President Bush recently signed into law the FHA Modernization Bill which will bring much needed change and improvement to the reverse mortgage industry. That's the good news, the bad news is we are still waiting for HUD to issue a mortgagee letter to clarify the application of the legislation.
This is an overview of the new law.
Maximum HECM Loan Limit – HUD’s lawyers have still not resolved whether the bill creates a single national loan limit at $417,000 or $625,500, or area limits at 115% of area median home value, with a floor of of $417,000 and a cap of $625,500. If, in the end, the lawyers conclude that there is a single national loan limit at either of the two option levels, HUD will be able to implement that fairly quickly, probably with a Mortgagee Letter issued by October 1 that would take effect on November 1. If the lawyers conclude that the maximum loan limit will be based on the 115% of area median standard, it will take until January 1, 2009 to implement.
New Limitation on HECM Origination Fees – The new formula for maximum origination fees -- 2% of first $200,000 of maximum claim amount, plus 1% of the balance above $200,000, to a maximum origination fee of $6,000 – will become effective concurrently with the implementation of the new HECM loan limits. The Mortgagee Letter that will be issued to implement this will raise the “floor” on HECM origination fees, probably to $2,500. A Mortgagee Letter will implement the origination fee limitations and the new loan limits simultaneously.
HECM for purchase and Coops
HECM's are now available for use to purchase homes for seniors age 62 or older.HECM for Home Purchase can be implemented fairly quickly and should be operational by November 1. HECM for Coops will be implemented by a Mortgagee Letter that covers coops under both FHA forward and reverse mortgage programs.
Elimination of Waiver of Upfront MIP for LTC Insurance - The authority allowing HUD to waive the upfront mortgage insurance premium in cases where the proceeds from a HECM would be used to purchase long-term care insurance has been repealed. This provision had been on the books since the 2000 Housing Act, but was never implemented.
Elimination of HECM Advisor Programs - HUD will be issuing a Mortgagee Letter within the next 30 days eliminating any so-called “HECM Advisor” programs. Because the law requires that, “All parties that participate in the origination of a mortgage to be insured under this section shall be approved by the Secretary,” once the forthcoming M.L. is issued and takes effect, only employees of FHA-approved lenders and correspondents will be permitted to participate in the origination of HECMs.
Payments for Counseling - Effective upon issuance of a Mortgagee Letter within the next thirty days, lenders will no longer be permitted to pay for HECM counseling, either directly or indirectly, under any circumstances whatsoever. Sometime this Fall, HUD will also begin requiring all individuals on the roster of approved HECM counselors to have passed the counseling exam. Individuals currently doing HECM counseling will have up to six months to pass the exam; new counselors will have to pass before beginning counseling. New counseling protocols will also be implemented this Fall.
Cross Sales of Financial and Insurance Products - As far as the new language requiring lenders to have “safeguards and firewalls” to make sure individuals do not have any incentives for cross-sales of other financial or insurance products with HECMs, HUD will be issuing a Federal Register notice soliciting industry input on how to implement this provision.
Once we receive some clarity from HUD, I will issue an update on my blog. If you have questions in the meantime, please contact me by email.
Thursday, August 14, 2008
Wednesday, July 2, 2008
Reverse Mortgages- A Great Opportunity
Not familiar with reverse mortgages? You should be. A growing number of seniors have been buying these innovative loans in recent years to augment retirement income, pay for long term health care, or even pay for that dream vacation. According to HUD, the number of reverse mortgages issued this year has more than quadrupled from the early 1990s, when the products were first introduced.
Consider that there are over 20 million seniors with more than $2 trillion in home equity, according to 2000 census figures, and you will begin to appreciate the potential opportunity these unique loans offer for seniors today.
Reverse mortgages explained
Reverse mortgages enable senior homeowners 62 years or older to convert part of the equity in their home into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. Borrowers will never be forced to leave their homes, providing they make their real estate property tax and insurance payments.
There are three types of reverse mortgages: the Home Equity Conversion Mortgage (HECM), Fannie Mae HomeKeeper (HK) and private reverse mortgage products offered by several lenders and designed for higher value homes.
Borrowers can choose to receive the reverse mortgage funds as a lump sum, monthly income (for as long as they remain in the home), line of credit, or any combination. They make no monthly mortgage payments on a reverse mortgage during the life of the loan. The loan becomes repayable when the borrower sells the home or permanently moves out. In addition, the repayment amount can not exceed the value of the home and the equity can be used for any purpose.
An important consumer protection built into these loans is the requirement for independent third-party counseling prior to application. This counseling session serves to provide an objective review of the program for the senior and their advisors to help them decide if it is the correct option.
Reverse mortgages, although distinctly different from traditional mortgages, still are mortgages and have the same basic cost structure for closings costs. These fees would include items such as appraisal, title insurance, document fees and other typical closing costs. One difference is that the closing costs of a reverse mortgages are generally funded in the loan, so the senior borrower has no out-of-pocket expense. Qualification for this loan is simple, as there is no income qualification and minimal credit review.
So if you think that reverse mortgages might be a good decision for you or your parents, a great resource is the National Reverse Mortgage Lenders Association (www.reversemortgage.org), a national nonprofit trade association for financial services involved in reverse mortgages in the U.S. and Canada. NRMLA promotes awareness of reverse mortgages, keeps members informed of legislative and other developments, and represents the industry in Washington, D. C.
And for answers to your specific questions or an illustration of how much benefit you might qualify for, contact me at tscabareti@aol.com.
Consider that there are over 20 million seniors with more than $2 trillion in home equity, according to 2000 census figures, and you will begin to appreciate the potential opportunity these unique loans offer for seniors today.
Reverse mortgages explained
Reverse mortgages enable senior homeowners 62 years or older to convert part of the equity in their home into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. Borrowers will never be forced to leave their homes, providing they make their real estate property tax and insurance payments.
There are three types of reverse mortgages: the Home Equity Conversion Mortgage (HECM), Fannie Mae HomeKeeper (HK) and private reverse mortgage products offered by several lenders and designed for higher value homes.
Borrowers can choose to receive the reverse mortgage funds as a lump sum, monthly income (for as long as they remain in the home), line of credit, or any combination. They make no monthly mortgage payments on a reverse mortgage during the life of the loan. The loan becomes repayable when the borrower sells the home or permanently moves out. In addition, the repayment amount can not exceed the value of the home and the equity can be used for any purpose.
An important consumer protection built into these loans is the requirement for independent third-party counseling prior to application. This counseling session serves to provide an objective review of the program for the senior and their advisors to help them decide if it is the correct option.
Reverse mortgages, although distinctly different from traditional mortgages, still are mortgages and have the same basic cost structure for closings costs. These fees would include items such as appraisal, title insurance, document fees and other typical closing costs. One difference is that the closing costs of a reverse mortgages are generally funded in the loan, so the senior borrower has no out-of-pocket expense. Qualification for this loan is simple, as there is no income qualification and minimal credit review.
So if you think that reverse mortgages might be a good decision for you or your parents, a great resource is the National Reverse Mortgage Lenders Association (www.reversemortgage.org), a national nonprofit trade association for financial services involved in reverse mortgages in the U.S. and Canada. NRMLA promotes awareness of reverse mortgages, keeps members informed of legislative and other developments, and represents the industry in Washington, D. C.
And for answers to your specific questions or an illustration of how much benefit you might qualify for, contact me at tscabareti@aol.com.
Friday, June 20, 2008
Straight Answers on Reverse Mortgages
For many seniors retirement is a mixed blessing. On one hand it is time to enjoy family and friends, and enjoy living to the fullest. All too often people find themselves in need of extra income just to keep up with rising costs. A reverse mortgage can help many homeowners who are 62 or older live in their home comfortably by turning the equity in their home into extra cash or income.
Some typical questions regarding a reverse mortgage may be:
What are the benefits of a reverse mortgage?
A reverse mortgage provides easy access to the equity senior homeowners owners have in their home. There is no income or credit qualification and best of all no monthly mortgage payments are required during the life of the loan.
What are the borrower qualifications?
The borrower must be 62 or older and of course, own a home! A reverse mortgage allows a borrower to live in their home for as long as they use the home as a primary residence.
How much money can a borrower receive?
The amount a senior homeowner is eligible for depends on their age, the value of the home, current interest rates and the specific reverse mortgage product selected. Generally speaking, the older a borrower is, the greater the benefit (i.e. more money!) available.
How can the money be used?
Fund home repairs, pay off an existing mortgage, pay for medical expenses, purchase long-term care insurance, and establish a resource to help grandchildren and loved ones, go on vacation! The money can be used any way the borrower wishes!
Does the bank own my home?
No, this is a very common misconception; a reverse mortgage is merely a loan on the property that can be repaid at anytime with no prepayment penalty.
Will my children be against the idea?
No, experience has shown that many adult children see a reverse mortgage as a good decision for their parents. It provides the senior with independence and allows them to age in the home they love and raised their family.
For more straight answers to your questions, send me an email at tscabareti@aol.com.
Some typical questions regarding a reverse mortgage may be:
What are the benefits of a reverse mortgage?
A reverse mortgage provides easy access to the equity senior homeowners owners have in their home. There is no income or credit qualification and best of all no monthly mortgage payments are required during the life of the loan.
What are the borrower qualifications?
The borrower must be 62 or older and of course, own a home! A reverse mortgage allows a borrower to live in their home for as long as they use the home as a primary residence.
How much money can a borrower receive?
The amount a senior homeowner is eligible for depends on their age, the value of the home, current interest rates and the specific reverse mortgage product selected. Generally speaking, the older a borrower is, the greater the benefit (i.e. more money!) available.
How can the money be used?
Fund home repairs, pay off an existing mortgage, pay for medical expenses, purchase long-term care insurance, and establish a resource to help grandchildren and loved ones, go on vacation! The money can be used any way the borrower wishes!
Does the bank own my home?
No, this is a very common misconception; a reverse mortgage is merely a loan on the property that can be repaid at anytime with no prepayment penalty.
Will my children be against the idea?
No, experience has shown that many adult children see a reverse mortgage as a good decision for their parents. It provides the senior with independence and allows them to age in the home they love and raised their family.
For more straight answers to your questions, send me an email at tscabareti@aol.com.
Wednesday, June 18, 2008
The Seniors Are Coming......
Many people ask me why haven't reverse mortgages grown more in acceptance. Even though there has been significant growth over the past few years, research shows that slightly over 1% of the available senior market has taken advantage of this product. The senior population continues to grow everyday as thousands of boomers turn 62 in 2008. Reverse mortgages are not a solution for all senior homeowners, but one would expect a deeper penetration of the potential market, particularly with our slowed economy bringing more financial demands on fixed income living.
I believe that awareness of reverse mortgages and their benefit to senior homeowners continues to be a major factor in their acceptance. No major lender has committed to a public awareness campaign to actively educate both seniors and their adult children. The industry association, NRMLA, has dedicated efforts to educate seniors and their advisors, but the burden should not solely fall on their shoulders. As a society we owe it to our seniors, to our parents and grandparents to offer free education and information to assist them in this decision process.
So I am asking you get the word out, tell everyone you know that this product exists. Send them to the Internet to learn more. The NRMLA site is an excellent no sales site that provides excellent consumer eduction.
Also talk to your Representatives, both on the State and Federal level. With an impending Social Security crisis, our legislators should be on the bandwagon delivering education and information on a possible solution for senior homeowners. Seniors are some of their biggest voting constituents so they should be both informed and concerned about this issue of awareness. Your efforts and their support will go a very long way in raising awareness.
I apologize for the rant, but we must build awareness to be able to deliver solutions to our senior population.
PS. Here is the NRMLA site http://www.reversemortgage.org
I believe that awareness of reverse mortgages and their benefit to senior homeowners continues to be a major factor in their acceptance. No major lender has committed to a public awareness campaign to actively educate both seniors and their adult children. The industry association, NRMLA, has dedicated efforts to educate seniors and their advisors, but the burden should not solely fall on their shoulders. As a society we owe it to our seniors, to our parents and grandparents to offer free education and information to assist them in this decision process.
So I am asking you get the word out, tell everyone you know that this product exists. Send them to the Internet to learn more. The NRMLA site is an excellent no sales site that provides excellent consumer eduction.
Also talk to your Representatives, both on the State and Federal level. With an impending Social Security crisis, our legislators should be on the bandwagon delivering education and information on a possible solution for senior homeowners. Seniors are some of their biggest voting constituents so they should be both informed and concerned about this issue of awareness. Your efforts and their support will go a very long way in raising awareness.
I apologize for the rant, but we must build awareness to be able to deliver solutions to our senior population.
PS. Here is the NRMLA site http://www.reversemortgage.org
Monday, June 16, 2008
Straight Answers
Reverse Mortgages are a great decision for many senior homeowners but is it the right decision for you. This blog is all about straight answers to the questions you and your advisors will have about reverse mortgages. Education is the best straight answer when it comes to deciding if this is right for you. So we will try to answer all of your questions and help guide you through the decision process. You should do your homework, get all of your questions answered and when you are ready make the decision.
As an experienced reverse mortgage professional, I will post information, industry news and answers to questions to help you. My personal goal is to build awareness and understanding for this dynamic senior product that has literally changed the lives of hundreds of thousands of people just like you. I will also address the challenges of being a caregiver and how a reverse mortgage can provide solutions for adult children who are caring for their parents.
Most of all you will receive straight answers, no selling allowed, just the facts. Have a great day.
As an experienced reverse mortgage professional, I will post information, industry news and answers to questions to help you. My personal goal is to build awareness and understanding for this dynamic senior product that has literally changed the lives of hundreds of thousands of people just like you. I will also address the challenges of being a caregiver and how a reverse mortgage can provide solutions for adult children who are caring for their parents.
Most of all you will receive straight answers, no selling allowed, just the facts. Have a great day.
Subscribe to:
Posts (Atom)