Government in Debt Over Reverse Mortgages

Government Plans Big Reverse-Mortgage Curbs

By Philip Moeller

Reverse mortgages, long criticized for high fees and other anti-consumer features, turn out to actually be the opposite—such a good deal that the government is nearly $3 billion in the hole on outstanding mortgages. As a result, the Federal Housing Administration (FHA) will later this month unveil sharp curbs on its loan product, called the Home Equity Conversion Mortgage (HECM).

When the new rules are issued, consumers will need to take a close look at the terms of these loans. While the specifics of the changes have yet to be announced, they will lead to consumers being able to access a smaller share of their home's equity when they take out a reverse mortgage. In addition, lenders will probably be required to set aside a portion of the borrower's home equity to pay future property taxes and home-insurance premiums. And there may also be limits that restrict lower-wealth borrowers from taking out a HECM.

The FHA (and thus taxpayers) has been losing the most money on the most popular HECM loan: a fixed-rate loan known as the Standard HECM loan. This type of loan will be halted under the new rules. Most borrowers thus will be required to consider a newer reverse mortgage called the HECM Saver.

The HECM Standard loan often carries steep insurance fees and other charges. But it pays out a higher percentage of a homeowner's equity than the Saver, which charges nearly no insurance fees and is less costly to consumers. But it is also a more conservative loan to the FHA because it pays out a smaller percentage of an owner's equity than does the HECM Standard loan. This provides the government a bigger cushion against loan losses that could eventually lead to costly insurance claims by private lenders.

Read more HERE


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The Law Offices of Jeremy W. Howe, LTD. are ElderLaw attorneys in Rhode Island who specialize in wills and trusts, estate planning, guardianship, probate, and Veterans Aid and Attendance Benefits.

They also are Newport Rhode Island Divorce Lawyers, Attorneys, Mediators, and Arbitrators providing services for family law issues such as divorce, child custody and visitation, support, and military family law.

Call them today at 401-841-5700 or visit them on the web at http://www.CounselFirst.com.

Reverse Mortgages Are Causing Some Homeowners to Lose Their Homes

Reverse Mortgages

A reverse mortgage can be a great tool in the right circumstances, but if you aren't careful you could end up losing your home. A recent front-page article in the New York Times lays out some of the problems homeowners are encountering with these mortgages.

You must be 62 years or older to qualify for a reverse mortgage, which allows you to use the equity in your home to take out a loan. The loan does not have to be paid back until you sell the house or die, and the loan funds can be used for anything, including providing money for retirement or to paying for nursing home expenses.

It all sounds like a no-lose proposition, but there are downsides. For example, these loans carry large insurance and origination costs, they may affect eligibility for government benefits like Medicaid, and they are not ideal for parents whose major objective is to safeguard an inheritance for their children. There also have been complaints about aggressive marketing techniques.

In addition to these drawbacks, the Times points out two more important potential pitfalls:

Pay attention to whose name is on the mortgage. When purchasing a reverse mortgage, be sure to put both spouses' names on the mortgage. If only one spouse's name is on the mortgage and that spouse dies, the surviving spouse will be required to either pay for the house outright or move out. This might happen if only one spouse is over 62 when the mortgage is signed. According to the Times, some lenders have actually encouraged couples to put only the older spouse on the mortgage because the couple could borrow more money that way.

Watch out for a lump-sum loan. Usually reverse mortgages come in a line of credit with a variable interest rate. This allows homeowners to take money only when they need it. According to the Times, some brokers have been pushing lump-sum loans because the brokers earn higher fees. The problem is these loans have a fixed interest rate. The interest charges are added each month, so that over time the total amount owed can surpass the amount of the original loan.
The Consumer Financial Protection Bureau, which was created in the wake of the mortgage crisis in part to scrutinize consumer mortgages, is working on new rules to better regulate reverse mortgage lenders and provide disclosures to seniors.

Read more HERE

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The Law Offices of Jeremy W. Howe, LTD. are ElderLaw attorneys in Rhode Island who specialize in wills and trusts, estate planning, guardianship, probate, and Veterans Aid and Attendance Benefits.

They also are Newport Rhode Island Divorce Lawyers, Attorneys, Mediators, and Arbitrators providing services for family law issues such as divorce, child custody and visitation, support, and military family law.

Call them today at 401-841-5700 or visit them on the web at http://www.CounselFirst.com.

Is a Reverse Mortgage Right for You?

Reverse Mortgages

Attached please find an article that was received by our office as part of an e-newsletter called "Pathways to Independent Living," which is sent to us from a Rhode Island business out of Warwick called Senior Helpers. Senior Helpers provide "companion care" to seniors in their own homes. To reach Senior Helpers, contact Chad Neighbors at (401) 825-7200, or by email at cneighbors@seniorhelpers.com.

Is a Reverse Mortgage Right For You?

If you are a senior who is age 62 or older and you are living in fear that some day, when you need help, you'll have to sell your house to pay for it, there is a solution. You may still be able to stay in your home while paying for home care, home improvements or medical bills.

How? If your home is paid off or you have only a small mortgage left, you can get a reverse mortgage to tap the equity in your home without selling or moving. These mortgages are called reverse mortgages because the lender makes payments to you, the homeowner, not the other way around.

The money you will receive is tax-free and will not affect Social Security payments or Medicare benefits. You do not have to pay off the loan until you move out of the house or the home is sold. You will never owe more than the value of the home at the time of repayment, even if the loan balance is higher than the value of your property. No debt will be passed on to your heirs. Reverse mortgage funds are available to spend any way you choose.

Who Is Eligible?

To be eligible, you must be 62 years or older. (If you are a married couple the youngest partner must be age 62.) You must also either own the home outright or have a low mortgage balance that can be paid off with the proceeds from the reverse loan. You must also live in the home. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities.

Cautions and Things To Remember

Be sure to work with a reputable lender, consult with your financial advisor if you have one, and do your homework before you make any commitments or sign any documents.

Investigate the costs involved in a reverse mortgage before making the decision.

Closing costs and fees may amount to more than 5% of your home's value. If you plan to live in your home for more than three years, a reverse mortgage can make good financial sense. However, if you know you won't stay in your home that long, then the cost of the loan plus interest may make seeking a reverse mortgage an unwise choice.

Using the equity in your home will reduce the amount of money you leave to your family as inheritance.

If you live alone and need to stay in a nursing facility for more than a year, your loan will come due.

It takes 45 to 90 days to apply for and receive a reverse mortgage. It may be better to receive one when you do not urgently need the money for immediate home repairs or in-home care.

For More Information the AARP offers information about reverse mortgages, including an online calculator you can use to find out how much money you may get from a reverse mortgage. The National Reverse Mortgage Lenders Association (NRMLA) includes information for consumers interested in learning more about reverse mortgages.

You can also call our office for a referral for someone to speak with about Reverse Mortgages if you think this could be an option for you. We can also accompany you to a meeting with your reverse mortgage broker, or review the documents before you sign, or answer any questions you might have.


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The Law Offices of Jeremy W. Howe, LTD. are Elder Law Attorneys in Newport, Rhode Island who specialize in Wills and Trusts, Estate Planning, Guardianship, Probate, and Veterans Aid and Attendance Benefits.

They also are Newport Rhode Island Divorce Lawyers, Attorneys, Mediators, and Arbitrators providing services for Family Law issues such as divorce, child custody and visitation, support, and Military Family Law.

Call them today at 401-841-5700 or visit them on the web at http://www.counselfirst.com