Furthermore, according to a 2006 AARP study, 93 percent of people who received a reverse mortgage were happy with their choice, while only 3 percent said the effect of the reverse mortgage was mostly negative.  So, if you are considering a reverse mortgage click here to find out some more information.

A reverse mortgage could not only help keep parents out of a nursing home and provide money for paid caregiving, but could also help prevent stress upon the child caregiver.

Use our new reverse mortgage calculator to see if a reverse mortgage is right for you.

Senate Bill (SB) 36: regulates the licensing requirements for residential loan originators in compliance with the federal Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act.

SB 237: requires appraisal management companies (AMCs) and appraisers register with the Office of Real Estate Appraisers and subjects appraisers to the provisions of the Real Estate Appraisers’ Licensing and Certification Law.

SB 239: raises the crime of mortgage fraud from a misdemeanor to a felony and makes it easier for prosecutors to obtain fraudulent loan documents to investigate cases.

Assembly Bill (AB) 260: places restrictions on subprime loans and prohibits originators from “steering” borrowers, or encouraging borrowers to buy riskier loan products when they are eligible for affordable products. It also gives state regulatory agencies the authority to suspend or revoke the licenses of real estate lenders and mortgage brokers that violate the state’s lending laws.

AB 329: sets guidelines for reverse mortgages originated for elderly borrowers — those over 65 years old — requiring specific disclosures and offering counseling service referrals. Originators are also prohibited from selling other financial products to a reverse mortgage borrower.

AB 957: gives the buyers of foreclosed property the right to choose local escrow officers to complete transactions. It prohibits the seller of a residential property from requiring the buyer to use an escrow service company or purchase title insurance chosen by the seller.

AB 1160: requires originators to provide borrowers with a mortgage summary document translated in the language the contract was verbally negotiated.

How Much Money You Can Get for a Reverse Mortgage Will Increase and Qualifying for a Reverse Mortgage Will Get Easier with the FHA Modernization Bill

The FHA Modernization Act is designed to improve the Federal Housing Authority’s ability to help Americans obtain safe and affordable home loans and many see the Act as an answer to some of the woes of the subprime debacle. The Act is a bipartisan measure and has the support of the Bush Administration as well as both consumer and industry groups.

S. 2338, the Federal Housing Authority (FHA) Modernization Act, is good news for borrowers interested in a Reverse Mortgage. The Bill has been passed by the Senate by an overwhelming majority (93 to 1) and many hoped that it would be tacked onto the Economic Stimulus Package and be signed into law this week. However, it was not and is now waiting to be voted on by the House of Representatives. The House version of this Bill differs in many ways, but on HECM Reverse Mortgage issues, the House and Senate versions are identical.

The FHA Modernization Act Will Improve the Terms of Reverse Mortgages

The FHA Modernization Act will change the HECM program (HECM is the most popular type of Reverse Mortgage) in the following ways:

• Offer a Single National Loan Limit: Currently the actual amount you can qualify for with a HECM Reverse Mortgage varies depending on your county. The FHA Modernization Bill sets a single national limit of $417,000.. For most borrowers this means more money is available to them.

• Eliminate of the Authorization Cap: Currently only a set number of Reverse Mortgage loans may be granted. The FHA Modernization Act eliminates this limit, enabling the FHA to authorize as many loans as the market demands.

• HECM Could Be Used for Home Purchase: Currently Reverse Mortgage borrowers must reside in their home for at least one year before they can get a Reverse Mortgage on it. The FHA Modernization Act enables borrowers to actually purchase a home with a Reverse Mortgage — assuming an adequate down payment. This change makes a Reverse Mortgage an appealing loan for retirees who are downsizing and others.

• HECMs Could Be Used on Coops: Currently only single family homes are eligible.

• New Limits Would be Set on Reverse Mortgage Origination Fees: Fees would be limited to 1.5 percent of the maximum claim amount verses the current 2% percent of the maximum claim amount (or FHA lending limit in the county). More information on fees is available here:
  • New Fees:

  https://nrmlaonline.org/nrmla/publications/midMonthReport.aspx?article_id=578

  • Current Fee Structures:

  http://www.newretirement.com/Services/Reverse_Mortgage_Fees.aspx

As a whole, these changes should mean more money and better terms for seniors doing a Reverse Mortgage.

Learn More About FHA Modernization and Contact Congress Now

If you wish to see the FHA Modernization Act become law, consider contacting your Congressperson. You can locate them here: http://www.house.gov/

To learn more about The FHA Modernnization Act, visit here:

http://www.opencongress.org/bill/110-s2338/show

Reverse mortgages are mortgages whereby the payment streams of traditional mortgages are reversed. Instead of the bank lending you a sum of money to finance a new house and you paying the loan back over time (a forward mortgage), a reverse mortgage is structured such that the bank either makes monthly payments to you, gives you a lump sum or issues you a line of credit (all based on your home equity) and the loan is repaid with interest when you either sell your home or die. The big difference with a reverse mortgage is that it is a non-recourse loan – the amount due on the loan can never exceed the value of your house (which is good for the borrower). The lending bank takes the risk that the loan amount won’t grow faster than the equity in your home.

The major drawback of a reverse mortgage is that you will lose some or all of the equity you have built up in your home when you move or pass away. But if you are struggling to make high interest payments and face foreclosure, taking out a reverse mortgage may be an option to prevent the loss of your house. The major qualification for a reverse mortgage is that you have built up enough equity in your home and that you and your spouse are both 62 years old – there are no credit or income requirements.

It used to be difficult to find lenders willing to issue reverse mortgages and buy products other than the plain vanilla government-backed HECM (Home Equity Conversion Mortgage), especially at reasonable costs. Now, more than a dozen large banks and mortgage lenders, the largest issuers being Wells Fargo and Financial Freedom, offer a variety of reverse mortgage products, and there are thousands of smaller lenders throughout the nation. Costs have gone down – although they are still high, with fees typically more than 5% of the home value – and some issuers have reduced the minimum age requirement to take out a reverse mortgage to below 62. It has also given people more flexibility. For example, government-backed mortgages are subject to government rules, one of which prevents homeowners from cashing out above a certain limit (borrowing limits are capped based on where the homeowner lives). But private lenders who have stepped into the reverse mortgage business, such as Banc of America Corp., allow homeowners to borrow more than the limit on HECMs.

As competition in the market increases – expect to see lower fees and more innovation in the reverse mortgage market. Large lenders have become interested in creating a secondary market for securities backed by reverse mortgages; they have started to buy these products and plan to securitize them and sell them to investors on Wall Street. This means more available credit for reverse mortgages, which will decrease the costs of these products.

But more choices, especially with the increased availability of proprietary products offered by private lenders, result in more homework for the consumer. It is essential that distressed homeowners who are looking to purchase a reverse mortgage investigate the options available. It is important for the client not to blindly follow a salesperson’s recommendations, and that appropriate and challenging questions are asked to ensure suitability. Don’t fall into the trap of predatory lenders; this is hopefully one of the lessons learned from the subprime mortgage crisis.