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Comparing Reverse Mortgage Offers

If your parents or grandparents are considering a reverse mortgage, it pays to do your research in order to know exactly what they are getting into, in order to stay safe, and avoid scams.

Currently there is only one type of reverse mortgage available. It is called the HECM, or Home Equity Conversion Mortgage. This mortgage is insured by FHA.

You can obtain this type of mortgage from a HUD lender. Since the credit crunch, there are new rules and regulations these lenders must abide by. The fees are specific, and set by law. There are some HUD lenders, however, who may offer some type of discount.

The maximum amount a lender can offer for a reverse mortgage is $417,000. In addition, the origination fees will be charged as follows: 2% on the first $200,000 and 1% on any amount above $200,000.

What are the fees associated with a reverse mortgage? As an example, let’s assume a house is valued at $200,000. The origination fee would amount to $2500; the Mortgage Insurance Cost would be $4,000; the Closing cost is estimated at $2,200; and the Service Fee is approximately $5,345.

The origination fee is charged by the lender to implement the loan. Again, it is 2% of the first $200,000 and 1% thereafter.

The mortgage insurance cost is a requirement of HUD and is based on 2% of the home’s value up to $417,000. There is an additional .05% of the loan balance attached.

The closing costs encompass services that are performed prior to the reverse mortgage’s finalization, for example, the appropriate surveys, inspections, title searches, taxes, and credit checks.

The service fee is used to cover the costs of any future service fees, and they can range from $20 to $35.

You can compare a reverse mortgage to home equity loans, second mortgages, or a home equity line of credit. However, while a home equity loan may incur lower interest rates, since it is a variable rate, it is also possible that the monthly payments will be significantly higher.

Considering a reverse mortgage requires a great deal of research. Before the credit crunch, there were three types of Reverse Mortgage loans: HUD, Fannie Mae, and the Jumbo Reverse Mortgage. Due to decreases in home values at present, a result of the economic crisis, the only reverse mortgage now available is through HUD.

Do your research, and if you really think a reverse mortgage is right for your family, move forward with caution only through HUD. Avoid scammers or anything that sounds too good to be true. A reverse mortgage can help many seniors, but only if they don’t fall prey to reverse mortgage scammers.

February 23, 2009By pc House and Home, Mortgages money, mortgages, reverse mortgagesLeave a Comment

Beware of Reverse Mortgage Scams

With the current recession in full swing and unemployment rising, the quest by unscrupulous predatory lenders to take advantage of seniors is on the rise. One of the areas in which they are particularly insidious is in selling reverse mortgages.

There are a host of reverse mortgage scams that are plaguing our senior citizens, and steps are being taken to stop it. In this article, we will try to highlight the main things you need to watch out for when it comes to reverse mortgages.

According to HUD, deceptive practices and allegations of high-pressure sales tactics are being more frequently encountered as senior citizens are being taken advantage of under the guise of a helpful and legitimate reverse mortgage.

Borrowers also run the risk of being steered into inappropriate loans and annuities by sales agents and insurance brokers who could be working together without disclosing that relationship to the borrower. They are all in it for their percentage, and since greed is what got America into the current credit crisis, it will certainly not get us out. Common sense will.

A reverse mortgage can be of real benefit to people who truly need it, since it frees up equity in your home. Unfortunately, reverse mortgage scams were on the rise even before the current economic crisis hit. A case in point is California:
According to the Oakland Tribune dated Sept. 6, 2006, “Gov. Arnold Schwarzenegger signed a bill into law that adds protections against scam artists offering reverse mortgages.”

The new law requires that before getting a reverse mortgage, people must receive independent advice about the pluses and minuses from a certified counseling agency that does not have any profit motive. This shows you how profitable reverse mortgages can be, so buyer beware.

The law also requires that mortgage documents be translated into the language in which the loan was negotiated, ensuring that a borrower who doesn’t speak English has full access to the complex financial information. This reverse mortgage law also blocks the questionable practice of requiring people to buy annuities they may not need.

For more information on reverse mortgages, visit HUD at: http://www.consumerlaw.org/initiatives/seniors_initiative/tips.shtml.

Our seniors are particularly vulnerable these days to the scams that pervade our society. They have seen their retirement funds asvested in 401ks virtually vanish, and greed run rampant. They have seen higher taxes, and their children lose their homes to foreclosure. They have lost jobs, or are now reluctant or unable to retire.

Given the fact that so many seniors may be in financial trouble now, and are feeling more and more desperate, they become victims of relentless individuals and companies that seek to prey on their immediate financial concerns by offering seeming good advice and a quick fix to their problems.

But remember, buyer beware, and if it sounds too good to be true, it probably is.

If your parents or grandparents are considering a reverse mortgage, make sure you get involved as a back up person. By all means accompany them when they seek advice from a counseling agency so that you can assist them with any and all questions relating to reverse mortgages. Take notes, read the fine print, and get independent advice from a non-profit source.

Look up reverse mortgage scams online. Stay informed, and stay safe. Again, a reverse mortgage might be a great idea for some seniors depending on their situation, but beware of reverse mortgage scams now, to avoid disaster later.

February 19, 2009By pc House and Home, Mortgages finance, mortgages, reverse mortgagesLeave a Comment

Reverse Mortgages

Except for seniors who require long-term care, most are fiercely independent. Many seniors who feel they might be a burden to their family are opting for a reverse mortgage.

With seniors living longer than ever before, and baby boomers dealing with their own financial and senior issues, and possibly having to take on the added responsibility of caring for their older parent if they become ill, many older people would rather take out a reverse mortgage than submit their children to this fate.

According to statistics, approximately 40% of long-term care is paid for by seniors. If there are those who cannot afford to do so, the children are forced to pay for these services. This poses a problem for a senior who wishes to live out his or her life independent of their children. It also raises issues among the children such as who will care for mom or dad, and other sibling issues.

One woman writes, “My parents are 86 and 87 respectively, and both living alone now. If either one or both became ill and needed financial assistance, it seems to me that a reverse mortgage is a viable alternative in these difficult economic times. My sister and I agree that we would never put them into a nursing home. Their independence is crucial to their mindset and way of life. To deny them that independence would be cruel. At the same time, though, we need to worry about our own families, college, and making ends meet. A reverse mortgage, when done correctly, can make all that possible.”

Reverse mortgages alleviate the burden felt by seniors and their children. Imagine living in a home most of your adult life, and then suddenly becoming ill and discovering that you cannot afford to pay the bills or other expenses associated with home ownership any longer.

One of the things some of us fear, and seniors in particular, is change. Our parents usually have a schedule they live by. They receive their monthly social security and pension checks and try to stick to their budgets. They treasure every moment of life in ways only they can appreciate. But any bump in the road financially can threaten all that.

They ask for nothing other than being allowed to live out their lives in comfort and financial stability. However, if they become ill and cannot afford medical expenses or prescription drugs, their world can turn topsy-turvy.

A reverse mortgage can free their minds from worry, since it will help them secure day to day living expense. However, it is good to check out the latest options first before pinning your hopes on a reverse mortgage as the solution to your difficult problems. Given the current economic climate, the credit crunch is affecting even this area of the market.

However, if your parents or grandparents are struggling to make ends meet, it is an alternative that is well worth investigating.