Archive for the 'Mortgages' Category

Reverse Mortgages may be Riskier for Younger Retirees

Posted on May 7, 2012 by Rohith

A reverse mortgage taken too early could be a mistake, a New York Times article published last month points out. Homeowners who wait until age 72, as supposed to the minimum age of 62; to take out a reverse mortgage will get considerably more money. Gathering input from consumer advocates, the Times addresses what it finds as potential downsides for people taking reverse mortgages at a younger age and concludes that homeowners at or near retirement should work with a financial planner or a lawyer specializing in estates to make sure they have a clear plan for the next 20 years of living expenses

A reverse mortgage allows people age 62 and older to tap the equity they have in their home, pay no money to the bank as long as they stay in the home, and potentially have $1,000, $2,000, or more income each month. This may seem like a lifesaver, but like all other seemingly too-good to be true deals, it does run some risks.

According to Suze Orman, the biggest risk with a reverse mortgage is that while it can indeed be a viable way to generate income, it is very important to understand that after you take out a reverse mortgage you will still be responsible for paying the property tax, the insurance premium, and all the maintenance costs for your home. If you can’t continue to cover those costs you will risk losing your home to foreclosure.

Second, there are concerns over the expense of and use of the reverse mortgage proceeds. Some borrowers withdraw the maximum amount of equity ($625,500) because they think they should, rather than leaving it in a line of credit account to accumulate interest. Many borrowers also make the mistake of treating reverse mortgage proceeds as a windfall – when it is really a loan – and spend it on frivolous or lifestyle purchases, rather than on necessary living expenses.

Finally, borrowers also fail to realize that a reverse mortgage can affect their eligibility for certain government benefits, such as social security and Medicaid. According to Consumers Union, a ‘lump sum’ reverse mortgage payout may immediately put the elder above the asset limit for SSI/Medicaid and disqualify the senior for these important benefits, unless careful legal planning is done to avoid this result. Before obtaining a reverse mortgage then, all prospective borrowers should research the impact on the money they expect to receive from government entitlement programs.

Are you on the fence on whether or not you should receive a reverse mortgage? Take 30 seconds to use the Reverse Mortgage Calculator to help finalize your decision.

 

 

 

Medicare chief says health law working

Posted on February 10, 2011 by Jason

Yahoo News, February 10th, 2011

President Barack Obama’s chief of health programs for the elderly and
poor on Thursday said the year-old U.S. healthcare overhaul was
reducing Medicare costs and called a push by congressional Republicans to repeal the law unfortunate.

Medicare and Medicaid services administrator Donald Berwick, appearing
before a congressional panel, rebuffed Republican claims that the law
would raise costs for people enrolled in Medicare Advantage (MA), which
uses private insurance providers such as Humana Inc and UnitedHealth Group Inc, to deliver benefits.

Berwick told the House of Representatives Ways and Means Committee that
the latest data show premiums are down an average 6 percent this year,
while enrollment is up by 6 percent to more that 12 million people.

Separately, Oppenheimer & Co analyst Michael Wiederhorn said he
expects growth in private Medicare plans to continue to swell as more of
the nation’s baby boomer population qualifies for the program, which
covers people age 65 or older.

Such plans “should be an attractive alternative to control costs …
compared to the inefficient Medicare Fee-For-Service,” he wrote in a
research note, adding that cuts to the plans under the health law could
squeeze HMO profits.

Overall, shares of HMOS were up slightly compared to the larger S&P
500 index. Humana shares were down 0.7 percent at $58.14 while UnitedHealth was up nearly 1 percent at $42.46 in afternoon trade on the New York Stock Exchange.

As Berwick testified, Democrats released a report by the Government Accountability Office that said many Medicare Advantage programs spend a high percentage of premiums on administrative costs and profits.

“One out of every three MA enrollees is in a plan that spends less than
85 percent of their projected Medicare payment on medical expenses,
which means more than 15 percent of their projected Medicare payment
goes to overhead and profit,” the report said. The healthcare overhaul
places limits on how much insurers can spend on profits and
administrative costs.

Read more of this article.

Supplemental Medicare Insurance:  The new healthcare reform laws have definitely affected Medicare, but there is still a need at times for additional insurance.  Consider the options available to you at NewRetirement.com

Making Mortgage Lending a Family Affair

Posted on November 10, 2010 by Jason

The New York Times, November 4th, 2010

MATT RADO is in the market for his first home, but the 41-year-old in Santa Ana, Calif., does not plan to get a loan
from a bank. Instead, Mr. Rado, who works in sales for a technology
company, plans to have his retired parents lend him the money.

The idea behind the lending strategy is this: Mr. Rado, who is preapproved for a 30-year fixed mortgage
at about 4.75 percent from a commercial lender, will get at least as
favorable a rate from his parents along with lower closing costs. At the
same time, his parents will get a higher rate of return than is offered
by a traditional savings vehicle like a savings account.

In addition, the mortgage payments will function like the annuitylike investments
that Mr. Rado’s 71-year-old father had been considering. “I just feel
better about the money going to my dad as opposed to going to some
bank,” Mr. Rado said.

With credit tight and interest rates at historic lows, such intrafamily
loans can be a win-win for parents and children. “It’s an absolutely
terrific time to make an intrafamily loan,” said Carol G. Kroch, head of
wealth planning for Wilmington Trust.

Such loans, whether for a home, car or education, are essentially family bonds that could protect money from risky behavior by others.

Rick Kahler, a financial adviser
in Rapid City, S.D., who has experience in the real estate industry and
is the author of four books on financial planning, said such loans
could potentially deliver higher returns than a double-A-rated 10-year
corporate bond, which he said was returning about 4 percent; a triple-A
bond, which he said was delivering around 3 percent; or a certificate of
deposit, which has rates that are even lower. Still, he said, the
intrafamily loans are much riskier than such investments, and so are not
necessarily equivalent to them. With an intrafamily loan, parents are
betting that their children and their children’s significant others will
have the income to repay the loan. And even if the children have
excellent credit scores
now, their status could change drastically — much faster than a
corporation’s — if a job loss or illness were to occur. To help lessen
these risks, financial planners have specific recommendations about who
should make and get such loans.

Read more of this article.

Mortgage applications rise 7 pct. as rates fall

Posted on July 14, 2010 by Jason

Yahoo Finance, July 7th, 2010

Applications for home loans rose last week as consumers
raced to refinance at the lowest rates in decades.

The Mortgage Bankers Associations said Wednesday that
overall applications increased nearly 7 percent from a week earlier.
While they have been increasing in recent weeks, they remain below early
2009 levels.

Applications to refinance home loans
were up 9 percent to the highest level since May 2009. But new
mortgages taken out to purchase homes fell 2 percent.

Those applications have fallen in eight out of the
last nine weeks, after government tax credits
that spurred home sales ended on April 30. Applications were 35 percent
below last year’s levels.

The average rate for a 30-year fixed loan sank to
4.58 percent last week, according to Freddie Mac. That was the lowest
since the mortgage company began keeping records in 1971.

About Reverse Mortgages:  Reverse Mortgages and normal home loans are tied to the same prime index rates.  When one interest rate is low, so is the other.  Accordingly, it is also an excellent moment to look into getting a low-interest fixed-rate Reverse Mortgage.  Learn more at NewRetirement.com

Reverse mortgages now a less-costly lifeline

Posted on June 28, 2010 by Jason

Marketwatch, June 28th, 2010

Upfront fees on reverse mortgages have fallen
substantially in recent months, giving homeowners interested in this
product a new challenge: how to best compare offers to find the best
one.

“Quite a few of the lenders now have reduced the origination fees,” said
Barbara Stucki, vice president of home-equity initiatives for the
National Council on Aging. “Some of them are getting rid of the
origination fees. Some are willing to pay some of the mortgage-insurance
premium fees up front.”

It’s an important development for reverse mortgages, which have in the
past faced criticism for charging high upfront costs, said Peter Bell,
president of the National Reverse Mortgage Lenders Association.

Stay in your home

A reverse mortgage allows homeowners tap their home’s equity while they
remain in the house. The amount available to the homeowner depends on
his or her age and the home’s appraised value, among other things.
Payments can be made in a lump sum or in regular installments, or a home
equity line of credit can be established, according to the Department
of Housing and Urban Development’s website. Visit the
HUD website.

Reverse mortgages are available to homeowners who are 62 years old or
older and own their homes outright or have a substantial amount of home
equity, according to the HUD site. The vast majority of reverse
mortgages are insured by the Federal Housing Administration, through the
Home Equity Conversion Mortgage (HECM) program.

Read more of this article

About Reverse Mortgages:  With competition beginning to bring the fees down, now might be a good time to consider whether a reverse mortgage is the right move for you.  NewRetirement can help you make that determination.

House Money

Posted on June 8, 2010 by Jason

Financial Planning, June 1st, 2010

Is home equity an underutilized assetin retirement planning?
Traditionally financial advisors and retirees alike tend to leave the
home out of the equation when it comes to retirement planning. Older
generations considered the home something to be preserved, paid off free
and clear before retirement and left to heirs as a legacy.”

Historically, the previous generation was dead set against ever using
the house to fund retirement,” says Brad Davis, vice president of
retirement income solutions for Nationwide Financial. And financial
planners often view their job as asset preservation rather than the
drawing down of assets. “When advisors talk to clients about assets for
retirement, home equity really hasn’t been part of that discussion,”
says Sandra Timmerman, director of the MetLife Mature Market Institute
(MMI).

But many in the industry now think it is time to reconsider home
equity as an integral part of a client’s long-term portfolio and to
figure out strategies for leveraging clients’ homes that go beyond basic
reverse mortgages. Protecting home equity “may be a luxury that future
retirees can ill afford as Social Security replaces a smaller share of
preretirement incomes, and people rely increasingly on meager 401(k)
balances rather than traditional pensions,” according to a March 2010
report from the Center for Retirement Research (CRR) at Boston College.

 

RECONSIDER
THE HOME

In fact, research suggests that failure to tap
home equity may lead to undue hardship in retirement for boomers. The
decision not to tap home equity through a reverse mortgage increases the
percentage of retirees in danger of being unable to maintain their
preretirement standard of living to 61% from 51%, according to CRR.
Today’s retirees face more pressure on limited resources due to
increased longevity and the potentially devastating cost of long-term
care. Many have no defined benefit plans and may have to care for their
parents as well as help out their children financially.

Reverse
mortgage products have had limited appeal. Only 2% of those eligible
have used a reverse mortgage, according to CRR. Advisors tend to view
these heavily regulated products as complicated and expensive, used
primarily by seniors in lower income brackets as a last-ditch solution.

Yet
seniors have a sizable portion of their net worth tied up in their
homes. In today’s economy, even affluent clients may need to reconsider
utilizing their home equity as a resource. “A lot of affluent people
have been hit hard by the stock market crash, lost their shirts
investing in real estate or perhaps their golden parachute or retiree
pension has evaporated,” says Barbara Stucki, PhD, director of the
Reverse Mortgage Initiative for the National Council on Aging. “What may
at one point have seemed like a secure future may seem less so now, and
they may need to fall back on assets [such as the home] they once would
not have considered using.”

Read more of this article.

Reverse Mortgages Now Look Cheaper

Posted on April 19, 2010 by Jason

The Wall Street Journal, April 17th, 2010

Reverse mortgages have long been considered one of the most expensive
ways to extract cash from your house. But that is changing as some of
the country’s biggest reverse-mortgage lenders are slicing closing
costs—helping even some affluent homeowners who want to generate
additional income.

Reverse mortgages allow people who are 62 years old and older to
convert their home equity into cash. Instead of the homeowner writing a
check to the bank each month, the bank pays the homeowner, who can elect
to receive a lump sum, a line of credit or monthly payments. The loan
is due, with interest, when the borrower dies, moves, sells the house,
or fails to pay property taxes or homeowner’s insurance. Heirs typically
sell the house, pay the balance and keep whatever is left.

One of the biggest criticisms of reverse mortgages has been the fees,
which can total 5% of a home’s value. But the new cuts in fees mean
that some homeowners can save $10,000 or more on the closing costs.

Genworth Financial Inc., Bank of America Corp., Wells Fargo & Co.,
OneWest Bank’s Financial Freedom unit and other lenders also have
dropped or reduced their origination or servicing fees, or both.

Why are lenders cutting costs now? To drum up business. From Oct. 1,
2009, to March 31, 2010, home-equity-conversion mortgage volume fell 22%
from the same period a year earlier. One reason: In response to falling
home values, the Department of Housing and Urban Development cut the
amount of equity that reverse-mortgage borrowers could extract by 10%
last October.

That meant some homeowners no longer qualified for a large-enough
reverse mortgage to pay off their regular mortgage—a basic requirement
for getting such a loan approved. And some consumers have been dismayed
by falling home values and postponed taking action.

Read more of this article.

About Reverse Mortgages:  With the dramatic reductions in fees from many of the major reverse mortgage lenders, the program is now more financially viable to many homeowners.  Consider if Reverse Mortgages are a proper solution for you at NewRetirement.com

Feds warn of top 5 mortgage scams

Posted on February 5, 2010 by Jason

Deseret News, February 5th, 2009

When given the opportunity, criminals will target whom they perceive
as the weakest among us. And that notion could become even more
apparent as Utah and the nation cope with the bursting of the real
estate and economic bubbles.

The
Salt Lake office of the Federal Bureau of Investigation and the Utah
Division of Real Estate have compiled a list of the potential top five
mortgage related rip-offs in 2010. Chief among them: a reverse mortgage
scam targeting the elderly.

“Scam
artists are always looking for new ways to reinvent the same crime,”
said Michelle Pickens, special agent and mortgage fraud coordinator
with the FBI. “The reverse mortgage scam is based off the ‘straw buyer’
model where they use senior citizens … against their own mortgages.”

Reverse
mortgages can be a legitimate way for homeowners to take equity from
their homes without a monthly payment, which can be especially useful
to seniors who need supplemental income during retirement, she said.

Unfortunately,
con artists sometimes convince seniors they can live in a home for
free, obtain a home loan under the occupant’s name and disappear with
the equity, while leaving the victim to repay the mortgage.

Read more of this article.

About
Reverse Mortgages:  NewRetirement pre-screens reverse mortgage lenders to work with, and provides as much information as we can about the pitfalls and considerations that seniors should know about when dealing with reverse mortgages.  Learn more at NewRetirement.com.

Mortgage Refinancing:  Learn what you should and shouldn’t do when considering refinancing your home at NewRetirement.com.

Generation Mortgage Refutes Top 10 Reverse Mortgage Myths

Posted on January 20, 2010 by admin

PR Newswire – January 19, 2010

Recent headlines pointing to the detriments of reverse mortgages aren’t getting
the story straight.  One of the nation’s leading reverse mortgage lenders,
Generation Mortgage Company™, wants to separate fact from fiction.

“Because so many Americans over the age of 62 are facing significant
financial stress due to dropping retirement and savings account balances, as
well as higher healthcare costs, many groups are targeting seniors under the
guise of helping them,” said Scott Peters, CEO and
President of Generation Mortgage.  ”HECM reverse mortgages are Federal Housing
Administration-insured products and are heavily scrutinized by regulators and
legislators looking to protect seniors’ best interests.  As a result, more than
600,000 American seniors have obtained reverse mortgages that have enriched
their lives by allowing them to stay in their homes and pay off their
bills.”

According to Generation Mortgage, the most common reverse mortgage myths are:

Myth: If I take out a reverse mortgage the lender
will own my home.

Fact: False.  Homeowners still retain title and ownership to their
homes during the life of the loan, and can choose to sell the home at any time.
As long as the house is maintained and property taxes and homeowners insurance
are paid, the loan cannot be called due.

Myth: My children will be responsible for the repayment
of the loan.

Fact: False.  Reverse mortgages are non-recourse loans.  That means,
if the property is sold to pay-off the loan when the homeowner passes away or
decides to leave the home for other reasons, there will be no mortgage debt for
the family and heirs to repay. The maximum amount owed is the current
market value of the house.  If the homeowner’s heirs want to keep the home, they
would pay the balance in-full to the reverse mortgage lender.

Myth: I cannot get a reverse mortgage if I have an existing
mortgage.

Fact: False.  With enough equity, you may be able to pay off your
existing mortgage or other debt with the reverse mortgage. The reverse mortgage
must be in a first lien position, so any existing mortgage must be paid off.
 Seniors who take out reverse mortgages are free to do anything they want with
their reverse mortgage proceeds. Paying off an existing mortgage is the number
one reason most of our clients take out a reverse mortgage.

Myth: Only low-income seniors get reverse
mortgages.

Fact: False.  Although some seniors may have a greater need than
others for the monthly proceeds or lump sum funds reverse mortgages offer, most
simply prefer to be free of monthly mortgage payments.  Without monthly mortgage
payments, many homeowners find they can maintain their existing quality of life
and build their savings to help with future expenses. A growing number of people
who have no immediate need are taking out these loans so that they have a
financial cushion for future expenses.

Myth: If I outlive my life expectancy, the lender will evict
me.

Fact: False.  Reverse mortgage lenders put no time limit on how long
seniors can stay in their homes.  Since homeowners still own the property,
lenders cannot evict them, provided they follow the program guidelines.  

Myth:  Reverse mortgage lenders pressure seniors to buy additional
financial products.

Fact:  Generation Mortgage offers only reverse mortgage products; it
does not sell seniors any other financial products.  Not every reverse mortgage
lender operates that way. In fact, Generation has a policy to safeguard seniors
from buying unsuitable financial products with reverse mortgage proceeds.

Myth:  There are no objective advisors available to seniors trying to
decide if a reverse mortgage suits their needs.

Fact:  False.  Borrowers are required to work with independent, third
party counselors approved by the U.S. Department of Housing and Urban
Development (HUD) in their local communities. This educational session helps
them make the right decision for their unique situations.

Myth: There are restrictions on how reverse mortgage proceeds may be
used.

Fact: False.  There are no restrictions. The cash proceeds from the
reverse mortgage can be used for virtually any purpose and borrowers should be
cautious of lenders attempting to cross sell other products.  Many seniors have
used reverse mortgages to pay off debt, help their kids, make ends meet or to
have a financial reserve.

Myth:  Reverse mortgage lenders take advantage of seniors.

Fact:  False.  Seniors who have been victims of reverse mortgage
lending schemes are extreme exceptions and typically victims of unsavory
lenders.  As a consumer, you should only work with lenders who are Better Business Bureau and National Reverse Mortgage Lenders Association (NRMLA) members
and adhere to those organizations’ strict Code of Ethics and Standards for
Trust.

Myth: I’ve heard I won’t qualify for a reverse mortgage because of my
limited income.

Fact: Unlike a traditional mortgage where mortgage payments must be
made each month, a reverse mortgage pays you.  Because of this, many seniors who
do not qualify for traditional financing are eligible for a reverse mortgage.

See the original article here.

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

Professional
Financial Advisors:  Find out what a financial advisor can do for
you at NewRetirement.com.

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HUD Announces Changes to Help Borrowers Purchase Foreclosed Properties

Posted on January 20, 2010 by admin

Reverse Mortgage Daily - January 19, 2010

The US Department of Housing and
Urban Development announced it was expanding a temporary policy to help
borrowers access to FHA mortgage insurance and allow for the quick resale of
foreclosed properties. 

“As a result of the tightened credit market, FHA-insured mortgage financing
is often the only means of financing available to potential homebuyers,” said
Shaun Donovan, HUD Secretary. “FHA has an unprecedented opportunity to fulfill
its mission by helping many homebuyers find affordable housing while
contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a
home owned by the seller for less than 90 days. This temporary waiver will give
FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and
guidelines to assure that predatory practices are not allowed,” Donovan
said.

According to HUD, research finds that acquiring, rehabilitating and the
reselling these properties to prospective homeowners often takes less than 90
days. Prohibiting the use of FHA mortgage insurance for a subsequent resale
within 90 days of acquisition adversely impacts the willingness of sellers to
allow contracts from potential FHA buyers because they must consider holding
costs and the risk of vandalism associated with allowing a property to sit
vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase
HUD-owned properties, bank-owned properties, or properties resold through
private sales. This will allow homes to resell as quickly as possible, helping
to stabilize real estate prices and to revitalize neighborhoods and
communities.

“FHA borrowers, because of the restrictions we are now lifting, have often
been shut out from buying affordable properties,” said FHA Commissioner David H.
Stevens. “This action will enable our borrowers, especially first-time buyers,
to take advantage of this opportunity.”

The waiver will take effect on February 1, 2010 and is effective for one
year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect
FHA borrowers against predatory practices of “flipping” where properties are
quickly resold at inflated prices to unsuspecting borrowers, this waiver is
limited to those sales meeting the following general conditions:

  • All transactions must be arms-length, with no identity of interest between
    the buyer and seller or other parties participating in the sales transaction.
  • In cases in which the sales price of the property is 20 percent or more
    above the seller’s acquisition cost, the waiver will only apply if the lender
    meets specific conditions.
  • The waiver is limited to forward mortgages, and does not apply to FHA’s
    reverse mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the
text of the waiver, available on HUD’s
website.

See the original article here.

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

Professional
Financial Advisors:  Find out what a financial advisor can do for
you at NewRetirement.com.

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

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