Market Chaos and Reverse Mortgages

9/23/2008

posted by N. Sioris

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We are witnessing an historic calamity in our financial markets that is unprecedented since the stock market crash in 1929, which was followed by the great depression.

The total affects of this meltdown are completely unknown to us as regular American taxpayers, and even more frightening, they are unknown to those "running the show" right now too. It's anybody's guess as to what all of the ramifications will be and how truly expensive it will be for us and for future generations.


Now Might Be The Time

If you have been looking into a reverse mortgage, but now you are second guessing yourself about whether this is a wise time to be making any financial decisions, here are some thoughts to consider.

Since the federal take-over of Fannie Mae and Freddie Mac, interest rates have actually come down. It's hard to say how long they will stay down or if they could possibly go even lower in the short term. However, with the proposed 700 billion dollar bailout being tacked on to our all ready massive national debt, it is highly likely that interest rates will have to go up in the future and inflation will rear its' ugly head.

As the government prints money and continues to spend like drunken sailors, the value of the dollar loses ground to other currencies. For example, not so long ago the Euro was worth less than a dollar. Today it takes $1.45 to buy 1 Euro.

Yesterday oil prices had its' largest one day increase ($16.00/barrel) in history. The reason oil prices have been soaring is because the oil producers require more dollars because currently the dollar has less purchasing power. In other words, the dollar is "worth less" than it was in the past.


The Affect of Inflation

In terms of all types of mortgages, inflation means higher interest rates. Higher interest rates for reverse mortgages in particular, means that you as a senior homeowner will have less money available to access through a reverse mortgage, because the accumulating interest will be charged at a higher rate going forward.
Additionally, as home values tumble across the entire country, your eligible loan amount also decreases. Less equity, means less cash to you from a reverse mortgage.

So if you think a reverse mortgage will benefit you, now is the time to take a serious look at whether you should act quickly while interest rates are low and home values possibly have not hit bottom yet. You may kick yourself later, if you wait.

HECM Reverse Mortgages Are Non-Recourse Loans

9/16/2008

posted by N. Sioris

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HECM reverse mortgages, insured by FHA and backed by HUD are the most widely used reverse mortgages in the U.S. It is estimated that 85 to 90% of all the reverse mortgages originated are HECM reverse mortgages. (Home Equity Conversion Mortgage.)

The reasons for the popularity of HECM reverse mortgages are many. However, the purpose of this article is to define one of the major reasons for their attractiveness to consumers.

With Wall Street in turmoil from lack of regulation and financial titans like Bear Stearns and Lehman Brothers falling like domino chips, people are generally unnerved and seeking safety. Fear of anything financial or mortgage related is paralyzing people that might be in need of a mortgage product today.

If you are a senior homeowner thinking about obtaining a reverse mortgage in today's market, there is a safety feature built into FHA insured HECM reverse mortgages that is called "non-recourse." The term non-recourse, means that you or your heirs are not personally liable to the lender at the time your HECM reverse mortgage is paid off.


The House Stands Alone For The Debt

In its' most simple definition; your house stands alone for the debt. This means that at the time of repayment of the reverse mortgage plus interest, if your home cannot be sold or refinanced for the total amount owed on the loan, you, your estate or your heirs cannot be required to pay off any shortfall that may exist. The lender does not have "recourse" to anything other than your home. Not your other assets, not your income, or that of your heirs or estate.

Even if you live to age 112, and have received monthly loan advances throughout your lifetime, and your home declines in value between now and then, and the total amount of money that you have received plus interest from your HECM reverse mortgage is greater than the amount your house can be sold for, you or your heirs can still never owe the lender more than the value of your home. The pay off amount to the lender is limited by the net proceeds from the sale of your home.

At a time when home values are declining in most areas across the country and the economy is suffering from toxic lending practices and unregulated financial markets, it can be reassuring to have the "non-recourse" provision included as one of the safeguards for HECM reverse mortgages.

Click here to read about additional safeguards for HECM reverse mortgages.

Can I Be Forced To Move or Sell If I Get A Reverse Mortgage Loan?

9/07/2008

posted by N. Sioris

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You can never be forced from your home or required to sell your home if you have an FHA insured HECM reverse mortgage loan. A question that comes up frequently from folks that are considering a reverse mortgage is:

"If I live long enough to use up all the equity in my home, will I be forced to sell my home and pay off the reverse mortgage lender?"

The answer to this question is an unequivocal "NO."

As long as you continue living in your home as your primary residence, keep it properly maintained and pay your real estate taxes, you will never be forced from you home. If you live so long that all your equity has been paid out to you, or if your property value drops after the loan is in place, it is not your problem.

HECM reverse mortgages are non-recourse loans, which means that the house stands alone for the debt. When you take out a HECM reverse mortgage, one of the closing costs is the FHA insurance premium. The insurance fund is used to pay the difference to the lender, in the event of a shortfall at the time that you do leave your home permanently or sell. You or your estate are NEVER responsible for any shortfall at the end of the loan term.


HECM Reverse Mortgages Become Due:

* When the last borrower passes away.
* The borrower sells the home.
* The last borrower leaves the home for 12 consecutive months.
* The home is not properly maintained.
* Real estate taxes or property insurance are not paid.

A couple of the most attractive attributes of a HECM reverse mortgage loan is the guarantee of a payment free mortgage for as long as you live in your home.

If you elect the tenure income stream, you are guaranteed a fixed amount of money being paid to you on a monthly basis for as long as you live in your home. NO MATTER WHAT! This loan has the full faith and credit of HUD and FHA standing behind it.

Click here to read more about additional safeguards for HECM reverse mortgage loans.