August 2, 2010| Despite Readily Available Reverse Mortgage Information, Irresponsible Journalism Still Abounds

Time.com recently published a story on July 6 titled Six Problems the Consumer Financial Protection Bureau Should Tackle First. Reverse mortgages were listed as one of the six problem areas that the new Consumer Financial Protection Bureau needs to address. Author Stephen Gandel asserts reverse mortgages need to be made easier to understand and then litters the article with misinformation and erroneous claims not supported by facts. Much of the misinformation is due to a lack of education and proper research; irresponsible journalism by Mr. Gandel’s part. Is Mr. Gandel a lazy journalist or was he under a deadline to get the story in and did not take the time to research? Irresponsible articles like this misinform the public and most importantly the seniors who read these publications who are looking for the facts about reverse mortgages.

On July 9, Peter Bell, the president of The National Reverse Mortgage Lenders Association, responded to the article to address the inaccuracies. To read the letter in its entirety, click HERE.  Mr. Bell outlined the list of inaccurate statements that should be corrected by Time:

1.  The homeowner (senior) does not sell their house. The borrower retains title, the bank is a lien holder as the reverse mortgage is just a lien on the home just like any mortgage.

2.  A reverse mortgage does not give the bank the right to sell the property when the borrower dies or moves out. When the borrower dies or moves out the bank gives the homeowner (or heirs) up to 12 months to repay the loan in any way they wish. They may sell the home or refinance; the choice is theirs.

3.  Reverse mortgages do not give the borrower the value of their home, minus the cost of the loan. The amount made available in the loan is prorated based on the age of the youngest borrower, the home’s value and the expected interest rate.

4.  Reverse mortgages fees are only significantly different from traditional mortgages in the charges for upfront FHA insurance (MIP) and service set aside accounts. Did Mr Gandel bother to find out that many lender’s have waived loan origination, service fees and even are paying some or all of the upfront FHA insurance on fixed rate products? Our previous post explains why it’s important to use an experienced broker to understand the options available.

5.  What evidence or statistics back up the claim that banks and brokers “often” abuse reverse mortgages? The National Reverse Mortgage Lenders Association (NRMLA) trade group has polled attorney generals and banking supervisors across the country and has found no evidence that reverse mortgage borrowers face serial abuse from banks.

6.  Most of the time broker’s or lenders don’t “push seniors into taking the proceeds”…as a lump sum. It’s necessary in the majority of cases as the fixed rate product makes the most money available which is often times a must to pay off the senior’s high existing mortgage balance.

These articles do a disservice to seniors and that’s why it’s important for seniors to get proper education. Reverse mortgages are the only loan program that requires lenders to put borrowers through an up-front, federally mandated counseling session. As stated in the previous post, one of the best ways to get properly educated is to deal with an experienced Reverse Mortgage Broker. Brokers who work with multiple Lenders can get the full details of each product and analyze and compare them for you. Some brokers have a thorough knowledge of the Lenders and products available in the market today. Most consumers aren’t as familiar with Reverse Mortgages as they are with Conventional Mortgages; more reason to seek out an experienced Broker to help you find the best product that suits your needs. With a wide range of products and providers, it can be difficult for consumers to determine if their company is providing information on the full menu of product options available. Consumers need to be selective and they should work with providers who have an established history and a thorough understanding of reverse mortgages, as well as the unique needs of seniors. Stay In-Home Reverse Mortgage is aligned to offer you products from the majority of competent lenders nationally. Your Senior Home Advisor is knowledgeable in the whole range of HECM pricing options.

If you are considering a Reverse Mortgage the time to move forward is now as the cost of waiting may be substantial. Please call us @ 1-800-963-8011 to speak to one of our Senior Home Advisors. 

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October 1, 2009 | Why wait? Ten reasons to do a Reverse Mortgage TODAY!

Why wait? Ten reasons to do a Reverse Mortgage TODAY!

1.  Interest rates are at almost record lows.  The lower the interest rate, the more money homeowners qualify for. As interest rates increase less money becomes available to you. For adjustable rate HECM’s the Expected Rate changes every Tuesday. Every Tuesday the amount available to you may change until you fill out the Loan Application. When you sign the Loan Application you lock in the amount of money available to you. Delaying the process can significantly reduce the amount of money available to you.  Just a .25% increase in the interest rate could result in a loss of $5,000-$15,000.

 2.  Home values are stabilizing.   After two years of home depreciation values in many parts of the country have leveled – lock in now in case they continue their slide, and remember – any gain in home value is yours, either as equity when you sell your home or when it passes to your heirs, or yours to tap into with a HECM Refinance.

3.  FHA County Lending Limits – after seeing the maximum available limits increase in 2008 and then again in 2009 the latest increase to $625,500.00 signed in to law by President Obama is only temporary through the balance of this year.  Lock in now or risk the chance of that increase going away.

4.  HUD passed reduction to FHA HECM Principle Limit – this became effective today, Thursday,  October 1^st 2009. HUD implemented a 10% reduction in principal limits for its Federal Housing Administration (FHA) insured reverse mortgage product. This is the first ever reduction to the financial benefit of the FHA HECM. Still waiting for costs to come down or amounts to increase? The cost of waiting has already been substantial.

5.  Increase you net monthly cash flow. The sooner you utilize the FHA HECM to eliminate your current monthly mortgage payment means the sooner you can increase you net monthly cash flow and live more comfortably and more securely.

 

 

6.  Deferred home maintenance – are you really going to go another winter with an inefficient furnace or windows?  Are you tired putting off necessary repairs or improvements?

7.  Never have there been more options available with the FHA HECM.  Choose from a low, secure fixed rate of 5.56%, or lock in a high value loan with a growing line of credit option or choose an option with guaranteed monthly payments to you, for life.

 

8.  The FHA HECM is the Government replacement for old style reverse mortgages. There is no safer mortgage in America today.

9.  The FHA Reverse Mortgage guarantees that you retain title to your home along with full rights and responsibilities of home ownership.  You can sell your home at any time, make monthly payments (only if you choose to), pay the loan off in part or in full, there is no prepayment penalty – and, if you should pass while in the program, your home will transfer to your heirs, not the bank and not the government.

10.  The FHA Mortgage Insurance means that your loan is 100% Government Guaranteed.  Even if your lender should go out of business, the US Government guarantees the terms of your contract.  And, if your home should ever fall in value below the amount on the note, the FHA Mortgage Insurance will cover what ever shortfall there is.

Why wait? Ten reasons to do a Reverse Mortgage TODAY should help you in your decision. Don’t let waiting cost you…as the cost of waiting may be substantial.

How can you find out how much you qualify for under the new Principle Limit calculations?

CALL STAY IN-HOME MORTGAGE and speak to one of our senior home loan advisors! 

Stay In Home Mortgage is currently the largest independent reverse mortgage broker in Washington , Oregon , Idaho , and is also recognized as a Top 25 Reverse Mortgage Provider in other states such as California, Arizona, Nevada, Hawaii, New Mexico, Utah, Florida, North Dakota, Minnesota, Michigan, Alaska and Colorado.

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July 2, 2009 | FHA HECM Fixed Rate Reverse Mortgage or FHA HECM Adjustable Rate Reverse Mortgage? That is The Question.

 

 

 

 

 

Fixed or Adjustable? That is The Question.

Are FHA HECM (Home Equity Conversion Mortgage) Fixed Rate Reverse Mortgages a better deal throughout the years for borrowers based on historical information, as compared to HECM Adjustable Rate Reverse Mortgages at today’s interest rates? Let’s take a closer look.

If you look at historical information for the last 10 years (the average term for a HECM Reverse Mortgage loan is 7 years), the borrower with a HECM LIBOR adjustable rate reverse mortgage would have an average interest rate of 6.29%. This is based off of a LIBOR margin of 3.0 combined with the last 10 year average (3.29%) of the LIBOR Monthly Index, the HECM 1 -month LIBOR. Today the HECM LIBOR 300 (adjustable HECM) has an Initial Interest Rate of 3.31%, however adjustable monthly HECM’s have a lifetime cap of 10% above the initial rate, so the Interest Rate Cap is 13.31%. The lowest HECM Fixed Rate Reverse Mortgage available today is at 5.56%.  Now let’s look at the difference in proceeds between the HECM Fixed and HECM Adjustable programs by using a Reverse Mortgage Calculator:

 Sample Loan Comparison for a 70 year old borrower with a $200,000 home:

                            HECM Fixed         HECM 275          HECM 300     HECM 325

Available            $122, 466.38       $100,000.00    $96,172.03     $91,894.02
After Fees       

As you can see, the HECM Fixed Reverse Mortgage offers borrowers the most money.  If you’re looking to maximize the amount of money that you get out of a HECM Reverse Mortgage, the HECM Fixed Rate is your best bet.  There are some disadvantages of a HECM Fixed Rate Reverse Mortgage. The main shortcoming of the HECM fixed is that it requires borrowers to make a full draw at closing. This means that you begin accruing interest on the full amount of the loan from the very first day. Because of the other options the adjustable rate mortgages allow, which include the line of credit, monthly payments and any combination, interest is not accrued until you actually receive the money. This way, you are only taking money as you need it, preserving more of your equity over time.

 Closed End vs. Open End Credit

Closed End Credit – A loan or extension of credit in which the proceeds are dispersed in full when the loan closes. Borrowers with a closed-end loan will not be able to draw any additional funds unless they refinance. Borrowers may pay back any money they do not want at closing, but they will no longer have access to the money.

Open End Credit (Revolving) – Line of Credit where no restrictions (other than the maximum credit limit) are placed on withdrawals and repayments. Any amount repaid is available for re-borrowing. Borrowers with an open-end loan may make payments, decreasing the outstanding balance and therefore increasing the principal balance available to the borrower for future use.

 Why is the Line Of Credit Option Not Available For The Fixed Rate Program? 

From a secondary marketing perspective, investors are more at risk if a Line Of Credit structure is used, because at the time borrowers draw funds the market rate can be drastically different. This means investors are lending money at “non market” rates. 

·        So, for that issue, the structure of a HECM Fixed Reverse Mortgage must be such that it is a one-time draw. 

·        HUD does not allow for Fixed HECM products from which only a portion is drawn.  In other words, you can’t say “I just want x amount of money.”  What’s left of x has to go on a Line Of Credit, or be disbursed as payments, which is undesirable for investors with a HECM fixed rate. A HECM Fixed Rate Loan with a Line Of Credit is worthless in the secondary market and as such, the pricing makes it worthless to a consumer.

In closing, I encourage you to look at the HECM Fixed when exploring your Reverse Mortgage opportunities. The HECM Fixed Rate provides you the maximum benefit combined with the security of a fixed rate that is not subject to the monthly interest rate adjustments that come with ARM products.

Stay In Home Mortgage is currently the largest independent reverse mortgage broker in Washington , Oregon , Idaho , and is also recognized as a Top 25 Reverse Mortgage Provider in other states such as California, Arizona, Nevada, Hawaii, New Mexico, Utah, Florida, North Dakota, Minnesota, Michigan, Alaska and Colorado.

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