The Unexpected Caregiver | Basics of Reverse Mortgages with Beth Paterson-Part I

I just listened to a great radio interview with Keri Berit, The Unexpected Caregiver, talking to Beth Paterson. Beth is a fantastic reverse mortgage originator from Minnesota. Here is the link to the show and you can listen to the interview yourself. It is part 1 so I will add the remaining part of the interview as they become available.

The Unexpected Caregiver | Basics of Reverse Mortgages with Beth Paterson-Part I

Reverese Mortgages in the media spotlight again

The CBS Early show ran a feature on Reverse Mortgages this week during their Money Watch segment. While it was mostly positive and spoke about the recent reduction in closing costs, there were some this about the piece that bothered me.

The first thing they mention is a Consumer Reports "investigation" about how the number of reverse mortgages that have "failed" has quadrupled in four years.

2004 = $81 million

2008 = $381 million

It's enough to scare off seniors and have them ignore the rest of the story. But what does this really mean and how does it effect seniors who are interested in this product.

When you take out a reverse mortgage, the biggest upfront fee is the FHA mortgage insurance. This equals 2% of the value of your home. This is used to protect you and your heirs so that when the time comes when the loan is due, either because you pass away or move out of the home, you are not liable to the bank if the home is valued at less that the balance of the loan. This is whats called a non-recourse loan. So when they say that in 2008 $381 million of reverse mortgages failed, what they mean is that loans worth $381 million came due and the home were worth less than this amount. So the seniors and their families were protected. This should not scare you for any reason.

The second issue is that even though they talk about how closing costs have been reduced, they continue to raise the issue of the high costs of the reverse mortgage. With all costs associated with any loan, you have to weigh the cost against any benefit. With a reverse mortgage the cost are justified for many people. Now with those costs reduced, the product has become very attractive. Regardless of this, they still bring up the high costs.

Here is the spot.

Changes in the Reverse Mortgage Product

I know, I've been neglecting this blog and I've never been a very prolific writer so this is a little hard for me. My intention was to use this blog to highlight news articles and positive stories that I thought would be helpful to my readers. (if I have any). But I started using twitter for that when I added a twitter feed to my home page.

I don't know if this will be redundant but I am recommitting myself to add to this blog and hopefully get a discussion going.

There have been some very positive changes in the Reverse Mortgage market in the past month. Margins are starting to drop making the rates on the adjustable product lower. Some of the biggest changes are with the fixed rate reverse mortgage. First, our primary lender dropped the service set-aside fee. This is what they take and set aside to pay the $30 a month service fee and typically runs about $4,000. No monthly fee, no service set-aside to worry about. Shortly there after most lenders followed suit. Then we were able to reduce and then eliminate our origination fee because of better pricing. This is turning into an all out price war with our lenders and I'm curious to see where it will end.

For now, all I can say is that it is a great opportunity to take advantage of the savings.