The Reverse Mortgage Source

Why Reverse Mortgages Need Mortgage Insurance

ReverseMortgage360 — Thu, 29 Oct 2009 22:55:43 +0000

It’s important for seniors who are taking on a reverse mortgage to know their funds are protected not only from the downfall of the company they chose to service their loan but also from the pitfalls of a sagging real estate market as we have been experiencing for the past several years. When a senior depends on additional cash flow from a reverse mortgage he doesn’t want to have to worry about those payments reducing his equity to the point there will be nothing left for his heirs when he passes away or nothing left for him to pay expenses on another place if he chooses to sell the property.

When you take out a reverse mortgage that is insured through the FHA you pay two percent of the home value at the time of settlement and one half of one percent annually. The annual premium is usually aid for you by the lender and added to the balance of your reverse mortgage. You don’t need to be concerned about owning more on your reverse mortgage than the value of your home because mortgage insurance will cover any potential losses that may occur because of a declining real estate market.

Many financial institutions are going out of business either through bankruptcy or just closing their doors. Without mortgage insurance a senior homeowner could lose any funds from his reverse mortgage that lender still has. Since you don’t have clear title to your property it would mean being able to find another lender willing to assume the remainder of your reverse mortgage. Once a company closes it is very difficult to obtain any remaining assets in the form of accounts receivable or accounts payable they may still have. The premium you pay at settlement and throughout the term of the loan are your assurances that the funds of your reverse mortgage are protected from additional encumbrances or potential losses.

Mortgage insurance is essential during those times when real estate prices are declining rather than rising. Though mortgage insurance is designed to protect the homeowner, it also helps lenders in the respect the borrower never owes more on the property than it is worth. This means when the homeowner decides to move from the home or the property is sold upon his death there will be enough funds to pay off the reverse mortgage. Of course, whether there is any remaining cash will depend on the real estate market at the time of the sale, but at least the sellers will be able to clear the mortgage and provide a clear deed to new owners.

The minimal price for the insurance is small compared to the benefits it provides, especially when you look at what a senior homeowner stands to lose. These premiums also allow more flexibility in the loan amounts compared to obtaining reverse mortgages from private lenders with no government insurance on the loan.

A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of “62 Senior Moments.” If you would like more information, please call (866) 683-3690 or visit our website to research a Reverse Mortgage Lender.

Understanding a Reverse Mortgage Line of Credit

ReverseMortgage360 — Wed, 21 Oct 2009 22:06:33 +0000

A reverse mortgage credit line is an excellent option for those seniors who do not need all of the cash from their loan at one time. One thing to keep in mind is that the credit line option is only available with an adjustable interest rate—the fixed rate option is for those who want or need all of their funds from the start such as those who wish to use a reverse mortgage to pay off an existing mortgage and/or other loans with high balances. However, for those who do not want to draw against the entire loan balance a line of credit is the perfect solution.

With a HUD reverse mortgage line of credit not only does the borrower not pay interest on any unused funds but those unused funds increase in value. This additional growth is not interest as such but a growth index that is based on the interest on the loan itself. The unused funds in a reverse mortgage grow in value at the same rate as the accrual of interest on the loan plus an additional half of a percent. This means the available unused principal on the loan increases on a monthly basis giving the borrower more money with which to do as he feels necessary.

When you are looking at a reverse mortgage line of credit you want to remember the growth rate is for the borrower only. At the time a homeowner with a reverse mortgage line of credit dies only the remaining principal funds are available to his or her heirs. That means if a borrower has not withdrawn all of the money from his reverse mortgage before his death any remaining balance that consists of the growth margin will not be distributed to the heirs. This portion of the unused balance of the reverse mortgage is only available to the borrower.

In addition to its ability to grow in monetary value, the line of credit option also helps borrowers who only need cash on an occasional basis. For example a borrower may pay off his mortgage but needs funds to pay his annual taxes on the property or maybe take a vacation. The choices are abundant and will be different for each homeowner. Making the choice to use a reverse mortgage line of credit can certainly help the senior homeowner tap into the cash value of his home without paying interest on the entire loan amount. The money a borrower can save not only on interest but also using the growth factor can add substantially to the amount of cash a senior has to make his life easier.

The mortgage insurance for which you pay guarantee your money is always available for you to use. Even if the company goes out of business before you use all of your funds the money is still available. You never have to worry about your funds being frozen as many companies do if you have not withdrawn all the funds within a certain period of time.

Reasons to Refinance Your Reverse Mortgage

ReverseMortgage360 — Tue, 20 Oct 2009 21:50:27 +0000

The idea of refinancing a reverse mortgage is not one that occurs to all seniors. It may be because they don’t know they can do it or because they just don’t have enough information to know if it’s the right choice for them. It’s important to make sure you have all the information you need before you make a decision about refinancing your reverse home mortgage. There are several things you want to consider as you conduct your research in order to assure you have enough information to make an informed decision.

There are several reasons a senior might want to refinance an existing Home Equity Conversion Mortgage though the most obvious one is the necessity for additional funds. Whether it’s because of added expenses or just things that you need or want to do is of little importance—the important issues is to obtain the information you need to know whether refinancing your current reverse mortgage will be beneficial.

If you have had your current reverse mortgage for awhile, you may find that the value of your home has increased. This single factor means there is a potential you will be able to obtain more cash from your home. Several things come into play in determining the amount of money for which you are qualified: age of the borrower, prevailing interest rate and the value of the home. The average reverse mortgage is forty to seventy percent of the home’s value with the highest amounts going to older homeowners.

The change in the maximum limit is also another good reason to refinance your reverse mortgage. This is especially helpful to those homeowners who have higher priced homes and obtained a reverse mortgage under previous limits of $417,000 or lower. Currently the limit is $625,500 until the end of 2009. However, Congress may revert back to the previous limit or may approve a different amount. The current limit also includes a ten percent reduction to the principal limit on a reverse mortgage.

Even if your current reverse mortgage was a lump sum payment, you can refinance and obtain a line of credit. A line of credit allows you to schedule payments on a regular basis or request the cash as you need it. The advantage to a line of credit is you only pay interest on the money you actually withdraw, so you can actually save money be refinancing a lump sum reverse mortgage into a line of credit.

Changes throughout the real estate industry and within the HUD provisions make it attractive for seniors to refinance one reverse mortgage to obtain another one. The additional cash you can expect to gain through this transaction will allow you to do many of the things you may not have been able to do otherwise. The key is doing enough research to allow you to make the decision that will meet your monetary needs for the present and avoid undue financial hardship on your family in the future.

Is a Reverse Mortgage Right for You?

ReverseMortgage360 — Mon, 19 Oct 2009 23:12:06 +0000

As you approach retirement age you may want to think about a reverse mortgage loan to supplement your retirement income. Before you make a decision you need to weigh your options in order to determine if a reverse mortgage is right for you. It’s important for you to first be aware of the qualification process. Before a person can qualify for a reverse mortgage he or she must be at least 62 years old, live in the home full time and have enough equity in the home to support a reverse mortgage. The amount for which you qualify depends on many factors including the borrower’s age, amount of equity in the home, current interest rate and value of the home. A senior homeowner can usually obtain between 40-70 percent of the equity and the older the borrower is the more money he will be able to obtain.

Once you know you qualify you should consider any other options in order to ascertain if a reverse mortgage would be beneficial for you. The most important consideration there is the amount of equity in your home compared to your indebtedness, a figure that is even more crucial if you still have a mortgage on your home as the reverse mortgage holder will need to be the first lien holder. In this case it will be necessary to pay off the existing mortgage before you do anything else with the proceeds from a reverse mortgage. The amount of your first mortgage will affect the amount of additional proceeds you can obtain and will help you assess whether a reverse mortgage is right for you.

Even in the event you are only able to use proceeds from a reverse mortgage to pay off your current mortgage you will still have some additional monthly cash flow based on the fact you will no longer have to make mortgage payments on your home until you move or die. Of course, if you have enough equity in the home to also pay off your other debts you will increase your cash flow even more. That doesn’t mean you have to use the funds to pay off your other debts—you can use the money for any purpose you see fit including purchasing or paying off a vacation home.

The maximum lending limit for a reverse mortgage loan amount is $625,500 but as of October 1st the principal limit was reduced by ten percent. If you were considering a reverse mortgage but did not meet the September 30th deadline you will not be able to take advantage of the higher principal amount. However, you still need to weigh your options and determine if a reverse mortgage is the best option for you. If you don’t plan to live in the home until you die and are only searching for a way to get rid of some high interest loans you may want to look in another direction as you will need to pay off the reverse mortgage once you are no longer living in the house.

HUD Considering New Reverse Mortgage Product

ReverseMortgage360 — Wed, 14 Oct 2009 18:00:57 +0000

Talk has gone on for some time about the possibility of a new reverse mortgage product from HUD. It seems that recent developments indicate that it is on the horizon, but just how soon it will be available is not yet clear.

New Reverse Mortgage Product Announced

At a conference of the Mortgage Bankers Association in San Diego, CA, the Director of the Office of Single Family Program Development at HUD, Meg Burns, announced that a mini-HECM (Home Equity Conversion Mortgage) is in the works. While still only in the developmental stage, it apparently is far enough along to be announced.

One possible reason for the new reverse mortgage product is the action which was just taken by Congress to subsidize the HECM program at a cost of $798 million. The recent economic situation has forced more seniors to rely on reverse mortgages to provide them with an monthly cash flow. This influx of new applications has put a strain on the system.

Future Reverse Mortgages May Be Reduced

Another senator had recently proposed that the actual amount given to each senior be lowered by a small amount – possibly up to 5%. He said that if this were initiated, then subsidizing the plan would not be necessary. Many seniors, however, really cannot afford to have their income reduced even further. Other cuts have already taken place.

New Reverse Mortgage Product Will Work with Smaller Amounts

The new mini-HECM, it seems will provide seniors with an opportunity to work on reverse mortgages that are based on less than the entire amount of the equity. The new product is to be offered along with the more standard HECM product.

The new reverse mortgage product is not fully developed yet. Burns also stated that HUD will also have to develop a way to regulate the use of the product. One concern held by HUD is that it could start a stampede of people wanting to refinance their HUD reverse mortgage. Some time will be needed to study the possible effects once it is released.

Burns also told those attending the conference that HUD would be contacting some of the lenders to gain some feedback from them about the new reverse mortgage loans. With several obvious steps that have to be accomplished before it can be released, it is evident it will not be coming out real soon.

The new mini-HECM may also lower the interest rate, too, but more details need to be revealed. Truly, it is a product that many want to look into, but the details are not yet forthcoming. This is leading many to guess at what might be in it.

Principal Limit Reduction on Reverse Mortgages

ReverseMortgage360 — Wed, 14 Oct 2009 00:31:34 +0000

The change has begun within the reverse mortgage industry with the recent implementation of new principal limits imposed by HUD. One of the problems is the lack of sufficient notice to lenders and borrowers of the ten percent reduction. Even though there had been rumors of a principal reduction, the final notification of this change came only a week before its commencement thus providing little time for potential borrowers to arrange required counseling and obtain a FHA Case # by the September 30th deadline. Only those homeowners who were able to meet the deadline were able to obtain reverse mortgages under the previous principal limitations. Even though many lenders hired additional staff in order to provide the necessary counseling they were unable to keep up with the increase in applications the short notice caused.

This ten percent reduction may prevent some borrowers from being able to pay off their debts thus creating a reduction in their expected cash flow. That means instead of having extra cash from the repayment of debts they will have to pay those debts with their retirement income or from the monthly payments they receive from their FHA reverse mortgage if they have chosen a variable rate mortgage that allows monthly payments. This is even more chaotic for those who still had a mortgage on their homes and had to include that into the reverse mortgage—it will leave an even larger gap in the proceeds that are available for payment of debts or other necessities.

The sudden ten percent reduction in the principal amount means both lenders and borrowers have to reanalyze their needs in order to come up with a different plan from the one they had previously developed. Although this change does not affect the actual national lending limitation, it does affect the amount an individual borrower can obtain by reducing the amount for which he or she qualifies. The purpose of the reduction is to help finance the $798 million HECM subsidy that is necessary to cover projected losses due to the declining real estate market.

Whether the decision was sudden or the notification was late, does not change the fact that it is creating chaos throughout the industry. Though ten percent does not seem like a substantial amount, for those on a fixed income it can mean the difference between being able to pay off high interest debts and be able to live comfortably during their retirement years. For those who had planned to use the money to buy a smaller home the results may be even more disastrous. Unfortunately the only solution is for each senior homeowner to speak to a reverse mortgage specialist in order to work out an equitable solution for still doing the things they need to do with the funds from their reverse mortgages.

Wells Fargo Reverse Mortgage

ReverseMortgage360 — Mon, 12 Oct 2009 23:23:46 +0000

Jeff Taylor is a leader in the mortgage industry boasting of almost 40 years mortgage industry experience before recently retiring as head of Wells Fargo’s reverse mortgage division. During his tenure with Wells Fargo he was program manager of the Senior Products Group during which time he helped the company become the leader in reverse mortgage origination. He founded Wendover Funding Inc and helped the company become a large provider of sub-prime primary and reverse mortgages. Mr. Taylor is also one of the founding chairperson’s of the National Reverse Mortgage Lenders Associations where he still sits on the Board of Directors. He is a Certified Mortgage Banker and holds a Faculty Fellow Award from the MBA’s School of Mortgage Banking.

Although Mr. Taylor is retired from Wells Fargo, he officially came out of retirement recently to become chairman of Reverse Market insight. One of the key services RMI provides is reverse mortgage consulting and boast that eight of the top ten reverse mortgage lenders are customers including Wells Fargo. The company was founded in 2007 and there is little reason to question why they chose Taylor. With his track record for creating strength within the mortgage industry, he is one who will help generate enough customers for RMI to help the industry remain strong and productive even in light of a sagging economy. Whether the strength he created within Wells Fargo will remain now that he is gone remains to be seen; however, having them as customers of RMI will help them maintain some strength.

The reverse mortgage industry itself needs someone who has the ability to keep them moving forward no matter how the industry fares as a whole. With HUD lowering lending limits on reverse mortgages it’s important to have someone who is still able to find ways to keep the lenders going strong. It takes someone with a great deal of experience and expertise within the mortgage industry to insure continued success. While his retirement from Wells Fargo was short-lived Taylor continues to make an impact on the reverse mortgage industry with his continuing board membership on NRMLA and his job as chair of RMI.

Changes within the reverse mortgage industry require those who have the expertise to stay on top of the latest updates. Companies that don’t follow the latest trends will be unable to provide their borrowers with the information they need in order to make the right choices. It takes someone with not only strong leadership abilities but also someone who has been in the industry long enough to know where to look for new information and know the importance of getting that information in the hands of lenders and borrowers. Even when those in positions of authority fail to get the information to the public we depend on those who know the industry to have the information as quickly as possible. A person like Jeff Taylor who possesses these traits can ascertain that all reverse mortgage lenders have the most current information just as he provided during his tenure with Wells Fargo.

A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of “62 Senior Moments.” If you would like more information, please call (866) 683-3690 or If you would like more information, please call (866) 683-3690 or visit our website to research a Reverse Mortgage Loan.

Why You Should Consider a Reverse Mortgage

ReverseMortgage360 — Wed, 07 Oct 2009 22:54:10 +0000

If you’re 62 years old or older, own the home in which you live and need additional cash to maintain a comfortable lifestyle, a reverse mortgage may be just what you need. Why do they call it a reverse mortgage? It is called a reverse mortgage because you cash in on the equity of your home without having to make any payments on the loan unless you move or die. Basically you are borrowing from the end of your loan similar to the way you would do if you were obtaining an extension on a loan payment.

There are no restrictions on the way you use the funds from your reverse mortgage loan—you can pay off existing debt, take a vacation, buy a vacation home, give it to your children or save it for a rainy day. If you have the option to take payments, you can leave the money until you need it unless you choose a fixed rate reverse mortgage that requires you to accept all of the funds at closing. An adjustable rate reverse mortgage allows you to take the cash in increments, and you will only pay interest on the money you actually borrow from your reverse mortgage.

None of the funds from your reverse mortgage are taxable. Thus if you need an extra $2,000 monthly to support your lifestyle you will only pay taxes on your actual income sources such as pension, Social Security, 401K or any other taxed sources of income. You can choose the amount of cash you want each week, month or however you set it up with your reverse mortgage lender. Even if you still owe on your home you can obtain a reverse mortgage but you will need to provide first lien to your reverse mortgage holder. What this means is you will need to pay off your first mortgage with funds from your reverse mortgage first thus providing clear title to your property and the reverse mortgage being the only lien.

Current limits on reverse mortgages are $625,500 but that figure is only good until the end of 2009. There is some speculation it will return to the previous figure of $417,000 but there is also a possibility it will be extended or another figure will be put into place. If your home falls into the upper-priced category and you feel you might be entitled to the full amount of the limits, you want to move quickly before the current limits expire. Keep in mind that the amount to which you are entitled is based on your age, the interest rate and the equity in your home. The average for a reverse mortgage is between 40-75 percent of your home’s equity and increases as you grow older.

The limitations are national and will not change because of where you live. The only thing that will differ based on your location is the value of your home and the individual lending policies of your reverse mortgage lender. The older you are the more money you will be able to obtain in a reverse mortgage.

Reverse Mortgage Condo Changes

ReverseMortgage360 — Tue, 06 Oct 2009 22:12:46 +0000

Although condos have qualified for reverse mortgages for some time, the Department of Housing and Urban Development issued Mortgagee letter 2009-19 on June 12th that changed guidelines in the approval process. This new letter makes changes to the approval process for not only condominium mortgages but other home equity conversion mortgages (reverse mortgages) that are insured by the FHA. These new amendments were developed as a result of the new 2009 Housing and Economic Recovery Act. It is important to understand that none of the provisions of the previous legislation or the new revisions are intended to pertain to time share condominiums even if the owner spends 50 weeks out of the year in any time share or combination thereof. The provision of any reverse mortgage program state the homeowner must live in the housing unit full time which disqualifies any time share condominium.

The new approval process of condominiums is expected to become effective on October 1st after which all new condominium projects will require approval before any new mortgages will be insured. The lender must wait until after the project has been approved before he can underwrite a loan for any condo unit. The HUD mortgagee letter also states that once a condominium has been added to HUD’s list of approved projects the approval automatically expires in two years. In order for that particular condominium project to remain on the list of approved HUD projects it will need to undergo recertification. The two year term applies not just to new projects that are placed on the list but for all of the projects currently on the list. It is believed there are currently about 40,000 condominium projects on the list nationwide.

Under the new provisions direct endorsement lenders will be able to approve condominium projects for the first time. These particular lenders have been given the authority by HUD to approve condominium projects based upon the availability of their staff as well of the necessary expertise that is required for the approval of condominium projects. Those lenders that had been unconditionally endorsed by HUD to approve condominium project would be allowed to evaluate the project’s eligibility, review all documentation connected to the project and provide the necessary certification to show that the project was in compliance with all of the HUD regulations.

Under the same HUD letter beginning immediately there is no requirement for single family homes to obtain project approval. Previously manufactured homes that were part of condo projects were eligible for FHA mortgages but beginning on May 21st with the release of mortgagee letter 2009-19 their approval is limited to HUD only and they cannot be processed within the scope of site condominiums. Though many people tried to rush and obtain new reverse mortgages before the implementation of the new approval process, it is likely that some existing condominium projects may need re-certification in order to be in compliance with the new regulations. The new regulations will also stop the loan processing for any projects that have not already been approved.

Appropriations Act 2010 changes Reverse Mortgages

ReverseMortgage360 — Thu, 01 Oct 2009 14:55:49 +0000

Seniors are often the target of legislation and it seems that they will once again be hurt by new legislation before Congress concerning reverse mortgages. The Appropriations Act 2010 requires that new policies will be set concerning HUD’s Home Equity Conversion Mortgage (HECM), or reverse mortgages.

The Reverse Mortgage Problem

As the money was being decided upon in Congress, it became evident that the economy had hurt the HECM program. A limping economy meant that there would be a shortfall and the program would need to be subsidized for the first time - to the amount of $798 million.

Both the House and the Senate have already passed their own version of the proposed legislation. A committee will soon be established that will seek to unite the elements of the Bills into one.

The House’s Plan for Reverse Mortgages

The House has decided against subsidizing HUD’s under funded program. Instead, it will seek to reduce the deficit by cutting down on the principal limits by about 10%. This amount will be used to subsidize it instead.

Another issue that will be up for grabs during the committee meeting is the lending limit for next year. At present, it is set at $625,500 and the House proposes that the same limit remain in place through the end of next year. This was raised during the financial crisis of last year so that seniors who had suffered some financial loss could have a way out of their larger home and bigger bills. The amount was raised to enable many to get a new reverse mortgage and pay off the balance, and then buy a smaller home where the bills and home would be easier to maintain.

The Senate’s Plan for Reverse Mortgage Loans

The Senate was a little more generous than was the House. It wants to help subsidize the HECM program with $288 million. Then, it will require HUD to reduce its principal limit by 5% to meet the rest of the projected needs. In addition, however, there will also be an additional charge of 2.66% on new reverse mortgages to create a surplus over the expected $30 billion that will come in.

Besides the overall reduction, the Senate also proposes that the lending limit be reduced to the pre-crisis figure of $417,000. If approved, this will occur on January 1, 2010.

Seniors Will Be Hurt Either Way

Both versions of Appropriations Act 2010 will soon be before Congressional committees who will have to find a way to merge them after some agreements are made. Obviously, there will be a winner and a loser. The real loser, however, is going to be the senior.

With an already small income, seniors will now have to face a reverse mortgage that will be 10% less principal than in previous years. In addition, about the only way that reverse mortgage rates can go is up, which means even less - particularly on an adjustable rate mortgage.