Financial Advisors and Reverse Loans
The obligation of a Financial advisor to their client, is to to guide them in their investments to develop a healthy portfolio of funds and also protect those funds from running out, by managing the account and providing guidance to the clients on an ongoing basis.
For many years, Advisors have felt that a Reverse loan defeats the purpose of protecting their clients’ assests and due to lack of knowledge about the FHA loan program and how they function, the Advisor would not consider them as an option to protect their client’s principle from being drawn down.
But recently an article was published in Financial Advisor magazine to the industry, about how they can utilize a Reverse mortgage to extend the life of their clients investments without any tax consequences. It is simply a matter of the Advisor being more open to learning about this unique federal loan program for seniors and what it could mean for their business in the coming years because the future of financial planning will be rapidly changing as the Boomers begin to consider retirement and new methods and options for financial planning will need to adapt to the changes as they appear.
I will be posting some comments in two parts from Reverse Mortgage Daily with the first one here:
Reverse Mortgages on the Verge of Financial Planning Breakthrough?
Posted By Elizabeth Ecker On April 18, 2012 @ 6:36 pm In News,Retirement,Reverse Mortgage | No Comments
An article  published Wednesday in Financial Advisor magazine demonstrates the way in which a reverse mortgage can preserve the portfolios of retirees who have investments. On the heels of another recent article written for financial planners on the same topic, it is beginning to sound like a sea change for the reverse mortgage industry and its work with financial planners.
Featuring an interview with nationally-recognized retirement expert Harold Evensky, the Financial Advisor article  details the Saver option for use by baby boomers who are planning for retirement.
“I’m reasonably positive [the Saver] will become an important part of our planning in the future,” Evensky told the publication.
Evensky and colleagues at Texas Tech have worked on a yearlong study on the use of reverse mortgages in retirement planning that is expected to be published soon. In speaking with groups of financial professionals about the research, Salter told RMD  he has received positive feedback from the planning community. In the meantime, Evensky says the studies indicate that use of the reverse mortgage Saver product will significantly increase the survivability of a retiree’s portfolio in retirement.
Part 2 to follow on 4/20/12
HUD and a Homeowners Assistance Program
As the nation continues to stumble through the housing crisis, the government is coming up with another program that might be of help to people who are struggling with making their mortgage payments.
It seems that HUD Secretary Shaun Donovan has announced that they are working in conjunction with NeighborWorks America to launch this program in a limited number of states. And those who are lucky enough to live in one of them , might be eligible for a loan up to $50,000 that could be used to pay part of the homeowners mortgage payment.
Here is the article for further information:
HUD Launches $ 1 Billion Homeowner Assistance Program/ Written by Brett Varner
“As the government debates ways to reduce the size of their involvement in the housing finance market, HUD announced the launch of a $1 billion assistance program designed to offer interest free loans to borrowers who are at risk of foreclosure.
The program, called the Emergency Homeowners’ Loan Program (EHLP) has been made available in 27 states and Puerto Rico. It offers interest free loans up to $50,000 to pay a portion of their monthly mortgage payments for up to two years.
“Through the Emergency Homeowners’ Loan Program the Obama Administration is continuing our strong commitment to help keep families in their homes during tough economic times,” said HUD Secretary Shaun Donovan. “Working with our community partners across the nation through NeighborWorks® America, we are pleased to launch this program today in 27 states and Puerto Rico to help families keep their homes while looking for work or recovering from illness.”
HUD expects the programs to help about 30,000 distressed borrowers with an average loan amount of $35,000.
Considering that the majority of homeowners who have their mortgages modified re default within a short period of time, adding additional debt to distressed homeowners, even at an interest free rate, may merely delay the inevitable and lead to significant losses of the $1 billion allocated to the program.”
Obviously this won’t make much of an impact on the overall level of foreclosures but if you are the “one’ that is lucky enough to take advantage of the program, it certainly will make a difference in your life, wouldn’t it?
In the past several months, there have been a number of changes to the Reverse mortgage that is offered by FHA, resulting in less fees to the borrower. Less start up costs, means more money to the borrower and there are more choices in loan selection as well. Here is a copy of an article from Bankrate that provides further details to these changes.
“Bankrate is reporting that reverse mortgages are now affordable with the new HECM Saver product.
Peter Bell, president of the National Reverse Mortgage Lenders Association, a group in Washington, D.C., that represents lenders and investors in the reverse mortgage business says the new option empowers seniors to tap smaller amounts of equity in a more affordable way.
“Some changes from the market, from the regulatory side and in the counseling, have really improved the value proposition for a lot of seniors from what has been the traditional perception of reverse mortgages,” he says.
While the adjustable rate product allows borrowers to take out smaller amounts of money initially, Susanna Montezemolo, vice president of federal affairs at the Center for Responsible Lending in Washington, D.C., says it may be a smarter choice because the fixed rate requires that the borrower tap the full amount of equity upfront.
“For the majority of people, it makes more sense to take out a minimum amount upfront and then have access to that line of credit, because they will owe less in interest over time,” she says.”
For more details: http://bankrate.com