Archive for June, 2008 Page 2 of 3

« Older Entries
Newer Entries »

Rethinking Reverse Mortgages

Posted on June 18, 2008 by Jason

The Motley Fool. June 18, 2008

Reverse mortgages — a way for seniors to tap into their home equity without having to make monthly payments — have become a mainstream retirement-planning option
in recent years. Despite some drawbacks, for many retirees, a wisely
chosen reverse mortgage has helped fund a comfortable, active
retirement when savings and pensions alone weren’t sufficient.

But recently, the reverse-mortgage picture has gotten very complicated.

Consider: The conventional wisdom around reverse mortgages has long
been that retirees should wait as long as possible before taking one.
There are two reasons for this:

  • Reverse mortgages usually have an actuarial component,
    meaning that the lender looks at your likely remaining life expectancy
    when deciding how much to lend you. The older you are, the better your
    chances of getting more money. More money is good.
  • Historically,
    houses have appreciated over time, so that (according to the
    conventional wisdom) the longer you wait, the more equity you’ll have.
    The more equity you have, the more money you can get.

You see the problem, don’t you? (If not, read that second bullet point again. It’ll come to you.)

Yes, reverse mortgages are yet another area to take a hit from the
declining housing market. Not only are reverse-mortgage lenders such as
IndyMac Bancorp (NYSE: IMB) and Wachovia (NYSE: WB)
reeling from the housing crisis (and tightening up their lending
standards across the board accordingly), but also for those on the
borrowing side of the equation, you probably have less home equity than
you did a year or two ago.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Don’t let a reverse mortgage scam you

Posted on June 17, 2008 by Jason

News 8 Austin, June 16, 2008

This article includes a video about scams involving reverse mortgages, which we at NewRetirement strongly encourage you to view.

Mr. Finance Guy, you mean there is another scam alert?

John Henry McDonald: Oh yeah, there seems to be no end
to the number of ways that shysters foist bad ideas on our elderly
population.

And since I’m fast becoming a part of that population,
I am a little sensitive. Reverse mortgages are essentially a loan
against your house that you don’t have to repay until you’re dead or
the house is sold.

If your 62 years old, and your mortgage is paid off, you can have one. Not much more is required.

So there is a whole lot money out there, in the form
of equity, that salesmen and women can tap?132,000 were taken out 2007,
up 50 percent from 2006. I pretended I was 70 years old, that Miss
Louise was 60 years old, and I made like I was applying for a reverse
mortgage on a $300,000 home.

Based on the information I gave,
HECM said they would provide me a loan of $133,664 in a lump sum to be
used any way I wanted to, or a monthly check for as long as I lived in
my house of $786.

Now here’s the deal. Unscrupulous insurance salesmen
and women are taking advantage of these loans and placing the lump sum
in all kinds of investment products?most often some kind of annuity.
The reverse mortgage is something you can use if you need to dollars to
improve your life.

Use it only if you absolutely need it.

I would stay away from any kind of scheme that encourages you to put money in an investment of any sort.

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Selling Manufactured Homes Using Reverse Mortgage Program

Posted on June 16, 2008 by Jason

Manufactured Housing Global Network, June 16, 2008

Reverse Mortgages are becoming popular in
America. The U.S. Department of Housing and Urban Development (HUD) created one
of the first. HUD’s Reverse Mortgage is a federally-insured private loan, and
it’s a safe plan that can give older Americans greater financial security. Many
seniors use it to supplement social security, meet unexpected medical expenses,
make home improvements, and YES even
PURCHASE a home.

What is a reverse
mortgage?

A reverse
mortgage is a special type of home loan that lets a homeowner convert a portion
of the equity in his or her home into cash. The equity comes from the strong down payment that many
Seniors traditionally are empowered to make.  . But unlike a
traditional home equity loan no repayment is required until the
borrower(s) no longer use the home as their principal residence.
HUD’s reverse mortgage provides these benefits, and it is federally-insured as
well.

How does this benefit the home seller? 

  1. You can sell a land home package at 45% of retail or less!
  2. You can give a ZERO cost home to a senior that owns
    property!
  3. You can upgrade an existing client to a newer home at
    ZERO cost. 



The advantages of a reverse mortgage purchase
are: 

  1. NO FICO score requirements.
  2. NO qualifications other than age.
  3. NO mortgage payments for life
  4. Title stays in the owner’s name
  5. Opportunity to pay down loan and grow credit account

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Comfortable retirement a fading dream for many

Posted on June 16, 2008 by Jason

SFGate, June 16, 2008

Ruth Britton enjoys her part-time work as a
college instructor. But, at 69, there are plenty of other things the
Greenbrae resident would like to do – volunteer, write, take classes,
travel.

The problem is, with the cost of living rising and the value of her
investments falling, Britton can’t do without the money she gets from
teaching. She’s already put off retirement several years. Now, she says
she may have to stay on the job four or five years more.

“When someone asked me a few years ago when I would like to retire, I said 68, and here I am going on 70,” Britton said.

For more Americans, the dream of a comfortable retirement is fading.

The trend marks one of the great social transformations of the
postwar era. For four decades following World War II, an increasingly
affluent society afforded a growing number of older people the chance
to leave their jobs and enjoy a secure retirement. Social Security,
private pensions and, beginning in the 1960s, Medicare allowed tens of
millions of seniors to live decent lives without punching the clock.

About a generation ago, the tide began to turn. Guaranteed monthly
pensions gave way to 401(k)s that handed workers rather than employers
the lion’s share of responsibility for funding retirement. And health
care costs began eating up ever-larger portions of seniors’ income.

Quitting not an option

Today, for millions of older Americans, quitting their jobs is no
longer an option. That’s cold water for the leading edge of the Baby
Boom generation, just now moving into its retirement years.

“I was a typical Baby Boomer. We pretty much didn’t think about it,”
said Redwood City resident Michael Adler, 56, who works as a facilities
manager for a South San Francisco biotechnology company. “Now I’ll
probably have to wait until I’m 72 (to retire), unless my company’s
stock takes off.”

The stay-at-work trend has accelerated in the last year as the
economy has stalled, eroding savings, home values and wealth.
Government data show a higher proportion of seniors working now than at
any time in the last three decades.

In April, 16.6 percent of people age 65 or older were in the
workforce, compared with a postwar low of 10.8 percent in 1985. Among
those in the 65-to-69 age bracket, fully 30.7 percent were working or
looking for jobs, up from 18.4 percent in 1985.

The shift is affecting even the affluent. A nationwide survey
earlier this year of 60-year-olds with $1 million or more in assets
commissioned by the Oakland financial planning firm Bell Investment
Advisors found that 11 percent of those who responded said they were
postponing their retirement.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

REVERSE MORTGAGE DRUMBEATS /ALTERNATIVES: Sharing space can increase your financial options

Posted on June 15, 2008 by Jason

SFGate, June 15, 2008

Reverse mortgages are being
held out as an excellent way for house-rich but cash-poor seniors to
tap into their equity without having to sell and move. And they may
well be a good choice for some people. But there are other options
those homeowners might want to consider.

A reverse loan is intended to enable persons 62 or older to convert
part of the equity they have built up into tax-free income without
having to sell the home, give up title or move out.

The name is appropriate because the loan works backward. Instead of
you paying the lender every month, the lender pays you – either
monthly, in one lump sum or in amounts as you need cash (or in a
combination of these choices), ostensibly so homeowners can live out
their golden years in relative comfort.

The amount of money available is based on interest rates, lending
limits, the equity in the house, the applicant’s age and life
expectancy.

No payments are due while the reverse mortgage is outstanding. It is
repaid when the borrower (or, in the case of couples, the last
remaining spouse) passes away, sells the house or no longer occupies it
as his principal residence.

The borrower can never owe more than the house is worth, no matter
when he gives it up and no matter whether its value has gone down since
the loan was put on the books. Better yet, if the place sells for more
than what is owed, the excess (after sales commissions and other
selling expenses) goes to the borrower’s heirs or estate.

The knock on reverse mortgages is that they carry high up-front
charges. But some states, including California, offer less-costly
versions called deferred-payment loans. Generally, there are no
origination fees and insurance premiums, and closing costs, if any, are
very low.

The interest rate on the deferred loans is low as well, if interest
is charged at all. When it is, it is often on a fixed basis, meaning
that the rate never changes. Better yet, many programs charge simple
rather than compound interest, so interest isn’t charged on interest.
Some even forgive part or all of the loan if the borrower remains in
the house for a specified period of time.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

US life expectancy tops 78 as top diseases decline

Posted on June 11, 2008 by Jason

YahooNews, June 11, 2008

For the first time, U.S. life expectancy has surpassed 78 years, the
government reported Wednesday, although the United States continues to
lag behind about 30 other countries in estimated life span.

The increase is due mainly to falling mortality rates in almost all
the leading causes of death, federal health officials said. The average
life expectancy for babies born in 2006 was about four months greater
than for children born in 2005.

Japan has the longest life expectancy — 83 years for children born
in 2006, according to World Health Organization data. Switzerland and
Australia were also near the top of the list.

“The international comparisons are not that appealing, but we may be
in the process of catching up,” said Samuel Preston, a University of
Pennsylvania demographer. He is co-chairman of a National Research
Council panel looking at why America’s life expectancy is lower than
other nations’.

The new U.S. data, released Wednesday, come from the National Center
for Health Statistics. It’s a preliminary report of 2006 numbers, based
on data from more than 95 percent of the death certificates collected
that year.

Life expectancy is the period a child born in 2006 is expected to live, assuming mortality trends stay constant.

The 2006 increase is due mainly to falling mortality rates for nine
of the 15 leading causes of death, including heart disease, cancer,
accidents and diabetes.

“I think the most surprising thing is that we had declines in just
about every major cause of death,” said Robert Anderson, who oversaw
work on the report for the health statistics center.

The overall death rate fell from 799 per 100,000 in 2005 to about 776 the following year.

Health statisticians noted declines of more than 6 percent in stroke
and chronic lower respiratory disease (including bronchitis and
emphysema), and a drop of more than 5 percent in heart disease and
diabetes deaths. Indeed, the drop in diabetes deaths was steep enough
to allow Alzheimer’s disease — which held about steady — to pass
diabetes to become the nation’s sixth leading cause of death.

The U.S. infant mortality rate dropped more than 2 percent, to 6.7 infant deaths per 1,000 births, from 6.9.

Perhaps the most influential factor in the 2006 success story,
however, was the flu. Flu and pneumonia deaths dropped by 13 percent
from 2005, reflecting a mild flu season in 2006, Anderson said. That
also meant a diminished threat to people with heart disease and other
conditions. Taken together, it’s a primary explanation for the 22,000
fewer deaths in 2006 from 2005, experts said.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

The Great Seduction

Posted on June 10, 2008 by Jason

The New York Times, June 10, 2008

The people who created this country built a moral structure around
money. The Puritan legacy inhibited luxury and self-indulgence.
Benjamin Franklin spread a practical gospel that emphasized hard work,
temperance and frugality. Millions of parents, preachers, newspaper
editors and teachers expounded the message. The result was quite
remarkable.

The United States has been an affluent nation since its founding.
But the country was, by and large, not corrupted by wealth. For
centuries, it remained industrious, ambitious and frugal.

Over the past 30 years, much of that has been shredded. The social
norms and institutions that encouraged frugality and spending what you
earn have been undermined. The institutions that encourage debt and
living for the moment have been strengthened. The country’s moral
guardians are forever looking for decadence out of Hollywood and
reality TV. But the most rampant decadence today is financial
decadence, the trampling of decent norms about how to use and harness
money.

Sixty-two scholars have signed on to a report by the Institute for
American Values and other think tanks called, “For a New Thrift:
Confronting the Debt Culture,” examining the results of all this. This
may be damning with faint praise, but it’s one of the most important
think-tank reports you’ll read this year.

The deterioration of financial mores has meant two things. First,
it’s meant an explosion of debt that inhibits social mobility and ruins
lives. Between 1989 and 2001, credit-card debt nearly tripled, soaring
from $238 billion to $692 billion. By last year, it was up to $937
billion, the report said.

Second, the transformation has led to a stark financial
polarization. On the one hand, there is what the report calls the
investor class. It has tax-deferred savings plans, as well as an army
of financial advisers. On the other hand, there is the lottery class,
people with little access to 401(k)’s or financial planning but plenty
of access to payday lenders, credit cards and lottery agents.

The loosening of financial inhibition has meant more options for
the well-educated but more temptation and chaos for the most
vulnerable. Social norms, the invisible threads that guide behavior,
have deteriorated. Over the past years, Americans have been more
socially conscious about protecting the environment and inhaling
tobacco. They have become less socially conscious about money and debt.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Another misleading wealth chart

Posted on June 6, 2008 by Steve

This is a contribution from Bud Hebeler who runs Analyzenow.com

So here we go again. The Wall Street Journal publishes the Fed Reserve’s Wealth chart* which makes it look like our household wealth has been increasing even though savings rates are zilch.


Consider the following:

First and foremost, this includes Bill Gates, Warren Buffett, George Zoros, etc. I personally don’t expect to get any of their wealth.

The chart is not inflation adjusted. That brings the 2007 value down almost to the 1999 value.

Retirement savings do not account for income taxes due.

Then we look at the footnotes from the Federal Reserve. Real estate is adjusted upwards to replacement costs.

And finally, it doesn’t account for the growth of the population.

So, what would an honest chart on wealth look like?

Instead of the total wealth of the country’s households in then year dollars it would be the Median Value of Wealth PER Household in Today’s After-tax Dollar values. (Median Value would eliminate the problem of Gates, Buffett, Zoros, etc.) Then to really make it exciting, it would subtract the per-household-value of national debt and present value of unfunded obligations for Social Security, Medicare and public pensions. Of course, the result would be all negative values on an ever worsening plummet downward. And maybe we wouldn’t be viewed as the richest people on this earth. Maybe the dumbest, but not the wealthiest.

Bud

Americans $1.7 trillion poorer

Posted on June 6, 2008 by Jason

CNNMoney, June 5th, 2008

Americans’ net worth falls for the second
straight quarter as home and stock prices decline, but it may not hurt
consumer spending, experts say.

Americans saw their net worth decline by $1.7 trillion in the first
quarter – the biggest drop since 2002 – as declines in home values and
the stock market ravaged their holdings.

Meanwhile, the amount of equity people have in their homes fell to 46.2%, the lowest level on record.

The
net worth of U.S. households fell 3% to $56 trillion at the end of
March, according to the Federal Reserve’s flow of funds report, which
was released Thursday.

The value of real estate assets owned by
households and non-profits declined by $305 billion, while financial
assets fell by $1.3 trillion, led mainly by a $556 billion drop in
stocks and a $400 billion decline in mutual funds.

The first
quarter’s decline follows a $530 billion drop in wealth in the fourth
quarter of 2007. Until then, net worth had been rising steadily since
2003, climbing nearly 31% over those five years. During the bear market
of 2000 through 2002, household’s net worth dropped 6.2%.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Leisure Living: Reverse mortgages more popular

Posted on June 6, 2008 by Jason

Forbes, June 6th, 2008

The distinguished voice
on the radio advertisement pitching reverse mortgages has a familiar
ring: Yes, that’s James Garner, the venerable television and film actor.

Garner, in ads for a lender, touts reverse mortgages as an option
for homeowners age 62 or older who are seeking an influx of cash to
better manage their ever-mounting expenses – or just live a bit better
in retirement.

But the increasing popularity of reverse mortgages has revealed some
pitfalls that can be avoided by doing what thousands of U.S.
foreclosure victims who entered into bad adjustable rate loans should
have done three and four years ago: Ask questions, do the proper
homework, and don’t get swayed by smooth-talking salesmen.

The basics of the reverse mortgage
are simple enough to grasp (though the name itself sounds like some
kind of ‘rassling move (its wrestling; I used rassling because it’s how
it was referred to in the olden days in the South). It allows an
eligible homeowner to borrow from the home’s equity in a lump sum, line
of credit or regular payments, while not having to pay a monthly
mortgage. The homeowner retains title and must pay insurance and
property taxes while living there.

The loan and fees are due once the homeowner listed on the deed dies
or vacates the home for 12 straight months. The home is usually sold,
and the proceeds from the sale are used to pay off the loan – plus
interest and those pesky fees.

The typical customer owns the home outright or has a relatively low
mortgage balance. Many who take reverse mortgages and the monthly
payouts are on fixed incomes from Social Security or pensions and want financial help as they work to meet the rising costs of taxes, medicine, utilities and food.

Others may take part of a lump sum for home improvements, for
example. The home can’t be foreclosed upon because of missed monthly
mortgage payments. (You’re not missing payments because you aren’t
making any. So, essentially, you can only be foreclosed upon if you
fail to pay insurance or property taxes. (INTERESTING, SO WHAT HAPPENS
IF YOU MISS A PAYMENT?), and the homeowner never owes more than the
home’s value.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

« Older Entries
Newer Entries »
NewRetirement Blogs Home