Reverse Mortgage Information

Studies showed that in the year 2007, buyers aged 55 and above accounted for 19% of all home buyers, according to a research study made by the Metlife Mature Market Institute and The National Association of Home Builders. But the number of houses bought by this age group has fallen since the year 2005 and it is projected to fall likewise until the year 2010 because of the unstable conditions in the housing markets.

These baby boomers and senior home buyers continue to pay mortgages while relying on their current wealth, according to a report “Housing for the 55+ Market: Trends and Insights on Boomers and Beyond.”

More than 69% of home buyers aged 55 and above used a mortgage to purchase a home in an age-qualified community, a jump of more than 50% when compared to the figures for 2005. And more than half of home buyers in the same age group bought a home in an age-qualified community. There was also a drop in mortgages taken by older borrowers for homes in other 56+ communities (not age restricted).

Home ownership in the 55+ age group has remained nearly constant at nearly 71% since 2001. The average income of home owners drops as the age of homeowners increases.

The study was based on Housing Survey Data from 2001 to 2007. The results were released on April 28 in Philadelphia.

Here is a piece of good news for all Washington state consumers. Due to a recently introduced law, residents of Washington will soon have access to more reverse mortgage lenders. They will also have more reverse mortgage safeguards for their security.

Reverse mortgages are a special financing arrangement that allows homeowners age 62 and above to borrow money from a lender. This money can be borrowed in a lump sum or monthly installments or as a line of credit. Interest is charged on the amount that is borrowed and keeps on getting added to the principal amount. This amount is repaid when the house is sold or the borrower dies or moves out of the house.

Until last year, only select leaders could offer reverse mortgages.  With the implementation of the new law i.e. HB 1311,  other lenders can also offer reverse mortgages. Now people will have access to more reverse mortgage lenders.

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The number of federally insured reverse mortgages done by the FHA continued upward during the month of April. The HUD (Department of Housing and Urban Development) data shows that the FHA endorsed 11,650 HECMs (reverse mortgage - home equity conversion mortgages), which is 400 more than the figures for March.

The largest retailer of HECMs remains Wells Fargo Home Mortgage. Wells Fargo registered nearly 2,100 reverse mortgages in April, out of a total of 11,790 for the fiscal year. The number two position is occupied by Bank of America and Countrywide Financial is in the fifth position.

Bank of America acquired Countrywide last year and they endorsed more than 1330 retail loans in April. The merger was officially completed on the 27th of April. HECM watch groups expect to see the endorsement reports for Countrywide Financial ‘tail off quickly’.

Financial Freedom currently ranks third in total retail reverse mortgage originations, with a total completed 2,772 originations so far. World Alliance Financial comes fourth with a total of 2,371 HECM loans originated so far.

In the state of Washington, non-bank lenders will now be able to offer reverse mortgages as part of the reverse mortgage legislation made into law recently by the Governor of Washington. House Bill 1311 rectified provisions in a law that took effect last summer that prevented lenders who are not banks from offering reverse mortgages. The non-bank lenders in Washington need to be licensed under the state’s Consumer Loan Act. The law also regulates ‘proprietary’ reverse mortgages.

The law comes into effect 90 days after April 26, according to a legislative assistant of a prime sponsor of the bill, Rep. Steve Kirby. Reverse mortgages are used by senior homeowners to get access to a steady stream of money, but there have been some situations where unscrupulous mortgage lenders have forced homeowners into foreclosure, which is why it becomes important to regulate the reverse mortgage industry.

HUD (Housing & Urban Development Department) has requested nearly $800 million for reverse mortgage, in its budget for the year 2010.

The HECM (Home Equity Conversion Reverse Mortgage) program allows senior home owners to tap their home equity amounts as regular monthly income streams or as a line of credit. This amount does not have to be paid back while they still live in the same homes.

The only problem of HECMs is the unpredictable housing prices which can fluctuate erratically.

When a senior citizen takes a line of credit as reverse mortgage to the tune of $300,000 and the value of the home falls, then the FHA will have to bear the losses. It is for meeting these anticipated losses that the FHA’s budget calls for nearly $800m.

If prices of homes fall, then the insurance fund of the FHA can be hit hard by losses arising out of the reverse mortgages. But the reverse mortgage program itself is still seen as being very solid.

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Foreclosure filings have been going up incrementally in the United States since the year 2006. There has been an increase of more than one hundred percent since this year, in the number of filings for foreclosure.

RealtyTrac released a Foreclosure market report recently in January of 2009 where it showed that the states of California, Arizona and Florida were the states with the highest numbers of foreclosures during the year 2008. Foreclosure activity in California increased more than 400% since the year 2006. This was followed closely by Florida and Arizona, in that order. Other states with top foreclosures were Ohio, Illinois, Texas, Michigan, Georgia, Nevada and New Jersey.

Foreclosures and mortgage delinquencies are continuing to rise every day. Even during these gloomy days hope comes to senior home owners in the form of a Home Equity Conversion Mortgage (HECM) or reverse mortgage. If you have got a reverse mortgage then you need not be worried about increasing foreclosure rates and about the ability to make mortgage payments. No monthly payments are required with a HECM reverse mortgage.

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In the twilight years of retirement, seniors are usually under financial pressure. There seems to be a need to cut down on expenditures as far as possible, while improving the sources of money to be as many as possible. A reverse mortgage is a good option to go for, to raise money to meet living requirements during the retirement years. There are no requirements of passing credit score, and there is income proof required either, in order to qualify for a reverse mortgage.

The only requirement is that the borrower needs to be of minimum age 62, and have sufficient equity in a home property. The HUD insures more than 90% of all reverse mortgages. The reverse mortgages are non-recourse loans so the borrower cannot owe more than a home’s market value. For example, even when a senior uses the value of a reverse mortgage to the tune of $200,000, if the home is valued at $180,000 when the senior passes away, then that is the amount that becomes repayable to the lender, and nothing more.

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If you are an eligible senior home owner aged 62 years or above you may want to have some guidance on why you would like to go for a reverse mortgage loan.

Here are 5 reasons why people may want to get reverse mortgages.

Meet retired living expenses - Most home owners have been spending a lot of years making mortgage payments, this could have been anything between a few hundred to a few thousand dollars a month. Now you can get the same amount back in every month, to meet living costs like housing, medical, insurance and other expenses. This would complement other fixed incomes like from pension plans, social security, retirement accounts, etc. This would be the number one reason why people would be motivated to take up a reverse mortgage - to enhance sources of income.

Pay medical expenses - Medical issues to meet are increasing in seniors daily lives. With the rising costs of health care, this can take the form of cost of undergoing medical treatment or surgical procedures, buying prescription drugs, meeting medical bills, etc. Reverse mortgage can help meet these medical  and long term care costs.

Home improvement/modifications - You may want to make improvements, remodeling and improvements to your home, or get a landscaped garden perhaps. The money from a reverse mortgage can help fund the cost of home modifications and improvements.

Taking a Vacation - The proceeds from a reverse mortgage can be used to take your dream vacation, which would be a good way to relax after spending your time working through your life.

Pay off debts - This is one of the top reasons why people take reverse mortgages. Reverse mortgages can provide a way to get a large amount of cash to manage or repay debts.

With the rising costs of essential items for daily consumption, such as food, medical expenses and rent, seniors have to trim and prune their expenses and budgets, especially more so in these times of economic problems. They can take a reverse mortgage to utilize the equity in their home if they are aged 62 or above. A reverse mortgage is a federally insured loan insured through the FHA (Federal Housing Administration). The FHA uses approved appraisers to determine the value of the home or property being reverse-mortgaged and charges a 2% MIP (Mortgage Insurance Premium).

The FHA requires that borrowers would need to undergo counseling before submitting an application to a reverse mortgage lender. The property being reverse mortgaged would need to be the primary place of residence for the borrower. There are no other credit or income requirements.

The money got from a reverse mortgage is tax-free and can be treated like any other monthly income, a credit line, a lump sum or any combination of these. Home owning borrowers would still need to pay taxes and insurance on their homes.

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Reverse mortgage brokerage can be a good profession to pursue. To get a reverse mortgage broker license, you will need to possess reverse mortgage training to succeed in this competitive industry. There are many options when you would like to get some reverse mortgage training. You can find ads selling training programs in newspapers, websites and televisions.

It is a good idea to do a historical check of the company that is going to train you to see if the reverse mortgage training program they offer covers everything that interests or concerns reverse mortgage. If the training company is a member of the Better Business Bureau then that would be something better, as it is an indicator of quality.

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With the fall of the stock market, the retirement investments of senior Americans fell dramatically. The EBRI (Employee Benefit Research Institute) has calculated that the average 401-K account balance fell by nearly 20% for workers above age 55.

Almost 43% of older workers had said that they had less than $50,000 saved for retirement. With interest rates being low in the present market, the AARP reported that during the year 2008, about one in five workers aged 45 stopped further investments into their retirement accounts.

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An increasing number of older Americans are turning to the use of reverse mortgages as a way to increase their cash incomes during retirement, to avoid financial hardships. These figures came into light after the recently released HECM data (Home Equity Conversion Mortgage) from the HUD (Department of Housing and Urban Development).

The data says that the number of HECM reverse mortgages increased by about 7,000 during the calendar year 2008. The HUD data also showed that the number of reverse mortgage loans taken in March of 2009 increased 24% as compared to the figures for February 2009, and 11,261 reverse mortgages were made during March 2009.

For those senior home owners facing foreclosure, reverse mortgages are seen as a way to get additional income, one way which does not need a qualifying credit source and a source of money that does not have any income or repaying ability requirements.

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Americans spend a huge proportion of dollars every year on senior health care. With a little thought, senior Americans and their families can save quite a lot of money.

Listed below are a few creative ideas on how to save money spent on senior care.

Compare prices

Seniors can compare prices for health care, all online. Home owners’ insurance policies can be got from the cheapest providers at significantly less costs. As a senior, you may want to opt for bundled services like phone and cable.

Use existing services

You may want to buy fall prevention alarms to prevent serious injuries from falls and other medical emergencies. A personal fall prevention alarm that can connect directly to 911 with no monitoring fees/ service contracts is a likely candidate.

Consider home care

The annual cost for a room in a nursing home has been steadily increasing every year. The annual cost of home care can be half the cost of nursing home care. Home care makes it possible for seniors to remain in their homes while maintaining their independence.

Take a reverse mortgage

A reverse mortgage loan allows a home owner to convert a portion of home equity to cash, and there is no need to repay a reverse mortgage as long as the borrower stays in the same home. Seniors would need counseling to take a reverse mortgage.

Try bulk buying

Seniors can opt to buy personal care items and non perishable items in bulk as a way to save some money. Monthly delivery with automatic shipping often saves the greatest amount of money.

The margins of reverse mortgages have recently been revised upwards by reverse mortgage lenders in the country.

The rates/margins of reverse mortgages are always in a state of fluctuation. There are both fixed rate and adjustable rate reverse mortgages options available.

A reverse mortgage (fixed-rate) is a ‘closed’ instrument, meaning that borrowers can get their first draw-out and then there are no other additional draws.

This may not be an issue for senior home owners who would like to draw all the funds at the outset to pay off an existing mortgage or for use for the HECM for home purchase program. For the senior borrower who would like monthly payments for lifetime or would like to avail of a line of credit, the only option available is the adjustable rate fixed mortgage.

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SECU (State Employees’ Credit Union) a North Carolina lender is increasingly being seen as a consumer-oriented reverse mortgage solution provider. The SECU has funded more than 50 reverse mortgages totaling above $5 million since August 2008 when the program was introduced.

A reverse mortgage is a loan provided to qualified home-owning American seniors (above 62 years of age). The money derived from reverse mortgage can be used for any purpose by the borrower.

SECU’s loan is somewhat different from the standard reverse mortgage because the Credit Union provides a fixed and stable interest rate, an accrual method with simple interest, a low origination fee of 1%, no MIP (mortgage insurance premium) and nil monthly service fees.

The Credit Union had consulted with the North Carolina Housing Agency, AARP (American Association for Retired Persons), and Resources for Seniors - a group for counseling reverse mortgage applicants.

With a SECU reverse mortgage, seniors can pay off bills and use the rest of the money for any purpose that they want. There is no need for the senior to make monthly re-payments on a reverse mortgage loan.

Seniors typically use the money from a reverse mortgage to pay off outstanding bills and lead a comfortable living as they please. The money is an additional income for them as they don’t have to pay a regular mortgage repayment any more.

The NCOA (National Council on Aging) has been officially named by the HUD (Department of Housing and Urban Development) as one of the five national counseling agencies for American seniors interested in taking up a reverse mortgage loan.

A reverse mortgage is a type of loan taken by senior home owners/borrowers aged 62 and above by converting a portion of their owned home equity into cash while continuing to live in the same home for as long as they want. Any senior home owner wanting to take a reverse mortgage is first needed to obtain counseling from an approved agency, before they take up this kind of loan.

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A Massachusetts Division of Banks spokesman said that state lenders will need prior government approval to originate the home equity conversion mortgages (HECMs) for purchasing homes in Massachusetts.

As per existing law in Massachusetts, lenders offer reverse mortgages approved by the Division of Banks to senior borrowers - the “owner of the real estate”. The Banks Division Spokesman Jason said that the law did not preclude lenders from doling out HECM for Purchase programs. But they will need to amend their existing purchase plans or submit new ones.

The FHA (Federal Housing Authority) made available the HECM for home purchase program since January 1, 2009. But till date no lenders in Massachusetts have submitted an application to provide the reverse mortgage for home purchase program for home buyers.

During 2008, Steven Antonakes, Massachusetts Commissioner of Banks issued cease-and-desist notices to some reverse mortgage lending companies in Massachusetts that were not approved.

A credit union in North Carolina,  has completed funding of more than $5 million of reverse mortgages since August last year, when it launched a private-label reverse-mortgage product.

The Raleigh, NC, based company State Employees’ Credit Union issued a statement saying it has funded nearly 50 reverse mortgages. SECU offers a reverse mortgage program that is not insured by the FHA (Federal Housing Authority). The reverse mortgage available to senior home owners aged 62 or above, has a fixed rate of interest with simple accrual, a 1% origination fee and doesn’t need payment of mortgage insurance premium (MIP) or monthly service fees.

This reverse mortgage product was developed in coordination with the North Carolina Commissioner of Banks, the North Carolina Housing Finance Agency, the North Carolina AARP, Retired Government Employees Association, and Resources for Seniors, a counseling group.

The senior VP of SECU loan administration, Phil Greer, said that the credit union developed a loan by itself after a lot of research made on the standard available reverse mortgage products. The resulting reverse mortgage loan provides more available funds to members for meeting daily living expenses.

The SECU is a not-for-profit cooperative that serves 1.5 million members in 223 branches across the country.

Texas in the United States has been booming as the 3rd largest state in terms of number of reverse mortgages in the country according to data available from Reverse Market Insight. California and Florida are the first two states when it comes to reverse mortgages.

The TARML (Texas Association of Reverse Mortgage Lenders) announced that Texas originated over $2.2 billion worth of reverse mortgages between the years 2004 and 2008. There were a total of 7,087 loans made out during the year 2008, an increase of 23.5%.

The reverse mortgage industry in Texas is on pace to extend above $855 million to senior home owners - a 38% increase from last year. There are now more than 1.5 million residences where senior home owners are aged 62 or above. In 2008, 201 lenders originated reverse mortgages in Texas, up from 116 during the previous year.

The combination of potential and number of lenders will make the Lone Star state as a very positive area in the country for reverse mortgages.

Over the past two years, senior Texas home owners have borrowed over $1.1 billion, as reported by the TARML. Texas will shortly originate its 30,000th reverse mortgage later this year.

More and more senior home owners are seen to be taking up reverse mortgages across the country. The number of reverse mortgages is hitting a new high since last month. The HECM (home equity conversion mortgage) program allows senior home owners aged 62 and above to take cash out of the equity in their homes without needing to make any mortgage payments.

During February 2009, a record number of 11,261 reverse mortgage loans were taken. The recent increase in the ceiling limit for reverse mortgage from $417,000 to $625,500 has allowed more seniors to apply for reverse mortgage loans.

Seniors see reverse mortgages as an important source of income that can replace stock market investments returns. Seniors are willing to take reverse mortgages to avoid the foreclosures and continue to live in their own homes. They get additional income through reverse mortgages to pay the bills and meet the daily expenses.

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