Making Sense of Reverse Mortgages Information you need to make a good decision!

March 30, 2010

Underwriting Requirements?

Filed under: Uncategorized — Scott Larson @ 11:36 am

One of the most talked about issues in the industry publications is the issue of “technical defaults.”  This is where the homeowner is not able to keep the property taxes paid, and the home insured.

This is one of the few areas where the inaction of the owner can result in a foreclosure. Until now the issue of the technical default has been (and may still be) an issue that only affects a very small portion of the reverse mortgage consumers, but as we continue through these difficult economic times more consumers are at risk of defaulting. HUD is not releasing the figures of the people that are in technical default.

One way that this is to be addressed is by way of an announcement of a new HUD counseling protocol. With its next revision HUD will require an analysis of a seniors income and assets to make sure that there is a likelihood that the senior will retain the ability to keep the taxes current and the property insured.

Should this appear to be an issue, HUD may allow/require a set aside for the payment of these items, reducing the net amount available for the senior.

This is not a credit or financial underwriting, just another measure designed to protect the senior, making sure that the program is not a stopgap measure.  A reverse mortgage does not have income or credit requirements.

As always, should you have any questions please give me a call.

March 24, 2010

a GREAT summary of the economy

Filed under: Uncategorized — Scott Larson @ 8:54 am

Going through some of my paperwork and found this summary of the economy Definitely worth a few minutes to look at!

A better use of retirement funds?

Filed under: Uncategorized — Scott Larson @ 8:34 am

I had an inquiry today for a person that owed a little to much to get a reverse mortgage, she would have had to bring in cash to the escrow company to pay down her current mortgage to the new loan.  While I have not heard back from her yet, I  think the answer I gave to her is instructive;

I have had people take money out of retirement accounts to close a reverse mortgage.  Sometimes a better use of the money than leaving it to “grow” in retirement and generate $1300-$3450 income per year (2-5% return) is to use it to pay down the mortgage and “save” (not pay) $24,000/yr. 

It’s hard to really play this out on a financial level, because there are so many variables.

  • How many years will she live?
  • How else could she invest the money?
  • How much of her savings/retirement would this use up?
  • How long does she expect to be in the property?

There is a significant cost to a reverse mortgage, both as an up front cost, and the cost of the interest, but if you look at eliminating over $24,000  per year in cash flow, that can make a significant difference in a retirement!

March 18, 2010

Another source of funds for seniors

Filed under: Uncategorized — Scott Larson @ 10:26 am

The  New York Times today has an article on life insurance and selling it to generate cash for a senior, cash that can be used for any purpose… I always hate to see advice like this, because it is never placed in the context of  this is a one time event, you can’t go back to this well again.

When considering a reverse, or selling insurance, make sure this decision is not made lightly.  Yes, there is a place for using some of these proceeds to enjoy life, to help children etc., but this must be placed in the overall financial picture.   

And especially with the life insurance product, don’t take the first offer you get;

Oklahoma needed to address a spate of out-of-state buyers who solicited older residents and encouraged them to buy and then sell policies, offering perhaps $30,000 or $35,000 for rights to a $1 million policy, she said. (emphasis mine)

Each state regulates these types of sales, unlike reverse mortgages which are federally regulated.

Read the rest of the article here.

March 17, 2010

Backround information

Filed under: Uncategorized — Scott Larson @ 10:36 am

In a post in Origination News today, Brad Finkelstein writes about the demand for mortgage backed securities based on reverse mortgages, but the comment that caught my attention was this (emphasis mine):

The underlying current of the meeting is NRMLA’s code of ethics. “I have been in the business for over 40 years and I have never been around a group of people who are so focused on treating the customer right,” Mr. Yeary said, adding the aim is to make sure as a trade association all of the members are following the code of ethics.

“Let’s face it, when you are dealing with seniors, one bad actor can stir up a whole bunch of stuff that can have a negative effect on the program,” he continued.

Mr. Yeary also noted the passing of a milestone, that reverse mortgages now have a market share penetration of greater than 1% of the eligible population.

“We’re all very optimistic this program will continue to be a viable alternative for a lot of seniors.”

Nice to see this recognized.  You can read the rest of the article here.

A little bit behind

Filed under: Uncategorized — Scott Larson @ 10:10 am

My goodness, the fun of dealing with an aging parent!

I apologize for the lack of posts but since Jan 27 my mother has had 2 major strokes, a pulmonary embolism and a fractured pelvis…

She is currently in a skilled nursing facility, with the need to come home to 24 hour, live-in care at a cost of about $7000 per month.  And yes, I am looking at a reverse nortgage.  She has enough money for about 8 months of care, we will see how she does during that time.

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