Should I Do It?

I have been talking with senior homeowners about reverse mortgages for many years now and the program keeps improving for the consumer. So with today’s economic problems, you might be thinking about your options and wondering if a reverse mortgage will help you or if it is worth doing.

Some of the clients I have spoke with over the years that did not do the reverse mortgage are now sorry they did not do it. Here are some of their stories:

Many did not like the closing cost ( they are high), so decided to get a home equity loan because the cost there really low. Today, their line of credit is closed or reduced and they still have to make payments. Also, they need more money but unable to do a normal refinance or owe to much to do a reverse mortgage.

Many are told by advisor to only do a reverse mortgage as last resort (i still don’t understand way wait till the car will not run anymore, instead of taking it into the repair stop to make it run larger), and now that it is last resort home values are down so they are getting alot less money or unable to qualify beause they owe to much. Maybe the advisor can now chip in.

Many did not want to tap into their investment, for many reasons, but not their investment are down and they are mad i can not get they the same amount of money from a reverse mortgage.

Again, many are mad at the closing cost and were glad congress lowered our fees but are now paying more in fees because the limits are up and congress didnot lower their MIP.

There are many more stories, but I get sad when folks are harding and they have the resourses available to they, but think we are trying to trick them.

Senior (really everyone) needs to be careful about people taking advantage of them, but please, there are many ways to check out real companies that serve the community.

So I want to wrap this up by saying, get a check up and see if your financial situation could be improved by getting a reverse mortgage. Over 90% of senior homeowners who get a reverse mortgage are help they did it!

New Section With Consumer Guides

Check out Consumer Guides page. We have posted many consomer guides; NRMLA, Fannie Mae, AARP and HFC. Also included is a general reverse mortgage process form, counselor phone list fo your use.

We are looking to get you as must information as possible. With the new lending limits (not really) and low rates, you could be getting the best principal limits, lets find out together 877-967-4700.

NEW YORK TIMES

Over the weekend, the New York Times published an article about how more retirees are exploring reverse mortgages as they face declining income, falling home values, and dwindling savings from Wall Street’s meltdown. In The Reverse Gear, journalist Vivian Marino writes that as mortgage financing gets increasingly tougher to obtain, reverse mortgages continue to look more appealing.

“Many seniors have been able to use reverse mortgages to avoid delinquency or foreclosure, and to help fund their retirement,” said Regina M. Lowrie, a former chairwoman of the Mortgage Bankers Association and the chief executive of Vision Mortgage Capital in Montgomeryville, Pa.

One of the bright spots of the article comes from Martin Shenkman, a New Jersey based attorney who specializes in estate and tax planning. Shenkman considers reverse mortgages “a great tool, when the right circumstances exist.” He even acknowledges that the reverse mortgage industry has come a long way in attracting business and burnishing its reputation, which was full of stories from years past of lenders preying on the elderly.

The comment from Shenkman is one of the first times I’ve read anyone outside our business mention that the industry has come a long way in improving its reputation. Not that I wasn’t aware of everything being done, but hearing people outside the business take notice is definitely positive.

The article also points out the growing interest in the ability to use a HECM on co-ops. Mark Draper, a senior loan officer for the reverse mortgage department at Regional Home Mortgage, says he is adding at least one client a week who wants to take advantage of the new feature once HUD issues the mortgagee letter.

Not surprisingly, it does mention that some co-ops are apprehensive. “If someone is in that position, they are obviously in need of cash,” said Daniel DiBenedetto, the co-op board president at 15 West 11th Street in the East Village. He expressed doubts about a reverse mortgage as a permanent solution to financial problems.

But Elliot Meisel, a real estate lawyer from Manhattan, says that co-ops can easily monitor such borrowing. “I would encourage boards to permit them with appropriate safeguards and tight controls and oversight,” he said

It’s a good read, definitely worth the time.

What is a Reverse Mortgage?

The Home Equity Conversion Mortgage (HECM) is FHA’s reverse mortgage program which enables you to withdraw some of the equity in your home. You choose how you want to withdraw your funds, whether in a fixed monthly amount or a line of credit or a combination of both.

You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

HECM counselors will discuss program eligibility requirements, financial implications and alternatives to obtaining a HECM. They will also discuss provisions for the mortgage becoming due and payable. Upon the completion of HECM counseling, you should be able to make an independent, informed decision of whether this product will meet your needs. You can search online for a HECM counselor.

You can use a reverse mortgage calculator to help you see if you qualify. If you meet the eligibility criteria, you can complete a reverse mortgage application by contacting a FHA-approved lender.

Borrower Requirements
You must:
Be 62 years of age or older
Own the property outright or have a small mortgage balance
Occupy the property as your principal residence
Not be delinquent on any federal debt
Participate in a consumer information session given by an approved HECM counselor
Mortgage Amount Based On
Age of the youngest borrower
Current interest rate
Lesser of appraised value or the HECM FHA mortgage limit
Financial Requirements
No income or credit qualifications are required of the borrower
No repayment as long as the property is your principal residence
Closing costs may be financed in the mortgage
Property Requirements
The following eligible property types must meet all FHA property standards and flood requirements:
Single family home or 1-4 unit home with one unit occupied by the borrower
HUD-approved condominium
Manufactured home that meets FHA requirements
How the Program Works
If you are a homeowner age 62 or older and have paid off your mortgage or have only a small mortgage balance remaining, and are currently living in the home, you are eligible to participate in FHA’s reverse mortgage program. The program allows you to borrow against the equity in your home. You can select from five payment plans:

Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term – equal monthly payments for a fixed period of months selected.
Line of Credit – unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
Modified Tenure – combination of line of credit plus scheduled monthly payments for as long as you remain in the home.
Modified Term – combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
You can change your payment options for a fee of $20.

Unlike ordinary home equity loans, a FHA reverse mortgage HECM does not require repayment as long as the home is your principal residence. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to you or your heirs. You can never owe more than your home’s value.

If the sales proceeds are insufficient to pay the amount owed, FHA will pay the lender the amount of the shortfall. FHA collects an insurance premium from all borrowers to provide this coverage.

The amount you can borrow depends on your age, the current interest rate, other loan fees, and the appraised value of your home or FHA’s HECM mortgage limit for your area, whichever is less. Generally, the more valuable your home is, the older you are, and the lower the interest, the more you can borrow. If there is more than one owner, the age of the youngest owner is used to determine the amount you can borrow. For an estimate of HECM cash benefits based on your age, home value, and current interest rate, go to the online calculator.

There are no asset or income limitations in order for you to be eligible for a HECM. In addition, there is no limit on the value of homes qualifying for a HECM. The value of your home will be determined by an appraisal. However, the amount that you may borrow is derived from the lower of the appraised value or the FHA HECM mortgage limit of $625,500. You are charged an upfront insurance premium of 2 percent of the maximum claim amount that may be borrowed plus a 0.5 percent annual premium.

HECM Costs

You can pay for most of the costs of a HECM by financing them and having them paid from the proceeds of the loan. Financing the costs means that you do not have to pay for them out of your pocket. On the other hand, financing the costs reduces the net loan amount available to you.

The HECM loan includes several fees, including an origination fee, closing costs, mortgage insurance premium, interest and servicing fees.

Origination Fee

You will pay an origination fee to compensate the lender for processing your HECM loan. A lender can charge a HECM origination fee up to $2,500 if your home is valued at less than $125,000. If your home is valued at more than $125,000 lenders can charge 2% of the first $200,000 of your home’s value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000.

Closing Costs

Closing costs from third parties can include an appraisal, title search and insurance, surveys, inspections, recording fees, mortgage taxes, credit checks and other fees.

Mortgage Insurance Premium (MIP)

You will incur a cost for HECM insurance. You can finance the mortgage insurance premium (MIP) as part of your loan. You will be charged an upfront MIP at closing which will be 2% of the lesser of your home’s value or the FHA HECM mortgage limit for your area. You will also be charged a monthly MIP that equals 0.5% of the mortgage balance.

The HECM insurance guarantees that you will receive expected loan advances and that you will not have to repay the loan for as long as you live in your home. The insurance also guarantees that, if you or your heirs sell your home to repay the loan, your total debt can never be greater than the value of your home.

Servicing Fee

Lenders or their agents provide servicing throughout the life of the HECM. Servicing includes sending you account statements, disbursing loan proceeds and making certain that you keep up with loan requirements such as paying taxes and insurance. HECM lenders may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate and $35 if the interest rate adjusts monthly. At loan origination, HECM lenders set aside the servicing fee and deduct the fee from your available funds. Each month the monthly servicing fee is added to your loan balance.

Interest Rate

HECM borrowers can choose an adjustable interest rate or a fixed rate. If you choose an adjustable interest rate, you may choose to have the interest rate adjust monthly or annually. Lenders may not adjust annually adjusted HECMs by more than 2 percentage points per year and not by more than 5 total percentage points over the life of the loan. FHA does not require interest rate caps on monthly adjusted HECMs.

Repaying a HECM

A HECM loan must be repaid in full when you die or sell the home. The loan also becomes due and payable if:

You do not pay property taxes or hazard insurance or violate other obligations.
You permanently move to a new principal residence.
You, or the last borrower, fail to live in the home for 12 months in a row. An example of this situation would be if you (or the last borrower) were to have a 12-month or longer stay in a nursing home.
You allow the property to deteriorate and do not make necessary repairs.

Is a Reverse Mortgage Right For You?

Money from a reverse mortgage can provide you with the financial security you need to enjoy your retirement years
Traditionally, the only way to get money from your home was to sell it and move or borrow money against it and have payments. With a reverse mortgage, you can convert your home equity into cash while continuing to own and live in your home (with NO payments) — with the lender making payments to you!
During these difficult times, one of the safest programs is a Federal Insured Reverse Mortgages, to increase your monthly income and bring peace of mind. Many people see a decrease in their investments and are looking for a way of maintaining their standard of living, by tapping into their home equity without causing a new payment; they can get through these uncertain times.
Getting a reverse mortgage is a complex decision, but we can make the process easy. First we inform you all about reverse mortgages; cost to you, counseling requirements and any other items you need to know about. Once you are ready to move forward, we take the application, arrange for the appraisal and get the loan approved. This usually is done in less then 30 days, some times within two weeks!
To find out if you might benefit from a reverse mortgage, ask yourself a few simple questions:
 Do I want to live in my home for as long as possible?
 Is my mortgage fully paid or almost paid?
 Do you run out of funds before the end of the month?
 Do I have a substantial amount of equity in my home?
 Could my family and I benefit from extra income each month?
 Hard time sleeping at night because of your financial situation?
If you answered yes to two or more of these questions, it’s probably worth exploring the benefits of a reverse mortgage. It has benefited many seniors in your situation and a reverse mortgage can help you pay off your existing mortgage to free up monthly cash flow, assist or send your grandchildren to college, take that dream vacation…or just bring you some peace of mind. Give our specialist a call at 877-967-4700.

More Funds For Reverse Mortgages

Seemingly headed in opposite directions, the HECM loan limit has risen just as home values are falling. The new HECM limit is $625,500 (only for this calendar year) – representing 150 percent of the GSE (Fannie Mae/Freddie Mac) forward mortgage conforming ceiling. The new limit is good for HECM loans closed on or after Feb. 24, according to HUD’s Mortgagee Letter 2009-07. Yet, this rise comes as the median home sale price in the United States fell to $201,100 in January, a 9.9 percent one-month drop from December.

“Home prices are coming in lower,” acknowledges Daniel Chavez of Housing Financial Corp. California has been hit hard; down [in values] 20 to 30 percent,” he reports. As a result, “some people are not qualifying for loans because their equity amounts have been [adversely] affected.”

“Dramatic changes in the real estate market continue to create disparity between appraisal values and actual values,” he says, adding: “In some of the most challenging markets, such as Florida and California, home appraisals are higher than actual sale prices.” Generally speaking, though, Chavez says “seniors can take advantage of the new higher lending guidelines and permission to use a HECM for purchase for a terrific opportunity.”