HECM - Most Popular Reverse Mortgage

4/29/2007

posted by N. Sioris

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The most popular Reverse Mortgage is the Home Equity Conversion Mortgage, also referred to as the HECM. The HECM is federally insured through FHA and backed by HUD. The HECM reverse mortgage, for most people, offers the most money as well as the lowest interest rate.

90% of all the Reverse Mortgages originated in the United states in recent years have been HECM loans. The FHA insurance fund is what guarantees that the lender will always be able to make the payments to the homeowner. Or in the case of a line of credit, that the funds will always be available as long as the reverse mortgage is in effect.

Home Equity Conversion Mortgages are offered in every state as well as Puerto Rico. The maximum loan amount for HECM reverse mortgages varies by county and state. There is currently some discussion taking place among policymakers in Washington, DC about the advisability of making the maximum loan amount uniform throughout the nation, in the same way that Fannie Mae loans are.

To Qualify For a HECM Reverse Mortgage, all owners on title to the home must be at least 62 years or older. All applicants must take HUD counseling before they can make an application for a reverse mortgage. The counseling is done, to insure that seniors are fully aware of how a reverse mortgage works. During the counseling session seniors are advised of other options that they may not have considered. The counseling safeguard has gone a long way in helping seniors and their families feel well informed and comfortable when considering the prospect of a reverse mortgage.

You can locate HUD approved counselors through the AARP Foundation's Reverse Mortgage Education Project at 1-800-209-8085

You can also locate the HUD-approved counseling agency nearest to you by calling 1-800-569-4287.

Seniors: Be Aware of Reverse Mortgage Scams

4/28/2007

posted by N. Sioris

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Seniors need to be aware that even though the vast majority of the people working in the Reverse Mortgage field are reputable, there are a few that are not completely honorable. A few things that the senior should be aware of are:

Encouraging Reverse Mortgages So That Seniors Can Buy Other Investments
Some companies that are selling expensive insurance products or annuities, may suggest using reverse mortgage proceeds to fund the purchase of these products. Be aware that the commissions paid to sell these products are quite large. There is a lot of incentive on the part of the sales person to find a senior that has access to a large lump sum of money to invest in an annuity or a life insurance product. Seniors should know that a reverse mortgage itself can be a form of an annuity, if the homeowner chooses the tenure option. Additionally, if a senior does purchase one of these insurance products with reverse mortgage loan proceeds, they need to factor in the cost of obtaining the reverse mortgage plus the cost of the insurance purchase. Often times the combined costs will be greater than the benefit provided by the annuity or insurance product.

Charging For Information That Is All Ready Free
There are some that are charging for information that is all ready available for free, such as recommending a lender. Beware of estate planning companies that charge for information that HUD provides for free. HUD does not recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender. HUD provides this information without cost, and HUD approved reverse mortgage counseling agencies are also available for free.

If you are looking into reverse mortgages, there are several things that you can do to protect yourself from falling victim to these types of scams

1. Speak with a HUD approved reverse mortgage counselor. The counselor will help you understand reverse mortgages and help you evaluate your situation.

2. Obtain several offers from different reverse mortgage lenders in order to compare different options. The rule of thumb is to get at least three separate offers so that you have a good comparison of the terms offered.

3. Make sure you understand all the terms and conditions within the reverse mortgage contracts. Your reverse mortgage counselor can guide you through the contracts.

4. You generally have three business days after signing the loan document to cancel it for any reason.

If you suspect that a company is operating in violation of the law, let your reverse mortgage counselor know and then file a complaint with your State Attorney General’s office or banking regulatory agency and the Federal Trade Commission (FTC) at www.ftc.gov.
Locate A HUD Approved Reverse Mortgage Lender Near You.

Reverse Mortgage Popularity Skyrockets

4/27/2007

posted by N. Sioris

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Reverse Mortgages are gaining in popularity as the aging population in America grows larger each year. In case you are not familiar with what a reverse mortgage is, here is a short definition:

A reverse mortgage is a unique type of loan or financial planning tool that allows senior homeowners that are 62 years or older to access the equity that they have built up in their homes. A reverse mortgage is unlike any other type of mortgage, because a reverse mortgage requires no monthly payments to be paid to the lender. It also does not require the senior homeowner to qualify for the loan based on credit or income.

The equity that is paid to the homeowner can be taken as a lump sum, a set monthly amount or a combination of the two. The money is non-taxable and does not adversely affect the senior's Social Security or Medicare benefits. The amount of money that a senior can qualify for is determined by the age of the youngest owner on title, the value of the property and it's location, the interest rate at the time of application, and the amount of equity the senior has built up in the
property.

One of the biggest criticisms you will hear when you first look into the pros and cons of getting a reverse mortgage is that the closing costs are expensive. Well at face value, that seems like a true statement. If you compare the closing costs of a reverse mortgage to the closing costs of a traditional forward mortgage, you will find that a reverse mortgage can cost more than twice as much in fees than a forward mortgage. But lets take a moment and analyze why this is the case. Income is paid to the homeowner and is guaranteed for as long as the seniors remain in the home, regardless of how long that is. The reason that the government can stand behind such a huge guarantee like that, is because they have essentially required every reverse mortgage borrower to contribute to the insurance fund that will payoff the lenders in case of a shortfall. So instead of your estate or your heirs having to make up the shortfall, the insurance fund is tapped to make the lender whole. If this insurance fund was not there, you can bet there would be few, if any, lenders making reverse mortgages with the safeguards that are in place today. Each FHA-HECM reverse mortgage that is initiated today carries a 2% fee for this insurance fund which is a part of the overall closing costs associated with a reverse mortgage. So, yes the costs are higher for a reverse mortgage, but they are justified in order to make the reverse mortgage the valuable financial planning tool that it is for many seniors today. Many seniors would be strapped for money if they did not have the ability to tap into one of their biggest assets, their home equity.

Reverse Mortgages are becoming more and more popular by the day, as more seniors are becoming educated about how they really work. There have been a lot of reverse mortgage myths perpetuated over the years as well as a lot of improvements made to the reverse mortgage products that are currently offered. The number of federally insured reverse mortgages made in the United States increased by 77% in the fiscal year 2006 compared to 2005. More reverse mortgage products are being developed and will be introduced to the market place in upcoming months. You can see here how much money you can get from a reverse mortgage.

Baby Boomers Drive Reverse Mortgage Boom

4/20/2007

posted by N. Sioris

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With 78 million baby boomers on the verge of retiring, reverse mortgages are soaring in popularity. Life expectancy is much longer than Franklin Roosevelt ever imagined when he designed the Social Security retirement benefit program. Consequently, government entitlement programs including Social Security and Medicare are dangerously over extended. It is only going to get worse in the years ahead as the baby boomers retire and tap into these programs.

Lawmakers in Washington, DC see this disaster looming ahead, and are encouraging Americans to plan on taking more responsibility for their own financial well-being in retirement. The federal government is actually encouraging seniors to consider reverse mortgages as a way to supplement their income as well as pay for their own in home health care needs and health care costs. The HECM reverse mortgage program sponsored by FHA and HUD provide incentives for seniors that will use reverse mortgage proceeds to pay for health care needs.

If you are a senior homeowner 62 years or older you may want to see whether a reverse mortgage is right for you. There is a lot to learn before you decide. Reverse mortgages are wonderful financial planning tools for some people, but they are also complicated and should be fully understood before deciding if it's right for you or a loved one. You can request a FREE Reverse Mortgage analysis here, and find out how much money you might be able to receive from a reverse mortgage.