Reverse Mortgage Information: Deborah Nance - Corona Reverse Mortgage Professional - Riverside County (Corona Temecula Riverside Moreno Valley Reverse Mortgages)

New Reverse Mortgages in Orange County, California as well as the rest of the country will be changing in a few short weeks on October 4, 2010

An informative and relative post at Reverse Mortgage Daily, yesterday:

Here's the gist of  it: On October 4, 2010 (yep, next month) there will be some changes to all new HECM loans with case numbers assigned after that date.  We've know n about these upcoming changes for some time now and here they come.

• The MIP will increase from a .5% annual premium to 1.25%.  This amount is added monthly to the loan  balance. 
• The principal limits (sort of like Loan To Value ratios) will decrease between 1 and 5% where they are currently.  Use a Reverse Mortgage Calculator to see what your Orange County home may qualify for.

 On the bright side - If you look at the raise in MIP as effectively an "interest rate" in as much as it accrues to the balance, even at 1.25% MIP rates are lower than they were when I first got into this business and it was benefiting many seniors.  At that time the FHA HECM lending limits were around $212,000.  Now the limit is $625,500, making if very useful for seniors living in higher value areas like Southern California.  It also allows FHA to keep this great product viable and available for senior homeowners and home buyers over the age of 62.

Last year, HUD reduced the principal limits by 10% and I noticed an immediate increase in the number of homeowners I was unable to help.  This is because for the most part seniors use the reverse mortgage to payoff an existing mortgage, eliminating the monthly mortgage payment and effectively increasing their cash flow.  When I have to tell them that they now have to bring funds to the table to get a reverse, many times (not all) I am told.  "Gee, Debbie, if I had $XX,XXX.XX dollars I wouldn't be trying to get a reverse mortgage!" For them, the best option may be to sell.  Others will look for ways to supplement their income. Most will just keep going as they have been, deeper into savings, deeper in credit card debt until....

This is the second time HUD has been forced to reduce the principal limits in the last two years.  Last year HUD reduced the principal limits by 10% which had a large effect on the number of seniors able to utilize a reverse mortgage to payoff their existing traditional mortgage.

According to HUD, loans with a case number assigned prior to October 4th will still be eligible for the previous principal limits.  A mortgagee letter explaining the changes will be published in September.

In addition to these changes, HUD is expected to release a new type of reverse mortgage, called a HECM light.  More to come on that!

Reverse Mortgages here in Norco and the rest of the country will undergo some changes in a few short weeks on October 4, 2010.

An informative and relative post at Reverse Mortgage Daily, yesterday:

Here's the gist of  it: On October 4, 2010 (yep, next month) there will be some changes to all new HECM loans with case numbers assigned after that date.  We've know n about these upcoming changes for some time now and here they come.

• The MIP will increase from a .5% annual premium to 1.25%.  This amount is added monthly to the loan  balance. 
• The principal limits (sort of like Loan To Value ratios) will decrease between 1 and 5% where they are currently.  Use a Reverse Mortgage Calculator to see what you may qualify for.

 On the bright side - If you look at the raise in MIP as effectively an "interest rate" in as much as it accrues to the balance, even at 1.25% MIP rates are lower than they were when I first got into this business and it was benefiting many seniors.  At that time the FHA HECM lending limits were around $212,000.  Now the limit is $625,500, making if very useful for seniors living in higher value areas like Southern California.  It also allows FHA to keep this great product viable and available for senior homeowners and home buyers over the age of 62.

Last year, HUD reduced the principal limits by 10% and I noticed an immediate increase in the number of homeowners I was unable to help.  This is because for the most part seniors use the reverse mortgage to payoff an existing mortgage, eliminating the monthly mortgage payment and effectively increasing their cash flow.  When I have to tell them that they now have to bring funds to the table to get a reverse, many times (not all) I am told.  "Gee, Debbie, if I had $XX,XXX.XX dollars I wouldn't be trying to get a reverse mortgage!" For them, the best option may be to sell.  Others will look for ways to supplement their income. Most will just keep going as they have been, deeper into savings, deeper in credit card debt until....

This is the second time HUD has been forced to reduce the principal limits in the last two years.  Last year HUD reduced the principal limits by 10% which had a large effect on the number of seniors able to utilize a reverse mortgage to payoff their existing traditional mortgage.

According to HUD, loans with a case number assigned prior to October 4th will still be eligible for the previous principal limits.  A mortgagee letter explaining the changes will be published in September.

In addition to these changes, HUD is expected to release a new type of reverse mortgage, called a HECM light.  More to come on that!

Reverse Mortgages in Temecula, California and the rest of the country will be changing in a few short weeks on October 4, 2010

An informative and relative post at Reverse Mortgage Daily, yesterday:

Here's the gist of  it: On October 4, 2010 (yep, next month) there will be some changes to all new HECM loans with case numbers assigned after that date.  We've know n about these upcoming changes for some time now and here they come.

1. The MIP will increase from a .5% annual premium to 1.25%.  This amount is added monthly to the loan  balance. 
2. The principal limits (sort of like Loan To Value ratios) will decrease between 1 and 5% where they are currently.  Use a Reverse Mortgage Calculator to see what you may qualify for.

 On the bright side - If you look at the raise in MIP as effectively an "interest rate" in as much as it accrues to the balance, even at 1.25% MIP rates are lower than they were when I first got into this business and it was benefiting many seniors.  At that time the FHA HECM lending limits were around $212,000.  Now the limit is $625,500, making if very useful for seniors living in higher value areas like Southern California.  It also allows FHA to keep this great product viable and available for senior homeowners and home buyers over the age of 62.

Last year, HUD reduced the principal limits by 10% and I noticed an immediate increase in the number of homeowners I was unable to help.  This is because for the most part seniors use the reverse mortgage to payoff an existing mortgage, eliminating the monthly mortgage payment and effectively increasing their cash flow.  When I have to tell them that they now have to bring funds to the table to get a reverse, many times (not all) I am told.  "Gee, Debbie, if I had $XX,XXX.XX dollars I wouldn't be trying to get a reverse mortgage!" For them, the best option may be to sell.  Others will look for ways to supplement their income. Most will just keep going as they have been, deeper into savings, deeper in credit card debt until....

This is the second time HUD has been forced to reduce the principal limits in the last two years.  Last year HUD reduced the principal limits by 10% which had a large effect on the number of seniors able to utilize a reverse mortgage to payoff their existing traditional mortgage.

According to HUD, loans with a case number assigned prior to October 4th will still be eligible for the previous principal limits.  A mortgagee letter explaining the changes will be published in September.

In addition to these changes, HUD is expected to release a new type of reverse mortgage, called a HECM light.  More to come on that!

Reverse Mortgages in Riverside, California and the rest of the country are set to change on October 4^{th, 2010.}

There was a very informative and relative post at Reverse Mortgage Daily, yesterday:

Here's the gist of  it: On October 4, 2010 (yep, next month) there will be some changes to all new HECM loans with case numbers assigned after that date.  We've know n about these upcoming changes for some time now and here they come.

1. The MIP will increase from a .5% annual premium to 1.25%.  This amount is added monthly to the loan  balance. 
2. The principal limits (sort of like Loan To Value ratios) will decrease between 1 and 5% where they are currently.

This is the second time HUD has been forced to reduce the principal limits in the last two years.  Last year HUD reduced the principal limits by 10% which had a large effect on the number of seniors able to utilize a reverse mortgage to payoff their existing traditional mortgage.

Last year, HUD reduced the principal limits by 10% and I noticed an immediate increase in the number of homeowners I was unable to help.  This is because for the most part seniors use the reverse mortgage to payoff an existing mortgage, eliminating the monthly mortgage payment and effectively increasing their cash flow.  When I have to tell them that they now have to bring funds to the table to get a reverse, many times (not all) I am told.  "Gee, Debbie, if I had $XX,XXX.XX dollars I wouldn't be trying to get a reverse mortgage!" For them, the best option may be to sell.  Others will look for ways to supplement their income. Most will just keep going as they have been, deeper into savings, deeper in credit card debt until....

According to HUD, loans with a case number assigned prior to October 4th will still be eligible for the previous principal limits.  A mortgagee letter explaining the changes will be published in September.

The bright side - If you look at the raise in MIP as effectively an "interest rate" in as much as it accrues to the balance, even at 1.25% MIP rates are lower than they were when I first got into this business and it was benefiting many seniors.  At that time the FHA HECM lending limits were around $212,000.  Now the limit is $625,500, making if very useful for seniors living in higher value areas like Southern California.  It also allows FHA to keep this great product viable and available for senior homeowners and home buyers over the age of 62.

In addition to these changes, HUD is expected to release a new type of reverse mortgage, called a HECM light.  More to come on that!

Reverse Mortgages in Corona, California and the rest of the country will be changing on October 4^th.

An informative and relative post at Reverse Mortgage Daily, yesterday:

Here's the gist of  it: On October 4, 2010 (yep, next month) there will be some changes to all new HECM loans with case numbers assigned after that date.  We've know n about these upcoming changes for some time now and here they come.

1. The MIP will increase from a .5% annual premium to 1.25%.  This amount is added monthly to the loan  balance. 
2. The principal limits (sort of like Loan To Value ratios) will decrease between 1 and 5% where they are currently.

Last year, HUD reduced the principal limits by 10% and I noticed an immediate increase in the number of homeowners I was unable to help.  This is because for the most part seniors use the reverse mortgage to payoff an existing mortgage, eliminating the monthly mortgage payment and effectively increasing their cash flow.  When I have to tell them that they now have to bring funds to the table to get a reverse, many times (not all) I am told.  "Gee, Debbie, if I had $XX,XXX.XX dollars I wouldn't be trying to get a reverse mortgage!" For them, the best option may be to sell.  Others will look for ways to supplement their income. Most will just keep going as they have been, deeper into savings, deeper in credit card debt until....

This is the second time HUD has been forced to reduce the principal limits in the last two years.  Last year HUD reduced the principal limits by 10% which had a large effect on the number of seniors able to utilize a reverse mortgage to payoff their existing traditional mortgage.

According to HUD, loans with a case number assigned prior to October 4th will still be eligible for the previous principal limits.  A mortgagee letter explaining the changes will be published in September.

The bright side - If you look at the raise in MIP as effectively an "interest rate" in as much as it accrues to the balance, even at 1.25% MIP rates are lower than they were when I first got into this business and it was benefiting many seniors.  At that time the FHA HECM lending limits were around $212,000.  Now the limit is $625,500, making if very useful for seniors living in higher value areas like Southern California.  It also allows FHA to keep this great product viable and available for senior homeowners and home buyers over the age of 62.

In addition to these changes, HUD is expected to release a new type of reverse mortgage, called a HECM light.  More to come on that!

Another Reverse Mortgage for Purchase closing today here in Corona! 

My senior borrowers purchased an approved short sale home and closed within 45 days.  Now, granted, they looked for awhile and made offers on several homes before this one popped.  But, I am thrilled to see how sellers and bank owned REO's are becoming more educated and receptive about this method of financing for homeowners over 62 years old.

The transaction went very smoothly with good communication between all parties (isn't that really the key?) If you have any questions about how it works check out Reverse for Purchase.

An online reverse mortgage calculator can help you to determine how much of your home's equity you can access for a reverse mortgage.

In general, at the current rates & fees you can ballpark that the funds available (after costs) will run as follows - take the youngest homeowners age, subtract 10. That figure is fairly close to the Loan(after costs) to Value senior borrowers/buyers can expect from their reverse proceeds. 

You can find very basic reverse mortgage calculators on the web at sites from AARP and HUD.  For a more detailed analysis please access my Reverse Mortgage Calculator.

This set of Reverse Mortgage  Q & A is educational and helpful as you research the HECM product. Let me know what you think!

What Is a Reverse Mortgage?

A Reverse Mortgage allows a senior homeowner to convert a portion of the equity in his or her home, eliminating mortgage payments and gaining tax-free income without losing the title to his or her home. The equity in your home that has built up over years of mortgage payments and appreciation can be paid to you.  Unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer uses the home as their principal residence.

Can I qualify for a HUD Reverse Mortgage?

HUD's federal housing administration (FHA) guidelines require that the borrower is a homeowner  62 years of age or older with a low enough mortgage balance or sufficient funds to reduce the current mortgage  balance  low enough that it can be paid off at the closing with proceeds from the reverse loan.  The home MUST be the borrowers principal residence.

To be eligible for a JUD Reverse Mortgage, the borrower(s) must receive formal counseling from a HUD-approved counseling source prior to completing the loan.  To find a counseling agency near you use HUD's own HECM Counseling Web Search at HUD Certified HECM Counselors.

What types of homes are eligible?

The home must be a single-family dwelling or a two-to-four-unit property that is owner occupied. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA approved.  The home must be in reasonable condition and must meet HUD minimum property standards. In some cases, home repairs can be made after the closing of a Reverse Mortgage.

What's the Difference between a Reverse Mortgage and a bank home equity Loan?

With a traditional second mortgage or a home equity line of credit, there must be sufficient income versus debt ratio to qualify for the loan, and monthly mortgage payments are required.  FHA Reverse Mortgages are different in that they pay you and are available regardless of current income. The amount depends on age, current interest rate, other loan fees and the appraised home value or FHA Lending Limits for your area - whichever is less.  There are no monthly payments required. (And there are no prepayment penalties should the senior homeowner wish to make prepayments.) The loan is not due as long as the house remains the principal residence, the property taxes and homeowners insurance are kept up to date and the home is reasonably maintained.

Can the Lender take my home away if I outlive the loan?

No! A borrower cannot outlive a Reverse Mortgage! Nor is the loan due. It does not have to be repaid as long as one of the borrowers continues to live in the house and keeps the taxes and insurance current.  .

Will I still have an estate that I can leave to my heirs?

When you sell your home or no longer use it for your primary residence, you or your estate will repay the loan proceeds from the Reverse Mortgage, plus interest and related fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.

How much money is available to me?

The amount you can borrow depends on your age, the current expected interest rate, other loan fees and the appraised value of your home or FHA's mortgage lending limits for your area, whichever is less. Generally, the more valuable your home is, the older you are and the lower the expected interest rate is, the more you can borrow.

What's the most you can owe?

Reverse Mortgages are nonrecourse loans, which means that in seeking repayment the lender does not have recourse to anything other than the home. Not income, nor any other assets. So even if a monthly loan amount advances until you are age 115, the home declines in value between now and then, and the total of monthly payment advances becomes greater than the home's value - you still would never have to repay more than what you could obtain by selling the home at market value.  If you or your heirs sell your home to pay off the loan, the debt is generally limited by the net proceeds from the sale. This is why mortgage insurance is so important. This insurance, which is part of your closing fees, ensures your heirs are not liable for a penny of your Reverse Mortgage after you are gone.

How do I receive payments?

You have several options:

*Tenure - equal monthly payments as long as at least one borrower continues to occupy the property as a principal residence.

*Term - equal monthly payments for a fixed period of months selected.

* Line of credit - unscheduled payments at times and in amounts of your choice, until the line of credit is exhausted.

Lump sum - obtain a lump-sum payment of some amount when the loan is funded.

*A combination - Most people do a combination of all the options. For example, you could take out some amount as a lump sum for home improvements, travel or large-item purchases, put some into a line of credit for possible future use, and use the remaining as a tenure monthly payment for life.

Are there restrictions on how I use my Reverse Mortgage loan proceeds?

You can do anything you want with the money; it is your money. Many people take vacations, buy a new car and help kids or grandkids with college or their first home. Many people put some in a line of credit that they will use in the future for in-home healthcare, medical costs, property taxes and home repairs.

What are the  costs?

Cost have recently been lowered by most lenders.  Most closing costs are generally of the same type found on traditional mortgages: interest charges, third-party closing costs (title search and insurance, surveys, inspections, recording fees, mortgage taxes that are required in your area. Reverse Mortgages also typically include a "FHA MIP "mortgage insurance premium".  Many lenders have eliminate the loan origination fee and monthly servicing fees.  Some do this on both fixed and adjustable, others only offer it on the Fixed Rate reverse. (This is because of the higher resale value of the fixed rate, closed end loans in the secondary market. )  Monthly MIP is currently charged on a reverse mortgage at an annual rate of .5% (one half of one percent) and is currently being reviewed for a likely increase this fall to 1.25%.

* Line of Credit, Tenure Payments, Term Payments and Combination of benefits are not available on the Fixed Rate Reverse Mortgage product.  The fixed rate reverse is a closed end loan and all funds must be disbursed at the close of the loan - in other words you must take all that you qualify for.

I am so excited to have a couple of deals in escrow right now where the buyers are financing their home purchase with an FHA HECM Reverse Mortgage!  It's a relatively new product (2009) and not every agent, broker or buyer is aware of it.

In one instance, a young 70 year old is  putting down $130K on a $318K property in a gated 55+ golf community!  He still works and plans on making payments to his Adjustable Rate Reverse Mortgage and build up a line of credit.  That way he will still be able to take advantage of the tax write off for interest payments.  When he wants to, he can stop making payments knowing that the money he pre-paid is available to him to withdraw again!  I think his plan is very smart.

Southern California Realtors, if you would like some information about how the Reverse 4 Purchase can help you to help your senior home buyers.... just let me know! I'd love to sit down with you and brainstorm.

Here is sensible advice for seniors looking into reverse mortgages.  FHA is your best bet when it comes to reverse mortgages.  HECM is the acronym for the FHA Reverse Mortgage.  It stands for Home Equity Conversion Mortgage.  HUD Approved counseling must be obtained by seniors  prior to applying for a reverse mortgage. Family members and trusted advisor are encouraged to attend the counseling session as well.

As far as the costs go, there is some good news at this particular time for seniors - many lenders are waiving the origination fee and servicing fees on the fixed rate reverse, some are even waiving them on the Adjustable rate reverse as well!  This is great news for seniors who have been waiting for costs to come down!

FDIC Consumer News

Spring 2010

Advice for Seniors: Understand the Risks and Costs of Borrowing With a Reverse Mortgage

A reverse mortgage is essentially a loan against your home that you do not have to pay back for as long as you live there. It allows homeowners age 62 or older to borrow cash from the equity in their homes without having to make monthly payments. A reverse mortgage is often advertised as a great source of easy money for older homeowners to supplement their income, pay healthcare expenses or use the money as they please. But as FDIC Consumer News has reported in the past, while there are potential benefits to a reverse mortgage, it may not be the best option for everyone. With the number of potential borrowers growing with the aging population, it's important that homeowners fully understand the risks involved. Here are our latest tips.

Remember that a reverse mortgage is a loan that must be repaid. "Not all advertisements clearly indicate that a reverse mortgage is a loan," said Mira Marshall, an FDIC Section Chief specializing in consumer issues. "In fact, a reverse mortgage is a very complicated loan that uses home equity as collateral, just like the mortgage you probably used to purchase your home."

Reverse mortgages allow homeowners to receive cash in a lump sum, through monthly payments, as a line of credit whenever they need money, or any combination of these options. Unlike traditional mortgage products, homeowners do not make any monthly payments to the lender. However, they eventually do have to repay the principal and interest when they move, sell the house or pass away. And, because no monthly payments are being made, the amount owed will grow over time as interest costs build up and, in some cases, as additional funds are advanced.

The borrower also is still responsible for paying the property taxes and insurance and maintaining the house. Failure to do so can cause the reverse mortgage to become immediately due and payable in full.

The rules to determine how much you can borrow through a reverse mortgage are complex. For example, the total amount of cash available is a percentage of the home's value that will vary by the age of the borrower and the location of the property. And if there's a co-borrower, the value is determined by the age of the youngest borrower.

Let's say your house has a market value of $250,000, you owe nothing on a mortgage and the youngest co-owner is 70 years old. Even though your home equity is about $250,000, with a reverse mortgage and depending on the location of the property, you can borrow only up to approximately $130,000. In contrast, with a traditional home equity loan, it may be possible to borrow up to 100 percent of the value of the home.

Be aware that not all reverse mortgages carry insurance and other protections from the federal government. The most common type of reverse mortgage - the Home Equity Conversion Mortgage or HECM - is offered as part of a program from the U.S. Department of Housing and Urban Development's Federal Housing Administration. The FHA has protections for the lender as well as the borrower. In the case of the latter, for example, if the borrower or heirs sell the home to repay the reverse mortgage (instead of keeping the house and repaying the loan otherwise), the total debt will never be greater than the value of the home.

However, there are several types of reverse mortgages that are not FHA-insured. These are mostly reverse mortgages developed and offered by private companies, nonprofit organizations, and state and local governments. They may not offer the same guarantees and protections as an FHA-insured HECM.

Understand the costs and fees, which can be significant. Most reverse mortgages have an origination fee, closing costs and periodic servicing fees. There also is an additional monthly insurance premium for an FHA-insured reverse mortgage. The total amount of fees will depend on the loan product. And while the costs and fees can be added to the reverse mortgage instead of being paid up front, doing so increases the loan balance and incurs interest charges.

Borrowers also should keep in mind that the more cash they take out and the longer they go without making loan payments, the interest charges and other costs can use up much or all of the equity, leaving fewer and fewer assets for the borrower or heirs. And if you or your heirs want to keep the house instead of selling it, the full loan amount would be due and payable from your own funds, even if it's more than the value of the property.

"Because the costs and fees can be extremely high," said Mike Evans, an FDIC Fair Lending Specialist, "most experts generally advise homeowners not to take out a reverse mortgage if they plan to stay in their home less than five years or if they simply need extra money for small expenses."

Do your research and shop around before committing to a reverse mortgage. To understand the potential pros and cons of a reverse mortgage, talk to financial advisors and qualified housing counselors. Depending on your circumstances, there may be other, less expensive options available to you. Explore different kinds of loans (including a mortgage refinancing, a home equity loan and a home improvement loan) and programs from local government agencies or nonprofit organizations. In some cases, it may even make financial sense to sell your home and downsize to a less expensive home or even a rental.

If you decide that borrowing money is the way to go, contact several lenders and compare the costs and benefits of the options they offer.

"Most financial experts also agree that it is never a good idea to use the funds from a reverse mortgage to purchase other financial products or services," added David Lafleur, an FDIC Senior Examination Specialist. "Not only will you immediately incur expensive interest charges and other fees in connection with the reverse mortgage, but having large deposits or annuities may make it tougher for you to qualify for certain entitlement programs that take assets into consideration, such as Medicaid. Also, if you tie up money in CDs or annuities, you will be giving up easy access to funds you may need to meet your expenses."

Additional information and guidance on reverse mortgages is available from HUD at www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm or by calling 1-800-569-4287.

Note: To receive an FHA-insured reverse mortgage, you must first speak with a HUD-approved counselor, who can provide you with information on this product and other alternatives so you can determine what is suitable for you.