Reverse Mortgage Information

This is the third part of our new Reverse Mortgage Report series where different seniors share their reverse mortgage experiences with us.Cornelius Foster

Cornelius Foster

I love my wife, home, and have a few close friends from my windshield wiper business. I am fortunate to have wonderful neighbors who are just the same age group as I am. We would all count ourselves as financially middle-class, or an addition to the ‘I aspired to be rich, just as you did’ cesspool. J One day I was taking my car to the car wash when I met Joe, one of our neighbors and he casually told me how their old-age finances had improved after taking up a reverse mortgage offered by a local real estate bank. I listened carefully but I wasnt quite convinced whether a reverse mortgage was the right choice for us. We sure had some money, saved when my business was at its peak. But just like everyone else, we had a desire to be ‘richer’ so we could lead more fulfilling lives. We also had a home remodel pending which could suck up considerable money.

We met with a reverse mortgage counselor before going to the bank (Joe said it was legally required to meet with a counselor before taking a reverse mortgage). We were told yes, a reverse mortgage was appropriate given our financial situation, and that, we could get a nice down payment for meeting the costs of home repair/remodel, and further a monthly income to take care of recurring expenditure such as medical expenses. After looking through our options, we decided to get a new reverse mortgage loan from the bank. We do not have to worry about our most valuable asset - our home - anymore. It is all well taken care of. I think we have been on the right track so far. We got the money for repairs, and we have a nice decent income to supplement our pension funds. Though we aren’t living the ‘life of our dreams’ we are very comfortable and one step upward from a middle class life style. Reverse mortgage is the concept we need to thank.

This is the second part of our new Reverse Mortgage Report series where different seniors share their reverse mortgage experiences with us.

Corey Holt

After my husband passed away I felt lonely and overwhelmed trying to pull our finances back together in working order. I have always been an independent person, never to depend on others (not even dependent on my parents since the time I was a teen). I worked double jobs part-time to get through college. Luckily my college education has stood by me guiding me through thick and thin. I used to go the local park and spend time there watching the fountains and the playing children, the clouds and the grass and the evening walkers, sometimes with their pets. This was my only contact with the outside world. I effectively isolated myself from the world as I tried to come to terms with my life as it stood. I hired household help on the advice of my daughters so I could have someone to talk to, at least during the day.

Once when speaking with my hired help I came to know of how her mom had taken reverse mortgage on her home to help her pay the bills and live a financially secure life. She arranged a meeting for me with a reverse mortgage agent (counselor). Then I found that I could use a line of credit for performing home repairs on our home and make it more livable and I could continue to live in it and the amount only becomes repayable after I have passed away. My daughters live 1500 miles from here and they probably will not need the house for themselves so I decided to sign up for the reverse mortgage plan. I used the moneys to perform remodeling and repairs on the decades-old home. I also got myself a nice little income from the bank to help take care of the bills. I couldn’t be happier that our finances are well taken care of now.

This is the first part of our new Reverse Mortgage Report series where different seniors share their reverse mortgage experiences with us.

William Shaw

I retired last summer and I was kinda worried about how I would be able to meet the rising costs of living with my meager pension checks. Luckily my wife and I had been able to provide for a home of our own before our twilight years. We discussed among ourselves our retirement planning finances. My wife suggested we meet with a reverse mortgage counselor whom she had heard about through some of her closest friends. First I was not sure if this was a good idea. I thought we would lose the rights to our own home or they would sell our house before giving us finances or something like that. But my fears were calmed after speaking with the counselor. We had a patient, smooth and long talk with the counselor who was able to understand our financial situations and she suggested us appropriate financial plans and she helped us decide whether a reverse mortgage was the way to go for. We could continue to stay in our same old home, while we would get a monthly payment from the lender. This would improve our financial situation considerably, and we didn’t have to be seen asking for money from our children who are facing the world on their own with their limited incomes. I think reverse mortgage was a perfect fit for meeting our financial obligations while still staying in the same home. We made the right decision then and there and never looked back. We are comfortable standing on our own legs now, with dignity, and we spend our time like any elder couple would. I recommend reverse mortgage as something to explore for older couples looking to obtain financial security or to meet general living expenses when finances are tight, especially during these days when costs of living have gone up.

Only a few senior citizens these days feel they have built up an adequate nest egg for meeting the expenses of their golden years. Higher costs of living and higher life expectancies are forcing senior citizens to consider more options for converting assets into liquid income upon retirement. One such option is the reverse mortgage. The loan first made its debut during the late 70s and early 80s. Only a few borrowers understood the program and it was also abused by several lenders. But these days the loan’s image and impact has changed dramatically.

The FHA (Federal Housing Administration) insures reverse mortgage loans calling them Home Equity Conversion Mortgage (HECM). While proprietary (non-insured) reverse mortgages exist, nearly 95% of reverse mortgages originated are insured by the FHA and are classified as HECMs. The FHA has been regulating reverse mortgage naming them HECMs since the year 1989. Since then, the growth of the reverse mortgage loan has been significant.

Typically, reverse mortgage loans are seen with the likes of big names like Wells Fargo and Bank of America. But credit unions - even smaller credit unions - have a significant role to play. Credit unions are seen employing three types of models in order to make reverse mortgage programs a feasible component of their lending portfolios. These models are as follows.

1.   Partnerships

This option is more suitable for smaller credit unions. It establishes a partnership with a broker or lender. The credit union sends interested members to a trusted partner who is then responsible for managing the relationship of reverse mortgage. With these kinds of partnerships, credit unions bypass the need to make a commitment but can still include the reverse mortgage as part of a package of loan solutions.

2.   Turn-key approach

This option is a great one for credit unions wanting to increase their involvement with reverse mortgages while bypassing prohibitive obstacles such as FHA licensing, processing and employee training, etc. Several CUSOs and suppliers offer complete lending solutions to credit unions, including the reverse mortgage component. The credit union can decide the appropriate level of involvement of the second party.

3.   In-House System

This option is good for larger credit unions. It may not be suitable for smaller credit unions because of the volume required for in-house staff in order to develop expertise in reverse mortgage. The advantage is that the credit union can have the degree of flexibility and ownership which it seeks.

Your credit union can start seriously looking into reverse mortgage, as more number of FHA-insured HECMs was originated during the year 2009 than during the first 15 years of its existence. The right solution for the right members might be a responsible reverse mortgage package.

Generation Mortgage has announced the availability of Generation Plus, a new jumbo reverse mortgage package (fixed rate) for houses valued up to $6 million.

The product is tailored for senior home owners whose homes have an appraised value higher than $1,000,000.

Jeff Lewis, the Chairman of Generation Mortgage said many home owners with high-value homes find themselves in the position of being rich in terms of the house they possess, but they also feel they are poor cash-wise. With the Plus reverse mortgage loan, senior home owners can receive the cash liquidity they desire without needing to sell their home and assets. With the real estate market improving, this reverse mortgage offering tends to become more attractive.

The minimum eligible appraised home value for this program is $500,000. Borrowers need to produce a HECM counseling certificate and the product also includes a $25 servicing fee. Senior homeowners can also use the Prime loan to purchase a home.

Generation is the first non-bank reverse mortgage lender to come up with a proprietary reverse mortgage product in the previous two years. Bank of America did also offer a jumbo reverse mortgage package, but  it wasn’t very competitive to start with. Lewis wouldn’t comment on how many or which investors are purchasing the reverse mortgage product.

The Generation Plus product is open for both retail and wholesale customers.

For many Americans, reaching the retirement age is when they have accumulated enough capital in the form of a home property. Reverse mortgages are not like a regular loan. Reverse mortgages help many retirees meet their financial difficulties and help them maintain their independence and dignity. Retirees are reaching out for this solution in record numbers. This was even before the current economic downturn came about. As per the National Reverse Mortgage Lenders Association in 2004, lenders originated a record 37,829 HECM loans during the recent federal fiscal year - which represents an increase of 109 percent over the 18,079 loans closed the previous year.

The types of homes that can take advantage of reverse mortgages are independent houses, townhouses, homes, condominiums and some housing units. The amount of reverse mortgage that one can expect from a lender is based on several factors such as projections of appreciation in the home value, borrowers’ age and a number of other factors. The money derived from reverse mortgage need not be paid back until the house owner moves or dies. HECM loans are federal government insured home loans that are provided by the U.S. Department of Housing and Urban Development. HECM limits the maximum amount of loan a home owner can receive. When the federal government insures the HECM loan, a much higher cost is associated with the processing of the loan.

The requirements for a reverse mortgage are as follows: The owner needs to be 62 years of age or older. There must be sufficient owned home equity in the home. If there exist a mortgage on the home, the mortgage amount can be repaid using the amount originated from the reverse mortgage. The loan can then be settled and closed with the proceeds from the reverse mortgage.

Reverse mortgages allow older homeowners to get cash out of their homes without having to make payments. Reverse mortgages are often used by people who would like to stay in their own homes but need some extra money to pay for things like medical bills. They can also use the money to travel, to take a long and well-deserved vacation, or for home repairs and remodeling.

A new pricing option for reverse mortgages has just been announced, making thousands more dollars available to reverse mortgage borrowers at a lower cost, allowing the senior homeowners to get more money fund a even more comfortable retirement.

The new pricing option will remove the servicing fee and origination fee, which means home owners will be able get more money ranging between $3,500 and $10,000.

HECM (Home Equity Conversion Mortgage) is a FHA-insured financial product that allows home-owning seniors 62 or older to borrow against their home equity without having to make regular monthly re-payments of principal and interest. Other options are also available to applicants- the money can be withdrawn as lines of credit and variable rates. For those who choose a fixed-rate HECM, there will not be any monthly servicing fee or origination fee.

Craig Corn, vice president of MetLife Bank who is in charge of the bank’s reverse mortgage line of business, said that the new pricing option will let senior home owners to draw the proceeds of the loan in an up-front lump sum to fund their retirement while unlocking even more of their home equity. The additional proceeds can help them meet their financial needs, pay off existing debts, cover unexpected expenses, or do likewise things.

While savings can vary by individual cases, typically senior borrowers can get more money in their pockets with the introduction of this new rule.

There will still be other closing costs involved, including FHA mortgage insurance premium, costs from third parties, like mortgage taxes, recording fees, appraisals, etc.

The National Council on Aging (NCOA) announced that it will offer free reverse mortgage counseling for home owning American senior citizens via its RMCS (Reverse Mortgage Counseling Services) network.

Counselors affiliated with the RMCS will start temporarily waiving the usual $125 counseling fee. This move is intended to help more senior home owning citizens understand how reverse mortgage loans can help them remain in their homes and tide over financial difficulties and get access to some quick cash based on the assessed value of their homes.

To qualify for a reverse mortgage, seniors need to have aged at least 62 or can be older than this age limit. Reverse mortgages are insured by the Federal Government in the form of HECM which is a short form for Home Equity Conversion Mortgage. The senior home owner can continue to live in and occupy the same home which has been reverse mortgaged while enjoying monthly incoming payments from the reverse mortgage lender. Or the money could also be obtained as a lump sum payment or can be drawn in the form of a credit limit. Either way, the home owner can continue to live in the same home and enjoy living a higher standard of life due to the additional influx in income.

Barbara R. Stucki, Ph.D., is vice president of the Home Equity division for NCOA. She said that the NCOA is offering free counseling so that older seniors can learn how to use home equity to draw cash when other assets such as stocks and bonds may have depleted as a source of income. This is because an increasing number of senior citizens are seen to be struggling with day-to-day expenses yet they own homes which have considerable value in them. The home equity can be used as a reverse mortgage loan while allowing the senior to stay in the same home during his or her life time. Many home owners need guidance on how and when to use this important asset during their life times.

The NCOA has also said that they will not charge fees upfront after the end of the free counseling. They would only charge fees at the time of closing as closing fees, when and if the client decides to take out a reverse mortgage.

It is worth remembering that the NCOA has always provided free reverse mortgage counseling for senior home owners with annual incomes less than the limit of $20,000 for individuals and $30,000 in the case of couples.

Reverse mortgages are increasingly being seen as an effective way to deal with the financial crisis during these days of economic recession and consequent slow recovery phase. More and more senior home owners need access to quality and well-informed reverse mortgage counseling in order to decide whether a reverse mortgage is the way to go for. Thus the NCOA has been doing a yeoman service by announcing that they will not charge counseling fees for those senior home owning citizens contemplating a reverse mortgage.

Here is an interesting Email we got showing how Seniors are now more likely to delay their retirement.

Last night, I was browsing through the internet to seek information about  retirement plans. My dad is going to retire in a couple of months, so I was helping him find a good plan.  I landed up on something that was hard to believe. I could not have thought in my wildest of dreams that anybody can procrastinate his/her retirement plan. At least, I would not! But, many people all over the USA are doing it, and the reason is (yes, you got that right!) recession.

A recent survey conducted by Golden Gateway Financial has shown that more and more senior citizens in the US are delaying their retirement in order to make their ends meet. In the time of economic meltdown, when the whole world is busy arranging finances, the older Americans are looking for new opportunities for employment.

The seniors in the US are looking for new jobs (at an age when they should have otherwise retired), so that they can recover from the losses in the financial, as well as housing sectors. Recession has taken a toll on everyone, and the seniors are trying their best to cope up with the situation by holding up their retirement plans.

Prior to recession nearly 67% of the seniors in the US were desirous to retire before 70. But the scenario has changed radically post recession. You would be shocked to know that at present about 40% of the seniors in America plan to work after 70, so that they can bear their living costs. They say they have their Equated Monthly Installments, food bills, electric bills and the like to pay, and they do not find a better way to maintain their finances.

I felt aghast seeing people on the verge of retirement slogging to earn a living. How do you guys feel about that?

We think seniors should consider getting a reverse mortgage if it applies to them. This might give them the finances that they need to retire.

Reverse mortgages have traditionally been considered one of the more expensive ways to get cash from your house property. Some big reverse mortgage lenders are now reducing closing costs, thereby helping affluent homeowners wanting to generate additional income by opting for a reverse mortgage.

Reverse mortgages are special loans which allow people 62 years of age and above to convert their home equity into cash. The home owner can receive a fixed monthly income from the bank during his or her life time. When the borrower passes away, moves or sells the house, the loan becomes repayable. The heirs typically sell the property, pay the balance and keep whatever remains.

The fees associated with a reverse mortgage have usually been somewhere near to 5% of a home’s value. There have been new cuts in this fees which means that homeowners can now save nearly $10,000 on the closing costs.

Bank of America Corp., Wells Fargo & Co., and other lenders have dropped or reduced their servicing or origination fees related to reverse mortgages.

Lenders have been cutting costs now in order to improve their business prospects. For the period from Oct. 1, 2009 to March 31, 2010, home equity conversion mortgage (HECM) volume fell 22% when compared to the same period a year earlier. The HUD (Department of Housing and Urban Development) has also cut the amount of equity that reverse mortgage borrowers can extract, by 10%. This caused problems for some homeowners as they could no longer qualify to pay off their regular mortgage with the proceeds from the reverse mortgage.

MetLife Inc. dropped its monthly servicing charges and its reverse-mortgage origination fee in March. This has led to more leads getting generated from better-off elder homeowners who had previously been put off by steep closing costs.

Federal law allows origination fees to run as high as $6,000. Homeowners still need to spend on mortgage insurance, which the HUD requires for most products.

So far, the cuts in fees apply mainly to the plain-vanilla fixed-rate HECM which is backed by the FHA (Federal Housing Administration). This product alone accounts for almost 60% of reverse mortgages.

Lenders like Wells Fargo are giving borrowers a break on monthly servicing fees and origination fees for adjustable-rate reverse mortgages. Barbara Stucki, vice president for the National Council on Aging’s home-equity initiatives says more of the costs are now being included in the interest rate, like a conventional mortgage. You may be better off with an adjustable-rate loan if you don’t need a large amount up front.

Consider consulting with a HUD-certified reverse mortgage counselor to learn more about the options available to you, if you are seeking a reverse mortgage. The National Council on Aging and other nonprofit groups are offering such free counseling to homeowners until the end of April.

Reverse mortgages are aimed at senior citizens who would like some spendable income to meet their financial needs and who own sufficient equity in their homes. Reverse mortgages are usually a tough sell. Elderly home owners have a fear of losing their right to continue their living in the same home. This was a fear well-founded because some early reverse mortgages had the provision that home owners could be forced out of their homes, under certain circumstances, by the lender.

But in 1989, Congress created a new type of reverse mortgage known as the HECM or home equity conversion mortgage. This completely protects the home owner as long as he or she continues to pay the property taxes regularly on schedule, maintains the home or property and doesn’t change names on the deed, the home owner can remain in the house forever. If the lender fails, any remaining payment obligation is assumed by the FHA (Federal Housing Administration).

The HECM program, though slow to catch on, has been growing rapidly in recent years. The year 2009 saw about 130,000 HECMs being taken by home owning senior citizens in America. Feedback from seniors who have taken such HECMs has been largely positive. A 2006 survey said 93 percent said that the reverse mortgage had a largely positive effect on their lives. 95 percent reported that they were satisfied with their counselors (All HECM borrowers need to undergo through a counseling process).

Some media sources have been bad mouthing the concept of reverse mortgage. These are spurious claims about home owners being asked to vacate their homes by their lenders. Seniors can rest assured that with a HECM, there is no scope for a reverse mortgage lender to ask a senior to move out of his home during the lifetime of the borrower. Some media outlets have been drawing parallels between reverse mortgages and subprimes and projecting that reverse mortgages will go the way of subprimes. For information and clarification, the two programs are much different, and there is no chance of a financial fiasco in the case of a reverse mortgage as happened in the case of subprimes.

Subprime loans impose repayment obligations on the borrowers. The financial crisis began because of the inability of subprime borrowers to meet their payment schedules so as a result, the number of foreclosures boomed to unprecedented levels. But compared to this scenario, reverse mortgage borrowers do not have to repay the money they get from reverse mortgage. They only need to maintain the home and pay property taxes correctly. Foreclosures do not apply to the reverse mortgage concept at all.

Subprime foreclosures caused losses on the part of lenders and investors in the form of mortgage securities which had been issued against subprime mortgages. In contrast to this, reverse mortgage lenders will not suffer due to losses on reverse mortgages because they are insured by the FHA.

In summary, the current state of the HECM (reverse mortgage) market does not have any resemblance as to the conditions in the subprime foreclosure market that led to financial disaster and crises.

Millions of Americans are paying a high price trying to find a safe place to deposit their moneys as banks offer very low interest rates on savings accounts and CDs (certificates of deposit).

The senior citizens and others on fixed incomes have been hard hit and many people are seeing their returns on savings, C.D.’s and bonds dwindling so much that it’s costing them money once inflation, taxes and fees are considered.

Joe Parks, a retired accountant in Houston working for an organization that works to help people in investing decisions, said that the general downturn in the American economy has an impact severe enough to cause a half to three-quarters of a percent cut in the senior income derived via maturing C.D.’s.

People who rely on such investment incomes for financial support are being forced these days to consider new and different options.

Peter Strauss, an attorney who advises seniors, said that if your assets are not appreciating or producing any sufficient income, it is better to start considering a reverse mortgage as a ways and means of making a huge asset produce income on your behalf for your benefit.

Recently, interest on one-and-two year treasury notes was also down to just 0.89 percent and 0.40 percent. Companies and financial institutions such as Bank of America, Citibank and Wells Fargo offer negligible rates of interest on standard money market accounts and basic savings accounts.

The average citizen finds some financial stuff difficult to understand. A significant part of the federal government’s plan of repairing the economy is to pay savers nothing. If you see the line ‘yield on cash’ and it shows rates like 0.01 percent then that means it is going to take thousands of years to double a money investment.

People like Eileen Lurie decided to obtain a reverse mortgage to help offset the decline in returns from investments tied to interest rates. Lurie took a reverse mortgage from a bank and she said the bank was going out of its way to explain the product to her.

These reverse mortgages are made available for seniors aged 62 and above. They can convert their home equity into cash. The money thus obtained via a reverse mortgage is considered tax-free for all purposes and intents. There is no impact on Social Security or Medicare incomes and payments. The reverse mortgage loans do not need to be repaid during the life time of the senior as long as the senior continues to live in the same house or property.

Financial Returns through certificates of deposit have dropped to between 1 percent and 2 percent. About a year or so ago, these C.D.’s were producing 5 percent returns. Seniors are also reluctant to redeploy money into high-risk ventures and high-risk investments. They need easy access to cash to meet basic and foreseeable expenses.

The interest rates for Treasury securities and bank products are also very low and negligible. They are not anywhere close to the levels before the financial recession. During these times of financial hardship, seniors can turn to a HUD reverse mortgage to help themselves with more cash inflow as a way of earning from their home equity while continuing to enjoy possession of the same property or home.

In the year ended 2008, foreclosures were reported on 2.3 million American properties. This is an increase of 80% from the year 2007, and it also represents an increase of 225% from the year 2006. These findings were made by the RealtyTrac U.S. Foreclosure Market Report made out on January 15, 2009. The soaring numbers of foreclosures have sent waves through the banking and housing industries with millions feeling the effects.

According to the study, California, Florida and Arizona posted the highest foreclosure totals for 2008. California posted a total of 523,624 properties for foreclosure filing in 2008. This is the nation’s highest figure per state. Foreclosure activity in California went up by nearly 110 % from the year 2007. Also, this number represents an increase of nearly 498 % from the year 2006. Florida came in second nation-wide with 385,309 properties receiving a foreclosure filing in 2008. This represents an increase of 133% from the year 2007 and nearly 412% from the year 2006. Arizona came in third with 116,911 properties coming in for foreclosure filing. This number represents an increase of 203% from the year 2007 and 655% from the year 2006. Other states in the top 10 foreclosures bracket were as follows: Ohio, Michigan, Illinois, Texas, Georgia, Nevada and New Jersey.

Foreclosures and mortgage delinquencies are expected to continue to rise due to mounting job losses and a weak economy. The nation’s unemployment rate stood at 7.2 percent during December 2008 at its highest since the year 1993. Overall, the U.S. lost 2.6 million jobs for 2008.

Even with all the doom and gloom in the housing arena, there exists a ray of hope for senior homeowners 62 years of age or older. That hope arrives in the form of a HECM (Home Equity Conversion Mortgage) or Reverse Mortgage. As a senior home owner who has taken a reverse mortgage, you need not be concerned with increasing foreclosure rates and whether or not you will be able to meet your mortgage obligations. With a HECM reverse mortgage, monthly mortgage payments are not required at all.

Borrowers can remain in their homes for their lifetimes. They never have to worry about making a mortgage payment. They only need to keep the property in good repair, pay property taxes and maintain their homeowners insurance.

Now may be the time to explore the reverse mortgage option for seniors who currently do not have a reverse mortgage. It doesn’t matter even if the senior is a little behind on their mortgage payments, the senior may still qualify for reverse mortgage. To qualify, borrowers must be aged 62 or above, must be occupying the property as their place of primary residence and not currently be in bankruptcy.

The reverse mortgage money may be used by the senior home owner as he or she sees fit. The money can be obtained as a fixed monthly income or as a one-time payment which can be invested also. Seniors can continue enjoying occupancy of the same place of residence for as long as they live and do not have to pay mortgage payments again after taking the reverse mortgage. The lender will pay the senior!

So in these tough economic climates, seniors looking for a little breathing space in their tight financial budgets may consider opting for reverse mortgages on their properties.

Congressman Barney Frank (D.-Mass.) recently appeared on the AARP-produced cable TV program “Inside E Street”. Barney Frank is chairman of the House Financial Services Committee and likely the elected official most well-informed and experienced about reverse mortgages. Barney Frank told host Sheila Kast that he doesn’t deduce a parallel between subprime loans and reverse mortgages.

Congressman Frank said that, in the case of the subprime loan, people are obliged to make payments. But in the case of reverse mortgage, people are receiving money. Thus there arises a clear distinction between the two.

In the case of the subprimes, as the values of the properties dropped, some people could not refinance, hence they were hurt. But comparatively, in the case of the reverse mortgage, the burden will fall on the government (because it is insured), just as it should. This is because this is not the fault of an individual but a part of a larger national economic problem.

Congressman Frank said that the results and the evidence in case of subprimes and reverse mortgages are very different. He invited people to read about the differences between subprimes and reverse mortgages. There is no talk about a reverse mortgage related crisis. But it is the subprime loans that shouldn’t have been granted in the first place, that have caused the financial crisis. Reverse mortgages are always given only up to the value or worth of a property. That way, people cannot be able to take out loans that their incoming cash flows cannot support. Thus subprime loans and reverse mortgages are two different use cases and should be viewed as such. Some of the things applicable to subprime loans are not applicable to reverse mortgages.

The host of the TV show, Kast, pressed Congressman Frank on whether he expected a crisis in the future in the case of reverse mortgages. Frank responded that we have had reverse mortgages for as long as we have had subprimes and reverse mortgages haven’t been a cause of the monetary crisis but the subprimes have been. This clearly illustrates that reverse mortgages are safer than subprimes as such they can’t be compared. Comparing subprimes with reverse mortgages would be like comparing apples and oranges.

Reverse mortgages help senior citizens during their times of financial needs. Borrowers need to be aged 62 years or above in order to qualify for a reverse mortgage. Further, the money derived from a reverse mortgage does not need to be repaid and can be used for any purpose as the home owner sees fit. The money can be drawn as a fixed monthly income, or as a one-time cash payment or as a line of credit. The only requirement is that borrowers need to keep the property in good condition and maintain the home owner’s insurance current.

Reverse mortgages are different from subprime loans, as seen by Congressman Frank. There is no need to repay the money obtained in a reverse mortgage. Sub primes were one of the causes of the current fiscal crises, but reverse mortgages are one of the solutions available for seniors to overcome the financial crises.

Stronger pro-senior laws put forth by tactful lawmakers have produced their intended effects. The laws are intended to protect the legitimate interests of senior citizens taking up reverse mortgages to help boost their wallets and live a financially comfortable retired life. Until now Reverse mortgage scammers would occasionally try to take advantage of senior citizens but thanks to an unwelcoming environment put forth by the lawful and ethical reverse mortgage community, reverse mortgage scammers are now facing hard times and eventually will be wiped out of their scammy business models entirely.

This is good news for the reverse mortgage industry itself and the senior home-owning borrowers looking to take up reverse mortgage on their properties.  It clearly shows that scammers have no place for deception in this legitimate and ethical industry. This is clearly a morale booster for ethical and honest reverse mortgage lenders, brokers, consultants and agencies.

The ready availability of comprehensive reverse mortgage information on the internet has empowered home-owning senior citizens to make informed decisions when it comes to taking up reverse mortgages. The AARP even has an entire section about reverse mortgages on its website.

The HECM or reverse mortgage loan is one of the most deeply and thoroughly regulated mortgages in the United States. For the ordinary unethical loan scammer, it is certainly not worth the time, cost and effort to try perpetrating reverse mortgage scams.

With these types of consumer protections in place, it is becoming quite clear that scammers have no place in this ethical reverse mortgage industry. Loan sharks are quickly discovering there are other easier ways of making illegitimate and dishonest bucks than selling HECM scams.

The concept of reverse mortgages has received some unfavorable and negatively biased press and media coverage lately. In this conjecture with this, the AARP (American Association of Retired Persons) has just released a webcast entitled “Reverse Mortgage: Rescue or Trap?” encouraging viewers to take a balanced,  informative and fair view of this type of loan.

Most newspaper articles or video segments that cover reverse mortgages usually devote only a couple of minutes or a couple of columns. The AARP has dedicated a full 26 minutes covering the key questions of consumer protection and abuse avoidance as it applies to the field of reverse mortgage loans.

The report is interview-styled and includes footage of a diverse group of people including two political representatives (a Democrat and a Republican), a reverse mortgage industry insider, a member of the media and a consumer advocate.

One AARP survey showed that 93% of the seniors who opted to take a reverse mortgage were glad they took one. But it still remains to be ensured that those who take this loan are protected from abuses.

Barney Frank, chairman of House Financial Services, was a member of the committee that improved the protection for people taking reverse mortgages as part of the Housing and Economic Recovery Act of 2008. Peter Bell, president of the NRMLA (National Reverse Mortgage Lenders Association) noted that abuses of the reverse mortgage system usually happen with newcomers coming into the business who use misleading sales tactics to convince seniors into taking reverse mortgages over other financial options available to them.

No industry is immune to some bad apples in the form of unethical or mis-guiding sales people. We have seen such elements in every profession that is in existence today, so it is no different in the case of the reverse mortgage industry also. Which is what is observed by a consumer advocate from the Center for Responsible Lending, that the loan itself is often not the problem - (the abuse by unscrupulous people is).

Abuse of seniors taking reverse mortgage can take many forms one of which is convincing seniors to invest their reverse mortgage proceeds into an annuity or other inappropriate financial product. The unscrupulous sales people prey on older adults who are desperate for help and are badly in need of financial aid.

Mary Beth Franklin, Senior Editor of Kiplinger Financial Magazine, observed that, due to the recent decline in the stock trade, some senior citizens have been using reverse mortgages as a bridge… “for five to ten years..” until the investments rebound and start to recover.

After going through a long and tiring working life, you may look forward to retiring with a stable and steady stream of income and being able to live off it comfortably. For many Americans, this means income derived from retirement plans, Social Security and any investments they may have made during their working lives.

One of the other most popular and widespread ways of supplementing retirement income is to take a reverse mortgage on your property. There are many banks and reverse mortgage lenders in the market today that provide reverse mortgages, and the market has become very competitive making this all beneficial for the customer.

Senior home owners age 62 or above are federally eligible to apply and qualify for reverse mortgage loans after going through a mandatory counseling process. The money can be drawn in the form of a one-time lump sum payment or as a monthly stream of income that flows in throughout the life time of the home owner. The money doesn’t have to be paid back to the lender during the life tenure of the borrower. The principal and interest become payable only when the home owner passes away or moves out of the reverse mortgaged property.

The extra line of income derived from a reverse mortgage puts seniors at financial ease and enables them to gain confidence about their social position and spending ability. The money can be used any way they see fit - be it for travel, vacation, medical expenses, education expenses of grand children, home remodeling, etc.

The additional level of financial backup from reverse mortgage offers senior home owners peace of mind and stability so they can live their pre-retirement lifestyles without any qualm of cash deficiency.

Reverse mortgage income is not taxable either; for the government considers  it  inappropriate to tax you on property you already own (and for which you are paying taxes in other ways and means).

Taken in perspective, reverse mortgages are good as an additional line of income for the senior home owners looking to improve upon their lifestyles with a little more money in their pockets.

The prolonged hard economic times are pushing people to the brink of financial hardship. Every source of incoming money is welcome these days, if not always. Fortunately, if you are a senior home owner with a considerable equity in your home property then you can qualify to take a reverse mortgage on your property so you can get access to cash to improve your lifestyle.

The money obtained through reverse mortgage does not need to be repaid during the life time of the borrower, as long as the owner continues to live in the same property. When the owner passes away, the lender stakes claim to the property which is then sold or auctioned to recover the money (principal and interest).

Reverse mortgage money can be used as a source of monthly income by the home owning senior. The cash inflow can ease up tight financial budgets so seniors can have a little more breathing space and dollars to spend in their wallets. The money can also be used as a line of credit to draw upon during times of need. It can also be obtained as a one-time lump sum payment.

The money can be used for any purpose the home owner sees fit - it is tax-free income. The money could go for meeting medical expenditures, educational expenditures of children or grandchildren, home repairs, remodels, or for traveling/taking a vacation.

In these economically tough days, seniors may find it hard to keep up with the mortgage payments on their properties. It is easy to fall back on such payments and the dues then keep piling up. In such cases, in order to prevent a foreclosure, it is important to consult with a reverse mortgage professional at the earliest opportunity. Reverse mortgage money can be used to pay off the existing mortgage and the balance can be used as a source of income for the senior to assist as a means of living.

Thus reverse mortgages offer a beacon of hope during financial troubles in these troubled times of economic hardship.

In the good old days, houses were only used for living in it. People in those days treated their homes as a place where they could find peace and solace. But at present, people are exploring beyond this.

Today, a house is treated as a piece of equity that can be used to induce cash flow. The expenses of a modern man are beyond what he can actually bear with his regular income. Therefore, he explores varies options to increase his funds, so that he can lead a respectable life. Using his house as equity is the result of one such endeavor.

During this economic meltdown, using home equity is one of the best ways to survive. It ensures a guaranteed return and thus it might be used to pay off the bills. It can be used to repay loans or bear the cost of education, mobile phone, vacation and car.

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Reverse Mortgages are one of the only profitable deal in this economic meltdown. Unlike real estate and other investment sectors, it is proliferating with each passing day.

Reverse mortgages make use of home equity to generate regular income. It allows the borrowers to release their home equity in the form of one or more payments. Reverse mortgages are geared at senior citizens nearing or above retirement age. This loan  is not only profitable because it assures guaranteed returns: it is great because it allows the borrower to choose the payment options and interest rates of their mortgage. The borrower also has the liberty to choose between adjustable and fixed rates for their mortgages.

Some of the other notable features of reverse mortgage or equity line of credit (ELOC) are:

* Guaranteeing an account that can never be closed till you have a balance for ELOC
* No interest is accrued on unused equity
* The unused equity can grow at an interest rate of 0.5% per month
* The insurances and taxes related to the equity must be cleared on time

Due to the choice allowed by reverse mortgage plan, more and more seniors across the world are choosing it for their livelihood. However, it is necessary for the borrowers to review the contract properly, so that all the clauses of the mortgage are properly understood. Reverse mortgage counseling is also mandatory for the borrowers, and it might help them to choose the option most suited for their situation.