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

Mr and Mrs Smith - Age in Place with a REverse Mortgage

The Smith’s

Mr. Smith retired from a government job and had a meager pension.  In order

To pay off debt and make their lives more comfortable Mr. Smith took out a reverse mortgage.  At the time Mrs. Smith wasn’t 62 so she couldn’t be a part of the loan. 

Once she turned 62 it would be important for her to be put on the loan so that if something happened to Mr. Smith she wouldn’t have to settle the loan.

Last year Mr. Smith was diagnosed with terminal lung cancer and Mrs. Smith hadn’t applied for a reverse mortgage to put her name on title.

The Smith’s called me to see if I could help because if Mr. Smith passed away Mrs. Smith would have to sell her home.  She wasn’t working and couldn’t afford a house payment. I did an application with Mrs. Smith and all went well and the loan closed.  Now Mr. Smith and Mrs. Smith can enjoy their remaining time together without worrying about Mrs. Smith having to sell their home and find a new place to live. 

The reverse mortgage was a wonderful tool for the Smiths to get the money they needed to live while never having to make a payment on their fixed, limited income.

This is why I do what I do and love it.  I improve the quality of life for seniors and help them to Age in Place.

New Rules for REVERSE MORTGAGES

New FHA Rules for Reverse Mortgages Borrowers are rushing to lock in reverse mortgages ahead of changes next month intended to strengthen the loan program for seniors but that will also reduce its popularity. "It has been a madhouse," said Helen Taylor, program director at the Northeast Denver Housing Center. "I am getting about 20 to 25 calls a day." Taylor, who conducts the mandatory counseling required to get a reverse mortgage, is hearing from applicants eager to qualify under existing rules rather than the ones coming Tuesday. Those changes, detailed in a letter from the Federal Housing Administration, include a 15 percent reduction in the maximum amount a borrower can access via a reverse mortgage. The FHA will also begin collecting 2.5 The Denver Post's reporters and editors offer news, analysis and commentary on the latest business, real estate, tourism, gambling and technology news in Colorado. percent of the home's value in an upfront mortgage-insurance premium rather than the 2 percent it has charged for those taking out 60 percent or more of their proceeds in the first year of a loan. And starting Jan. 13, borrowers will have to pass a financial assessment to measure whether they can handle insurance and property-tax payments. If not, funds will be set aside to cover those costs and prevent a default. "The changes coming down the pike are huge, and they will change how the business is done," said James Spray, an Arvada mortgage lender who specializes in reverse mortgages for home purchases. Spray expects the changes will cut his business by about a fifth, but he has heard from others in the industry who are expecting much larger reductions and are planning to get out. Reverse mortgages, also known as home-equity-conversion mortgages, allow a borrower to tap their home equity as a monthly payment or a line of credit. The program, around since 1989, is available to people ages 62 and older. A key goal of the reverse-mortgage program is to allow seniors to stay in their homes as long as possible, which has a larger societal benefit, said Rick Garcia, regional administrator of the U.S. Department of Housing and Urban Development's Region VIII, which covers Colorado and five nearby states. The Federal Housing Administration backed 1,072 reverse mortgages in Colorado and 54,676 nationwide in the last full fiscal year, which ended last Sept. 30. Those totals are down by about half from the peak seen in 2009 because of earlier changes in the program and a weaker housing market. Hedging against losses from reverse mortgages is difficult because it requires predicting two things correctly: how long a borrower will hold the loan and the direction of home prices. "We are trying to ensure the longer-term solvency of the fund," Garcia said. In 1990, the average age of a person taking out a reverse mortgage was 76.7. Last year, it had fallen to 71.9. Technically, a reverse mortgage doesn't have to be repaid until the borrower moves out or passes away. But younger borrowers are more likely to move than "age in place," and more of them have gone into default. Because of the unprecedented decline in home values during the housing bust, the FHA has found itself holding the bag for bigger losses than expected, depleting its insurance fund. "They have the new borrowers paying for the sins of the past borrowers," said Donald Opeka, president of Orion Mortgage in Broomfield. In the early days of the program, many borrowers turned to reverse mortgages to free up cash for spending, a use that declined with the equity available in homes. With more people carrying mortgages into retirement, reverse mortgages have increasingly been used to eliminate monthly loan payments, lenders said. Opeka said one client had a $1,200 monthly mortgage payment while collecting $1,400 a month in Social Security, an untenable situation. An inheritance allowed her to take out a reverse mortgage and stop the payments. "She has a chance of living in the house and staying there the rest of her life," he said. Some borrowers use the mortgages as a line of credit that prevents having to tap other money sources when conditions aren't favorable. At the other extreme are those who turn to reverse mortgages in desperation. "Seniors who shouldn't have gotten the mortgage got it," said Jim Veale, a senior vice president with Security One Lending in Lakewood, Calif. Veale said more people are retiring with heavy debt burdens that leave them unable to meet even the most basic requirements of covering insurance and taxes. Their defaults are what have depleted the reserve funds designed to protect taxpayers, although Garcia said the default rates on reverse mortgages are comparable to those on loans under other FHA programs. There had been hope within the industry that the reverse-mortgage program could make it over the hump without a bailout, but Friday the FHA requested $1.7 billion to shore up its long-term finances. Veale said there will need to be a major shift in how the loans are perceived and marketed, not as a loan of last resort but as a financial-planning tool. "We know we won't be able to help the most needy any longer," Veale said.

Baby Boomers want to MOVE!!!!!!

It's a fact that there are tens of thousands of people are turning 62 everyday.  If this is you or will be you soon keep reading.  According the Fidelity investments research study almost 40% of the baby boomers would like to move sometime during their retirement years.  Preferably to a warmer climate.  Even though they would like to move they currently  feel trapped by their financial situation.

Have your investments taken a beating?  Has your home value plummeted by 50% or more?  Has your dreams of buying a new retirement home vanished?  With countries like Greece going bankrupt it's directly affecting the retirees here in the U.S.  Here at home our county is trillions of dollars in debt and economist warn it's likely to get worse.  The fact is that many new retirees feel hopeless and stuck. Not being able to live out their retirement dreams.

I'm a specialist in helping people to understand how to purchase real estate with no monthly payments and without paying all cash down.  Not only that but I can show you how you can eliminate a mortgage payment.  You can sell your current home and get enough to purchase another one outright.  You probably have assets in your retirement account you could withdraw, but because they have less value than a few years ago you hate to pull it out now and need to really wait for a come back.  All this isn't your fault.  Like many you were a victim of tough economic times.  Some people are enjoying the retirement dreams right now.  They have purchase a retirement home and did it all without having a monthly mortgage payment and not paying for it with all their cash.

The HECM for purchase is a popular way to purchase a home - sell the family home that is now to big - or make needed repairs.  This is a easy way for you to capture the equity from your existing home and to take advantage of the wealth you've built with no income, assets or credit required.  However you cannot have any bankruptcies or tax liens on your record.  This is a huge opportunity for you to make your retirement dreams come true.

Have you ever imagined rental income to supplement your income?  You can do a reverse on your current residence and purchase rental property.  The rental property will create a positive "cash flow", without having to make a payment on it.

So to review, Baby boomer are more active and vibrant than the generations before them.  They can expect to live a very long life into retirement.  This HECM for purchase program was specifically designed with the baby boomers in mind.  Call me today at 314-220-3918 for a FREE quote and learn how you can move or create more income.  You can also visit my website at www.reversemortgagesspecialist.com.