Seniors and mortgage default

An article in Yesterdays USA Today Money section talked aboutOlder homeowners and the problems with being able to keep their homes. They talk about an AARP study indicating that almost 700,000 seniors over age 50 were in foreclosure or delinquent in their mortgage payments.  50,000 of them were in foreclosure or had lost their homes.For many seniors over age 62 their are financial alternatives to foreclosure! If that is you or someone you know or care about I’d be happy to discuss their situation. The foreclosure rate for seniors is  only 0.24% or one half the rate for those under 50 years of age. After a lifetime of mortgage payments  even this small rate is too high!

There are several alternatives that could be considered.  They include, Mortgage refinancing, tapping home equity, Shared equity alternatives, Reverse Mortgages, Accessing hidden assets to create an income stream to make mortgage payments, Will any of these alternatives work for you?  Lets find out!

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Seniors pinch to live within means

A recent article in the Minneapolis Star Tribune on Sept7th was written by HJ Cummins.  The article chronicles three different families and the steps that they are taking to reduce their expenses and protect their retirement assets. The article goes on to talk about gas prices having doubled since 2006, and the price of electricy and gas heat that are expected to  rise 30-50 percent this winter alone. The overall CPI increase is currently increasing by 6 % this year. That more than doubles the Social Security Cost of Living adjustment of 2.3% this year.

Even for the working class the pressure is very real. I can only imagine what it would be like with no new income stream.  Imagine taking money out of a portfolio that is actually decreasing this year or over the past two years. Thats the worst thing that can  happen taking money out of a portfolio that has lost market value. That is a real threat to family retirement and significantly increases the risk of out living your assets. Social security won’t make up the shortfall.

These families are doing  some of the right things.  They are cutting back on entertainment, cutting some surplus out of the grocery budget, looking at more energy efficient heating and cooling systems.   All of these are good steps.

Is there something else they could be doing?  YES I believe there is more that they can do. Where do they  have their savings and checking accounts? Are they getting a fair return on their money?  In many  cases the answer is NO!  If your emergency money is earning less than about 3% you are cheating yourself!  There are alternatives but your local banker is not going to tell you about it.  If you have assets invested what is the rate of return you have seen over the last one year and two year periods? If you are  in bank CD’s earning 3-4.5% you are wasting assets.  If you are invested in the market or have a 401K have you lost money over the past 1,2 or 10 year periods?  Why are you continuing to put up with that?  Do you know that there are financial products that will currently earn a guaranteed rate of 6 or as much as 7.2% per year in your income account value. This is the worst you  can do over a ten year or longer period of time. 7.2% per year doubles your assets in 10 year and quadruples your assets in 20 years. If your financial advisors are not telling you about these products ask your self whose interest are they looking out for? If its time for you look out for your interests first then maybe you should contact me. Would you like to add some diversification among your assets with some products protected form downside markt risk?

Furthermore if a homeowner or couple is over age 62 there is another option as well that can  significantly improve their cash flow. Have you considered a HUD guaranteed HECM Reverse Mortgage? These are not the  reverse mortgages of 15-20 years ago where you get thrown out of you house in ten years.  These new products guarantee you can live in your house as long as you want to, are well enough to do so or until the last surviving spouse over age 62 dies. You cash flow increases dramatically for two reasons. First you stop mortgage payments.  That  is an immediate increase in cash flow.  Second, you can actually access some of the equity in your home further increasing your cash flow.

There are other cash flow management technigues we could consider on you behalf as well.

There are products that will guarantee you a lifetime income that you  cannot outlive.

financial-services@live.com

What Effect Will The Current Banking Nightmare Have On Reverse Mortgages?

The closure of another bank this time a Nevada Bank, and the government taking control for Freddie Mac and Fannie Mae is ther likely to be any impact on the Reverse Mortgage Market. My guess is the news is both good and bad. None of these three institutions are active or significant players in the Reverse Mortgage market. Thats the good news. The flip side is that this type of banking turmoil  is likely to increase interest rates a little bit. this will impact the amount of money that one can draw out in a reverse mortgage loan. Thats the bad news as I see it.  Since this product isn’t driven  by your  credit score the impact is not as  severe as it might be in a regular loan.

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HUD HECM Reverse Mortgages; The Rules are Changing

With the new Federal rules on Reverse Mortgages many more people will be able to qualify for a Reverse Mortgage. The maximum loanable value is increasing to a national minimum of $417,000. In Ohio, just to provide an example, the former lending limits were between $210,000-236,000. In several high home price cities or areas the loanable value will actually go up to over $600,000. The maximum fees that can be charged are actually decreasing to 2% of the first $200,000 and 1% on the lendable limit above the $200,000 up to a maximum fee of$6,000. Last year over 104,000 homeowners took out a reverse mortgage and this year the number of HUD HECM Reverse Mortgage loans is approaching 10,000 loans per month.

You can determine if a HUD HECM reverse mortgage is right for you, if you are eligible and how much of a loan you are eligible to get. Referrals to a HUD certified counselor who will verify your suitability for a loan.

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What can you do with a reverse mortgage

A lot of people  don’t  know  what  a reverse mortgage is  or  what  you  can  do  with it. A  Reverse Mortgage is typically a   HUD  guaranteed Home Equity Conversion Mortgage (HECM).  These  are non  recourse  loans  which  means  if  the loan  balance  exceeds  the  property  value  they  get  the  house  but  can not  go  aftet  you  or your  heirs  to collect  the  difference. If  the  loan  balance   is  less  than  the  property  value  you  pay off the  mortgage  with  the  sales  proceeds and  you  or  your  heirs  get to  keep any  surplus equity. Upside  potential  with no  downside  risk. You  get  to  stay  in  your  home  as long as none of  these  three things  happen.  First  if  you or you  and  your  spouse  cannot take  care of  yourselves  and  need to  move  to an nursing home. Second if  you  and  your  spouses  die  the  heirs  have to  close  the  loan. third  if  you  voluntarily  choose  to  sell  the  house  you  have  to pay of the  mortgage. IN  all cases you  must  continue to  pay property  taxes and  homeowners insurance on  the  property.

What  does a typical  client  use a HUD HECM Reverse Mortgage  for? Most  get  a  reverse mortgage to significantly  improve their  cash  flow. They  immediately  stop  paying  mortgage payments  to  the  bank until  the loan closes.  The  savings in  their  monthly  expenses lets  them  do  other  things  with the  income. Many  make necessary improvements  and  repairs on  the  property. Many  use  part of the  proceeds to  pay of medical bills or  Long Term Care  (LTC)  premiums  or  LTC expenses  for  one  spouse.    Some use  part of  the  equity  to buy  an  insurance  policy  to  pay off the  Reverse mortgage balance  at  death so  the  heirs  get the  house  free and  clear. I  even  had  one client that  used  the  proceeds to get  the  house out of  foreclosure. She  was  behind in  property  taxes  and  behind in  condo  fees. We  used  a part of  the  equity  to  clear up  her  back  bills. we  also  set  up a line of  credit to  pays  the next  couple of  years  property  taxes  and  condo  fees  so  her Social security  checks  would  go  further towards  the  medical  and other  bills. This  was a pretty  sweet  result  for  a  woman  on a very  limited  fixed  income.

Im  proud  of  being  able  to  help  her  stay in  her  home.

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Some   use  part of  proceeds to

Lets  look at  the  possible  uses.

The Housing Bailout Act

The Senate  has  passed  the  housing Bailout bill.  President Bush is  expected  to sign  this important  piece  of  legislation  this  week. Several key  provisions relate  to  Reverse Mortgage  and  we  will talk  about  those in  more  detail. First  I  wanted  to  mention  one other  part of  the  bill  that might  affect low income  seniors. If  you  do  not  currently  itemize  deductions  because  of low  income or limited  deduction eligibility you  can deduct property taxes paid for  tax year  2008. The  sunset provision  currently only  grants a one  year  window  then  the  deduction  increase  for  non itemizing filers is  set  to  expire after 2008. Standard  deduction for  couples  that  do not  itemize  will  be  up to $11,900, or  for  individuals the  standard  deduction  will be $5,950. Talk  to  you  tax  prepared to see  exactly  what  this  will mean to  you  in you particular  tax  situation.

Now  for  the  changes  in  the  reverse  mortgage loan  marketplace. Two  major  changes  will  be  implemented  and  we  have  been   waiting  for  both  of  these  to  come  to the  market. First,  the  fees  charged  for  a HUD HECM Reverse Mortgage Loan  have  beenm  set  by  the  federal  government. The  maximum  fees  that  can  be  charged are being  reduced  saving  the  homebuyers money. Understand  that  the  fees  generally  are  calculated  and  rolled  into  the  loan. They  are  not  paid up  front.  The  only  up front  fees  are typically  only  about $450-600 and  include a loan  application  fee  and  often a termite  inspection fee. The fees  we  are talking  about that  the  law  will change are  the origination fees. The  new  fee limits  are 2% on a reverse mortgage ammount for  up to $200,000 in value plus  an  additional  fee of 1% on  loan  over the $200,000 home limit. The  fees  are  also  capped  under  the  law at a  statutory  limit of  $6,000.

From  my  clients viewpoint the  larger  issue  is  that  the  lending limit  is  going  up  to  a national  maximum loan  value of $625,500.  The previous national lending limit  was between $300-400 K. In  many  states or  areas  within a particular  state  the regional lending  limit  has  been  as low  as $200,160. What  this  will mean  is  that  many  customers  who would  have  been  rejected  for  a  reverse mortgage  last  year  might now  be  good  candidates  for  a reverse mortgage  moving  forwards. I had  several  candidates  who  were  rejected  last  year that  wanted  to purchase  a  reverse  mortgage that might now  be  able to  qualify.

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Who can get a reverse Mortgage?

The government only guarantees a certain number of Reverse Mortgages. Annual Reverse Mortgage volume is growing rapidly. Something short of 500,000 loans are written a year.

In my experience only about 70% of people who want one can get a Reverse Mortgage. Rule outs are not based on income or on credit scores. They are because of issues like limited home equity, zoning of the property, ages of one owner, or type of house and title. Predetermining eligibility does not even require your social security number. Qualifying for a Reverse Mortgage, does not require any particular income, and it is not dependent on any particular credit score. You may qualify with good credit, bad credit or no credit.

What is necessary to find out if you can get a reverse mortgage and how much you might qualify for. 1. All owners of the property must be 62 years of age or older. 2. Your City, State and Zip Code Zip 3. The equity you have in your house (current estimated value minus first mortgage and any second liens) 4. Zoning must be residential

Then after we determine if you might be eligible you have a counseling session. This is a HUD requirement. I provide a list of at least 5 certified counselors working in your state. You get a counseling certification after the counseling session. You cannot actually apply for the Reverse Mortgage until we have the counseling certificate. You can start the pre application process at anytime.

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Hello world!

Welcome to my http://reversemortgageweblog.WordPress.com. This is the first post.

There are a lot of misconceptions out their in the marketplace on reverse mortgages. Many peoples perception is based on the original private funded reverse mortgages that were available 10-20 years ago.

The new generation of Reverse Mortgages are HUD guaranteed HECM mortgages. These clearly are a horse of a different color. Although they are not available to everyone and are not suitable for everyone thay can be a very helpful product for the right client and in the right situation. All owners on the loan and title must be age 62 or over.

Just a personal example. I had an 84 year old client in St Louis, MO with late stage Alzheimer Disease. She could not be left on her own even for an hour. Her daughter was a full time care giver and couldn’t work to earn a living because she was taking care of her mother. They basically were trying to live on Social Security as their only income. I can only imagine how difficult that would be. They were behind on their condo fee’s and behind on taxes. The Bank and Condo association were beginning foreclosure actions.

Let me summarize what a Reverse Mortgage accomplished.

1. It stopped the foreclosure process after I talked to the Condo Association and bank.

2. It paid off the back taxes and back condo fees.

3. It stopped mortgage payments immediately improving their cash flow to help pay for medical expenses.

4. It left a cash reserve line of credit to pay for future taxes and condo fees

5. It let her stay in her home which is where she wanted to be.

I have not been able to find any bad results in this case! It isn’t a perfect alternative but it was nearly perfect for them. Up front costs are minimal and usually are less than $500. There are some internal costs amortized into the loan amount. I would be happy to discuss how a reverse mortgage might be right for you.

Hope to see you in future posts. How can we help you?

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