Aging in Place

I help people age in place by helping them get the money and services they need. I even know where they can get FREE durable medical equipment. Did you know that in 2009 the government created the asset recovery act. If someone goes into a nursing home and cannot pay the government will put a lien on the property up to 100% of the value? I can who you how to save 50% of the asset against that lien. Let me know if I can help,

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FHA Makes More Reverse Mortgage Proceeds Available for Older Borrowers

FHA Makes More Reverse Mortgage Proceeds Available for Older Borrowers

June 27th, 2014  |  by Elizabeth Ecker Published in FHA, News, Reverse Mortgage

The Department of Housing and Urban Development is making more proceeds available for some reverse mortgage borrowers, under new principal limit factors(PLFs) released Friday.

The new PLF tables now include borrowers who are under 62 years old, following a decision by HUD to allow for non-borrowing spouses of new reverse mortgage borrowers after August 3 to remain in their homes following the passing away of the borrower, under certain terms and conditions. The PLFs reflect loans for borrowers who are age 62 and older, but also loans for married couples where one borrower does not meet the traditional 62 year old age requirement.

A “special table” now includes PLFs for loans where one of the parties is age 18 to 61.

The new tables also make the Home Equity Conversion Mortgage program more sensitive to interest rates than previously.

“The biggest impact of these updated tables will be the reductions in PLF for higher interest rate scenarios, making the HECM market more sensitive to interest rates than it is currently,” says John Lunde, president and co-founder of Reverse Market Insight. “Right now home price appreciation is the biggest factor behind HECM to HECM refinance volume, and while that is likely still the case these new tables put more of a balance in place between home price appreciation and interest rates.”

HUD announced the new PLF tables via Mortgagee Letter 2014-12 on Friday, noting the change since last year’s PLF update. The new factors will go into effect as of August 4, 2014.

“The new Principal Limit Factor (PLF) tables have been wholly revised and now also include PLFs for use where the Borrower has a Non-Borrowing Spouse younger than 62,” HUD writes in its description.

Last year the agency slashed PLFs, resulting in a roughly 15% cut across the board for all borrowers. The newest change raises the amount of proceeds for the older spectrum of borrowers in a lower rate environment, but reduces PLFs for most borrowers in a higher rate environment.

The shift in the latest tables adjust depending on age and rate, resulting in different impacts versus the 2013 PLFs. PLFs increase in a lower interest rate environment whereas they will decline materially as rates rise.

For those on the younger end of the age spectrum, PLFs are reduced slightly versus the 2013 tables. At an interest rate of 5%, they increase for those who are 64 and older. At an interest rate of 6%, those who are 78 and older will see greater principal limits versus the previous table.

Chart courtesy of Ibis Software. 

“The older people benefit more,” said Jerry Wagner of Ibis Software. “The new PLFs are much more leery of rising rates.”

View the new PLF tables.

For more information contact Diane, the Reverse Mortgage Expert at 314-220-3918 or email fourquits@aol.com.

New Reseach: Get a Reverse Mortgage Sooner, Not Later

New Research: Get a Reverse Mortgage Sooner, Not Later

May 19, 2014 | by Editorial Team 

Today’s version of the saying “Strike while the iron’s hot” may apply to getting a reverse mortgage while interest rates are favorable, suggests new academic research recently published in theJournal of Financial Planning.

You’ve probably seen commercials and other advertisements touting reverse mortgages, but what you may not realize is that there’s also brand new research backing the use of reverse mortgages as a financial planning tool.

The Study

A group of financial planners and wealth advisors have just released a new report outlining the benefits of taking out a federally-insured home equity conversion mortgage (HECM) at a time when interest rates remain at historic lows, rather than waiting and risking the possibility of rates increasing or exhausting your retirement portfolio.

“Early establishment of an HECM line of credit in the current low interest rate environment is shown to consistently provide higher 30-year survival rates than those shown for the last resort strategies,” found researchers Shaun Pfeiffer, Ph.D.; C. Angus Schaal, CFP®; and John Salter, Ph.D., CFP®, AIFA®.

Reverse mortgages allow homeowners aged 62 and older to borrow against the value of their homes in the form of a non-recourse, federally-insured loan. In recent months, the HECM program has undergone several changes as the government seeks to make the loan a safer financial product for consumers.

These changes were considered in the financial experts’ latest report; some of the same researchers have previously explored using a “standby” reverse mortgage line of credit as a strategy to preserve and extend retirement portfolios.

For the new study, researchers projected several outcomes for a sample Calif. HECM line-of-credit borrower with a $500,000 nest egg and $250,000 in home equity at time of retirement. The nest egg comprised a portfolio split 60/40 between stock and bond investments along with a six-month cash reserve. The simulation used a 4-6% withdrawal rate of the credit line in 1% increments.

Using the simulated borrower, researchers looked at a few scenarios where a HECM line of credit was established during:

• A low interest rate environment at age 62 before the investment portfolio is exhausted
• Low interest rates once the investment portfolio is exhausted
• Moderate interest rates once the investment portfolio is exhausted
• High interest rates once the investment portfolio is exhausted

The Findings

The purpose of study was not to establish whether or not someone should take out a reverse mortgage, the researchers clarified in the report. Instead, they wanted to explore what factors to consider for a client whose income needs require the use of home equity, and how those factors impact the timing of taking out the loan.

“The empirical results from this analysis suggest early establishment of an HECM line of credit in the current interest rate and lending environment consistently provides greater survival rates than those strategies where the line of credit is established after the investment portfolio is exhausted,” write Salter, Schaal, and Pfeiffer.

However, it’s important to consider certain factors such as how long you plan to stay in your home, future home appreciation rates, how much of your loan proceeds you need to access each year, and where interest rates go, the report notes.

While each borrower’s situation is different, the research findings suggest that getting a reverse mortgage sooner rather than later may help you achieve a healthier, more sustainable retirement portfolio.

Are YOU a good Fit for a reverse mortgage? Take this quiz and find out

Are You a Good Fit for a Reverse Mortgage? Take This Quiz and Find Out

June 6, 2014 | by Editorial Team

Have you been considering a reverse mortgage loan, but you’re not quite sure if it’s the right fit for you?

Home Equity Conversion Mortgages (HECMs) are insured by the Federal Housing Administration and allow qualified homeowners to borrow against the equity they’ve built up in their homes in the form of a non-recourse loan.

The non-recourse feature guarantees that you’ll never have to repay more than what your home is worth, in the event your loan balance eventually exceeds your home’s current appraised value. Thanks to the government insurance, you can rest assured that reverse mortgages are a safe financial product.

Still not sure? Take our quick, five-question quiz to assess whether you’re cut out for a reverse mortgage.

1. Are you (and your spouse, if applicable) 62 or older?

The federally-insured reverse mortgage program requires borrowers to be age 62 or older. In order to take out a reverse mortgage and remain on the home title, you and your spouse, if you have one, must both meet the age qualification.

2. Do you own your home outright, or own with a small mortgage balance?

The amount you can get from a reverse mortgage depends on a few factors, including your age, your home’s appraised value and the amount of equity you’ve built up, and current interest rates.

If you still owe a large amount on a “forward” mortgage, there’s less equity available for you to tap into. Conversely, if you own your home outright, you’ll have more equity to access.

3. If you do still have a mortgage, are you looking for a way to pay it off?

Are you are an older homeowner with an existing mortgage? A growing number of seniors are retiring with mortgage debt, according to a new report released by the Consumer Financial Protection Bureau.

Around 80% of people aged 65 and older are homeowners, but as of 2011, 30% of them were still carrying mortgages. Among homeowners age 75 and older, more than 21% still have mortgages.

Did you know you can use a reverse mortgage to pay it off and eliminate your monthly mortgage payments? The HECM program requires borrowers to repay any existing mortgage debt, but reverse loans do not become due and payable until you leave your home or pass away.

4. Are you planning on “aging in place,” and do you want to make any home modifications to achieve this goal?

A whopping 90% of people age 65 and older have indicated a desire to stay in their current home for as long as possible, according to AARP. If that describes you, a reverse mortgage could help you achieve your goal. Reverse mortgages can be used for funds to carry out certain home modifications to enable aging in place.

Remodeling to create a safer living environment could range from installing grab bars in strategic locations to creating low or no-threshold entries or even widening hallways and doorways.

5. Will you most likely be able to comfortably live in your home for the foreseeable future?

Like most financial products, reverse mortgages come with some upfront fees and costs. For many borrowers, the expenses associated with taking out a reverse mortgage are well worth it down the road. However, if you’re only planning on remaining in your home for a couple more years, or you think you may need to move soon because of health issues, then a reverse mortgage may not be the right fit for you.

If you answered mostly “yes” to the questions above, you may be a great candidate for a reverse mortgage 

Retiring with a Reverse Mortgage is Predicted to be the New Normal

Retiring with a Reverse Mortgage is Predicted to be the New Normal

June 9, 2014 | by Editorial Team 

New research shows that the reverse mortgage will become an essential must-have tool for retirees.

The reality is that many Americans have saved very little for retirement, which will require them to tap the biggest asset: their home.

The good news is that seniors in the United States enjoy the highest rates of homeownership, with 81% of the 65+ population owning their own homes, according to a report released by the Consumer Financial Protection Bureau.

The typical U.S. household approaching retirement has nearly $140,000 in home equity, making it one of the largest assets older Americans can use to fund retirement according to the Center for Retirement Research (CRR) at Boston College.

“Accessing home equity will become increasingly important in a world where retirement needs are expanding: people are living longer and facing rapidly rising health care costs,” said Alicia H. Munnell, director of the Center for Retirement Research in a report for CRR. “The retirement system is contracting, Social security replacement rates are declining and employer-provided pensions have shifted from defined benefit plans to 401(k)s where balances are modest.”

How Can Seniors Tap that Needed Home Equity?

Reverse mortgages allow borrowers age 62 and older to borrow against the equity they’ve built up in their homes over the years.

Loan proceeds can be used to pay off existing “forward” mortgages and can be used at the borrower’s discretion as long as certain obligations are fulfilled, such as staying current on homeowners insurance and property tax.

The loan can be a boon for seniors who are on fixed incomes and are struggling to afford ongoing living expenses.

In the past couple of years, the number of senior households considered “cost-burdened” jumped from 3.1 million in 2001 to 4.1 million in 2010, according to the 2012 State of the Nation’s Housing report from the Joint Center for Housing Studies of Harvard University.

“As the baby boomers age, the number of cost-burdened seniors will likely rise sharply over the next 20 years,” the Harvard report said.

But recent changes to the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) program, which consolidated some of the loan offerings in 2013, have made the product even safer for consumers, Munnell believes.

“We need this program to work well, because people are going to need the money,” she writes for The Wall Street Journal’s MarketWatch blog.

Are you considering a reverse mortgage and are interested to learn more about how the federally-insured HECM program could fit into your retirement plan?

Why do People HATE Reverse Mortgages?

Why Do People Hate Reverse Mortgages?

June 12, 2014 | by Editorial

Despite hundreds of thousands of older Americans taking out reverse mortgages and surveys showing that these retirees are happy with the results, some people still have a strong distaste for them.

In nearly every case, if you dig a little deeper, much of the hatred for reverse mortgages comes from misunderstanding or lack of knowledge about the product. Here are some of the top reasons why people might hate reverse mortgages—and some counterpoints to consider as well.

Fear of the unknown

If you don’t know how a reverse mortgage works but you have heard it has a bad rap, you may dislike it purely by instinct – things that are new or confusing are often rejected. But rather than knock something you haven’t learned about, here are some facts to help you understand reverse mortgages.

Most reverse mortgages are obtained via the federally-insured Home Equity Conversion Mortgage (HECM) program. Homeowners age 62 and older can borrow against the equity they’ve built up in their homes in the form of a loan. HECMS are non-recourse, meaning you’ll never have to pay more than what your home is worth at the time of sale, even if your loan balance ends up exceeding the value of the home.

While there are some requirements of borrowers—including remaining current on homeowners insurance, property tax, and home maintenance—you’re free to use your loan proceeds however you see fit.

Reverse mortgage myths

There are a couple of reverse mortgage “myths”—common beliefs about the loan that aren’t founded in facts.
Those myths include:

• The bank will own your home
• You might lose your home or get kicked out
• There’s no way for adult children to inherit the home

One of the biggest misconceptions around reverse mortgages is that the bank will own your home if you get a reverse mortgage. This isn’t true at all. When a homeowner takes out a reverse mortgage, he or she retains the title to the home, just like in a traditional “forward” mortgage.

Reverse mortgages don’t become due and payable until the last surviving borrower dies or leaves the home. As long as you fulfill certain requirements related to taxes, insurance, and upkeep, you won’t get kicked out of your home.

While reverse mortgages do need to be repaid (which is often accomplished by selling the home), that’s not your only option. If adult children have a sentimental attachment to the home, or want to keep it in the family, heirs have the option of repaying the reverse mortgage through other means available to them. And if the home is sold to pay off the loan, there is often some money from the sale that is still inherited by your heirs.

Adult children want an inheritance

Many adult children don’t like the idea of their parents borrowing against their home equity because those children want to receive an inheritance. While it’s true that heirs will be responsible for repaying the loan once their parents pass away, there are a couple of factors to keep in mind.

Reverse mortgages insured by the Federal Housing Administration are non-recourse, which means adult children will never have to pay more than the home is worth at the time of sale.

“When a reverse mortgage becomes due and payable as a result of the borrower’s death and the property is conveyed by will or operation of law to the estate or heirs, that party (or parties if multiple heirs) may satisfy the HECM debt by paying the lesser of the mortgage balance or 95% of the current appraised value of the property,” explains reverse mortgage group the National Reverse Mortgage Lenders Association in its consumer Guide to Reverse Mortgages.

Adult children should also realize that there might be money left over after their parents take out a reverse mortgage. If the borrower’s heirs decide to repay the loan by selling their mom or dad’s house, any money left over after paying off the loan goes to the heirs.

Reverse mortgage fees

A reverse mortgage has fees that are similar to any other loan insured by the Federal Housing Administration. These include an initial mortgage insurance premium of 0.5% or 2.5% depending on the amount you take out. In addition, over the life of the loan you will be charged an annual mortgage insurance premium of 1.25% of the mortgage balance.

These fees all go to insure your loan and make sure you always have access to any remaining funds, even if your lender goes out of business. It also provides the non-recourse guarantee, which means you will never owe more than your home is worth at the time of sale.

In addition to the fees that borrowers pay to the Federal Housing Administration, there are standard title, taxes, and lender fees that vary depending on the provider. The good news is that lenders are not allowed to charge an origination fee more than $6,000 according to the Department of Housing and Urban Development, the agency that manages the program.

Loan balance that grows

Some people might not like reverse mortgages because they are a negatively amortized loan, which means that the loan balance grows over time. This is different than a traditional mortgage, which sees its loan balance get smaller as borrowers make payments each month.

Since borrowers pay for mortgage insurance, the threat of the loan balance growing too high is minimized because borrowers are protected if the loan balance ends up being more than the home is worth.

While every situation is different, a survey from AARP found that nearly 90 percent of people over age 65 want to stay in their residence for as long as possible. AARP also reported that 93 percent of borrowers said their reverse mortgages had had a mostly positive effect on their lives, compared to 3 percent who said the effect was mostly negative.

A reverse mortgage might not be the right fit for each person, but it’s time people start realizing it’s a safe way to enable older Americans to remain in their homes and live a comfortable retirement

Half of Americans Struggling to Afford Their Mortgages

June 4th, 2014  |  by Jason Oliva Published in News, Senior Housing

Americans have been struggling with housing affordability over the last three years, with 52% having to make sacrifices to cover their rent or mortgage, according to a recent survey.

Getting an additional job, deferring saving for retirement and cutting back on health care were just some of the sacrifices these struggling homeowners have made to afford housing, reports the “How Housing Matters Survey” conducted by Hart Research Associates.

The survey, commissioned by the nonprofit John D. and Catherine T. MacArthur Foundation, represents a shift among Americans’ attitudes toward the overall housing market and how they view homeownership as a valuable investment. 

About 43% indicate it is no longer the case that owning a home is an “excellent long-term investment and one of the best ways for people to build wealth and assets.”

Additionally, more than half (54%) believe that buying a home has become “less appealing” than it once was, given the current market environment, while a similar proportion of adults (51%) believe that renting has become “more appealing.”

“The housing crisis that began more than five years ago has left an indelible mark on the attitudes and experiences of Americans,” stated Geoffrey Garin, president of Hart Research Associates. “Housing affordability has driven a large share of the American people to make significant financial adjustments.”

Driving these attitudinal changes is a growing perception that the aftermath of the housing crisis has yet to signal relief for a high proportion (70%) of Americans.

Of this group, 51% continue to believe the country is still in the midst of the crisis, while 19% believe that the “worst is yet to come.” 

The public in 2014 is only slightly more optimistic than it was a year ago, the survey notes, when 77% believed the nation was still in the grips of the crisis. 

“The continuing stresses felt by the vast majority of Americans in the aftermath of the housing recession are real and profound,” stated Jula Stasch, MacArthur’s vice president of U.S. programs. “It is clear that Americans believe more can and should be done to improve housing affordability for renters and owners, and that government should take action to invest in both equally.”

Written by Jason Oliva