New Counseling Procedures Released For Reverse Mortgages

The U.S. Department of Housing and Urban Development (HUD), after nearly 2 years of studying and revisions, recently published new procedures governing the process for seniors who are counseled for federally insured Home Equity Conversion Mortgages (HECMs).

Before meeting with a prospective reverse mortgage borrower, a counselor must first mail, fax or email an information packet that includes: a document titled Preparing for Your Counseling Session (attached to the protocol), copy of loan comparisons, copy of the Total Annual Loan Cost (TALC), loan amortization schedule, and a copy of NCOA’s booklet, Use Your Home to Stay at Home.

As part of the process, counselors must ask 10 questions to ensure that a senior comprehends the reverse mortgage’s key elements and if the senior fails to answer at least five of the questions, the counselor may withhold the counseling certificate or schedule a follow up meeting.

Not enough cash? Get your priorities straight

Learn the art of compromise

What if you realize that you can't afford to pay for a home health aide to take care of Dad without doing serious damage to your own retirement plans? Rather than letting guilt subsume you, think about whether you can "massage your goal, and fulfill your need in a more creative way," suggests Nusbaum.

Is there another way to get to the same end result? If the goal is to get Dad the care he needs, you might look into whether he's eligible for government programs that would defray the costs; you might ask siblings to share the burden with you; or you might help him arrange a reverse mortgage.

5 Reasons To Secure a Reverse Mortgage Before October 1, 2010

1. Lower Costs: Lenders have been reducing the upfront costs.
2. Principal Limit Reduction: On October 1st, 2009 HUD implemented a 10% reduction in principal limits for its Federal Housing Administration (FHA) insured reverse mortgage product, the first ever reduction. FHA may consider a second reduction October 1, 2010.
3. Increase in the Mortgage Insurance Premium (MIP) from .5 to 1.25%. What this means to homeowners that get their Reverse Mortgage after this change is an overall increase in the cost of the loan.
4. Reverse Mortgage Appropriation? Included in the Obama Administration’s FY 2011 budget is a $250 million appropriation request to offset projected losses for the Federal Housing Administration’s reverse mortgage program. If congress does not provide the $250 million, FHA will be forced to reduce the amount of money available to seniors through the program by 21% according to testimony from Commissioner David Stevens earlier this year.
5. FHA Lending Limits are temporary through the end of 2010. Homeowners with homes valued between $417,000.00 and $625,000.00 would lose significant proceeds if the $625,000.00 limit goes away.

Former FHA official predicts ‘pivotal’ year for reverse mortgages

Former Federal Housing Administration Commissioner Brian Montgomery, who oversaw the nation’s most popular reverse mortgage product for nearly five years, sees a “pivotal” year ahead for the industry that allows seniors to tap the equity in their homes.

In 2009, the program’s fund suffered a $198 million shortfall that was generally attributed to the decline of home values, national media stories about unscrupulous lenders and a call by some legislators to keep reverse mortgages from becoming the next subprime debacle. In 2010, the shortfall is expected to be $250 million.

Because of the shortfalls, the principal limit factor has been tweaked to reduce the net amounts seniors can receive.

Financial Reform, Brings New Reverse Mortgage Oversight

The broader legislation also takes on consumer issues, including a key Obama administration proposal to create an agency tasked with policing most financial products sold to consumers. Housed in the Federal Reserve, the Consumer Financial Protection Bureau has the independent authority to write and enforce rules for consumer lending in mortgages, credit cards and other financial products.

The bill also includes new consumer protections for reverse mortgages.
Within the first year, the bureau is tasked with conducting a reverse mortgage study to determine any deceptive or abusive practices. It will also determine whether suitability standards are necessary, as well as safeguards to protect consumers from being sold reverse mortgages to fund inappropriate annuities, investments, and other financial products.

The bureau has the authority to issue regulations, orders, or guidance that apply to reverse mortgages prior to the completion of the study.

TIME Admits Using Old "Study" for New Reverse Mortgage Article

Last week Time Magazine posted a very inflammatory article on the reverse mortgage industry. Then, they print a correction. In our day we were taught to measure twice; cut once.

"The original version of this story relied on a study of reverse mortgage fees that was three years old. Since then, new federal guidelines have brought down the expense of reverse mortgages."

Time Magazine: Another ignorant smear piece on reverse mortgages

Shannon Hicks; "I couldn’t read this “journalistic” (too use the term loosely) hit piece (Six Problems the Consumer Financial Protection Bureau Should Tackle First) and not respond. Below is my letter to the editor of Time Magazine requesting a retraction…"

Dear Editor,

As a reverse mortgage professional I am writing about your publication’s recent story published July 6th highlighting reverse mortgages as one of the six problem areas that the new Consumer Financial Protection Bureau needs to address. After reading my comments I would ask that your publication publish a retraction or correction in fairness to your readers who deserve the truth. Unfortunately, such retractions are much like trying to pick up feathers scattered in the wind.

ABC News Runs Reverse Mortgage Feature

ABC News Good Money ran a segment on reverse mortgages earlier this week. ABC’s Tanya Rivero  talks with Eric Tyson, author of personal finance for seniors for dummies and asks him loads of questions.

Specifically Tyson says a borrower needs to look at how many years they plan to remain in the home. ”If you end up not holding onto the reverse mortgage for many years, the effective interest rate can be quite high,” he said.

MarketWatch: Reverse Mortgage to Help Adult Children?

Question: My parents are 83 and 88 years old and live in a home that is paid for in full. They are considering a reverse mortgage because we children need the funds now. Can you please advise us how to go about this, and the pros and cons?

Here are a few questions to start: Will our parents be taxed? Can they give funds to their children as a gift, and would we be taxed? How does a reverse mortgage affect getting Medicare later on with no equity? Or better said, how would this affect them if they need to go into a care facility?

When you meet a Veteran, shake their hand and thank them for their service.