Currently borrowers can attain a FHA insured reverse mortgage based on home values up to $625,000. Unless Congress takes some action, the lending limits for reverse mortgages will lower in over 600 counties across the United States. Congress temporarily increased the lending limits to $625,500 in 2008. On October 1, 2011 they will revert back to the old limits of $417,000 in those counties. After that time, if you have a home valued over your county limits (maximum $417,000), the reverse mortgage proceeds will only be calculated on values up to $417,000. For many homeowners this will disqualify them altogether.
Example: 68 year old reverse mortgage borrower with home value of $525,000 would currently qualify for approximately $323,000. When the value limits revert back to a maximum of $417,000, that same home owner will only qualify for approximately $255,000.
If you are a homeowner with a home value exceeding $417,000 and a reverse mortgage is part of your financial plan, you may want to consider this information as to moving forward with your reverse mortgage sooner than later.
I f you have a reverse mortgage question, Call Angella Conrard, Reverse Mortgage Adviser and Certified Reverse Mortgage Professional at 866-949-7030. No sales, just great information and outstanding service.
Yes, you can default on a reverse mortgage. When a borrower attains a reverse mortgage, they agree to pay and keep current their property taxes and homeowner’s insurance policies. Failure to do so puts the homeowner in default to the contract with their lender. It’s not widely known but tens of thousands of reverse mortgage homeowners are in default of their contract. This is causing reverse mortgage defaults and ultimately foreclosures.
How will this effect reverse mortgages in the future? More qualifications. HUD has been concerned about suitability and defaults for some time. Consumer credit counseling surveys show less than 25% of those counseled have any budget training and less than 40% use any kind of budget. In an effort to circumvent this knowledge challenge, HUD and the reverse mortgage industry have required all reverse mortgage borrowers to participate in HUD approved third party counseling appointments. This process certifies that the homeowner has demonstrated knowledge in understanding these loans.
Income qualifications will be the next step in HUDs efforts to set borrower’s up for success in the decision of whether or not a reverse mortgage is an appropriate cash flow tool for older homeowners. By requiring income qualifications HUD hopes to minimize tax and insurance defaults. My hopes is that the industry will not do hold backs in proceeds to reverse mortgage borrowers but perhaps adopt escrow accounts that borrowers can pay into on a monthly basis. This in my opinion is a friendlier approach to setting reverse mortgage borrowers up for success vs. disqualifying them by lowering proceeds and holding back funds.
I f you have a reverse mortgage question, Call Angella Conrard, Reverse Mortgage Adviser and Certified Reverse Mortgage Professional at 866-949-7030. No sales, just great information and outstanding service.
Potential reverse mortgage borrowers may be concerned with big banks such as Wells Fargo and Bank of America leaving the reverse mortgage business. Both HUD and the National Reverse Mortgage Lender’s Association assure consumers have nothing to fear and reverse mortgages are here to stay. With Baby Boomers aging and being underfunded funded for retirement, Boomers will be working longer, sharing housing and looking toward resources like reverse mortgages to supplement retirement income. The reverse mortgage market is sure to expand with new products and more choices.
Wells Fargo and B of A will continue to service their portfolio of reverse mortgages, nothing will change. Consumers will continue to have multiple choices of reverse mortgage lenders. FHA insures these loans against lenders going under and consumer’s loan balance exceeding their home value when the loan becomes due. By law the FHA insurance fund must operate at least at par (balanced budget anyone? Make sense?) for added assurance.
I f you have a reverse mortgage question, Call Angella Conrard, Reverse Mortgage Adviser and Certified Reverse Mortgage Professional at 866-949-7030. No sales, just great information and outstanding service.
You have seen them on TV, you have received dozens of pieces of junk mail regarding them, but where do you get the facts and how do you decide if a reverse mortgage is right for you?
The best resource for reverse mortgage facts is professional or non-profit organizations. Many reverse mortgage lenders will provide you with DVDs/videos to watch. These generally will give you an idea of how reverse mortgage works, However, “the devil is in the details”. There are several consumer-based reverse mortgage guides that will provide you with what you need and with the questions that you should ask yourself in the process of researching reverse mortgages.
National Reverse Mortgage Lender’s Guide “Just the FAQs” click here
It is advisable to talk to at least a couple of different lenders. Look for consistency in the information. Do not tolerate being sold to. Be sure to check out the company and the originator online. Ask for references. When you speak to lenders, if they simply talk about the features and benefits to the program, be a little cautious. A seasoned originator will ask questions to help you discover if you should even consider a reverse mortgage. Examples:
How long do you plan to live in your home?
Do you live in an age friendly home?
Have you done a budget? Do you know that you can support yourself comfortably in your home?
Is this a home you can comfortably maintain as you age?
The person/company you choose to work with needs to be:
Knowledgeable
Informative
Credible
Act in a fiduciary manor
If you have a reverse mortgage question, Call Angella Conrard, Certified Reverse Mortgage Professional. 866-949-7030.
Ms. C of HueytownAlabama initially made an inquiry of reverse mortgages in January of 2010. Like most borrower’s she started her research online. She had heard of all kinds of bad things about reverse mortgages. Many of her friends told her not to do it. She heard things like the bank will take your house and why would you ever want to do something like that.
I contacted Ms. C after her inquiry. She was cautious (as she should be). I provided her with educational materials and followed up with her to answer questions. She told me she didn’t want the reverse mortgage and that I should take her off my contact list, which I did. November 2010, Ms. C called me and said she wanted to revisit the possibility of doing the reverse mortgage. After, researching each program and her options, she chose the LIBOR HECM adjustable program with the credit line. For her needs of a small lien payoff and a conservative immediate cash need, the credit line proved to be the most financially conservative program for her.
“Angella, Thank you for the help and patience in working with me. I appreciate all that you did. After a long time of reading and studying this was a great thing I chose to do. You are a great person to work with and a very efficient one. Hope to talk to you again, Ms. C”
When considering whether or not to do a reverse mortgage it is important not to rush into your decision, consider all your options, do your research, make a budget and make a plan. Choose someone you trust and who is willing to work with you at your pace.
One of the most important components of attaining a reverse mortgage is your FHAappraisal. Your appraisal will be performed by an independent third-party licensed appraiser. His or her job is to professionally value your home.
HUD issued a mortgagee letter (2009-28) indicating that all lenders must assure appraiser independence as a third party. Most lenders use appraisal management companies to comply with these guidelines. Your lender will order your appraisal. The management company will randomly select a FHA approved appraiser from your area to perform the inspection.
There are three components of the appraisal process:
inspection
attain comparables
compile and submit final report
What to expect
You must be home during the time of the inspection. The appraiser will draw a sketch of the inside of your home. As the appraiser walks through your home they will note the amenities and any updates or upgrades you've done to your home. Generally it is the appraiser's job to make notes of these items however it can be helpful if you make a list of them and provide them to the appraiser. This will reduce the chance of the appraiser missing any items or updates of value that are not obvious.
The appraiser will inspect each room and take pictures. They will also go outside and measure the outside of your home and take more pictures. The entire appraisal inspection process is usually no more than 15 to 20 min.
The appraiser will check what type of heating and air that you have in your home. Uncompleted rooms cannot be counted in your gross living area/square footage. For room to be considered a bedroom, the room must have a closet. A bath is considered a full bath if it has just a shower that it does not need to have a bathtub. And appraisal inspection is not a home inspection. The appraiser will just assume that utilities are functioning and operating. Finished basements do add value however they do not add square footage to your gross living area.
The appraiser will look for any physical damage in your home or basic flaws. Examples:
holes in the wall
peeling paint
exposed wiring (ex: a missing light fixture in the ceiling must be capped)
water damage or signs of water leakage
cracks in the walls, ceiling
foundation issues
roof integrity
Any repairs that are similar to those above must be completed prior to the completion of your reverse mortgage or a contractors bid for the repairs must be submitted to the underwriting dept. If you choose to close your reverse mortgage prior to the completion of the repairs, the lender will hold back 150% of the repair bid and an administration fee. Once the repairs are completed you will need to notify the lender so that they can order the appraiser to come out to do another inspection. The lender will then release the funds held back. If you choose to complete the repairs prior to the close of your loan, the appraiser will perform a final inspection and there will be no funds held back. A final inspection is typically $100-$150.
Typically appraisals are $450-$550 through an appraisal management company and are paid prior to inspection. Once your inspection is complete your appraiser will use local comparable properties that are similar in size, age and type in the process of placing a value on your home.
If you have a reverse mortgage question, Call Angella Conrard, 866-949-7030 or log onto www.reverse-your-mortgage.com.
-Your home value is important in making the decision if a reverse mortgage is right for you
You may or may not have a good idea of what your home is worth on today’s market. Perhaps you are contemplating selling your home in comparison to attaining a reverse mortgage. The information is important in formulating your decision.
There are a number of websites on line will help you get an idea of your home value is. Among them are www.zillow.com and www.eppraisal.com. You can also contact a local real estate professional. Most agents will welcome the opportunity in providing you with home comparable information. It gives them an opportunity to develop a relationship with you in the event you do decide to sell your home.
There is also a service called ValuClear. For $48 this service will provide you with sales and listing home comparables, overall market condition and your neighborhood market condition. To view a sample report click here.
There is also such a report as a Broker Opinion of Value (BPO). This is a price opinion. Broker Opinion of Value includes current area rent rates, asking prices, sold prices and demographic reports. This report will help property owners understand what current property value is and why. The cost of this report can be between $45-85.
Both the ValuClear and the BPO is not only helpful information but it can also be used as a tool to argue any value arguments given by an appraiser or underwriter.
Are you considering a reverse mortgage? In the past when you attained a traditional mortgage, one of the first things you searched for was the lowest rate, not so with a reverse mortgage.
There are various reverse mortgage programs that may suit your needs. The lowest rate reverse mortgage may not be the program that is best suited for your goals.
Ask yourself:
Why do you want a reverse mortgage?
What do you think a reverse mortgage will do for you?
The Fixed Rate Standard Program is best suitable for people who have a mortgage to extinguish that is similar in size to the amount they qualify for. It is also suitable for people who need or want a lump sum of money, want the assurance of a fixed rate, or may want to make payments on their loan (none required).
The Libor Adjustable Standard Program is usually used as a cash flow tool for long term goals. It allows you the most flexibility. It is usually the most costly reverse mortgage, but for many may be the most financially conservative.
The Fixed Rate Saver Program has higher rates than the Standard fixed rate program. The upfront costs are smaller. The loan size is also smaller. This might be suitable if you have a smaller mortgage to pay off or would like to use the sum to pay off extra medical or credit card bills. A lump sum must be taken at closing.
The Libor Saver Program is adjustable and similar to the Fixed Saver program in that it has lower upfront costs. This program is sometimes used by borrowers who need to make smaller purchases like a new car or a new roof for the house.
One thing to be sure to know before talking about rates is to know why you want a reverse mortgage and what your goals are. Once established then it is time to go shopping.
When a senior homeowner attains a reverse mortgage they agree to maintain their home, pay their property taxes and keep adequate amounts of homeowners insurance as part of their contract. If a reverse mortgage borrower fails to meet these obligations, they are technically in default of their loan.
Participation in Reverse Mortgage Counseling is a HUD requirement and industry standard prior to attaining a reverse mortgage. During the counseling, the counselor will help borrowers look at budgeting. The counselors job is make sure borrowers understand how a reverse mortgage works in their specific situation and their obligation to the reverse mortgage contract.
Reverse mortgages are wonderful cash flow tools for many senior homeowners. It is important that you make an informed decision as to if it is the right choice for you.
If you have a reverse mortgage question, call Angella Conrard, Reverse Mortgage Advisor, CRMP. 866-949-7030.
The credit limit of $625,500 was set to expire on December 31, 2010. This change in extension of the lending limits will help seniors with home values in excess of $417,000 access more cash proceeds through the process of getting a reverse mortgage.
The opinions expressed in this Blog and those providing comments are theirs alone, and do not reflect the opinions of iReverse Home Loans or any employee thereof. iReverse Home Loans is not responsible for the accuracy of any of the information supplied by the Blog. Please click your browser's back button if you do not wish to continue.
reverse mortgages help seniors strapped for cash More seniors are turning to a reverse mortgage loans these days. A reverse mortgage is a loan that allows seniors to tap into their home equity and use the money to pay for things such as medical bills, groceries and even home repair.
FHA is overwelmed with condo projects to be approved HUD, did away with condo projects ability to be approved with "Spot Condo" proceedures to get a better hold of the data of how many FHA loans exist in what projects. Approvals are adding another month in the process of attaining a reverse mortgage for condo owners.
Older American Home Values are flattening Golden Gateway Financial released new usage data from its online reverse mortgage calculator showing that average home values for older Americans have halted their slide after remaining flat or declining for seven consecutive quarters.
A new survey from the Center for Retirement Research at Boston College found that 40 percent of individuals 45-59 expect to retire later than they had before the downturn, with most of the respondents intending to work an additional four or more years before retirement.
Financial Planning Exchange Forum This is an excellent forum, set up by my friend Bryan Wisda who has a passion in helping seniors and people with finances in general
Obama to Promote Annuities and Other Forms of Guaranteed Life Income The Department of Labor and the Department of the Treasury (the “Agencies”) are soliciting comments whether the agencies could or should enhance the use of lifetime income or other arrangements designed to provide a stream of income after retirement.
One of the questions is related to reverse mortgages:
What are the advantages and disadvantages of approaches that combine annuities with other products (reverse mortgages, long term care insurance), and how prevalent are these combined products in the marketplace?
Why the sudden interest in how the government can enhance the use of lifetime income arrangements?
The New York times recently reported that the Obama Administration is promoting annuities as a tool to give Americans a better shot at a more secure retirement.
Is Reverse Mortgage Interest Deductable? Reverse Mortgage interest deduction rules are the same for traditional loans and for reverse mortgages:
Reverse mortgages are meant for the elderly who will most likely be paying their mortgage and the accrued interest only after they die so the interest deduction is usually just an afterthought. Upon death and on their personal tax returns mortgage interest may be deductible for the original acquisition debt interest, home improvement debt interest and possibly up to $100k of debt on the home for any other use but not deductible for AMT (but it probably won't make that much of a dent in their personal taxes)
Qualified Residence Interest Expense.
Congressional Justification Docs Detail Possible Changes to FHA Reverse Mortgage Program The US Department of Housing and Urban Development published the 2011 Congressional Justifications for the FY 2011 Budget which provides more information regarding the OMB’s $250 million credit subsidy request for the Federal Housing Administration’s reverse mortgage program.
