Reverse Loans and the Mortgage Meltdown

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.

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Reverse Mortgage, New HUD Lending Limit

 

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!

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Wall Street and Seniors

Wall Street’ and it’s current BIG PROBLEM is affecting every aspect of the American economy and virtually every single person in the country is experiencing some level of fear about the future.  And if you happen to be a Senior who is relying on funds from a retirement portfolio, it is all the more disastrous.  Seniors are generally on fixed incomes and if that money disappears, it can effect their very existence.

The purposed “Bail Out” for Wall Street and the very scary and very real problems that are happening in  the economy are beyond comprehension.   If you happen to be a Senior, trying to live off of Social Security (what a “hoot”, no one can live on it.) or relying on retirement funds, the current deplorable situation is extremely terrifying for them.  They are wondering how they will survive.

They have worked hard all of their lives, been through WWII, the Korean War and Viet Nam, raised their families, paid their taxes and prepared for retirement by saving money.   You know?   Something that the current, greedy generation hasn’t done and now the “golden” egg, stinks.

The Sandwich Generation, those who are helping their Senior parents out financially or doing care giving, are really feeling the squeeze more than ever, now.   Not only is there retirement portfolio disappearing but they are still trying to assist their parents and they don’t know what they are going to do to relieve the pain.

On top of the mess, many Seniors have been living off of credit cards or a traditional line of credit where they are obligated to make mortgage payments every month and now they are running out of money.   And they’re also running out of time.

Seniors are turning to bankruptcy to relieve them of the debt and sadly many of them are losing their homes to foreclosure as well.  It’s unbelievable that after all of the efforts to protect themselves, the sacrifices that the Senior community has made in trying to plan for their future, they are in a dangerous zone of reality and an undertow of uncertainty.

Reverse Mortgages can play the “hero” to a Senior and their family.   The only concern would be that they still have enough equity to complete the loan, if not, then a Reverse Mortgage can’t save them either.  Seniors and their families need to get past their fears regarding Reverse Mortgages and find out how they can literally save the “family farm”.

Read up  on it by downloading Home Made Money from AARP.

www.aarp.org

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Reverse Mortgage Requirements

The only condition that is required by a potential applicant for a Reverse Mortgage, is that they must be not less than 62 years of age.   And if there are two applicants, the loan amount will be determined by the age of the younger borrower.

Sometimes a situation will occur when one of the borrowers isn’t 62 and in that case they both can’t apply for the loan.   What is not recommended (although some Loan Officers will tell you it’s okay), is to remove the younger borrower from the Title of the property, have the older one apply for the loan and THEN PUT THE YOUNGER PERSON BACK ON THE TITLE.

WRONG!!!!!

The problem with this reasoning, is that it’s called fraud.   And how would a senior look in jail?   And what about the shifty Loan Officer?  They got their commission and could care less about the client.  The other potential issue, is that what if the older borrower dies?

The younger survivor may not be in the position to qualify for a Reverse Mortgage that would be large enough to pay off the current balance and they would have to sell and vacate their home. 

I caution anyone against doing this in order to receive funds from a Reverse loan, as it could be a very dangerous and costly mistake and could cause heartbreak for the borrowers and potentially their children as well.

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Reverse Mortgages and the Mortgage Meltdown

 

There has been some concern by the Senior community that Reverse Mortgages are in trouble along with the rest of the Mortgage industry.  With the huge issues facing all of us at this time, some Seniors and their families are worried that a Reverse loan isn’t safe and won’t considering using one at this time to help with financial problems.

Other than the decline in the property values across the country, the Reverse Mortgage industry is a safety zone for Seniors who are struggling in these very difficult economic times.  But if a Senior is considering using the funds from a Reverse Mortgage to retire an existing loan, there might be a problem.

And that would be the appraised value of the property.   If the mortgage to be paid off is particularly large and depending on the age of the borrower(s), there’s a possibility that a Reverse loan cannot be done if there is not enough equity.

The need and value of the Reverse loan is more important than ever, given that the Senior community is trying to exist on a fixed income, which is certainly not enough these days, to cover the costs of living.  If you think that things are tough for you, consider what it must be like to be a Senior trying to stretch their dollars every month, eating less and in some cases, not able to afford their medical prescriptions.

And if a Senior has a mortgage payment to make, sometimes they just can’t do it and they find themselves in foreclosure.  Even more of them are going into bankruptcy, as they are trying to live off of credit cards and when the money is used up, they of course can’t make the payments that are owed.

The bleeding can be stopped by using a Reverse Mortgage and so can a foreclosure.   It’s ridiculous and appalling that a Senior should have to lose their home and dignity when the answer is right at hand.

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