Tips On Finding The Best Reverse Mortgage Loan,
It can be a tough, though excellent decision, to get a reverse mortgage loan however, it can be tougher in finding one that best suits your needs. Choosing the wrong product, can cost you thousands of dollars - money you could have spent on improving the quality of your life. To help your decision, here are some tips on what’s on offer and what each program offers.
There are three types of program available to seniors. We’ll start by taking a look at the most popular and then look at the more complex programs - sometimes called jumbo reverse mortgage loans.
HECM Reverse Mortgage Loan
This is by far the most popular program and account for over 90% of all loans. Its popularity is mainly because it is insured by the US government using the FHA insurance scheme. HECM stands for Home Equity Conversion Mortgages and is administered by the U.S. Department of Housing and Urban Development (HUD). This program is often called a HUD or FHA reverse mortgage.
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Tips On Finding The Best Reverse Mortgage Loan
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Written by News & Feeds on April 10th, 2008 with no comments.
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Declining Home Values - What Effect Will It Have On Reverse Mortgages?,
Falling home prices are putting pressure on homeowners across the country. What do the declining home values mean to your Revere Mortgage or your chances of getting one?
Many homeowners have seen their equity drop in the last year and it’s likely that this trend will continue in the near future. The question you may be asking yourself, and the question we are being asked quite often lately, is what effect the decline in the housing market will have on Reverse Mortgages. This question really actually breaks down into two seperate questions and they are both very important to those concerned. The first question here is what effect the declining home values will have on those trying to get a reverse mortgage, and the second question is what the effect will be on those who already have a reverse mortgage. Lets look at both these questions to see what this housing debacle might mean to you.
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Declining Home Values - What Effect Will It Have On Reverse Mortgages?
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Written by News & Feeds on April 10th, 2008 with no comments.
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March HECM Production Falls From February Record,
Home Equity Conversion Mortgage (HECM) figures released by HUD show that 9,663 HECMs originated during March 2008, down 11% from the record 10,913 HECMs endorsed in February
The 12-moving average fell from a record high of 9,249 in February to 9,147. On an annualized basis, 109,765 HECMs were originated in the twelve months ended March 2008.
Still, March 2008 represents the sixth best month ever for HECM output.
For more HECM statistics and analysis, visit our HECM database tool.
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Written by News & Feeds on April 10th, 2008 with no comments.
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Monthly HECM Activity Nears 11,000 Mark,
Home Equity Conversion Mortgage (HECM) figures released by HUD show that 10,913 HECMs originated during February 2008 - making this the highest monthly production on record. The previous record month was March 2007 when 10,888 HECMs were recorded.
More important than the record, however, is the fact that February was the second consecutive strong month for HECMs reversing a four-month spell which saw monthly HECM activity fall below the moving 12-month average. February’s strong performance also brought the 12-moving average to a new record high of 9,249. On an annualized basis this represents out put of 110,988 HECMs for the twelve months ended February 2008.
For more HECM statistics and analysis, visit our HECM database tool.
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Written by News & Feeds on April 10th, 2008 with no comments.
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January HECM Activity Rebounds,
Rebounding from four consecutive months of below average performance, the number of HECM reverse mortgages originated rebounded in January posting the fourth best monthly performance on record. The 9,957 HECM’s approved in January represented a 24% increase over the 8,007 HECMs endorsed in the prior month (December 2007) and a 13% jump over the 8,824 endorsements made in January 2007.
January’s strong numbers represent the first time in four months that monthly performance has exceeded the “12-month moving average”. This is significant since it may indicate a reversal of declining growth spurred by the subprime/housing market crisis. Borrowers may be realizing that if we are in for a long period of housing price decline, it may be wise to “lock-in” value now by taking out a reverse mortgage at the extremely low HECM interest rates that are now available.
On an annualized basis, 109,426 HECMs were endorsed in the twelve months ended January 2008 - the best twelve month period ever for HECM reverse mortgages. The twelve month figures through January 2008 represent a 23% increase over the 88,906 HECM endorsed during the twelve months ended January 2007.
For more HECM statistics and analysis, visit our HECM database tool.
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Written by News & Feeds on April 10th, 2008 with no comments.
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203b Loan Limits Remain Largely Unchanged,
At the start of each year, HUD/FHA does a comprehensive update to the single-family mortgage limits that set the maximum amounts that can be loaned under the HECM reverse mortgage program. In 2007, 203b limits were,for the most part, left unchanged and this is again the case for 2008. Only 151 of 326 limits throughout the country were changed in 2008. The vast majority of 203b limits currently in effect date from 2006, as the following table shows:
According to the recently released HUD Mortgagee Letter 2008-02, the explanation for not changing 203b limits is as follows:
The National Housing Act provides that the mortgage limit for any given area shall be set at 95% of the median house price in that area, as determined by the Department of Housing and Urban Development, except that the FHA mortgage limit in any given area cannot exceed 87% of the Freddie Mac loan limit, nor be lower than 48% of the Freddie Mac loan limit for a residence of applicable size. As a result of Freddie Mac’s announcement that there is no change in their mortgage limits, FHA’s floor and ceiling loan limits will remain unchanged.
The bottomline for potential reverse mortgage borrowers is that, for now, many will continue to be limited in the amount of cash they can access via a HECM reverse mortgage. There is a push in Congress to set a higher national loan limit, but it is unclear when this might become a reality.
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Written by News & Feeds on April 10th, 2008 with no comments.
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Heatmap Compares HECM Activity: 2007 vs 2006,
The following heatmap shows how HECM reverse mortgage loan activity changed from 2006 to 2007:
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Written by News & Feeds on April 10th, 2008 with no comments.
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Top 10 Reasons People Get a Reverse Mortgage,
AARP recently released one of the most comprehensive reports to date on the state of the reverse mortgage industry. The report (Reverse Mortgages: Niche Product of Mainstream Solution?) includes a wealth of information about consumer attitudes and experiences with reverse mortgages.
One of the more interesting presentations in the report is the listing of the top reasons given by people for considering a reverse mortgage.
Pay off mortgage (20%)
Home repairs/improvements (18%)
Improve quality of life (14%)
Everyday expenses (10%)
Emergencies/unexpected (9%)
Pay off non-mortgage debts (7%)
Health or disability (5%)
Property taxes/insurance (5%)
Financial help to family (2%)
Investments, annuities, or long-term care insurance (1%)
Household chores (1%)
No huge surprises here. Most of the reasons given could be categorized under “financial necessity”, affirming the perceived status of reverse mortgages as being a “last resort” measure. However, the third most popular reason given - improve quality of life - could mean that a fair number of borrowers are taking on reverse mortgages for non-essential things like travel.
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Written by News & Feeds on April 10th, 2008 with no comments.
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2007 HECM Numbers,
HUD has reported Home Equity Conversion Mortgage (HECM) endorsements for December 2007 and, as the chart below shows, growth continues to slow markedly from the first months of 2007.
Key Points:
8,007 HECM loans were endorsed in December 2007, a 3% decline from the 8,270 endorsements in the prior month (November 2007) and just a modest 3% increase over the 7,760 HECMs endorsed in December 2006.
December’s HECM figures represent the second consecutive monthly decline and the second worst monthly production of 2007. The only lower month was September 2007 when just 7,605 HECMs were endorsed.
The 12-month moving average of monthly HECM volume hit an all time high in December (9,024), due to the very healthy monthly totals in the first part of the year. Unfortunately, December was the fourth consecutive month in which HECM production fell below the 12-month moving average (indicated in the chart by the blue line falling below the red line).
108,293 HECM loans were endorsed in 2007, a healthy 26% increase over the 85,639 HECM loans generated in 2006. By way of comparison, the 2006 total represented a 77% increase over 2005 (48,493 loans).
2007 can be dissected into two distinct parts: for the first 8 months of the year, 75,904 HECM were endorsed, a 39% rise over the same period in 2006; in the last four months of 2007 (post-housing crisis), 32,389 HECMS were endorsed, just a 4% rise over the last four months of 2006.
Three months of 2007 - March, May and July - saw HECM endorsements top the 10,000 mark. The all-time high was reached in March 2007 when 10,888 HECM loans originated.
For more HECM loan information (or to do your own analysis), visit our HECM Information database tool.
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Written by News & Feeds on April 10th, 2008 with no comments.
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Reverse Mortgages Under Senate Scrutiny,
Recently, the United State Senate Special Committee on Aging held hearings on the problems and opportunities surrounding the rapid growth in reverse mortgages (Reverse Mortgages: Polishing Not Tarnishing The Golden Years). The testimony of witnesses is loaded with some compelling insights (good and bad) and is highly suggested reading for those considering a reverse mortgage.
We thought it worthwhile to re-publish some of the testimony for the benefit of visitors. The first entry is from the daughter of a elderly California homeowner who clearly feels her mother was taken advantage of in the reverse mortgages process:
Statement of Carol Anthony
Before the Senate Special Committee on Aging
December 12, 2007
Senators Kohl and McCaskill, thank you for shining a light on this important issue.
My father, John Adcock, was a member of the greatest generation. During WW2 he served proudly with the United States Marines in the South Pacific. When the war was over, he returned to his home town, Salinas California, Grateful to be able to get a good
job and in his words “marry the prettiest girl in town.” Mom and Dad built a home, lived their lives modestly and made sure their 2 daughters were provided the opportunity of higher education.
When dad died in 2000, he left mom with a comfortable estate so she would be provided for safely the rest of her life.
What he didn’t provide, what he never even anticipated, was the need and knowledge to protect her from Predatory Lenders, Con-Men and the “new California Gold Rush” also known as the reverse mortgage.
That’s why I’m here today. In April 2006 my 80 year old mother (Betty) was sold a reverse mortgage. At the time of the sale, she was in poor health, frail and not at all capable of entering or understanding even the simplest financial dealings. And, most
importantly, mom didn’t need a reverse mortgage. She had substantial money in different accounts and investments and beside, I had already helped her establish a $150,000 home equity line of credit in her name for any unforeseen emergency. The closing cost for the home equity line was zero.
In the 3 years she had access to the credit line, she had only borrowed $19,000. She was paying very little per month to service this line.
But in April 2006, a salesman entered the picture, introduced to my mother by her 86 year old friend (by the way, also a widow). The salesman and the lending institution promised:
• “There would be no risk of losing her home.” But there was.
• “She would receive independent credit counseling.” But she did not.
• “All loan options available to her would be reviewed”. But they were not.
• “She would never be rushed into signing anything she did not fully
understand or was not ready to sign.” But she was.
• “She would never be pressured into applying for more money than she
needed.” But she was.
• “She would not be incurring a mortgage.” But she did.
• “All loan terms would be carefully explained.” But they were not.
When mom signed on the dotted line, she felt the salesman was a good friend. But he was not.
In place of the no fee home equity line, she now had a reverse mortgage that charged 18 closing fees depleting the equity in her home: The equity that had been saved over the years …. one buck at a time.
The 18 closing fees totaled a staggering $16,791.23. Next, she was forced to make home repairs of about $5000. Repairs not mandated with the equity line, but are all to common with financial freedom. Now, instead of paying interest only on the $19,000 equity line, she received her first statement showing a principle balance of almost $37,000 with interest compounded daily. She would also be charged a monthly finance charge called an “MIP” and another monthly finance charge called a “Finance Charge” to compound the financial damages, the salesman converted $125,000 from one of mom’s municipal bond funds into a 20 year annuity.
The municipal bonds had been paying mom a nice monthly income, now, she would have to wait until her 100th birthday to see a cent of her money.
Even though the salesman, working for Senior Financial Freedom (for the reverse mortgage) and Standard Life of Indiana (for the annuity) had no real estate or securities license, the harm was done. On the day she signed the loan and insurance documents,
close to $165,000 had been effectively lifted from her estate.
Why Should You Get Involved?
I believe the current housing crisis and the explosion of reverse mortgages have some similarities and connections. Both entities have at least insinuated, if not promised home values would continue to rise at about 4% forever. Both sets of lenders have
demonstrated they are more than willing to sell loans to people who can’t afford them, or to the elderly with home equity lines that don’t need them. Lenders are no longer dealing in subprime loans and people without money are unable to qualify for loans.
So where do you think the thousands of real estate and insurance salesmen and women are headed? To the reverse home mortgages market!
It is the new California Gold Rush coming to your area faster than a California wild fire. Thanks to aggressive DVD marketing, featuring such trusted celebrities like James Garner and Robert Wagner. Over 86,000 seniors purchased reverse mortgages just last
year. Sales seminars are seeing 10 times the number of participant as they were seeing just a year ago. Senior Financial Freedom is offering careers in what they are calling the explosive market of reverse mortgages.
I have some suggestions on how to put a damper on the reverse mortgage market.
First make reverse mortgage lenders compare their product with other conventional home mortgage products – such as the home equity line of credit. This one act would reduce the future number of reverse mortgages and the problems associated with them.
The current system of letting the lending institutions provide their own sales pitch and calling it “independent credit counseling” should be stopped. And second, substantially reduce loan fees the elderly must pay for the privilege of tapping into the equity of their own homes.
When mom realized what the salesman had done, she became very depressed and all but stopped eating. The rage that I felt seeing her cry and hearing her call herself a fool was profound. She was lucky, I was able to buy back her house and amicably settle the annuity issue.
But what about the other victims, the aged, the elderly, the members of the greatest generation. They are part of that trusting generation now so susceptible to predators, predators whose only appreciation for the elderly is appreciation of their money. I
appreciate these members of the greatest generation and will be forever thankful and in awe of their sacrifices. They put their lives on hold, went to war and saved the free world. Now I am asking you to save them.
The experience of Ms. Anthony and her mother make it abundantly clear that self-education is the key to a successful reverse mortgage transaction.
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Written by News & Feeds on April 10th, 2008 with no comments.
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