow the last several years.

A much better option would have been to apply for the HECM Line-of-Credit and only use the funds as needed and not be obligated for a money mortgage payment.

A new report was recently published by HUD’s office of Policy Development and Research discussing this concern and what options seniors will have in the future to manage their housing debt.

I will post a summary of the findings in the next three posts.

HUD: Reverse Mortgages Provide Solution to Retirees’ Housing Needs

By Jason Oliva

“Baby Boomers and senior homeowners have the potential to reshape the nation’s housing market. But as a growing share of this demographic carries mortgage debt into retirement, they will need to seek additional solutions to improve their financial situations. For many, this could mean tapping into home equity through a reverse mortgage, according to a new report from the Department of Housing and Urban Development.

The broader housing market has shown positive signs of recovery in the years following the financial crisis, but several challenges remain, especially for older homeowners nearing retirement, according to a report recently issued by HUD’s Office of Policy Development and Research.

A rising percentage of older homeowners are carrying mortgage debt as they approach and enter retirement. Among owners aged 65 and older, 40% had mortgages in 2014, according to the Joint Center for Housing Studies of Harvard University.”


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