The Reverse Mortgage Insider by sofiaie


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   The Reverse Mortgage Insider
                                                                                                         Volume 2, Issue 1

Manage Your                                                                                              STIMULUS BILL
Finances With A                                                                                          INCREASES
Reverse Mortgage                                                                                         LOAN LIMIT
After watching their savings disappear in a                                                              We have great news for
severe bear market, today more and more                                                                  owners of higher valued
seniors are worrying about how they will fund                                                            homes. The current stimulus
a secure retirement. Ever-rising costs in health                                                         package passed by congress
care, prescription drugs, energy, and property                                                           includes a provision that
taxes stress even the best-prepared seniors.                                                             boosts the lending limit for
                                                                                                         the federally-insured Home
Add to this scenario the growing longevity                                                               Equity Conversion Mortgage
of our senior population and the increasing                                                              (HECM) to $625,500
number of years they are spending in retirement.   Learn the facts                                       throughout 2009 only.
The result? More seniors are retiring with debt                                                          The new, higher lending
or concerns about outliving their resources.       When using the line of credit or the monthly          limit enables borrowers to
And they need to find a creative solution.         check option, no interest charges accrue until the    obtain a substantially greater
                                                   money is accessed. And the amount available to        benefit from their homes, if
Not only a “last resort”                           the borrower in a line of credit continues to grow,   the value is higher than the
                                                   making more funds available in the future.            previous HUD limit.
A reverse mortgage can be used to meet a wide
array of retirement goals. Whether the objective   The reverse mortgage financial strategy may           Previously, the 2008 FHA
is avoiding excessive depletion of retirement      also result in a lower tax bracket. The loan          Modernization bill made
assets or funding a favorite dream, senior         proceeds are tax-free; they are considered to         several improvements to the
homeowners should learn about the reverse          be a loan and not reportable as income.               Home Equity Conversion
mortgage option. A reverse mortgage may be                                                               Mortgage (HECM), includ-
used, not as a ‘last resort’, but as part of an    The only requirement for the use of these funds       ing lower origination costs
integrated strategy to improve the odds that       is that any existing lien or mortgage must be         for borrowers, one national
your financial resources will last a lifetime.     satisfied before the cash is used for other           loan limit of $417,000,
                                                   purposes. Many reverse mortgages are used             strict rules against combin-
Using the cash available from home equity          simply for the purpose of paying off a current        ing the federally-guaranteed
can especially be of help during the present       mortgage, thus reducing monthly cash flow needs.      reverse mortgages with
time of financial turmoil. Seniors can conserve                                                          financial product sales, and
their savings by drawing funds from a reverse      Reverse mortgage demand continues to                  increased independence for
mortgage line of credit or they may supplement     increase at a phenomenal rate and industry            the mandated HECM con-
their income with monthly checks.                  leaders expect to see ongoing growth in this          sumer counseling program.
                                                   unique loan for seniors. For those who want
                                                   to stay in their home, it can be an excellent
                                                   financial tool.
    The Reverse Mortgage Insider                                                         Volume 2, Issue 1

 What Makes
  a Reverse
Mortgage Safe?
• Required third-party counseling
  which includes review of potential
  borrowers’ income and expenses,
  needs, and information on other
  available programs

• Strict guidelines for the reverse
  mortgage loan officer to provide
  borrower with a list of at least
  5 counseling agencies, and
  prohibition against directing
  borrower to preferred counselors

• Upfront disclosure of all fees,      Purchase a Home With a Reverse Mortgage
  interest rates, amortization
  schedule of loan (so borrower        The FHA Home Equity Conversion            Borrowers must occupy the home
  has a good idea of how much          Mortgage (HECM) is now available          within 60 days from closing. Any
  they will owe in the future), and    for home purchases. Seniors,              combination of funds used must
  total annual loan cost (TALC)        62 years of age and older, can            be enough to purchase the new
                                       purchase a principal residence and        property outright.
• Disclosure to the borrower of a      use reverse mortgage proceeds in a
  minimum of three loan program        single transaction.                       The benefits of this program are
  options showing monthly and                                                    otherwise identical to the familiar
  annual adjustable rates              Borrowers will be able to preserve        HECM program: no payments
                                       funds from the sale of their previous     due to the lender while living in the
• Legislation in place prohibiting     home for their monthly cash flow          home, borrower retains title and full
  cross-selling of investment          needs, rather than putting all the sale   ownership, and only the proceeds of
  products such as annuities           proceeds toward the purchase of the       the sale of the home must be used to
  by the individual or company         new home. Or, they can make up any        eventually satisfy the reverse mortgage.
  assisting the borrower with the      shortfall in their own funds with the
  reverse mortgage origination         new HECM loan.                            While most senior homeowners often
                                                                                 seek to remain in their current home,
• 3 day rescission period after        The senior homeowner can use this         those senior homeowners considering
  closing during which the             new program to relocate to other          a move will be able to consider
  borrower can cancel the loan,        geographical areas to be closer to        the HECM for Purchase as a safe
  incurring only the cost of the       family members or downsize to homes       financial option to make that move
  appraisal, credit report, and        that meet their physical needs such as    possible. Senior homeowners can
  flood certification                  homes with handrails, single levels,      continue to enjoy the independence of
                                       ramps, and wider doorways.                homeownership while living close to
                                                                                 family or in a home that meets their
                                                                                 physical needs.
 The Reverse Mortgage Insider                                                     Volume 2, Issue 1

                                                                                  What is a
That’s a Good Question...                                                         Reverse Mortgage?
                                                                                  A reverse mortgage enables
What happens to my reverse mortgage when I die?                                   homeowners, age 62 and older, to
The loan needs to be repaid to the lender when the last surviving borrower        convert part of the equity in their
passes away. Your heirs or estate have an initial six months to decide how to     home into tax-free* cash. There are
satisfy the loan. If more time is needed, two additional ninety day extensions    no income or credit qualifications
can be requested. Generally your heirs will choose one of the following:          and no monthly payments to make.

  • Sell the home and pay off the reverse mortgage through the proceeds of        The property must be your primary
    the sale. The selling process such as choosing a realtor, preparing the       residence. The amount that can be
    home for sale, and listing the property is handled by the heirs or estate     borrowed is based on a formula using
    representative. Any remaining equity goes to the heirs or estate.             the youngest borrower’s age, home
                                                                                  value, and current interest rates.
  • Take out a conventional mortgage on the property. If the heirs decide         Even seniors with a current mortgage
    to keep the property, they can take out a traditional loan with a lender      may qualify, but the proceeds must
    of their choice. At closing, the reverse mortgage would be paid off and       first be used to repay any debt on
    the heir would make begin making monthly mortgage payments with               your home. The remaining dollars
    their new lender.                                                             can be taken as: a lump sum,
                                                                                  monthly checks, or a line of credit
                                                                                  which makes cash available when
Can I refinance my reverse mortgage as I could a                                  you need it and grows in value
conventional home mortgage?                                                       through the years. You may use
                                                                                  these funds for any purpose.
Yes. By taking advantage of any or all of four possible changes since you first
acquired a reverse mortgage—you are older, the value of your home increases,      You always retain the title and can
interest rates drop, or the FHA maximum lending limit increases—you might         continue to live in and own your
be able to put more cash in your pocket by refinancing.                           home. You remain responsible for
                                                                                  home maintenance, property taxes,
Seniors who wish to refinance an existing HECM will benefit from savings
                                                                                  and insurance.
on the upfront mortgage insurance fee charged by FHA. When refinancing
a HECM, the 2% is only charged on the difference between the original             Repayment is due—of any funds
loan’s home value and today’s appraised value. In addition, mandatory             advanced to you, the closing costs
counseling will be waived if you have received counseling within the last         and accrued interest—when the
five years.                                                                       last borrower permanently leaves
For a refinance, HUD would like to see a 5:1 ratio in comparing the               the home. The amount due will
amount of benefit versus the cost of the loan. That means you have to take        never exceed the value of the home,
all the costs incurred to do the new loan and multiply those by 5 to get the      regardless of the loan balance. Any
amount HUD recommends you gain with the new loan. If the amount to                remaining equity always belongs to
be gained is less, it doesn’t mean you can’t get the loan, but you must go        you or your heirs.
through counseling again to make sure you understand the program.                 You are required to take part in
                                                                                  a counseling session with an
                                                                                  approved housing counselor who
Remember, we are always available for a personal consultation or a group
                                                                                  will review the loan and discuss all
presentation to explain this innovative financial product for seniors.
                                                                                  options available to you.

                                                                                  *Consult your tax advisor
      The Reverse Mortgage Insider                                                            Volume 2, Issue 1

  Marketplace Home Mortgage,             Store To Door Celebrates 25th Anniversary
  LLC is pleased to offer reverse
                                         Most of the clients using Store to Door      If you are interested in donating money
  mortgages to our senior
                                         can’t walk much anymore and can’t do         or time as an order taker or shopper, or
  homeowners with the same               heavy lifting. A large and energetic group   know of a senior who needs this help to
  attentive service you have             of volunteers take their grocery orders      stay in their home, call 651-642-1892 or
  always come to expect from us.         and deliver to their home, often putting     email for more
  Marketplace Home Mortgage is           the groceries away and stopping for a        information. Learn more from their
  an employee-owned company              visit. They live the Store to Door mission   website at
  and we want this difference            statement “enhancing opportunities for
  to show through to you. Our            aging adults to live independently”.
  primary goal is to always be
  a trusted source of financial          This is the 25th Anniversary year for
                                         Store to Door, a grocery delivery service
  information and assistance.
                                         for homebound adults. Along with a
  We appreciate the opportunity
                                         celebration planned for May 1, the goals
  to work with you. Marketplace          for 2009 include spreading the word
  Home Mortgage is licensed in           about their service and continuing to
  MN, IA, ND, NE, WI, and FL.            reach out to prospective volunteers and
                                         new clients. The organization appreciates
                                         support from individuals and from
                                         corporations like Cargill and Target for
                                         volunteer time and donations to cover
                                         groceries for those who cannot pay.

Reverse Mortgage Marketplace

     Reverse Mortgage Specialists

Dory Lidinsky (763) 780-0703        Gail Wempner (952) 544-0821  

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