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Monthly Archives: August 2010

Reverse Mortgage Misconceptions Remain says Fed Study

As part of the many proposals from the Federal Reserve last week, a new report details the work done to develop new reverse mortgage disclosures and shows that while misconceptions about the product remain, consumer protections have improved.

Conducted by ICF Macro, the research consisted of two rounds of focus groups held in Bethesda, MD and St. Louis, MO.  To assess participants’ general understanding of reverse mortgages, those without a reverse mortgage were first asked to explain how they thought the product worked. At the end of the discussion, current reverse mortgage holders were asked to share their understanding of the product.

“Responses in all four focus groups were mixed,” says the report.  ”Several participants appeared to have a good understanding of the positive and negative features of reverse mortgages, while some individuals did not understand or had misconceptions about the product.”

The most common misconceptions include the belief that by getting a reverse mortgage, a borrower is signing their home over to the bank, but the report also shows that borrowers are understanding key concepts about the product better than before.

One of the most heated topics in the industry is how to manage loans when borrowers fail to keep current on their taxes and insurance.  The report found that all reverse mortgage holders and some participants without a reverse mortgage understood that “the homeowner is still responsible for paying taxes and insurance on the property.”

Additionally, even as many politicians and consumer advocates declare that abuses from reverse mortgage lenders selling other financial products remain, the focus groups found just the opposite.  ”No one indicated that they were encouraged to purchase another financial product, such as an annuity, with proceeds from their reverse mortgage,” says the report. “In fact, one person said that he had to sign a waiver that he would not buy an annuity with the proceeds.”

However, there were several areas where borrowers were confused.  For example, borrowers expressed confusion about the mortgage insurance paid on the HECM loan.  According to the report, participants in three of the four groups either did not understand why mortgage insurance was included on the form or were unsure of how it was to be paid.  When asked who they thought collected the insurance on the loan, “all participants assumed these payments were given to the lender,” says the report.

IFC Macro also found that none of the participants in the study understood how to read the Total Annual Loan Costs (TALC) rate table.  Because of this, ICF Macro and the Board developed and tested alternative ways to present information about the costs using tables and bar charts to explain how the balance would grow over time.  Most of the changes were made to the explanatory text that accompanied the table, as well as table labels and column headings.  However, none of these changes were effective; participants continued to be very confused by the TALC rates.  For this reason, the Fed did not include it on its proposed model forms.

To help address a number of consumer misconceptions about reverse mortgages not addressed by current disclosures, the proposal by the Fed would require creditors provide a two page document that explains how reverse mortgages work and important terms and risks to consider, rather than the current documents.  The Fed said that by consolidating the reverse mortgage disclosures, “the proposal would ensure that consumers receive meaningful information in an understandable format.”

To download a copy of the report, click here.

 
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Posted by on August 25, 2010 in Uncategorized

 

Seniors Live Better with Reverse Mortgage Equity

Reverse mortgage has become pretty popular among seniors; no doubt that it offering them an excellent opportunity to use their home ownership as a security against mortgage loan. Reverse mortgage loan in increasingly gaining currency among global populace of seniors; perhaps this is the reason why everyday more and more banks and financial institutions are becoming a part of mortgage industry. From a lenders point of view, current reverse mortgage features can cause less beneficial deal but for a senior it is a win-win situation as he receives a heavy amount of loan along with monthly income as reverse mortgage equity. In fact, many seniors decide on reverse mortgage loan just because of its high benefits as with it they get financial security along with freedom to live in their own house for as long as they want.

Apart from all these benefits, reverse mortgage equity is that highly luring feature which any other loan or mortgage service can never offer to seniors. With this equity, seniors can get a steady source of income to fulfill their day to day requirements; as just a pension can never help a senior in enjoying his or her old age to the fullest, with this income all enjoyment stuff can be arranged easily. Be it a vacation or any celebration, seniors can meet up all extra expenses with this income. Reasons for taking a reverse mortgage loan may vary from home improvement to bill payment, from medical treatments to vacation in abroad but benefits will remain same as there is not any restriction regarding usage of loan amount. Reverse mortgage equity is powerful tool to re-establish a good financial position that help homeowners in obtaining a tax free cash flow.

Being a tax free income, reverse mortgage equity sets a senior free from all hassles of paying tax on his or her monthly income. Today, millions of seniors are using their income for reverse mortgage equity to enhance their post-retirement life. Reverse mortgage loan is a government sponsored facility; government launched that service with an intention to provide every senior with social security. Unquestionably, it has proved its effectiveness in filling financial security and happiness in every senior’s life, who is associated with it. Moreover, a senior also gets a facility to postpone repayment of loan till he or she live in his or her home.

Reverse mortgage equity enables a homeowner to access the money he or she has built up as equity in his or her home. If you are a senior and want to live your life in a carefree manner, strongly consider the benefits of a reverse mortgage loan and let your home help you out in making your old age pleasant.

 
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Posted by on August 25, 2010 in Uncategorized

 

How Seniors Use Reverse Mortgages to Increase Cash Flow or to Pay Off an Existing Mortgage in Maryland

Money is tight for most people with the way that the economy is today, and this can be especially true for seniors. Social security doesn’t tend to be enough to get by and when there are so many bills to pay for such as medical bills and a family to provide for, there isn’t any money left over to enjoy retirement. Things can be especially tough when there is still a mortgage to pay because the interest rates and monthly payments just seem to get higher and higher. Fortunately there is a way for seniors to increase the amount of money they receive monthly and even pay off their mortgage without having to leave behind large debts for their children.

Reverse mortgages have been around since the 1980’s and have come a long way since the first one. They are now supervised by the government and there are laws that lenders and borrowers have to follow in order to complete the reverse mortgage transaction. The way that a reverse mortgage works is different than any other kind of loan because instead of needing money to purchase an item, the person has an item and needs money. In this case, the item would be the home that a person lives in.

A person must be over the age of 62 to qualify for a reverse mortgage. The older the borrower is, the more money they will get from their reverse mortgage.

Some home may not qualify for the reverse mortgage, and other types of homes such as mobile homes have to meet certain restrictions in order to be considered. Any borrower who chooses to get a reverse mortgage must go through counseling to be sure that they understand the loan and that they can afford the fees that go along with it.

Once a senior has been approved for the loan, they can do whatever they want with their money. The most common option is receiving their cash flow in monthly payments that will continue for as long as the borrower is alive, no matter how long they live. Since the borrower is taking out money against the house, when they no longer are no longer in the home, the estate will sell the home to repay the loan, or the family can choose to refinance. If the sale of the house doesn’t make enough money to cover the loan, the borrower doesn’t have to make up the difference, because all reverse mortgages are insured by the federal government.

For questions or more information regarding a Reverse Mortgage, visit an expert at www.myreverseadvisor.com!

 

77-year-old on verge of losing home over $1,600

From the OC Register

After some seven decades of living, Gilma Gurdon bought her own home on Sandra Street in Garden Grove.A modest home, to be sure — two bedrooms, one bath, 800 square feet. But it was hers.

Gurdon worked at Mervyn’s, until the retailer ran into difficulty. Then she helped with her son Louis’s construction business, until that ran into difficulty, too. She babysits where she can, but that isn’t quite keeping body and soul together.

Now, some eight years after buying her house, Gurdon is on the verge of losing it. A foreclosure sale is slated for noon Aug. 11 at the County Courthouse.

Gurdon paid GMAC Mortgage as long as she could, but the well ran dry in December. Her son  Louis — who is having his own problems — got a job with Home Depot and is helping Gurdon as much as he can. They offered to settle her outstanding bill for nearly $7,000 a few months ago, only to find that penalties had swollen things to nearly $8,000.

There is equity in the house, so Gurdon decided that a reverse mortgage would be the way to go. Bank of America is willing to do a reverse for $210,000 — about $1,600 shy of what GMAC Mortgage says she owes, with penalties — but so far, GMAC has been unwilling to budge, Louis says.

“She’s 77 years old, she doesn’t’ really have a place to go, my own place is in foreclosure proceedings and I’m going through loan modification,” Louis said. “All we’re trying to say is, Bank of America is willing to do a reverse, saying ‘We’ll cut our costs,’ trying hard to make it happen. But GMAC is not budging on penalties. They know there is equity in the house, and they can sell it and charge the owner $60,000 for foreclosure costs. They would rather have someone 77 years old lose her equity, her house, rather than relinquish $1,600. I even thought of writing to President Obama.”

Gurdon can’t take advantage of loan modification programs, because she can’t provide a profit/loss statement from her babysitting “business.”

These things are always pretty complicated. GMAC is investigating the case for us, and we expect to hear back from them on Friday. We’ll post again with its side of the story as soon as we get it.

 
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Posted by on August 15, 2010 in Uncategorized