Reverse Mortgage News

When you go to get your reverse mortgage loan, you'll find that there is a lot of information to consider. On top of all of the general reverse mortgage loan decisions that you'll be making, you'll need to decide what type of reverse home mortgage you want to get. There are many different reverse mortgage lenders to choose from (and new ones popping up every day!) but there are three basic reverse mortgage loans that you should know about.

As described recently by the LA Chronicle, here are the three basic reverse mortgage loans you'll want to consider:

1. HECM Reverse Mortgage Loan. This is the most common and best-known reverse mortgage loan program out there. It's the one that you've heard about that relates to HUD housing and FHA regulations.

2. Home Keeper Reverse Mortgage. This reverse mortgage loan is a lending program through Fannie Mae, a lender you may recognize from other mortgage and business loans that you may have gotten in the past. It's a government-sponsored enterprise that operates these loans.

3. Jumbo Reverse Mortgage Loans. These are the reverse home mortgage loans that are offered through various private banks and lenders throughout the nation.

There are pros and cons to each of these reverse mortgage loans. You'll want to work with a finance professional to make the right decision about your loan.

Question of the Day: What is the biggest factor assisting you in deciding which reverse mortgage loan is the right one to go with?

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Just when you thought you knew the reverse mortgage loan inside out, it's going to change on you. That's because the reverse mortgage market is swelling with interest from prospective borrowers and those borrowers each have their own unique mortgage loan needs. In order to meet those needs, the reverse mortgage market has to adapt.

One of the changes that people are starting to notice is increased availability of (and interest in) reverse mortgage refinancing. As the name suggests, this is a method of changing the terms of your reverse mortgage loan by working with your lender to make the adjustments that you see fit.

Like with traditional home mortgage refinancing, there are pros and cons to taking this action. It may result in greater financial benefit to you but it may come at a long-term financial loss. In contrast, it may do the opposite; you may have to pay a refinancing fee up front but then ultimately get more out of the reverse mortgage loan in the long run after you've refinanced it.

Learn more about this issue here.

Question of the Day: Would you be interested in reverse mortgage refinancing or do you prefer just sticking with the terms of your original reverse mortgage loan?

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An article published recently by HuliQ brings up a topic that is of concern to many seniors who are of age to consider a reverse mortgage home loan. The article discusses how declining home mortgage rates impact the reverse mortgage market. As discussed throughout the article, the impact is virtually non-existent for those people who have already taken out a reverse mortgage loan but may affect those potential borrowers interested in a new reverse mortgage loan.

Basically the impact is on the amount of money that you can borrow on your reverse mortgage loan. If you've already locked into the terms of your reverse mortgage loan then you don't have to worry about fluctuations in your home's value. There are built-in reverse mortgage protections that keep you safe in this situation. However, if your home value has gone down and you are looking at a new reverse mortgage, your borrowing ability may be limited by the decline in home value. Think of it as being the same situation as if you were trying to sell your home right now. If a buyer had already committed to the sale at previous rates, the deal would go through but if you were newly listing it on the market, the new value would apply.

It should be noted that the borrower interested in reverse mortgage refinacing (a topic discussed in yesterday's post) should pay careful attention to the impact of declining home rates on the new reverse mortgage terms. Make sure to work with a finance professional to sort out these details before committing to refinancing your existing reverse mortgage loan.

Question of the Day: Do you think the relationship between reverse mortgages and home values is important as a borrower?

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We've mentioned on this blog in the past that there are multiple ways that you can choose to get your reverse mortgage payment. However, it is always good ro review the basics when it comes to dealing with something as important in our lives as our money is.

A quick look at a recent online article reminds us of four specific ways that you might choose to take you money when you set up the terms of your reverse mortgage home loan:

1. All of it right now. You can take a lump sum payment immediately and then you'll just have the money to use as you wish.

2. Monthly payments for the rest of your life. Why worry about money when you get older when you could just get a regular check?

3. Monthly payments for a set period of time. Bank on not living long and get a little bit more money each month while you are alive.

4. Access it as needed. Use a line of credit to get the reverse mortgage money as needed.

You might have a set payment method in mind that immediately stands out as making sense for your financial situation. If not, work with a finance professional to determine what the best type of reverse mortgage payment is for you.

Question of the Day: What method or combination of methods would appeal to you most in terms of reverse mortgage payments?

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There is an interesting new alternative to the reverse mortgage loan which many people have been looking into in recent months. It's called the REX agreement and it's a type of home equity loan that has many similarities to the reverse mortgage but also some distinct differences.

Basically, you get up-front money from the value of your home just like you would with a reverse mortgage loan. However, instead of driving you into debt with your lender, the REX agreement functions as a sort of equity-sharing agreement. You agree to give a percentage of the future sale of your home to the lender in exchange for the money upfront now.

It's a unique twist on the reverse mortgage that isn't right for everyone but may be appealing to some borrowers. A new article on the REX agreement describes the three steps you would take to get a REX loan:

1. First you determine what the change in your home's value will be for a future date. You use that figure to determine what percentage (up to half) of the home's value you want to share with REX.

2. Next you work out the details of your REX agreement with the lender. This involves agreeing on the home value and setting the amount that you're going to receive as an upfront lump sum payment. Usually you get about ten percent of your home's value.

3. You enjoy your life and loan until you sell the home (or until fifty years have passed which is the typical expiration of the REX agreement). At that time, you get the remainder of your payment. (So if you agreed to give half the home's value to your lender and you already got ten percent up front, you'll get 40% of the value of the home.)

It's best to think through this loan and compare it with the reverse mortgage to see which suits you. Work with a finance professional to make this decision.

Question of the Day: Do you think the REX agreement is a good alternative to the reverse mortgage?

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In a recent news article called "How Your House Can Pay You Back", mortgage specialist Tammy Engel wrote a great overview of the reverse mortgage loan. In addition to providing a summary of the reverse home mortgage (and who does and doesn't benefit from it), Engel's article provides an interesting array of statistics about the reverse mortgage loan.

Some of those reverse mortgage statistics that you might not have realized include:

- The reverse mortgage home loan has been around for more than two decades. However, two thirds of reverse mortgage loans were made within the past three years.

- More than nine out of ten people who have reverse mortgage loans have reported that they are satisfied with their loans. This percentage also says that they are happy with their loans.

- Over eighty five percent of reverse mortgage loan holders believe that their quality of life has improved as a direct result of their use of the reverse mortgage loan option.

- Less than five percent of people who get a reverse mortgage loan are unhappy with their loans.

These are some interesting reverse mortgage statistics that point to a few basic things. First of all, they show that reverse mortgages have boomed in interest in the last few years. And secondly, they show that most people are pleased with the choice to use a reverse mortgage loan to supplement their retirement income.

Question of the Day: Did you think this many people were happy with their reverse mortgages?

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One of the worst things about the reverse mortgage market is that predatory lenders cause a good thing to go bad. The reverse mortgage can be an excellent way for a senior homeowner to receive a monthly income, stay in his or her home after retirement and develop a sense of financial security despite the changing economy as they age. However, predatory lenders may target vulnerable seniors and convince them to get a reverse mortgage that doesn't have the terms which are right for them.

This predatory lending is in the process of being terminated or reduced through actions that the federal government is taking to protect America's seniors. However, as fast as the government can put protective measures in place, organizations are finding ways to do reverse mortgage harm. For example, a new press release from a group that sells direct marketing lists has explicitly stated that they include reverse mortgage prospects on their lists. In other words, a predatory lender could use this company's direct mailing to contact seniors who would be likely to consider a bad reverse mortgage loan.

The key here is for reverse mortgage borrowers to protect themselves. Don't respond to lenders who are seeking you out and asking if you want a loan. If you're ready to get a loan, you should be the one seeking out the lender - not the other way around. Consider all of your choices carefully and work with a finance professional to make sure that you're choosing a reverse mortgage loan that will benefit you for years to come.

Question of the Day: What should be done to improve the benefits of the reverse mortgage market while reducing predatory lending?

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Many people take out a reverse mortgage loan thinking that it's going to last them forever. Indeed, the reverse mortgage is typically designed to last until the home owner sells the home or passes away. That's part of why it's designed for seniors who are not likely to continue remaining in their homes for years upon years.

However, as a reverse mortgage borrower, you should know that there are different lengths of time for which the reverse mortgage can be obtained. And you should also be aware of the fact that the longer that you take out the loan for, the more that you're ultimately going to owe at the end of the home loan.

This is caused by the way that interest accrues on the reverse mortgage loan. It keeps adding up over time and increases steadily which causes you to owe more money as more time passes. For an example of this, take a look at the numbers highlighted in this recent Kiplinger report which compares a 10-year reverse mortgage loan with a 20-year reverse mortgage loan.

This doesn't necessarily mean that it's a bad thing for you to take out a reverse mortgage for the duration of the time that you live in your home. It's just a fact to be aware of as you get older and start planning your move to a retirement community, nursing home or the home of a family member. Sooner may be better than later in some cases.

Question of the Day: How long would you ideally expect the life of your reverse mortgage loan to be?

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The AARP experienced some ups and downs when working with the Senate in the passing of a new housing bill. The bill, called the Foreclosure Prevention Act of 2008, has the potential to assist the many people facing home foreclosure in the United States to remain in their homes and resolve their financial problems. Unfortunately, AARP believes that this may not be realized as a result of the way that the bill was written.

Despite some of the problems that the organization sees with the bill, AARP was happy with the reverse mortgage portion of the new legislation. The new provisions relating to the reverse mortgage aspect of the bill make it easier for more people to obtain a reverse mortgage loan. Additionally, the changes reduce some of the high fees that have typically been seen as gouging the elderly folks who need the reverse mortgage to remain in their homes.

AARP and others advocating for the senior population's housing and finance issues hope that the bill is just the beginning of what's to come in terms of addressing the foreclosure crisis that the nation is facing.

Learn more about this issue here.

Question of the Day: Do you believe that the new legislation is satisfactory in addressing senior housing issues?

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Reverse mortgage borrowers are starting to get smart. That's good news for the elderly population that is taking out reverse mortgages by the dozen. But it could be bad news for a niche group of first-time home buyers who have benefitted significantly from the problems that have traditionally plagued the reverse mortgage market.

The main problem with reverse mortgages has been a lack of understanding on the part of the borrower and an issue with predatory lending that has made these people vulnerable to bad loans. Ultimately what has happened for many is that they've taken out reverse mortgage loans that they didn't understand and ultimately faced home foreclosure. The government and good reverse mortgage lenders are working to change this so that the reverse mortgage can work the way that it's supposed to.

However, in the face of this as well as because of the general housing slump, we've seen a market in which home values are on the decline. Although many people are having trouble qualifying for home loans in the new market, there remain a significant number of people who have enough money to buy a house. Many first-time home buyers have emerged to purchase a home with their savings, something they can afford to do now that the market is bad.

As the reverse mortgage problem gets fixed and these loans increasingly work the way they're inteded, more and more seniors will be remaining in their homes. Home values will go up and these first time buyers may find that it's harder to get a home. If you're in the market to buy, you may want to talk to a finance professional to get the deal done now!

Question of the Day: Do you believe that this is a good time to invest in real estate?

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We're always happy to see when a reverse mortgage loan goes smoothly and empowers the borrower with financial stability. This is more often the case than not but it's not a part of the finance and real estate industry that gets highlighted frequently in the media. This week we see exactly one of those positive stories coming out of San Diego.

The story is of an elderly woman who has lived in her home for over thirty years. She wanted to continue to stay in that home and to participate in the community where she lives. However, she needed an increasing level of assistance to be able to maintain her life due to the ailments of aging. As this need grew, she started to feel the financial crunch of paying for in-home care.

She obtained a reverse mortgage loan and took monthly payments from the transaction. These payments allow her to pay for a home aide to assist her with daily tasks like walking the dog and cleaning the house. She gets to stay in her home and she has the help that she needs while she's there. It's exactly what the reverse mortgage was intended to do.

Question of the Day: Do you have a reverse mortgage success story to share with us?

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We all know that the basic reason that seniors look into reverse mortgage loans is because they need more money than they're getting from their retirement income. However, most people don't think about the reasons that these aging adults need this money. Reports indicate that a leading cause for seeking out a reverse mortgage loan is because of "health and disability" issues which make life too expensive for the senior.

One AARP study showed that thirty percent of people who had gotten a reverse mortgage loan cited medical issues as a leading reason for requiring the loan. This points to a problem that is much bigger than the financial issues faced as we age; it points to a need for this country to develop a better health care system for our elderly population. This is particularly true as the baby boomer generation starts to age.

We're not likely to see the need for medical care go away so instead we have to find a way to deal with the problem of rising health care costs. The real estate industry has found the answer in offering the reverse mortgage loan option to those people who are struggling to make ends meet due to exorbitant medical expenses. Perhaps those people who are opposed to the reverse mortgage industry should take a look at the underlying issues causing it to be necessary.

Question of the Day: Were you aware that the high cost of health care is a leading reason that seniors seeking out reverse mortgage loans?

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Reverse mortgages have grown considerably as an industry over the course of the last three years. Unfortunately, whenever something good happens, it tends to have a negative counterpart. The negative counterpart in the reverse mortgage loan business has been the fact that reverse mortgage fraud is also on the rise. Luckily, due to media attention and the acts of people concerned about senior advocacy, the government has taken efforts to stem the reerse mortgage fraud problem in order to keep this kind of lending safe and beneficial for the people interested in these loans.

To that end, the FBI has announced that it is cracking down on mortgage fraud to a significant degree. The reverse mortgage industry is just one area of mortgage fraud that the FBI is dealing with it but it is an important area receiving the bureau's attention. They are particularly looking at reverse mortgage lenders who take an aggressive approach to marketing and which have high fees associated with their loans. The FBI describes a "surge" in their focus on these matters and says that there's no indication that this surge will slow anytime soon.

Learn more here.

Question of the Day: What do you see as the best way for the FBI to approach its crackdown on reverse mortgage fraud?
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Most people in America tend to assume that the housing and mortgage crisis is of great importance to seniors today. That's because it's obviously a problem, particularly for elderly people who have some interest in selling their homes (something you clearly don't want to do in a bad housing market). We also make this assumption because the politicians that are all over the news these days frequently discuss this issue as being of utmost impotance.

However, new research indicates that seniors do have some concern about the mortgage but it doesn't top the list in terms of their biggest issues of importance. They're more concerned about what they've always been concerned about - social security and the rising cost of health care. They want the presidential candidates to start talking about how they're going to fix those problems, not to concern themselves so much with the mortgage issue.

Perhaps the fact that seniors aren't as concerned about mortgages as we thought is also related to the fact that they're resolving the problem on their own. Seniors who had originally planned to move from their homes after retirement are instead taking out reverse mortgage loans that allow them to cover the costs of staying in their homes. Additionally, it's possible that seniors believe that they wouldn't need to worry about mortgage costs if other issues, such as health care expenses, weren't eating up their bank accounts.

Question of the Day: What do you think should be the social issue of primary concern to seniors?

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The reverse mortgage loan is something that is taken out be seniors over the age of 62. However, it is something that may be useful to the younger generations in the family. That's because the reverse mortgage can be used to keep the elderly generation somewhat self-sufficient so as to reduce the financial drain that the individual places on the rest of the family as he or she ages.

We've talked here before about how the reverse mortgage can be of use to the sandwich generation - the population of baby boomers who are taking care of both their children and their elderly parents. The elderly parent takes out the reverse mortgage to assist with paying the bills. This helps the baby boomer from having to postpone retirement in order to care for both generations.

This can also be looked at in terms of the "negative inheritance". This term refers to the situation when a person caring for an elderly family member has to pay more for the care than he or she will get in inheritance. We do this because we love our family and it's the right thing to do. But it certainly places a burden on us. The reverse mortgage can alleviate that burden.

And of course, as the baby boomer generation ages, those individuals may also take out reverse mortgage loans to further reduce the strain on the younger generations. This may be increasingly important as our health care system struggles to care for the big baby boomer generation that's getting older. By limiting the strain as much as possible now, we'll be able to support each other in the years to come.

Question of the Day: Do you believe that the reverse mortgage is a good solution to the problem of negative inheritance?

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We don't typically think of the reverse mortgage loan as a form of financial investment. It's typically considered a financial necessity which assists an elderly individual in maintaining their way of life despite taking financial losses from retirement. However, the savvy retiree will find that thinking about the reverse home mortgage as a form of investment can actually make their financial situation even more stable.

A recent article on investing during the current recession pointed out that the reverse home mortgage is a loan that currently offers better returns than three different more common methods of investing.

'''If you''ve been in the house for 20 or 30 years, all you''ve seen is your rate of appreciation slowing,''' Mr. Glickstein explained. '''You''re still sitting on what may be the biggest piece of your retirement wealth.''' The reverse mortgage can give you better returns than a C.D., a money market fund or selling the house outright, he said. (source)

Seniors who have been involved in investments in the past may consider the reverse mortgage to be a financial risk. What must be kept in mind is that the state of the economy has changed in recent years and the real estate market has changed as well. These changes require a change in the investor's way of thinking - and they make the reverse mortgage loan something worth looking into.

Question of the Day: Do you agree that the reverse mortgage loan may offer better financial returns than CDs and money market accounts?

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Many people who are interested in obtaining a reverse mortgage loan are disappointed to find out that they can't get as much money out of their homes as they had originally hoped they would be able to obtain. Sometimes this is due to the fact that they don't entirely understand the way mortgages, home equity and associated fees all work together. However, it's often due to the constraints placed on the loans themselves.

When taking out a reverse mortgage loan, you're going to be dealing with "floors" and "ceilings" that have been worked into the legal side of reverse mortgage lending. The "reverse mortgage floor" is a number equal to slightly less than half of the conforming loan limit. The "reverse mortgage ceiling" is a similar number equal to just under ninety percent. What this means is that your loan will fall somewhere between 50% and 90% of the conforming loan limit regardless of the actual value of your home equity.

For most people, this isn't actually a problem. The majority of people who own properties that are more expensive than the average across the nation are not people who are in a financial position to require them to need a reverse mortgage loan. However, in parts of the country where housing costs are particularly high (such as New York or San Francisco), this may pose lending problems for some consumers.

Learn more here.

Question of the Day: Do you know how much money you would be able to access through a reverse mortgage loan?

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One of the biggest things that is happening in the reverse mortgage market today is that legislators and others in positions of authority are working hard to make this industry safe for seniors. We've seen this in many different forms, including a recent crackdown by the FBI on reverse mortgage fraud. And we're going to see it continue until the problem of bad lenders in the reverse mortgage market has been diminished.

One of the people who is pushing hard for this kind of attention to remain strong is U.S. Senator Claire McCaskill. Specifically, she has been urging Missouri Attorney General Jay Nixon to play an active role in reducing the amount of predatory lending that is happening in his state. The main thing that they're working on is reducing the number of reverse mortgage lenders that are using false or misleading marketing tactics to rope seniors into bad loans.

One area that we haevn't seen a lot of attention to before which these two are working on covering is the marketing of the reverse mortgage as a "benefit". Some lenders are saying that it's a government program designed to help seniors in the same way that social security and Medicare are designed to do. This leads to much confusion in the senior population and that leads to bad loans.

Learn more here.

Question of the Day: Are these marketing tactics the area of reverse mortgaeg fraud that we should be most concerned about?

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The news has been buzzing lately with warnings that the government is cracking down on reverse mortgage fraud in an effort to keep seniors safe from predatory lenders. Just take a scan back through our headlines here over the past few weeks and you'll see that everyone from the FBI to our United States senators are involved in this effort. And bad reverse mortgage companies are starting to see the impact.

For example, a New York company that had been sending out misleading advertisements about reverse mortgage loans to vulnerable seniors has just been fined by the state's Attorney General. The business was found guilty of trying to act like a non-profit organization when it's obviously in the business of making money. They promoted the reverse mortgage loan as a "tax-free government program" ... and failed to explain the details of the loan in their ads.

This type of advertising is problematic because it puts seniors at risk. The seniors who are unhappy with their reverse mortgage loans are almost always the seniors who didn't understand what the loan was all about which is precisely what happens in cases of this kind of advertising. By cracking down on this, authorities hope to make it so that individuals who use their reverse mortgage loan options do so with complete understanding of what the loan is all about.

Learn more about the NY case here.

Question of the Day: Are you happy to see that authorities are cracking down on bad reverse mortgage lending?

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Last week, the Attorney General in the state of New York cracked down on a reverse mortgage loan firm that had ben using misleading advertisements to trick senior citizens into getting bad loans. The lender itself has to pay a significant amount of money in fines but the lender isn't the only one who is out some cash in this equation. A politician in the state is also planning to return some funds which were given to his campaign from employees of the bad lender.

Democratic congressional candidate Dan Maffei had received about $16,000 in campaign funds from employees of the questionable company. There have been no accusations that there was anything wrong with the contributions in terms of the role that the candidate played in accepting them. He may not even have known that the money was related to bad reverse mortgage lending. However, he says that returning the funds is the right thing to do.

Learn more here.

Question of the Day: Is returning the money the right thing for the candidate to do?

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The National Housing Coalition Association (NHCA) is a non-profit organization which was created for the purpose of establishing clear guidelines for HECM Reverse Mortgage counselors and HUD counseling organizations. The organization has just hosted its first industry meeting which outlined the purpose and goals of the association.

Priorities for this new association include:

- Establish a code of ethics for the counseling that is given to seniors seeking out reverse mortgage loans. This should help to make reverse mortgages more understandable and safer for seniors.

- Funding for counseling. In order for this counseling to take place for all seniors in the ever-growing reverse mortgage industry, there needs to be money. The association will figure out ways to create funding for the counseling.

Learn more here.

Question of the Day: Is a streamlined process necessary for reverse mortgage counseling to be more effective?

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An unusual reverse mortgage case made headlines this week. Normally, headlines are only made in the reverse mortgage industry when a bad lender gets caught doing something he shouldn't have done. Sometimes there are headlines of reverse mortgage success stories. But this could very well be the first news report of a reverse mortgage lender who saved a woman's life during the course of doing his job.

The lender was on the phone with an elderly woman whom he was trying to interest in obtaining a reverse mortgage loan. She was acting very strange and said the phrase, "help me". He wasn't sure what was going on but he called 911 and emergency responders went to her home. It is unclear what was wrong with the woman but she reports that she is very grateful for the fact that the emergency responders saved her in this situation.

She also says that she is considering getting that reverse mortgage loan!

Learn more here.

Question of the Day: Do you think there are other cases out there of lenders saving lives over the phone?

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