New data from the Department of Housing and Urban Development (HUD) reveals that more than 300,000 seniors have used the federally-insured Home Equity Conversion Mortgage (reverse mortgage) program to generate cash without the necessity of selling or leaving their home.
More than 76,000 seniors obtained a reverse mortgage through HUD last (more…)
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
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…)
John Gosselin, a Massachusetts attorney who deals in elder law, offers the case for reverse mortgages on his Gosselin Law Blog.
Gosselin suggests that one reason for reluctant public acceptance of reverse mortgages was initial misunderstanding of the product:
“Reverse mortgage lenders, the elder law bar and the public did not get off on the right foot when reverse mortgages became generally available,” says Gosselin. “There were many confusing features to the initial loans and the government and banks did little to help borrowers understand their transactions. Reverse mortgages became known as the estate planning tool of last resort for truly financially needy elders. The elder law bar was hesitant to recommend reverse mortgages, estate planning lawyers put their heads in the sand and real estate lawyers, at least many of the real estate lawyers in Massachusetts that my law firm deals with, were completely in the dark on the workings and benefits of reverse mortgages. So what has changed? In a word, education. The reverse mortgage industry made it their mission to educate the market place, not only consumers but also lenders about the powerful benefits of reverse mortgages.”
If you thought the USA vs. the USSR race to nuclear dominance was one for the ages, wait until you see Countrywide vs. BofA vs. Wells Fargo vs. the rest of the reverse mortgage banking industry. I have been watching Countrywide recruiting ads (for Simple Equity job fulfillment) pop up all over the country and thought to share this one from an Arizona career site with you guys. As I have stated before, competition is a good thing, but the little guys can remain competitive for so long, before the big guys swallow them up.
It is a difficult task to find advice regarding mortgages that is not promotional or contrarian that also makes sense. The following piece is one you should consider with your reverse mortgage information gathering process.
DEAR BRUCE: I wish you would give us a general talk about reverse mortgages. I am not sure I trust the advice I receive from someone who is selling them. Are there special criteria that set candidates apart? — M.T, via e-mail
DEAR M.T.: A reverse mortgage is a useful tool for some people. In essence, it is simply borrowing against the equity you have built up in your home and receiving payments on a monthly or quarterly basis… Read More by Bruce Williams
If you are like me, the range of financial advise you have heard over the years when it comes to how to take proper deductions on your taxes ranges the gambit from writing off money given to the guy outside of the 7-11 to not having to pay the IRS any taxes because the laws are “allegedly” illegal. I came across a solid article that goes into detail of deducting interest accrued from a home equity loan that you may want to know about:
The state of California recently reviewed a sample of state tax returns which claimed large mortgage interest deductions and found that 75% of the tax returns had claimed excessive interest deductions. There are rules that limit how much interest you can deduct for your mortgage and other monies borrowed against your house. However, historically, only the extremely (more…)
