WHO REALLY USES REVERSE MORTGAGES?

Rates: Hecm 150: 3.440%, HECM Fixed: 6.810%: Jumbo Cash Acct: 5.750%


R.M. Do People Really Use Reverse Mortgages?

A Few of Our Recent Reverse Mortgage Closings
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Southern Virginia Couple:

This couple was lucky in that they had no mortgage, and their property had increased greatly in value. But they did suffer from some early retirement health problems. He needed two knee replacements; and she had a stroke that affected her legs making it painful to walk. They needed additional funds so he could retire from his plumbing business, and to pay for their medications and food. They opted for monthly tenured payments, along with a credit line and a minimal initial payout of funds for current bills.

Fairfax Woman:

A single woman, a prior real estate agent, living on a small income from social security. She had no mortgage, some savings, but needed more cash flow. She loves her home and is doing a lot of home improvements (even laying her own kitchen floor – although she did allow workmen in to put in the new kitchen counter and sinks). For her 75th birthday this last April she went out skydiving (strapped to the instructor, thank goodness). She opted for lifetime (tenured) monthly payments.

Maryland Couple:

A couple with a wide disparity in age. He wanted to make sure that should something happen to him, his wife would have funds available to her immediately. In addition they wanted to travel and pay for their daughters wedding. They had no mortgage, good savings and opted to take all their funds in a Reverse Mortgage credit line. And the unused portion of their credit line will grow each month at an annual rate of over 6%.

Unmarried Woman:

A woman with a beautiful home fully paid for, but a minimum of savings and a medium-income. Her desire was to increase her monthly income, pay off some bills for home improvement and to pay for her dreams of traveling throughout the United States – especially Montana – and ride, ride, ride the most beautiful horses there. She opted for an initial payout and lifetime monthly payments. Update: After one trip West, she came home and bought two puppies.

The Italian Sisters:

Two widowed Italian sisters who live close together in Fairfax, VA. They live in condos, have strong savings but small incomes from their husband’s social security. The daughter of one is an Elder Attorney/CPA, who recommended they get tax-free Reverse Mortgages, instead of using their savings (which were partially taxable) to meet everyday expenses, entertainment, travel and medical costs, such as long term care insurance.

Mother and Son:

This borrower, 86, was quite ill, and deemed legally blind. Because of her extreme medical bills she was facing foreclosure. Her son was determined that his Mother be able to stay at home as she wished, instead of going to a nursing home. He has been caring for her, but his car repair business and his own health has suffered. With her approval and her Power of Attorney he arranged her Reverse Mortgage. She will no longer have a mortgage payment or medical bills, and her spendable income will increase considerably. The Reverse Mortgage will pay off all lienholders, give her cash to pay off medical bills and set up a credit line account for possible future emergencies. And, the unused portion of the creditline will grow each year.

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WHAT SHOULD BORROWERS EXPECT FROM LENDERS?

What Should Borrowers Expect From Lenders?

Posted By Dennis Haber On May 12, 2008 @ 1:49 am In Reverse Mortgage No Comments

For too long, too many lenders have been enlisting advertising campaigns that have overstepped the boundaries of reasonableness and fairness. NRMLA — the National Reverse Mortgage Lenders Association — has now set the bar with its first ethics ruling regarding advertising standards for reverse mortgage lenders.

At its eastern regional meeting in Philadelphia, NRMLA issued guidelines that every reverse mortgage lender should use — and every prospective borrower should know about. Some of the highlights include:

1. It is unethical and a violation of the NRMLA code of ethics to suggest that a loan is made by the government or FHA.

2. It is unethical and a violation of the code to suggest that a reverse mortgage is either funded by the government or is a benefit from the government. (The FHA insures most reverse mortgages, it provides no funding to borrowers or lenders.)

3. It is unethical to say that you must call a particular number first, before you can be entitled to benefits. (There is no reverse mortgage “benefit” anymore than there is a 30-year mortgage “benefit” for those who borrow a forward loan that’s FHA insured.)

4. It is unethical to suggest that a product or service must also be purchased as a condition to obtaining the reverse mortgage.

5. It is unethical to say that such a reverse mortgage is “endorsed” or “approved” by the government, HUD, AARP, FHA or NRMLA.

Since the conference, NRMLA has issued a second ethics advisory. Here are some of the highlights:

6. It is unethical to require an applicant to purchase any other product as a condition to receiving a reverse mortgage. (Think of insurance, home repairs, annuities, etc.)

7. It is unethical to refer, recommend, or offer other products that do
not provide a bona fide advantage to the senior borrower. Anyone offering other products must be appropriately licensed and follow all related rules, regulations and laws. (Think of the sale of annuities when considering this item.)

8. It is unethical to sell deferred, fixed-rate annuities or deferred variable rate annuities with surrender charges, and any financial product that contains a penalty for early withdrawal or cancellation if they do not provide a bona fide advantage to the senior. (Note that [1] BestReverseMortgage.com has consistently argued that lenders should not be allowed to sell annuities funded by reverse mortgages. Also, a number of reverse mortgage lenders refuse to sell annuities.)

9. It is appropriate and ethical to provide borrowers with written notices explaining that reverse mortgage products are complex, that caution needs to be used when considering such financial products and that it’s wise to consult with an independent professional before selecting any reverse mortgage option.

10. It is unethical to receive unreasonably high compensation as a result of cross selling. (Think of home repairs, annuities, etc.)

11. It is unethical not to provide timely, clear and concise information regarding cross selling compensation.

In the future, there will be many more such standards handed down. The challenge, I think, will be in the enforcement of same, when NRMLA members violate the letter and spirit of these opinions. It is far better that the industry police itself, rather than a governmental agency.
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Attorney [2] Piggy Bank Your Home: Tap Into The Power Of A Reverse Mortgage.
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Article printed from Reverse Mortgage Guide: http://www.bestreversemortgage.com

URL to article: http://www.bestreversemortgage.com/reverse-mortgage/what-should-borrowers-expect-from-lenders/

URLs in this post:
[1] BestReverseMortgage.com: http://www.bestreversemortgage.com

[2] Piggy Bank Your Home: Tap Into The Power Of A Reverse Mortgage: http://www.piggybankyourhome.com

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