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.

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.

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.

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.

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.

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.

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.

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.

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 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.