Good people, my great grandmother once told me that not everything that glitters is gold. It is so important to take your time when considering long term financial decisions that can affect you long term. In other words, if it sounds to good to be true, it probably is. The Houston Chronicle recently followed a few seniors that have fallen prey to schemes invloving their homes, please read and make sure it does not happen to you.
Shortly after Anita Spivey filed for bankruptcy, letters poured in from companies promising to help her avoid foreclosure.
One solicitor enrolled her in a reverse mortgage, which allowed the 63-year-old to live in the house free. Her family won’t inherit the home unless they pay off a $35,000 mortgage balance after she dies.
“I know what I’m getting into,” she said.
Other seniors, however, don’t understand the implications of reverse mortgages, consumer advocates say. And in some cases, scam artists use the loans and other tactics to dupe seniors with bad credit out of their homes. Full Story
As I have often chronicled on this site, the Big Boys of Mortgage Banking, (Wells Fargo, Bank of America, Countrywide, etc.) are just warming up with their push to grow and win over the reverse mortgage market. The most intriguing trait of these big banks is their innate ability to cut out the costs that are found in government backed HEMC loans and create their own proprietary products that are much more consumer friendly. Whether you are for or against reverse mortgages, it is clear to see that banking competition is helping to drive down fat broker fees that have been a large part of critics’ argument against them. The Real Estate Journal had this to say in a recent article.
For instance, Bank of America, which recently acquired the reverse-mortgage business of Seattle Mortgage Company, said it will soon launch nationwide a reverse-mortgage product it’s offered to customers in Arizona since November. The product, called Senior Equity Maximizer, offers loans on up to $10 million of home equity, said Colin McCormick, reverse-mortgage product executive at Bank of America.
Bank of America’s product allows you to set aside a portion of your home’s equity to be preserved for your heirs, and the fees charged are a lower percentage of the home’s value than those charged on traditional reverse-mortgage loans. But the interest rate on the bank’s new product is generally higher, McCormick said.
Today about 90% of reverse mortgages are the traditional government-backed product, the most prevalent of which is the Federal Housing Administration’s home equity conversion mortgage, according to the National Reverse Mortgage Lenders Association, a trade group.
Borrowers have taken out about 71,500 new FHA-based reverse mortgages so far this fiscal year (which began Oct. 1), a 49% jump from about 48,000 loans in the same period a year earlier. From 1990 through to the present, about 310,000 such loans have been taken out, according to the NRMLA. Full Story
The proposal — currently pending before the House Veterans’ Affairs Committee — would allow the Veterans Affairs Department to provide a home equity conversion mortgage, or HECM, to U.S. veterans. Under the plans, sponsored by Rep. Michael Michaud (D-Maine), veterans age 62 and older could receive monthly payments from the VA that would be based on how much equity they have in their home and how long they would like to receive monthly payments. The payments would have to be repaid, with a fee, when the home is sold either by the veteran or by survivors.
Opponents say the bill does not provide anything that the existing Federal Housing Administration loan program doesn’t. Keith Pedigo, the VA’s loan guaranty service director, said the FHA program may be better, he said, because it fully insures lenders against “all losses,” while the VA only guarantees a percentage of a mortgage, generally one-quarter of the full amount. Full Story
When I think of PBS I usually think of Big Bird, Charlie Rose, documentaries and not so funny British comedy. In this clip a local PBS affiliate chronicles the phenomenon that has grown into the modern reverse mortgage industry.
In yesterday’s LA Times, we find one of the first true green light articles for reverse mortgages from a major newspaper. But of note, were the words of Housing and Urban Development Secretary Alphonso Jackson described reverse mortgages as “the bright spot in today’s housing market,” adding that “their significance will only increase as more baby boomers reach retirement.” Wow I did not know the government was in the business of well (more…)
On the surface, a reverse mortgage is surely not the best usage of home equity, especially for families that have children with resources. The fees are high, although they are coming down and the erosion of equity is not that sweet of a deal. However, the loan is not all bad as those that do utilize it often do so to their reward. A reverse mortgage is kind of like a medication that is taken to “cure” one illness that may bring on other side effects. If those effects are reasonable then why not go for it? Well when considering side effects of a reverse mortgage, consider how it may affect one’s heirs. A great posting on the topic by law firm Bacon and Wilson below:
If you’re like most retired people, the single largest asset you have is your home. Since it may be paid for or possibly subject to a small home equity loan, there is significant equity there that could be used for living expenses, including luxuries such as vacations, a new car, or for necessities, such as a new (more…)
Santa Ana, CA — (SBWIRE) — 06/20/2007 — California-based Reverse Mortgage Lending, Inc. Specializes in FHA insured Reverse Mortgages and currently serves the entire State of California and Hawaii. The high efficiency and decreased costs of internet marketing have lowered the company’s costs, allowing them to pass those savings on to the Seniors they help.
“Many people that could benefit from a Reverse Mortgage have been reluctant to go forward due to the high initial costs.” Said Wally Welter, President of Reverse Mortgage Lending, Inc., noting that a big percentage of those costs are actually set by the FHA.
“The decreased costs and efficiency of using the internet to disseminate information about our company and Reverse Mortgages is exciting. This has allowed us to significantly lower our costs. “ said Welter. “This means we can offer what we believe to be the lowest cost FHA Reverse Mortgage in the State of California. The absolute most anyone will pay in origination fees for loans we originate via the internet is $2995, and if the borrower is willing to complete the application process via the mail, we lower it to $2495. This results in putting almost $5000 of additional money in the pockets of our senior borrowers.”
A Reverse Mortgage enables homeowners who are 62 and older to turn part of their home’s value into immediate cash, for any purpose, and with no repayment for as long as they live in their home, and in the case of a married couple, for as long as one of them lives in the home.
The purpose of the Reverse Mortgage is to turn what was once inaccessible — the value of one’s home — into a liquid asset for use by seniors at a time when they need it most. “Seniors have worked hard for the equity in their homes; this program allows seniors to forget about making house payments and enjoy life”, said Welter “We seek to educate the public at-large and seniors specifically about access to this valuable resource, and provide it at the lowest possible cost to the borrower”
