Bush Signs Housing Rescue & Foreclosure Bill – Reverse Mortgage Advantages

BUSH Signs the Housing Bill: It’s Now The Law

IT’S THE LAW: BUSH SIGNS THE NEW HOUSING FORECLOSURE AND RESUE BIL INTO TO LAW AROUND 7:00 AM THIS MORNING.“Bush signed the measure in the Oval Office shortly after 7 a.m. EDT with his economic team on hand, including Treasury Secretary Henry Paulson who helped negotiate the package with the Democratic-controlled Congress.” (Reuters 7-30-2008)At last, the new Housing Bill is law, and HUD, FHA and other involved agencies will be busy putting the new programs into effect. While some of them will not be effective until October 1, 2008, we should all be preparing for using these new programs.

For senior citizens, and also Realtors, now is the time to begin planning for the changes and start our work to make sure we are ready to implement them.

For the Reverse Mortgage the changes will be:

1. A single national loan limit of $417,000 that can increase up to as much as $625,500 in high cost areas. (Currently, limits vary by county and range from $200,160 to $362,790.)

2. Ability to use FHA insured reverse mortgages to purchase homes.

3. Ability to get a HECM on a co-op property.

4. Reduced origination fees of 2% on the initial $200,000 of maximum claim amount (lesser of the home value or county lending limit) and 1% on the balance thereafter with a cap of $6,000.

5. Prohibitions on requiring the purchase of annuities and other financial products

6. Restrictions around cross selling financial products.

7. Requirements on counseling protocols, funding and practices that promote independence and quality in counseling.

REALTORS:

The Reverse Mortgage is now a tool that will be of assistance to you to help your older clients downsize, and move to an are they have been wishing for.

Often the elderly have not had enough equity when they sell their current home to purchase a home of their choice in this area, or another place, such as a retirement community. And, becaues of their lowered income, they could not qualify for a loan for the difference between their down payment (equity from old home) and the cost of the new home.

Now they can sell their home, use all or part of the equity as a down payment, and get the balance from a Reverse Mortgage. Between the downpayment and the Reverse Mortgage the house will be paid for, and the new Revere Mortgage will not have any loan payments.

In addition there is no qualifying for the Reverse Mortgage. The Reverse mortgage does not require any credit score, does not check into assets or reserves.

And, the Reverse Mortgage is a non-recourse loan. In other words the borrower/homeowner may have assets in stocks, CD’s, other real estate, but in that case, when they leave the new home by moving or death, and if the amount owed is greater than the value of the home, none of their other assets can be used to pay off the Reverse Mortgage.

At the end of the Reverse Mortgage, normally there is a great deal of equity. The heirs may refinance the home, or sell it. And FHA not only gives them up to a year to sell the home (more in a bad market), but FHA contributes 7% in closing costs.
In other words, the payback of the loan is 93%. The balance at the end is the total of the origination costs, principal used and accrued interest.

If you have questions, please call me at 703/244-8151. In addition I will be posting more details in the days ahead.

SENIORS:

Many senior have not been able to qualify for a Reverse Mortgage large enough to pay off their current loan. With the increase to $417,000 up to $625,000 in high cost areas, many more senior homeowners will be eligible for this mortgage.

Another boon is that the new FHA Loan amounts will no longer be goverened by the county one lives in. The new, larger loan amounts are the same throughout the country.

For many seniors who have a reverse mortgage from the 1990’s or early 2000’s, their home, in spite of the recent turndown, is very likely much higher in value, and the senior is older. Both these facts would indicate that it might be worth their while to investigate whether it would be financially good for them to refinance the older loan. The amount of the Reverse Mortgage is based on the value of the property, the interest rate and the age of the borrower. Depending on these factors, the borrower is eligible for a percentage of the FHA cap. With such a huge increase in this borrowing cap (from $210,000 – $372.790 depending on the county) up to $417,000-$625,000 it is possible they may be able to obtain a new influx of cash.

We have been waiting for this legislation regarding Reverse Mortgages to happen since April of 2007…and now the new opportunities are here.

One very important note of caution: Make Sure You Check Out Your Loan Officer and Your Lender. Do not let anyone take advangage of you, and make sure you understand every facet of this new improved Reverse Mortgage.

A good place to check for an ethical and professional reverse mortgage expert in your area is to go to the National Reverse Mortgage Lender Association (NRMLA) at http://www.reversemortgage.org/

. On this page are directions for selecting approved lenders. NRMLA is the Reverse Mortgage industry trade organization and oversees the ethics, professionalism of lenders, as well as representing the industry before Congress.

Please call me if you have any questions.

Gloria
703/244-8151

 

Reverse Mortgage Credit Lines and Payments Do Not Freeze

Regarding IndyMac demise, and their subsidiary Financial Freedom, Inc.  Bank credit lines may freeze; but Reverse Mortgages will continue on unscathed. 

To All:

In conjunction with the story below by AllReverse, I would like to add that the majority of Reverse Mortgages have been provided or purchased for servicing by Financial Freedom, Inc., a subsidiary of the recently fallen IndyMac Federal Home Bank, in Pasadena, CA. But, not to worry.

The fall of IndyMac the 3rd largest producer of homeloans (and, yes, subprime loans) on July 11, 2008 created a wave of fear, and major withdrawals of funds (almost $2 Billion) from the newly formed IndyMac Federal Bank, created when the FDIC swarmed into the bank that Friday afternoon. Depositers with $100,000 or less, or retirement accounts with $250,000 or less were fully insured by the FDIC, and will receive all their funds.

Reverse Mortgages

But, to date, the FDIC has stated that they do not intend to interfere with the operation of Financial Freedom, Inc., the only profitable arm of the huge subprime lender.

All Reverse Mortgage Contracts Will Be Preserved and Honored

In addition, and this is very important, Reverse Mortgage borrowers loans will not be affected. RM Borrowers who have monies set aside in credit lines, or who receive monthly payments will not see any changes.

All borrowers of the FHA/HECM Reverse Mortgages are insured by the FHA for two major items.

1. If, at the end of the Reverse Mortgage the house cannot be sold for as much or more than the balance owing, that difference is paid for by FHA Insurance, and none of the borrowers other assets can be touched.

2. A second part of the FHA Insurance guarantees the Reverse Mortgage borrower that if the institution holding the Reverse Mortgage fails, then FHA will take over servicing and all of the Reverse Mortgages and will continue to operate as the loan contract was originally set-up.

In other words if you have a credit line, it will be protected, and the unused portion will continue to grow as outined in the loan agreement. The interest will stay the same, and conditions for making withdrawals will be the same.

If the Reverse Mortgage was set up to provide either Term, or Tenure (lifetime payments) those agreements will be honored exactly the same as the original contract spelled them out.

So, if you were wise enough to take out a Reverse Mortgage, with no monthly payments, and insured by FHA, your loans are safe.

If you took out a Financial Freedom Propriety Cash Account Jumbo Loan, these, too, will continue to be serviced as originally contracted, even though they are not FHA insured. Financial Freedom is solvent, and their operations will continue.

If you have questions, please don’t hesitate to call me at 703/244-8151.

Sincerely,
Gloria
703/244-8151

Credit Lines FREEZE, But Not For Reverse Mortgages
Posted July 17th, 2008 by allreverse The “comfortable income” many seniors thought they had planned is often eroded by rising costs and incomes which don’t keep pace with those costs. Are there any guarantees anymore…     

Life doesn’t hold too many real guarantees anymore. Seniors work hard their whole lives and expect to receive a pension and often those pension funds aren’t available or the company closes and the individual is left looking for work late in life with no pension at all, starting over.

Borrowers go to their local banks and get Home Equity Lines of Credit so that they will have cash available when they need it, but then banks freeze those lines due to falling values or bank liquidity issues and if you are a senior borrower on a fixed income, you may not qualify for a new loan. The “comfortable income” many seniors thought they had planned is often eroded by rising costs and incomes which don’t keep pace with those costs.

Are there any guarantees anymore?

For those senior borrowers who have chosen to obtain a government-insured Home Equity Conversion Mortgage (HECM or “Heck-um”), there are some guarantees in which they can find comfort.

The HECM is also known as a reverse mortgage because it operates in reverse of a normal mortgage. Instead of a falling debt, rising equity loan which is what you get when you borrow money, make monthly payments and then pay back the principal, the reverse mortgage allows you to receive money from your property without making any monthly payments so your principal balance increases.

On the HECM loan, you also pay mortgage insurance to the Federal Housing Administration (FHA), a division of the Department of Housing and Urban Development (HUD). The insurance that the borrower paid on this loan to the government insures that the borrower will always receive the funds owed to them under the terms of their reverse mortgage, on time, no matter what happens to their lender.

This is particularly important to borrowers who choose the Line of Credit option or the Monthly Payment Options (the Term or Tenure) to receive their reverse mortgage funds. Borrowers can take a lump sum when they close their reverse mortgage, can take a line of credit to be drawn when they desire or need, can take monthly payments (for a specified period or for the rest of their life) or a combination of any of the three options above – the complete HUD requirements.

The government insurance guarantees that as long as the borrowers follow the terms of their reverse mortgage documents (live in the property as their primary residence, maintain the home in a reasonable manner and pay the taxes and insurance are the main provisions), the borrowers are guaranteed by the government to always have access to their funds.

Some of the other guarantees that are given to senior borrowers by the government-insured HECM are that if you are aged 62 and over you cannot be turned down for credit other than delinquencies on federal debt or other debts which adversely affect the title of your property.

You are guaranteed that you will not be turned down for insufficient income issues. You are guaranteed that no matter how much you receive over the years or what happens to property values, you or your heirs will never owe more than your property is worth. You are guaranteed that YOU own your property, not the bank, and retain all rights of ownership including deciding what will happen to your home upon your demise.

Michael G. Branson (CEO All Reverse Mortgage Company)is a Mortgage Broker who has over 31 years of mortgage banking experience.   http://www.allrmc.com/

UPDATE: FHA Rescue Plan – Senate 7-11-2008

Foreclosure rescue plan poised to pass Senate

INCLUDES MAJOR NECESSARY CHANGES TO THE
REVERSE MORTGAGE PROGRAM FOR SENIORS

Associated Press – July 11, 2008 7:43 AM ETWASHINGTON (AP)

A mortgage rescue plan is headed for Senate passage today, but it’s anything but a done deal.Despite broad bipartisan support, the bill is facing a rewrite in the House and a veto threat from President Bush.

The package would authorize $300-billion in new government-backed loans for strugglinging homeowners. It also includes billions in tax breaks and a nearly $4-billion provision to buy-up and rehabilitate foreclosed homes.

Key players are planning for a week of intense negotiations over House concerns about the Senate version. One bone of contention is the home buy-up provision. Conservative “Blue Dog” Democrats say that needs to be balanced by tax hikes or spending cuts elsewhere.

And the White House also objects, calling that a bailout for the lenders who helped cause the mortgage meltdown in the first place.

“Ask the Expert” Video: Your Home As A Retirement Tool

Your home as a retirement tool:  Click on http:// address on the next line:

 http://money.cnn.com/video/#/video/moneymag/2008/07/07/money.expert.reverse.moneymag

This is an excellent video to see if you want simple, straightforward information, and warnings about agressive salesmen, regarding the Reverse Mortgage.  It is presented very well, very balanced and very impartially by “Ask the Expert” on CNN Money News.

Gloria

Cashing In On Your Home, U.S. NEWS AND WORLD REPORT

Cashing In On Your Home

It’s no surprise that reverse mortgages are becoming popular among seniors

By Leonard Wiener
Posted 6/5/05

For many of today’s retirees, a home can seem like Fort Knox without the key. Escalating real-estate prices have caused many seniors’ homes to skyrocket in value. But unless they’re willing to sell, it may be an inaccessible gain during a time in their lives when extra income and liquid assets would be most welcome. There is a way to tap those profits–a reverse mortgage. “Many seniors are sitting on home equity they never dreamed of,” says realty expert Tom Kelly, whose recent book, The New Reverse Mortgage Formula, is a guide to what a growing number of elderly homeowners see as a way to have their home and cash in on it, too.

A reverse mortgage allows a homeowner to borrow against the equity in a home, but unlike a home-equity loan, the loan and interest do not have to be repaid until the home is sold. The loan might be in the form of a line of credit that can increase over time and be drawn on as needed, a lump sum payout, a fixed monthly check for as long as you live in the home, or a mix of options.

There is minimal or no upfront cost, as closing and other fees can be wrapped into the loan. The reverse mortgage also pays off any existing mortgage, ending that monthly bite on income. Cleo Dunn, an 88-year-old widow in Leawood, Kan., says the $1,200 a month she receives from her reverse mortgage supplements her Social Security check. That helps her pay medical and other bills while remaining in the home she loves. “I have this most beautiful garden,” she says. “I have a life here I could not have anyplace else.”

Reverse mortgages have been around for years, but it wasn’t until the early ’90s that they began earning respectability after the Federal Housing Administration started insuring the mortgages for repayment to lenders. Even so, they’ve been a niche product; only about40,000 were done last year. But an aging population is expected to begin tapping into home equity more aggressively. New loans have doubled since 2003. Interest rates on reverse mortgages are mostly about 5.3 percent now but can also be about 6.5 or 8.5 percent, depending on the type and size of the loan.

Bolstering demand are seniors who see the loans not as a lifeline but as a route to a more active life. Francisco and Joanne Santana-Montez of Antelope, Calif., 69 and 68, will use their reverse mortgage line of credit to finance a dream trip to Cancun, Mexico. “Our adviser told us we’re spending our kids’ inheritance, but our children are delighted,” says Joanne.

A prime consideration when getting a reverse mortgage: age. The older you–and a spouse–are, the more cash you can get since the loan will presumably be shorter in duration. A 75-year-old with a fully paid-off $250,000 home in suburban Cleveland, for example, might receive about $917 a month. Or, as is more popular these days, the homeowner would qualify for a line of credit of about $140,000. A 70-year-old Clevelander would nail down less, about $791 a month or a $130,000 line of credit; an 80-year-old would draw more, a monthly check of about $1,099 or a $152,000 line of credit.