Grappling With Senior Parents & Their Care

I had attended one my my Chamber breakfasts this morning and I mentioned the difficulty that adult children are facing with their senior parents.   As of this time, there are 20 million people that are either financially assisting their parents or doing some sort of care giving.   And in many cases they are doing both.

This puts extreme pressure on the entire family and typically the one who is providing the care giving becomes quite ill within a year.   The solution is to use funds from a reverse loan to pay for professional help and relieve the family of this hellish situation.

After the breakfast, someone approached me with this identical situation.   The immediate family is overwhelmed, angry, in pain and suffering with guilt.   The senior parents, well…they’re angry, too.

She said that she would pass on my name to her friend and hopefully she will contact me and if a reverse loan isn’t a solution, I can at least point them in the right direction for an assessment of the parents’ conditions and possibly have a professional care giver come in for a few hours each week and provide some relief for the family.

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Seniors and More Money

In all of the hoopla regarding the passage of H.R 3221 a week ago, nothing was mentioned in the media about the provision regarding Reverse loans.   The FHA Home Equity Conversion Mortgage (HECM) will have it’s lending limit increased nationwide to $417,000.

In the greater metropolitan areas, that figure could be $625,500!   In either case, these amounts will be the same throughout the United States and no longer based on the previous method of using the amount designated by a County.

As of this time, there is ongoing discussion as to whether the 417K will be the “floor” and the $625,500 the ceiling but until that is decided it could cause a delay in moving forward with these new figures.

There is also a provision that will allow the funds from the HECM to be used for a home purchase.   This could be very signaficant for a senior wishing to relocate but unable to qualify and make mortgage payments on a traditional loan.

I don’t have any additional details on it as of this but the time.  But the projection is for it to be available sometime in November.

The loan origination fee has been reduced by .50% but in actuality, the overall cost to the borrower doesn’t change, because of the higher lending limits. This is because the Mortgage Ins. Premium  (MIP) that is charged by FHA, is based on the lending limit and since they are going to be higher, pretty much washes out the savings gained from the lower origination fee.

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What Happens To The House After My Parent’s Die?

There is a misconception among the general public and professionals as well, that when the last survivor passes away, the Bank will assume ownership of the property and the heirs will receive nothing at the end of the loan.   This is one of those persistent myths that as continued for quite some time and is totally incorrect and sadly hurts the senior community and their families when they are trying to make a decision as to whether or not a Reverse loan would be appropriate to use.  When the last borrower passes away, the heirs inherit the property, at which time the loan becomes due.  The family will have 12 months to pay off the loan and typically it’s done through the sale of the property. When the sale is concluded, they will receive the remaining equity and any interest that has accrued on the loan, is a tax deduction for the heirs within that year.

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Does a Borrower on a Reverse Loan Have to Prove Income?

Unlike a traditional loan where the applicants(s) must prove that they can make the mortgage payments and have good credit scores, the qualifications for a Reverse loan are completely different.   A Reverse loan doesn’t require the borrower to ever make any mortgage payments but instead, the borrower receives money (equity) from their home.  Even if they should have poor credit scores, that will not affect their ability to be approved.   The only requirement is that the borrower(s) be age 62.

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