REVERSE MORTGAGE INFORMATION: Tools, News and Resources to Help Seniors Decide

The mortgagee letter 2009-07 was released today setting the new nationwide lending limit for reverse mortgages (HECM) to $625,500. This was changed as a result of the American Recovery and Reinvestment Act of 2009 (ARRA) that was signed into law February 17th of this year.

For a time period between now and April 30th, if you were engaged in the process of obtaining a reverse mortgage and your home was worth more than the previous amount of $417,000 you can chose to use the lower lending limit versus the higher limit. The difference will be in the HUD based Mortgage Insurance Premium (MIP). As an example- if your home is worth $550,000, the MIP would be $11,000 under the new plan but $8340 under the previous plan- a $2660 difference. Of course your net principle limit would also be based on the lower lending limit but you have that choice until April 30th.

With the new limit, someone 75 years old in a home worth more than $625,000 could gain access to somewhere around $420,000, whereas the previous limit gave them access to roughly $280,000- a 50% increase. All circumstances are different and you can find out which plan works best for you by submitting a request for more information at the Express Quote section in the upper left hand section of this website and someone will contact you within 2 hours or you can call the toll free number 866-599-1391 and be connected to someone that can answer all of your questions concerning this new bill and just about everything else regarding reverse mortgages.

This website has often mentioned the notion of having financial planners consider the use of reverse mortgages as possible tools in their planning arsenal. Some financial planners are up to speed on the effective cash flow capabilities a reverse mortgage can provide and others are not very well versed on all aspects of the product. As has been said before that its not an indictment of their effectiveness but we feel some planners think they can provide practical advice with income and investments and they don’t touch the home except as last resort. We’ve penned the use of the phrase “” on several occasions as well as challenging planners and elder law advisors about the “certainty” that exists when a reverse mortgage is used to create cash flow for its users.

We’ve received a bit of indirect validation today on our thoughts from a publication that echos our sentiments almost to the word where they interview financial advisors from around the country on concerns regarding retirement and the how the aptly named “Fall of 2008″ has affected them. Judy Ludwig, vice president of financial planning services at in Newton, Mass mentions in the article that some are curtailing their spending “while they wait for their portfolio to recover”. We have mentioned that on more than one occasion here and here. She later mentions something that rides along with the certainty issues in the previous paragraph that many clients are focusing more on the guarantees bank accounts provide for their cash reserves, saying “I can’t remember hearing as much talk about CDs as I have recently.” Judy herself doesn’t appear sold on reverse mortgages suggesting that the client could arrange for a sale-leaseback with a younger family member. That’s great advice and a suitable alternative but what if that younger family member already has a home or can’t make this work? Another question for another article maybe.

The well written article by Donald Jay Korn specifically mentions reverse mortgages to help with cash flow concerns. Frank Butterfield, principal at , a wealth management firm in Atlanta, says “We had always ignored the house in our retirement projections, but a few clients might need to include their home equity now.” If a wealth management firm has a few clients in need of additional cash flow, imagine those without professional guidance that haven’t been able to put enough retirement away to warrant a professional’s advice? Where do they turn for advice?

A reverse mortgage is not for everyone as mentioned several times on this website and other places but it can be the RIGHT tool to supplement cash flow where someone’s income capabilities have fallen short and alternative resources are dwindling.

The recent signing of the HOUSING AND ECONOMIC RECOVERY ACT OF 2008 (HR 3221) by President Bush puts into motion something that has been long in the making and that’s a modernization of FHA rules for reverse mortgages. Some of the changes facing potential reverse mortgage clients are an increase in the national lending limit from the individual county limits now in place. Folks in some parts of the country will see their lending limit rise from as low as $200,160 to an anticipated $417,000 and that’s good news for those with home values over their county lending limits since any equity access was determined from the lower of the appraised value or the respective county lending limit. In many cases where the reverse mortgage was to utilized to pay off an existing forward mortgage there wasn’t enough cash access to pay off that mortgage and the borrower either had to come to the table with money or look for alternative methods which often led to selling the home and in a down market, that’s neither easy or fun.

Another change is with the origination fee, currently capped at 2% of the lesser of the appraised value or the county lending limit. The new bill will keep the 2% up to $200,000 but cap the origination fee at $6000 which is more than $1200 less than some of the highest fees where county lending limits were as high as $362,790. In that case, 2% of that amount would have resulted in an origination fee of $7255.80.

Higher lending limits combined with lower origination fees are great for those seniors whose circumstances have them looking at ways to increase their monthly cashflow without making risky investments in a roller coaster stock market.

Some new additions to the bill are for folks in co-ops and those looking to use the reverse mortgage as a finance tool to help them purchase a home, most likely in a downsizing event. Currently, only New York co-op owners are able to secure reverse mortgages because of their prevalence. There are other pockets of the country with co-ops and this will be a relief for those co-op owners as other means of financing have disappeared as most boutique programs are no longer available. In the event someone wants to downsize from a larger, more expensive home, the ability to purchase a home using a reverse mortgage is also a welcome addition. As an example, someone in a $400,000 home can sell the home, take a portion of the proceeds for purchase of a less expensive home, say $200,000, and instead of putting up the entire value in cash, they can put down a small portion, in this example, half of the value and finance the other half and not only do they eliminate monthly mortgage payments, they keep a larger portion of their cash in their pocket and in this market, cash is king. Instead of having $200,000 left over from the sale of the home, they now have $300,000 and no monthly payments as long as they live in the home. That’s also great for those that don’t currently qualify for a regular mortgage because of bad credit or insufficient fixed monthly income as those programs have gone the way of the other boutique programs once offered by most forward lending brokers.

Some other features are a prohibition against requirements to purchase additional products as a condition for HECM eligibility such as annuities or life insurance policies. That is good news as the recent negative information about reverse mortgages has been because of this very practice. Folks short on cash flow that need a reverse mortgage should not have their money tied up in any annuity, be it immediate or deferred. The reverse mortgage provides more cash flow with less restrictions than the annuity could anyway in most situations where monthly cash flow is short. Another mention is about a study to determine consumer protections and underwriting standards for HECMs which will help to insure that purchase of any additional products by a consumer is appropriate for the consumer.

We like the new changes, they are consumer protection focused and open up opportunities to help save some homeowners from increasing monthly payments on their forward mortgages that were having a harder and harder time making that increased payment amount and the homebuying function is a great tool for credit challenged or those looking to downsize into more affordable housing.

Below are some frequently asked reverse mortgage questions from visitors. In addition to these FAQ’s, we have questions and answers focusing on other reverse mortgage topics:

Reverse Mortgage Basics

Reverse Mortgage Rates and Fees

Reverse Mortgages and Taxes

Reverse Mortgage Counseling

If you have questions about reverse mortgages not included here, you can use the form at the bottom to submit it! We’ll do our best to get you a prompt and accurate reply.

[faq summary Questions From Visitors]

Reverse Mortgage Questions From Visitors

[faq list Questions From Visitors]

[faq ask Questions From Visitors]

Below are some frequently asked questions and answers about reverse mortgage rates and fees. In addition to these FAQ’s, we have questions and answers focusing on other reverse mortgage topics:

Reverse Mortgage Basics

Reverse Mortgages and Taxes

Reverse Mortgage Counseling

Questions From Visitors

If you have questions about reverse mortgages not included here, you can use the form at the bottom to submit it! We’ll do our best to get you a prompt and accurate reply.

[faq summary Reverse Mortgage Rates and Fees]

Reverse Mortgage Rates and Fees Questions and Answers

[faq list Reverse Mortgage Rates and Fees]

[faq ask Reverse Mortgage Rates and Fees]

Below are some frequently asked questions and answers about reverse mortgage counseling. In addition to these FAQ’s, we have questions and answers focusing on other reverse mortgage topics:

Reverse Mortgage Basics

Reverse Mortgages and Taxes

Reverse Mortgage Rates and Fees

Questions From Visitors

If you have questions about reverse mortgages not included here, you can use the form at the bottom to submit it! We’ll do our best to get you a prompt and accurate reply.

[faq summary Reverse Mortgage Counseling]

Reverse Mortgage Counseling Questions and Answers

[faq list Reverse Mortgage Counseling]

[faq ask Reverse Mortgage Counseling]

Below are some frequently asked questions and answers about reverse mortgages and taxes. In addition to these FAQ’s, we have questions and answers focusing on other reverse mortgage topics:

Reverse Mortgage Basics

Reverse Mortgage Counseling

Reverse Mortgage Rates and Fees

Questions From Visitors

If you have questions about reverse mortgages not included here, you can use the form at the bottom to submit it! We’ll do our best to get you a prompt and accurate reply.

[faq summary Reverse Mortgage and Taxes]

Reverse Mortgages and Taxes Questions and Answers

[faq list Reverse Mortgage and Taxes]

[faq list Reverse Mortgage and Taxes]

[faq ask Reverse Mortgage and Taxes]