Wall Street Journal Interesting Article on Reverse Mortgages

The Wall  Street  Journal recently ran a short article that talked about the current bank credit  crunch and its impact on reverse mortgages.  Basically it  said that if you stick with a HUH HECM Reverse Mortgage that you are protected from the impact of the  credit crunch.  Your income stream is protected. Most of the Reverse Mortgages are  HUD guaranteed loans. There are some alternatives to the HUD HECM loans and according to the  article so far the income stream is still flowing to the loan holders. Hopefully, this will continue to be the case. If you stick with a government-backed reverse mortgage, your payments are guaranteed. And if you take your reverse mortgage as an up front one time  payment, there is no risk at all.  The government only guarantees a certain number of these loans per year so if you are interested don’t wait.

I dont know much about the  non  fererally  guaranteed products because I have not  sold them.

Reverse mortgages  most often are used to help older homeowners over age 62 that  are struggling with  mortgage payments, home maintenance or property taxes, paying for medical expenses or the costs related  to Long Term Care among other expenses. Instead of the borrower making payments to the lender, as with a regular mortgage, the lender makes a payment, or payments, to the borrower. Your cash flow improves dramatically as soon as the loan originates and your expenses decrease dramatically as well.  The borrower keeps control of the house and doesn’t have to pay back the loan as long as he or she lives there. When the homeowner dies, sells the house  or moves out, the loan comes due and must be paid within 12 months.  It is typically paid  off by selling the house, and any money left over goes to the homeowner or the homeowner’s estate. If the loan exceeds the value of the home at time of sale the HUD guarantees kick in and pay the lender the amount of the shortfall. The homeowner and the  estate are not liable for any shortfall. Of course if the house appreciates the homeowner reaps the rewards of the increase in value.

Fees are typically steep — up to about 6% of the home’s value but upfront costs are very reasonable ussually under $500.  Keep in  mind in many  cases these are loans of last resort for people who don’t have current income or do not have good  credit. They need to be evaluated from that perspective.   The HUD Guaranteed loans are  limited to people who are age 62 or older, and borrowing limits are capped. There’s a  good reference source  at www.reversemortgage.org.

The most common type of reverse mortgage is a  HUD Home-Equity Conversion Mortgage, or HUD-HECM, in which the Federal Housing Administration insures lenders’ and borrowers’ risk. Those loans, backed by federal-government insurance, are secure. But if you’re considering taking out such a loan, try to wait a few weeks: A housing law enacted earlier this year raised the lending limits for the HECM product. On or about Oct. 1, the Department of Housing and Urban Development is expected to announce those limits and start using them, says Peter Bell, president of the National Reverse Mortgage Lenders Association, a trade group in Washington, D.C.

There are also proprietary reverse mortgages — often with higher lending limits (and, sometimes, a minimum-age requirement of 60)  that aren’t government-backed but which get bundled and sold to investors.  It is getting tough to find any lenders offering the proprietary reverse-mortgage products. A year ago, there were about a dozen such products. At the present time there are only to one or two lenders who are offering the alternatives.

I offer  HUD HECM Reverse Mortgages in all 50 states.  I would be happy to discuss whether  a HUD HECM Reverse Mortgage might be right for your or a senior friend or family member.    How can I help you?

financial-services@live.com

Tags: Finance, Hud HECM Reverse Mortgage, Income for seniors, Money, Reverse Mortgage, Senior Financial Options