Making Reverse Mortgages Part of Older Americans Month

May is Older Americans Month, which the Obama administration has declared is part of the theme of "Age Strong, Live Long."



As part of this theme, Pulitzer Prize-winning journalist Saul Friedman is back writing about reverse mortgages. He writes that there is a way for older Americans to protect themselves against too many medical bills, high property taxes and the downers in your retirement savings plans by using a reverse mortgage.

"I am referring to the federal government’s reverse mortgages which too many beleaguered older Americans have ignored. Some don’t want to mortgage a home that’s free and clear; some are discouraged from tapping the equity in their homes by children who are waiting for their inheritance.

So here’s some welcome news for older Americans who own their homes and can use some extra income and cash. The up-front costs for many FHA-guaranteed reverse mortgages have gone down, which means the possible proceeds will go up by as much as $10,000.

I’m referring to the most popular and safest reverse mortgage, the Home Equity Conversion Mortgage, fondly known as the HECM. It is the safest for the lender as well as the homeowner-borrower because it is backed, insured by the Federal Housing Administration which has never defaulted on a mortgage that it has guaranteed.

Indeed, of all the mortgages that have fallen on hard times, or have been the subject of scandalous behavior by bankers and investors, the HECM has been largely untouched by these troubles. Last year, the Department of Housing and Urban Development raised to $625,000 the value of a home that could qualify for a HECM.

Gray Matters: Safest Reverse Mortgage

The Financial Health of Aging Seniors

With our current economic challenges, those of us looking forward to retirement need to be well-informed about our financial needs in coming years. And not only pre-retirees, but individuals already in retirement need to be wise to the changing economic environment. The good news is there are trained professionals who keep abreast of changes in the current economy, changes in laws and changes in government programs for the elderly. Professionals in this field are equipped to handle everything from help with retirement savings accounts, investment advice, guidance on government programs, estate planning or even new funding options such as reverse mortgages. A little planning prior to retirement will allow you to maintain your current lifestyle; whereas, a lack of planning may require you to live on an extremely tight budget. For those already retired, taking time right now to deal with financial problems instead of waiting for a crisis to happen is well advised.

A large number of retired individuals feel that they have planned well for the future only to find that rising medical costs, damage done to investment portfolios (by the current economy) and many other factors have caused them to go into debt. According to an article in "USA Today" seniors are racking up debt like never before. Elderly individuals who are in debt live with a constant burden over their heads. Most of these people are on fixed incomes and have no way of paying off credit cards and home equity loans that continue to mount to cover household budget deficits. In order to meet ongoing payments, seniors often forego purchasing medications and skimp on food budgets. They live like hermits -- never going out and pinching every penny -- in order to pay their obligations.

Most of these people worked hard their entire lives and managed their debt. They never anticipated the rising costs of prescriptions, expensive medical care or depletion of savings by living too long. The good news is there is help for these individuals. Here are just a few examples of some relief options that could be available. There are many more besides these.

Reverse mortgages - A Home Equity Conversion Mortgages (HECMs), also known as a reverse mortgage, is a risk-free way of tapping into home equity without creating monthly payments and without requiring the money to be paid back during a person's lifetime. Instead of making payments the cash flow is reversed and the senior receives payments from the bank. Thus the title "reverse mortgage". For those seniors who are less fortunate financially but own a home, a reverse mortgage can allow them to remain in the home by creating extra income.

Life settlements -- A life settlement enables older individuals, businesses and other organizations to sell life insurance policies they currently own – but no longer want or need – for an amount greater than the cash surrender value. In some cases the value can be 2-3 times the cash surrender value. Even some term life insurance policies with a conversion option to permanent coverage can qualify for a life settlement.

Government Programs -- Some government programs such as food stamps provide temporary financial help for food. Other programs provide subsidized housing, help with medical expenses and provide tax credits. For veterans there is free health care, inexpensive prescriptions and disability income. Area agencies on aging offer individual counseling, legal help and advice with Medicare costs. (National Care Planning Council)

For some, living on a fixed income and dealing with debt can be an overwhelming burden. There are knowledgeable professionals and debt relief strategies that can assist in easing this burden. The National Care Planning Council keeps a list of financial advisers and attorneys who specialize in this area of planning at www.longtermcarelink.net.

The Unexpected Caregiver | Myths of Reverse Mortgages, Part II with Beth Paterson

Here is part 2 of the radio interview with Keri Berit, The Unexpected Caregiver, and Beth Paterson. Beth is a fantastic reverse mortgage originator from Minnesota and this part talks about a lot of the myths regarding reverse mortgages. She also shares stories of some of her clients and how the loan has changed their lives.

The Unexpected Caregiver | Myths of Reverse Mortgages, Part II with Beth Paterson

Beware of Grandparent Scam

A VERY SUCCESSFUL telephone scam from way back has been uncovered again by the Federal Trade Commission. It goes something like this over the phone:

Caller: "Grandma! Hi, How are you?"
Grandma: "Hi,... Billy, Is that you? How are you?"
Caller: Actually, I'm in some trouble, and don't want Mom and Dad to know..."

The phony grandchild claims that he or she needs emergency cash to fix a car, get out of jail or leave a foreign country. "Billy" begs his grandparent to keep the request confidential and to wire money right away. Wiring money through Western Union and MoneyGram is much like sending cash, with little chance for tracking it or getting it back.

The Federal Trade Commission (FTC) says complaints about this scam are on the rise. In many cases the scammers know names of family members and are successful in impersonating the grandchild. It's also easy to trick the other person onto revealing a grandchild's name or other information. The con artists count on a grandparent's love and concern. It can often outweigh any skepticism. The victims often don't realize they've been taken until much later, when they speak to their real grandchild, who knows nothing about any phone call. By then, the money is long gone.

The FTC offers some "fight back" advice if you gat a call from a family member asking you to bail him or her out af a phony problem.
Try to verify the caller's identity by asking personal questions a stranger couldn't answer.

Resist pressure to act immediately. Tell the family member you need to call "right back" on a phone number you know is legitimate. If you don't have that phone number, call the persons parent, spouse or another close family member to check out the story before you send any money, even if you've been sworn to secrecy.
If you can't reach a family member and still aren't sure what to do, call your local police on the non-emergency line for assistance and advice.
No matter how dramatic the story, don't wire money or send a check or money order by overnight delivery or courier. Con artists use these services so they can get your money before you realize you've been cheated.
And if you suspect fraud, report it immediately to www.ftc.gov and click on "contact us" or call 1-877-FTC_HELP (382-4357).
from Costco Connection

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.