Seniors Benefit From New Higher Loan Limits

Written by rmpro
Posted November 17, 2008 at 5:18 pm

I like this article because it gives an honest overview of reverse mortgages. There are also some references at the end where the reader can find more information about these loans. The author mentions that these loans are comparatively expensive up front. That is true, but you also need to keep in mind that a reverse mortgage allows the homeowner to stay in the home until they die or move out permanently. If this type of loan enables a retired senior to stay in their home and live comfortably the rest of their life, with no payments, then it is worth every penny.

Monday, Nov. 17, 2008

Higher limits for reverse mortgages may benefit some seniors

By VICKI LEE PARKER - McClatchy-Tribune News Service

This month, many older homeowners got some long awaited good news when the Department of Housing and Urban Development approved the higher lending limits for reverse mortgages. Now a home equity conversion mortgage, or HECM, can be federally insured up to $417,000.

Brien J. Brandenburg, a reverse mortgage specialist for Wells Fargo Home Mortgage, said that some of his clients have been waiting at least three years for the higher limits in order to access more cash from their home equity.

“This is wonderful,” Brandenburg said. “The previous lending limits did not allow some seniors pay to off their first loan. The increased amount will help take that burden off their back.”

Brandenburg explained how someone would benefit under the new limits.

He gave the example of a 72-year-old person with a home valued at $400,000, for which he still owes $200,000.

Under the old limits, the most cash he could receive is $125,000, Brandenburg said. That’s not nearly enough to pay off his loan. However, under the new limits he could gain access to $255,000. That would be enough to pay off his loan and have $55,000 to spend on other expenses, he said.

Similarly, Brandenburg said, existing borrowers whose home value is greater than the new HUD limit may be able to increase their benefit by refinancing their reverse mortgage.

Over the past few years, the popularity of reverse mortgages has increased despite ongoing debate about their benefits.

In 2001, HUD reported that 7,793 HECM loans were funded. So far in 2008, there have been 112,154.

The ideal candidate for a reverse mortgage are seniors who have had their homes for a long time and have built up a lot of equity - the home’s value minus debt - in their homes. The idea is rather than sitting on all that equity, the homeowner could use the home as a source of cash.

Those who qualify can choose to get a lump-sum payment, monthly payments, a line of credit, or any combination of the three.

Christena Schafale, a counselor with Resources for Seniors, a not-for-profit agency in Raleigh, N.C., that provides services for older people, said she is excited about the new limits and believes it will help a substantial number of people.

However, she cautions that reverse mortgages are not for everybody. There are several circumstances in which getting a reverse mortgage would not be wise, she said.

- If you are planning to move soon it would not be worth it to get a HECM. “Theses loans are extremely expensive,” Schafale said. “It would be a waste of money to set up the loan if you don’t plan to remain in the house very long.”

- Don’t dip into your equity line too early. “People are tapping into their equity line just to have some fun and are finding themselves in their 80s with no more equity left in their home.”

- Don’t let a smooth-talking investor convince you to get a HECM loan in order to invest the money. “It rarely works,” Schafale said. She explained that typically the cost of the loan is about 8 percent of the loan amount. In order to for any investment to be profitable, you would have to invest your money in a fund that pays more than 8 percent. And that is rare in this strained economy.

To learn more about reverse mortgages:

- AARP’s Web site has a publication on reverse mortgages at www.aarp.org/revmort, or call (800) 209-8085

- Visit the National Reverse Mortgage Lenders Association’s Web site at www.reversemortgage.org.

To find lenders who offer FHA-backed reverse mortgages, go to:

- HUD’s Web site at www.hud.gov/ll/code/llplcrit.html. Enter your city or state and put a check next to “reverse mortgage (HECM),” then click “search.”

- NRMLA’s Web site at www.reversemortgage.org. Click on the “Locate a lender” box.

To calculate your HECM loan amount, try the following Web sites:

- www.aarp.org/money/revmort. Click on the loan calculator link in the middle of the page.

- www.revmort.com/nrmla/index.asp. Enter your date of birth, the value of your home and your zip code.

(Vicki Lee Parker is a freelance personal finance columnist. She can be reached at vickileeparker@gmail.com or (919) 877-5719.)

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Reverse Mortgages Are a Bright Spot in a Weak Economy

Written by rmpro
Posted at 4:43 pm

Reverse mortgages allow equity to work for you

Reverse mortgages are bright spot in bleak financial arena

By DUANE MARSTELLER - dmarsteller@bradenton.com

MANATEE — With the credit crunch, tighter lending standards and the weak economy clobbering the conventional mortgage market, more lenders and brokers are going in reverse — as in reverse mortgages.

Long considered a niche product, reverse mortgages have been gaining popularity despite widespread public unfamiliarity with them and scattered media reports of scam artists using them to target seniors.

“Reverse mortgages are really one of the only positive stories in financial services this year,” said Peter Bell, president of the National Reverse Mortgage Lenders Association, an industry group based in Washington, D.C.

Federal figures show that a record 112,154 federally-insured home equity conversion loans — as the most-popular reverse-mortgage product is called — were originated in the fiscal year that ended Sept. 30. While that’s up slightly from 107,558 in the previous fiscal year, it’s nearly triple the 43,131 that were originated in fiscal 2005.

Only 157 reverse mortgages were issued in fiscal 1990, when the federal government began insuring them. Government-insured reverse mortgages now account for 90 percent of the market.

Those numbers pale in comparison to the estimated 13.7 million single-family mortgages issued on an annual basis.

“We’re still a very small niche,” said Darryl Hicks, the association’s spokesman. “Compared to the traditional mortgage world, it’s a drop in the bucket.”

But reverse mortgages, which allow homeowners 62 and older to borrow against their accumulated equity without having to sell their homes or make payments, are poised for rapid growth at a time when the overall industry is in a slump.

For starters, the reverse-mortgage market remains virtually untapped, Hicks said.

Roughly 450,000 reverse mortgages have been issued since their inception, or less than 2 percent of the 35 million current U.S. homeowners who are 62 or older, he said.

The low market penetration rate largely stems from unfamiliarity with reverse mortgages and a general reluctancy among current seniors — many of whom survived the Great Depression — to take out a mortgage in their later years, Hicks said.

But coming up behind them are more than 78 million baby boomers, who have shown a greater willingness to borrow but less of an inclination to save for retirement.

With rising living costs and falling stock prices hammering their meager nest eggs, more boomers likely will turn to reverse mortgages to help finance their retirement, said Debbie Layer, BankUnited’s West Coast Florida market president.

“I think it will gain a lot of popularity, especially with the economic challenges our seniors are facing,” said Layer, whose bank only recently entered the reverse-mortgage market.

Recent changes in federal law also are expected to spur reverse-mortgage growth, those in the industry said.

An economic stimulus package passed in July raised the maximum amount of a federally-insured reverse mortgage to $419,000, up from the old limit of $200,160 in rural areas and $362,790 in more-expensive metro areas. Before the increase, the Manatee-Sarasota area “had some of the lowest caps in the nation,” Layer said.

The law also capped closing costs on reverse mortgages at $6,000, and required tougher regulations on how they’re marketed with other financial products like life annuities and long-term care insurance. The latter should help reduce the potential for fraud, Hicks said.

Reverse-mortgage growth is expected to be concentrated in Florida and California, now the two biggest markets because of their larger senior populations. Federal data shows the Tampa Bay area was the nation’s third-largest metro market, behind Miami and Los Angeles, during the first half of 2008.

Lenders and brokers have taken notice of the growth potential, with more entering the field. Last year, Bank of America bought the nation’s third-largest reverse-mortgage originator and Ginnie Mae offered its first reverse-mortgage product.

There were some 2,600 federally approved reverse-mortgage lenders in September, nearly double the 1,400 a year earlier, according to the U.S. Department of Housing and Urban Development.

Hicks said the trade group has more than 600 members who account for about 95 percent of the market.

“We do anticipate with these legislative changes taking place and more consumer education, the market will continue to grow,” he said.

[Note: The new ceiling for reverse mortgages is $417,000, not $419,000.]

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Another Great Article Explaining Reverse Mortgages

Written by rmpro
Posted November 5, 2008 at 2:30 pm

It’s amazing to me how many people are out there spreading confusion and half-truths about reverse mortgages. Many of these are people who should know better. Many are people who apparently are more interested in looking and sounding important and authoritative than in telling the truth. Seniors need to know the real truth so they can make informed decisions. This article is another I’ve found that contains the straight truth about reverse mortgages.

A lift for reverse mortgage market

By Tom Kelly

One of the most significant developments in the history of reverse mortgages occurred recently when FHA Commissioner Brian Montgomery announced that a new single national limit had been set, eliminating geographical boundaries for many seniors in the country’s most popular reverse mortgage program.

Loans insured by the Department of Housing and Urban Development, known as Home Equity Conversion Mortgages, or HECMs, now have a common ceiling of $417,000, regardless of where the home is located.

Previously, the HECM program assigned different lending limits by county ranging from $200,160 in rural areas to $362,790 in the highest home value areas. The new, higher lending limit will enable borrowers to obtain a substantially greater benefit from their homes, if the value is higher than the previous HUD limit.

Similarly, an existing borrower whose home value is greater than the new HUD limit may be able to increase that benefit by refinancing the reverse mortgage. The borrower is encouraged to contact the lender to weigh fees and costs to determine if it makes sense to refinance.

Lenders and consumers have been pushing for the single national limit for more than a decade, arguing that the long-time method of assigning limits by area for HECMs was too restrictive. All interested parties had been waiting for clarity on a figure: if the national limit would be set at $417,000, or $625,500, or a sliding scale somewhere in between. While many borrowers had hoped for a higher benchmark, the $417,000 number came as no surprise given the state of the conventional lending environment.

“HUD should be applauded for its expedient implementation of the single national loan limit for the HECM program, especially during such a tumultuous period,” said Peter Bell, president of the National Reverse Mortgage Lenders Association, a nonprofit trade group based in Washington, D.C. “The higher single national loan limit and other provisions expected to be implemented in the coming months make reverse mortgages a more viable retirement financial option for a broader audience who can receive higher benefits at lower origination fees than ever before.”

The Housing and Economic Recovery Act of 2008 recently reduced the maximum fee to 2 percent on the initial $200,000 of the home’s value and 1 percent on the balance thereafter, with a cap of $6,000. Previously, HECM fees were capped at 2 percent of your home’s value or the county lending limit, whichever was lower.

Bell said the new formula for maximum origination fees will become effective concurrently with the implementation of the new HECM loan limits. HUD is aiming for an effective date of Nov. 1.

Since HECMs were first launched as a pilot program in 1989, loan maximums have been slow to rise. In 2004, for example, the highest of the loan limits — applicable generally to major metropolitan areas — increased to $290,319, up from $280,749. The lowest loan ceiling, which typically applies to rural and non-metropolitan areas, rose to $160,176, up from $154,896. Clearly, a senior with an expensive home in a rural area did not find the HECM appealing.

More than 450,000 HECMs have been made since 1989. FHA, a branch of HUD, insured 107,367 HECMs in 2007 compared to 43,131 in 2005.

A reverse mortgage enables senior homeowners to convert part of the equity in their homes into tax-free income without having to sell the home, give up title or take on a new monthly mortgage payment. Reverse mortgages are available to individuals 62 or older who own their home. Funds obtained from the reverse mortgage are tax-free.

Borrowers can choose to receive the reverse mortgage funds as a lump sum, monthly income, line of credit, or as a combination of monthly income and line of credit.

They can use the funds anyway they wish — for home repairs and improvements, medical costs, in-home care, education and supplemental retirement income. Borrowers make no monthly payments on a reverse mortgage during its term. The loan becomes repayable when the borrower sells the home or permanently moves out. In addition, the repayment amount can’t exceed the value of the home.

Reverse mortgages are originated largely by private lenders. Most are members of the National Reverse Mortgage Lenders Association (www.reversemortgage.org) and are required to sign a code of conduct and follow best practices for the treatment and counseling of seniors.

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Reverse Mortgages — Much Better Than Most People Think

Written by rmpro
Posted November 4, 2008 at 5:52 pm

Reverse mortgage route works for Marysville woman

After some research, a Marysville woman finds an ideal way to pay for home repairs and a cruise.

By Christina Harper
Special to The Herald

MARYSVILLE — Dorothy Remington of Marysville found herself in a quandary last year when she realized that her house needed a new roof and new windows.

Remington, 80, didn’t have the money to make the repairs to the Marysville home that her late husband had built himself for the family.

“I thought, ‘Gosh, how am I going to do that?’ ” Remington said. “Here I am sitting on all this money and I can’t even repair the roof.”

Remington knew that she had equity in her home and after talking to neighbors who had a reverse mortgage, she decided to look into the loan for herself.

Reverse mortgages, or home equity conversion mortgages, are federally insured private loans that were created by the U.S. Department of Housing and Urban Development.

To qualify for this type of loan, borrowers must be 62 or older and own their home outright or have a small mortgage that can be paid off with part of the loan they receive. The home must be their primary residence.

Reverse mortgages are not taxable income and homes that qualify include single-family dwellings and townhouses, condominiums and some manufactured homes. They cannot be used on land that is leased.

Remington did qualify for a reverse mortgage and after finding out as much as she could, decided to go ahead and take out the equity in one payment. She invested much of her lump sum and got her new roof and windows. She also used money from the mortgage to take a cruise to Alaska and plans another to Mexico.

Karen Stubrud, a mortgage planner with the Mortgage Advisory Group in Everett, specializes in reverse mortgages and helped Remington with her loan.

Some people are retiring and living longer and are not able to keep up with bills, the cost of living and repairs to their homes. They might live month to month on a fixed income and would like to be able to take a vacation or pay off some other debt.

“Retirees can use credit like anyone else,” Stubrud said. “I try and help them think it through.”

Stubrud says she thinks there are lots of myths surrounding reverse mortgages that may put people off asking about them. One of the myths is that the lender will own the borrower’s home.

False, says Stubrud. Lenders do not take control of the title. The lender will receive the amount of the loan back plus interest when the house is sold. Any remaining equity will go to the heirs of the estate. The debt is never passed on.

The loan is due “when the owner dies, moves out of the home or sells it,” Stubrud said. “You can never owe more than your home’s value.”

People also believe that good health, a certain rate of income and good credit are needed to qualify. The fact is that how much you can borrow depends on the interest rate, other loan fees and the appraised value of your home. Age is also a factor.

“The older you are the more you get,” Stubrud said.

Loans can be paid out either by lump sum, monthly payments, in a line of credit or any combination of the three.

Borrowers “can draw money out as a pre-inheritance,” Stubrud said. “It’s a choice they are making. It’s not the kids’ choice.”

Stubrud gets calls from families whose parents are thinking about a reverse mortgage. They want their mother or father to be comfortable with their decision. She walks them through the process and meets with clients and their families at their homes, if needed.

One of Remington’s concerns was that her kids would get stuck with paying the reverse mortgage when she dies. But she felt better learning that when the house gets sold the loan gets paid off.

“Unless the kids want it and buy it,” Remington said. “But it’s not on their shoulders.”

By taking out a reverse mortgage, Remington was able to help out her children financially and enjoy that opportunity with them.

“It’s one of those things that I’m very grateful for,” Remington said.

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Reverse Mortgage to the Rescue!

Written by rmpro
Posted at 5:32 pm

Reverse Mortgages Provide Valuable Tool For Seniors

By THERESA SULLIVAN BARGER |Special to The Courant

November 2, 2008

MICHAEL AND CYNCY ABEL enjoy the Oyster River near their Old Saybrook home. They recently got a reverse mortgage, allowing Cyncy to retire and the couple to spend more time together. (PATRICK RAYCRAFT / HARTFORD COURANT / October 24, 2008)

Cyncy Abel laughs when talking about how her quality of life has improved since she and her husband, Mike, got a reverse mortgage on their Old Saybrook home.

The reverse mortgage allowed her to retire from her full-time job so that she’s able to work in her garden, help her husband in his hand-carved-sign business and take three weeks in early spring to visit friends and family down South.

Since taking out a reverse mortgage nearly a year ago, the couple says, they have peace of mind. They’re still frugal, Mike Abel says, but the reverse mortgage paid off the mortgage on their $500,000 Cape and provides a modest monthly income to supplement Social Security and retirement savings.

“We couldn’t figure how in the world we were going to be able to afford for me to retire,” Cyncy Abel said. “It was either [get a reverse mortgage] or move south. Four of our five children are in the area.”

They didn’t want to move, and they didn’t want to liquidate retirement investments, they said. Their children own their homes and supported the Abels’ plan, knowing they’d get little inheritance.

A reverse mortgage allows people 62 and older to borrow against their home’s equity. The loan isn’t paid off until they sell the house. There is no income or credit check, but the home has to be their primary residence. Seniors who obtain a reverse mortgage must first pay off their traditional mortgage and any outstanding property taxes, using reverse mortgage funds if they like.

The 90 percent of borrowers who get an FHA-insured reverse mortgage through the federal Department of Housing and Urban Development are required to receive consumer counseling from a HUD-approved counselor.

Reverse mortgages don’t have to be repaid until the last homeowner dies or moves out of the house. The funds can be taken in a lump sum, as a line of credit, in monthly payments or as a combination of these options.

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Lower Interest Rates = More Money From A Reverse Mortgage

Written by rmpro
Posted October 29, 2008 at 7:29 am

Lower interest rates are good news if you are getting a reverse mortgage on your home. Reverse mortgages are a great way for seniors to get more money for living expenses or for the other things they may need or want. It is a much better alternative for those over 62, in most cases, than a home equity loan or a 2nd mortgage. Now seniors will be able to receive even higher benefits from their new reverse mortgage.

Reverse Mortgage Rates - October 28, 2008

The average CMT HECM borrower will have benefits that are $6,000 higher on Tuesday the 28th. The average LIBOR HECM borrower will have benefits that are $8,000 higher.

This week, all Treasury-based HECM’s with a margin of +182 or less will pay the HECM maximum benefits. Ditto for LIBOR-based HECM’s with margins of +139 or less. Using these margins, the initial note rate on a LIBOR HECM would be 115 bp more than that on a Treasury HECM. The LIBOR yield curve is more normal this week.