Reverse Mortgage Information

Lakewood Reverse Mortgage Story

Fri, 18 May 2012 18:07:27 -0700

I love my job!

I had lunch today with a reverse mortgage customers at the HomeTown Buffet. One of my younger clients at only 64 years old, it was great to see her. She looked terrific! She was glowing, telling me about her new life. She lunches often with her sister and other friends and is planning a trip to Tahoe and one to New England this fall. She enjoys having time to putz around her home and gardening. Her life has changed so much for the better.

When I met her two years ago she was working as many hours as possible at a job 20 miles away. Traffic to and from work was wearing on her and her car - and the stress wasn’t good for her health. She hated that job, but needed the income to make the monthly payments on her small mortgage. Getting a reverse mortgage was a difficult decision but now that it’s done and she’s had over a year to sit with it, she says it’s the best thing she ever did.

With her reverse mortgage loan proceeds she paid off her small mortgage, purcashed some updated appliances, painted the exterior of her home, put in a deck and porch railing and established a growing line of credit for emergency use. With no more mortgage payment, she was able to quit her stressful job and now lives comfortably on her military pension - yes she’s retired military!

She’s able to stay in her home, have emergency funds and enough income to enjoy life. She espouses the concept of “balance” saying to me that she feels prepared for the future AND is enjoying today. That’s what I want for all my clients.

I love what I do!

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Riverside Reverse Mortgage Question

Thu, 10 May 2012 12:17:43 -0700

Riverside Reverse Mortgage Question - How much can I borrow with a reverse mortgage?

Whenever my mom talks to her friends about me, inevitably they get around to what I do for a living and the reverse mortgage questions come flying at her. One that she hears all the time is, "What is the loan to value on a reverse mortgage?" or "How much can you get on one of those reverse mortgage loans?"

The amount of money that a borower can obtain on a FHA Reverse Mortgage is based upon three “factors”.

The appraised value of the home up to the FHA Lending Limit.
The age of the youngest borrower.
The expected Interest rate.

They work like this:

The higher the home value, the more you can borrow.
The lower the interest rate, the more you can borrow.
The older you are, the more you can borrow.

All three of these factors have their own rules and quirks.

If your home is worth more that the FHA Lending Limit your loan amount will be based upon the lending limit.
If the expected rate is below 5.06% then you have reached the “floor” and the loan amount is already maxed out for that factor.
Once you reach the age of 90 you qualify for the maximum amount based upon the “age” factor.

Take a look at the HUD Principal Limit Factors based upon age, rate and loan type (Saver and Standard) to see the factors and the effect they have on LTV.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

What Happens When a Reverse Mortgage Loan is Upside Down?

Wed, 20 Jan 2010 19:00:45 -0800

I have posted on this topic before, and recently have had more questions and visits from seniors who are concerned about their reverse mortgage balances being higher than their home's current value.

I want to go into a bit of detail, but before I do here's the answer in a nutshell:

As long as the borrower is living in the home, paying taxes and insurance and maintaing the home in good condition, there is nothing to worry about. So please, do not lose any more sleep over this or don't let your loved ones lose any sleep. All is well.

Is this a bad thing?
Is the lender going to call the loan?
What about my line of credit?
Can I sell my home?
Will my children have to pay the difference when they inherit?

Here's the answers:

1. It's never fun to owe more than your home is worth, but you should know that an FHA Insured reverse mortgage is a non recourse loan. In fact all of the Jumbo Reverse Mortgages that I've ever dealt with are also "non-recourse" loans. Non recourse means there is no "personal" liability for the borrower. If the lender takes a loss on the loan, they cannot obtain a judgment or lien against the borrower.

2. As long as the senior homeowner occupies the home as their principal residence, pays insurance and taxes, and maintains the home in good condition the loan is not in default.

3. If you have an available balance in the line of credit for your reverse mortgage, it is available to you to withdraw. Even if the home value has exceeded your loan balance! That is not true for traditional HELOCs (nice feature for seniors, I wish they had it for me...)

4. Yes, you can sell your home. Anytime. But if it will be a short sale you will need to work with the lender. They will want to have an appraisal so that you don't "dump" the house and the sale will need to be an arm's length transaction.

5. Nope, the kids are fine. If you pass away with a reverse mortgage and the loan balance is higher than the value, your estate will need to payoff the loan. If there is no equity left, or the home is "upside down" the estate will most likely allow the home to go into foreclosure (which takes a minimum of 6 months on a reverse) and the lender will then sell the home and any loss will wind up being a claim for the lender to FHA.

Note- If the family inherits the home, and the loan is upside down, the family cannot purchase the home for the current value. Just as it is in the regular mortgage world any short sales must be "arm's length" transactions.

I hope that I have alleviated some fears and if you know of a senior who is losing sleep over their reverse mortgage or worred about whether or not getting a reverse is the right thing to do. Please direct them to my activerain blog or my linked outside blog, www.coronareverse.com where they can find links to lots of free and interesting information without any pressure.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

The Pros & Cons of Reverse Mortgages

Wed, 04 Apr 2012 16:27:57 -0700

Reverse Mortgage - Pros & Cons

A reverse mortgage is a tool - a financial tool that works great in the right situation. You wouldn’t use a high heeled shoe to hammer a nail would you?.... or Scotch tape to connect two electrical wires? You need the right tool (mortgage) that matches your plans for the future, your income, finances, and living situation. A reverse mortgage is one such tool that has it’s pros and cons. Let’s take a look.

Pros:

No Monthly Mortgage Payments are required on a reverse mortgage - ever. (But you can make paymenst if you choose to!)
You cannot outlive a reverse mortgage. Even if the loan balance is more than the home value or you have taken all the mones out of your line of credit - Neither is cause for the lender to begin foreclosure.
No Minimum Credit Score requirements.
No Income Requirements.
All borrowers must take Independent Counseling prior to obtaining the loan to be sure that they understand the loan and are aware of possible alternatives to a reverse mortgage.
Borrowers retain ownership of their home - The lender only has a lien on the property like any other loan.*
There is never a Prepayment penalty. Loan can be paid off at any time or even refinanced without penalty. You can even refinance a reverse with a new reverse.
Line of Credit cannot be rescinded by the lender, regardless of equity or home values.
Line of Credit grows over time. This can be great for emergencies..
You can choose to receive the funds in equal installments, in advances through a line of credit or otherwise, in lump sums, or through a combination of these options
Non Recourse Loan - Any shortages at time of payoff due to value being less than amount owed are not a liability to the borrower or the estate.
Flexible Options - Closed End Fixed Rate Reverse Mortgages available, Open Ended Adjustable Reverse Mortgages available. Both Standard and the new lower cost SAVER available.
Interest Rates are close to traditional mortgage due to the fact these loans are insured byy FHA.
Most Living Trusts are acceptable and title may remain in the name of the trust.

Cons:

You children won’t inherit a free and clear home.* The loan will be due upon the death of the last borrower. Heirs have 6 months to 1 year to payoff the loan before lender will foreclose.
If you should need to move to other housing, you may not have as much profit from the sale of your home due to the loan balance growing over time.
Upfront FHA Mortgage Insurance Premium (MIP) on the Standard Reverse is 2% of the home value up to a maximum of $12,510.00 on the SAVER it is .01% of the Home Value.
Loan Origination Fee - A Negotiable Fee regulated to a maximum of $6000
Ongoing Annual FHA MIP is 1.25% of the outstanding principal balance-added to loan mount. (Effectively raises the interest on the loan by 1.25%)
It is an age restricted loan - only homeowners over the age of 62 can obtain a reverse mortgage.
Lower loan to values than traditional financing - you won’t find an 80% or 90% loan.
Loan balance grows over time depleting your equity in the home.
Loan can become due and payable if taxes, insurance or Property Owners Association dues become delinquent*

Loan becomes due and payable when all the borrowers stop living in the home as their principal residence
Reverse mortgage is not available for second home or rental property.
Loan becomes due and payable if home is not maintained.
Loan becomes due and payable if HOA Dues are delinquent and in default.
Line of Credit can be frozen if borrower files for Bankruptcy.
Estate Planning issues - If the property goes into probate, the heirs may not have the legal authority to sell the home in order to payoff the loan.

Great independent links:

Department of Housing - HECM Loans
National Council On Aging - Home Equity Advisor
Counseling Agency

If you would like to discuss any particular scenario and the suitability of a reverse mortgage for you, a loved one or a client, please feel free to reach out to me. I love brainstorming!

* These things are also true of traditional mortgages.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

How Do You Buy a Home with a Reverse Mortgage?

Tue, 06 Mar 2012 10:36:04 -0800

How Do You Buy a Home with a Reverse Mortgage?

The simplest way to understand it, is to first understand that an FHA HECM loan is a mortgage loan. Simple.

Loan Amount + Down Payment = Purchase Price

Of course you have to add in the closing costs as well. Not only does the buyer have to bring in a down payment, they also will deposit funds to cover their closing costs. So now it looks like this:

Loan Amount + Down Payment + Closing Costs = Total Cost of Buying.

An FHA HECM (Reverse Mortgage) will not loan a typical percentage of home value. The loan amount is figured with a formula set by FHA which takes into account three factors:

Age of the youngest borrower.
Expected Interest Rate
Purchase Price or Appraised Value (whichever is less)

The required down payment is higher than the normal 3.5%, 10% or 20% that you see in traditional forward financing. Think more like 35% to 50% down.

That’s a big down payment - so why would someone want to buy with a reverse?

Limited income qualifying. Traditional debt to income ratios are not used.
Credit Scores not an issue. (Tax liens, judgments, and some foreclosures are though)
No monthly mortgage payments means more monthly cash flow.
You can afford to buy a higher value home. (safer, newer, less maintenance, gated, etc.)

Property Requirements:

Owner Occupied Only
Single Family Residences (1 to 4 Unit)
Some Manufactured Homes
FHA Approved Condominiums

Borrower Requirements:

All buyers must all be over the age of 62
Borrowers must complete a counseling session provided by a HUD Certified HECM Counselor.
New Reverse Mortgage must be the borrowers only FHA Mortgage

The start of 2012 has brought an increase of Reverse For Purchase buyers my way because it is such a great time to buy a home. It may be a solution for you, your parents or clients, so please feel free to reach out to me and we can brainstorm about the possibilities, benefits and potential pitfalls.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Cerritos Reverse Mortgage Question - What’s the Loan To Value on a Reverse Mortgage?

Sat, 28 Jan 2012 16:57:19 -0800

Cerritos Reverse Mortgage Question - What’s the Loan To Value on a Reverse Mortgage?

I get this question all the time. I know that most folks are hoping to hear a number from me like 60%, 80% even 100% of loan value, but that’s just not the way it works.

The loan amount (or principal limit) on a reverse mortgage is based upon a formula provided by HUD which factors in three elements: AGE, HOME VALUE & EXPECTED RATE.

AGE - The age of the youngest borrower is used in the formula as a factor. All borrowers must be over 62, but an older borrower will qualify for a higher loan amount than a younger borrower.

The reasoning for this is based upon life expectancy. A younger borrower needs a bigger cushion of equityto allow for the eventual repayment of the loan.

HOME VALUE - The higher the loan value, the higher the loan amount up to and including a maximum home value of $625,500. This doesn’t mean if your home is worth more you can’t get a reverse mortgage. It just means that if you are getting a HECM the calculations will be done as if your homes value was $625,500. If your home is worth considerably more than that you may want to research a Jumbo Reverse Mortgage which offers many of the same features and protections of the HECM.

EXPECTED RATE - Not the interest rate on the loan itself, the Expected Rate is just that, what the borrower can “expect” the interest rate to average. Easy to figure on the fixed rate reverse as it matches the interest rate on the loan. It’s a bit more complex on the adjustable. The expected rate for an Adjustable HECM is figured on the 10 Year Libor Swap and the Interest on the loan is figured on the 1 Month Libor index.

I hope that you found this information helpful! Here’s how to get your own Reverse Mortgage Information Kit.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Irvine Reverse Mortgage Story

Wed, 30 Nov 2011 22:56:31 -0800

Savvy Senior Uses Reverse Mortgage

I was fortunate to recently work with a senior who was very strategic and smart about using her home equity. This 82 year old was as sharp as they come, highly educated and in the financial field. She needed to access $300,000 for a short period of time (less than a year) and didn’t want to withdraw funds from retirement accounts, IRA’s, CD’s and the like. So she looked into the new HECM SAVER.

Things she considered:

Upfront Fees - Much lower on the SAVER
Interest Rate - Lower on the Adjustable
Available Funds - SAVER provided plenty for her needs and using the ARM allowed her to only access the amount she needed.

Because she lived in a high value home worth over $800,000, she was able to qualify for $344K in funds with zero origination fees, zero upfront Mortgage Insurance Premium. In about six months she will repay the reverse mortgage down to a very small balance to keep the equity line available should she ever need access to it. (No prepayment penalties on a HECM Reverse Mortgage)
Here is a snapshot of what she did.

$800,000 Home Value
$344,000 Appx Available Loan based upon Age, Interest, Lending Limit
$ 2,400 Closing Costs
$ 0 Payoff Current Mortgage
$341,600 Available Loan Proceeds
$300,000 Lump Sum Disbursement to her Checking Account
$ 41,000 Line of Credit

In six months, when she is ready to repay the loan, I advised her to just pay the loan down to a very small balance. (If she completely pays it off that will close the loan) Since the loan is an “Open-Ended” loan if she just pays it down her line of credit will correspondingly increase. That increased line of credit can be used in the future for unexpected financial needs that may come up (Medical Expenses, In Home Care, Other Needs)... or she may never need it. The carrying costs on that paid down loan would be very small. In my personal opinion this is a great example of a strategic use of of an HECM SAVER Adjustable by a savvy Senior!

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

SSI and Reverse Mortgages

Mon, 03 Oct 2011 23:04:25 -0700

A reverse mortgage does not have to affect a client/clients on Supplemental Security Income benefits. Here’s what the Social Security Administration has to say about it on their website.

“If you enter into a valid loan agreement, the value of the cash or item you receive is not income and does not reduce your SSI benefit. However, any funds that you borrow which you do not spend in that month will count toward your SSIresource limit of $2,000 for an individual (or $3,000 for a couple) the next month.”

In my opinion, and from casual conversations with personell at Social Security and in the reverse mortgage industry, as long as you spend the loan proceeds in the month you receive them, the funds will not be counted as a resource.

I always recommend that the homeowner consult with their SSI representative at Social Security and I would caution the homeowner to only take their reverse mortgage proceeds in the form of a line of credit, monthly tenure payments, or small term payments - and to be sure that they will spend those funds in the month they are received. I also give my clients a copy of this booklet about SSI and print out the linked webpage here, for them to show to their SSI representative.

It would make perfect sense for an older homeowner on SSI to use a reverse mortgage line of credit to access funds twice a year to pay for the property taxes and once a year to pay for the homeowners insurance and occasionally for the large unexpected expenses that come up. Regular maintenace items and home improvements geared toward helping seniors to “Age In Place” would be prudent expenses to pay for with a HECM Line of Credit.

Here is a link to an article from the California Advocates for Nursing Care Reform regarding reverse mortgages and SSI.

Thank you for taking the time to read this article and I look forward to your comments and feedback.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Anaheim Reverse Mortgage Question - Spouse Too Young For A Reverse

Sun, 13 Nov 2011 05:54:26 -0800

My spouse is not 62 years old yet - can I get a reverse mortgage?

That is an important question. Technically, if your spouse is willing to go off of title you could get a reverse mortgage, but it is rarely, if ever a good idea.

Why? The answer is simple. When the borrower on a reverse mortgage no longer lives in the home due to death, illness or sale, the loan becomes due and payable. As the elder spouse if you should die first, your partner would then have to figure out a way to payoff the loan. How would he or she handle that obligation? Would they have a large inheritance from you that would be enough to payoff the loan or would they be facing foreclosure and eviction. That’s the dilemna you could be placing them in if you chose to proceed as the sole borrower and asked them to deed their interest in the property to you. I don’t think that is ever a good idea even if it means more money now - and I recommend you talk with a knowledgeable, expert financial advisor or attorney. When a borrower is married, both spouses may be required to receive HECM Counseling even if one of them is currently not on title or planning to go off of title.

It is always imperative that you understand the obligations and terms of any real estate loan that you wish to become obligated to. Don’t be shy about asking hard questions and make sure you understand your responsibilities completely. Don't be rushed, and deal with a professional, ethical reverse mortgage professional.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Huntington Beach Reverse Mortgage Question - My Parents Have a Reverse Mortgage ...?

Tue, 11 Oct 2011 22:31:03 -0700

I had two phone calls today from family members of reverse mortgaged senior homeowners. One found me through my blog here and the other from a mutual business acquaintance. These two calls have me writing today about some things that borrowers and their families should know.

First

I know you don’t tell your parents everything and guess what? They don’t tell you everything either. But I think it ‘s a good idea for someone that the senior knows and trusts to understand the reason the senior has taken the reverse mortgage and what happens when the loan comes due. The house belongs to the homeowners, not the kids, but when mom and dad pass away, it can be confusing and frustrating for the heirs if they have no idea what happened and are not prepared.

If they already have a reverse mortgage, they should not “deed” someone else onto title with them (like one of the kids). Technically it can be done - but it could be considered a default action on the reverse mortgage causing the loan to become due and payable.

Not to mention, you could really mess up title to the property. Preparing a deed is serious business, not one that should be done lightly. You should contact a real estate attorney to review the terms and condition of any liens or agreements currently affecting the property, to review and counsel you on the tax and estate ramifications of being added on title and to prepare the deed properly.

Second

If your parents have a reverse mortgage ask them if they are both on the loan. If not you need to have a plan because once the last remaining “borrower” passes away, the loan will become due and payable, will the younger spouse have the funds to repay the loan? Perhaps they have a plan already in place, maybe she has a large life insurance policy on the old guy. That would be great.

Sometimes the younger spouse will have gone “off of title” in order for the older spouse to get a higher loan amount. In the situation I came across today, they did just that and if they hadn’t they would not have gotten enough money from the reverse to payoff their subprime, adjustable, negatively amortizing loan that they couldn’t afford. It would have been worth it for the family and everyone’s peace of mind to come up with another solution at the time they were taking the reverse mortgage.

Possible alternative solutions:

1. Instead of taking out a reverse - sell the home and move to a more affordable apartment. The market was much better then and they could have gotten a lot more on their home.

2. If the children wanted to keep the home in the family, perhaps they could have purchased it from the parents and then rented it back to them.

3. Take the reverse in both spouses names since the younger spouse was over 62 and when the loan proceeds were not sufficient to payoff the existing mortgage - the family members could have gifted the shortage amount to the senior couple. This way either spouse could have remained in the home without the loan becoming due and payable at the death of the other.

I think reverse mortgages are a wonderful financial tool for seniors who want to age in place in a suitable home. I don’t think they are for everyone, but I do think everyone should know and understand them.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Using a Reverse Mortgage to Supplement Income

Thu, 29 Sep 2011 00:08:29 -0700

Just closed a reverse mortgage loan for a homeowner here in Corona for a healthy, vibrant and young looking widow who owned her home free and clear. She lives in a beautiful single story newer home in Trilogy, a gated 55+ resort community. Her beautiful home was designed for “aging in place”. My clients monthly expenses were digging into her savings to the tune of about $700 each month and she could see her nest egg shrinking away. It would be completely gone in under 5 years! The current low interest rates weren’t helping either. She was sceptical at first about getting a reverse mortgage having heard some of the common misconceptions, but was interested to see what I had to say about it.

After I reviewd the new HECM Saver reverse mortgage with her, she saw that not only was the loan very inexpensive, but that she could preserve her savings (an asset that would grow) and instead, start tapping into her home (an asset that recently hasn’t done so well). Her closing costs were less than $2,000, and she will be recieving a $750.00 tax free loan disbursement every month for the rest of her life (as long as she lives in the home.) The beauty of this is that she is only borrowing $750.00 per month instead of the entire amount she qualifies for, preserving her home equity far better than if she had taken a lump sum from the reverse mortgage.

Her son was very supportive of her decision to get a reverse mortgage and understands that when he inherits the home, he will have 6 months (possibly even a year) to payoff the reverse mortgage. He says he will just sell the home and keep the change. Since my client is only taking $750.00 per month it is very unlikely that she will ever be “underwater” on her reverse mortgage and should pass on some equity dollars as well as her savings to her son. In the meantime, he does not have to worry about his mother running out of money and can better plan for his own retirement.

I love my job!

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Water & Seniors

Tue, 30 Aug 2011 12:52:57 -0700

This was a VERY informative article in the Corona Senior Center July August 2011Newsletter. Worth reposting and passing around!! I know it hit home for me.... I need to drink more water, and I don't recognize my thirst as easily....interesting. Dang, aging is not for the faint of heart, that's for sure.

http://www.ci.corona.ca.us/CityOfCorona/media/Media/Parks/Images/Newsletter-july---August-2011.pdf

WATER & SENIOR CITIZENS

As we age, the balance between our need for water and our thirst for water shifts.

In fact, the less water an older person drinks, the less thirsty they become, leaving

them open to the risk of serious dehydration and other complications.

Further, confusion over the difference between hunger and thirst intensifies over the

years, making it all the more important to conscientiously drink adequate amounts

of water throughout the day. At the very minimum, one should consume one cup of

water for every 20 pounds of body weight daily, that's around 6-8 glasses for the

average person.

Exercise and warm weather both call for additional water intake to replace fluids lost

through excessive perspiration. So, all those senior citizens who head south for retirement will need to increase water intake! Increased fiber intake among seniors,

which is usually recommended to aid with constipation and other health concerns,

also increases the need for water.

The human body is at least 50% water, of which 2-3 quarts are lost on a daily basis. Even bones are over 20% water! Aside from replenishing what is lost in order to

hydrate the blood and tissues, water also lubricates joints, regulates temperature,

and moistens the lungs to allow for breathing. Inadequate water intake over time

prevents these processes from occurring, leading to arthritis, sore muscles, heavy

breathing, and a higher body temperature. This means that not drinking enough

water over time can result in more severe effects at an older age, which means preventable problems during what should be the golden years.

Senior citizens are at particular risk for dehydration because their kidney function

has diminished to some degree. Symptoms of dehydration include confusion, drowsiness, labored speech, dry mouth, and sunken eyeballs. Side effects for seniors who

do not drink enough water, however, extend far beyond dehydration. Even shortterm water deprivation has been known to cause chronic pain. Over time, lack of

water causes loss of muscle tone, excess weight gain, slow metabolism, increased

toxicity, and even organ failure. Other negative effects include arthritis, dry skin,

migraines, hypertension, digestive complications, and persistent constipation.

In order to maintain health, the kidneys must excrete a minimum of ten ounces of

waste per day. When water is not available, there is nothing present in which to dissolve the body's waste products for expulsion. As a result, they build up within the

body, leading to kidney stones, while putting additional strain on the kidneys to find

adequate liquid with which to expel toxins.

Considering the abundance of water in our daily lifestyles, the fact that most senior

citizens are consistently dehydrated to some degree is alarming. All foods are partly

composed of water; fruits and vegetables are over 75% H2O, and even bread is

more than 30% water. Yet with the abundance of water in their diet, the average

senior citizen still requires over two-and-a-half quarts of pure water each and every

day to maintain good health.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Reverse Mortgage Costs in Southern California

Fri, 26 Aug 2011 23:51:22 -0700

Like any loan you obtain on your home a reverse mortgage will have costs. You can break the costs down into two general categories. First are one-time upfront fees and second are ongoing costs. Also, it’s very important to recognize that fees are different from state to state and even county by county.One time, upfront fees are almost always financed into the loan and are not an “out of pocket expenses”. In the reverse mortgage world though there are two exceptions.

First, is “HECM Counseling”. All borrowers must complete HECM Counseling prior to applying for a reverse mortgage and there is a fee for this. You can expect to pay between $90 and $125 for the counseling. Many agencies will allow you to have the fee paid from the loan proceeds, and they all will waive the fee in the event of a true financial hardship.

The second upfront fee is usually an “Appraisal Deposit”. The company I work for asks for an upfront $325 at time of application. So, the counseling and the appraisal deposit would be two “out of pocket” expenses.

Other closing costs are:
Initial Premium for FHA Mortgage Insurance. Depending upon which reverse mortgage loan you choose, SAVER or STANDARD the fee will be .01% of the lesser of home value or lending limit for the SAVER or 2% of the lesser of the home value or lending limit. That’s a huge difference. If you can get by with the SAVER, I recommend it!

Lender Origination Charge - lenders maximum origination fee is regulated at 2% of the home value up to $200,000 and then 1% of additional value beyond that, capped at a maximum origination fee of $6,000.00 Remember the maximum fee is regulated, but lenders can (and do) charge less!

Some states have additional fees, like Mortgage Taxes - but in Southern California you can bet on the following:

Escrow (Settlement) Fees
Title Insurance
County Recording Fees
Appraisal Fee (less any credit for prepaid deposit)
Attorney Trust Review
Notary Fees.
3rd Party Document Preparation

(these are the most common & what I always quote~but there could be others)

On a presentation August 19, 2011, I quoted to a client with a home valued at $250,000, fees equal to $3,624.56 for the HECM Saver and $9.599.56 for the HECM Standard.

According to my favorite notary, there are many, many lenders still charging the maximum allowable fees including monthly service fees on reverse mortgages, so be smart & shop around.

Ongoing costs relating to a reverse mortgage (and many other mortgages) are the interest, servicing fees, and mortgage insurance.

Interest on a reverse mortgage may be fixed or adjustable and again, may vary slightly from lender to lender.

Monthly service fees are an allowable charge of up to $35 per month on HECM loans although in today’s market, most (but not all) lenders are waiving this charge...so again, compare! Having this charge on your reverse mortgage also lowers the amount of funds you can access. (One of the reasons that I personally think now is a great time to get your reverse if it is something you are planning to do).

Finally there is the ongoing FHA Mortgage Insurance Premium on any HECM loan. This ongoing cost runs at 1.25% annual rate, calculated & charged monthly based upon the current loan amount. Think: loan balance multiplied by .0125 divided by 12.

This post got a little longer than I anticipated and if you made it this far, thank you. Please let me know if it was helpful to you.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Riverside Reverse Mortgages

Tue, 23 Aug 2011 20:55:52 -0700

The Most Common Questions

FHA's Reverse Mortgage Program, the Home Equity Conversion Mortgage (aka HECM’s) really are a safe, secure loan. In the course of my business I often run across some common misconceptions. I’d like to take this opportunity to educate the reader about some of the most common questions and myths about this loan.

How much can I borrow? Loan amounts are determined by three factors:

Age of the youngest borrower (the older you are the more you can borrow)
Home value (the higher the home value, the more you can borrow with a cap on calculations at $625,500)
Current interest rates.

Will the bank own my home? No. You remain the owner of your home and can stay as long as you wish, as long as you pay property taxes, keep the home insured and maintain the home. When your home is sold, the reverse mortgage is repaid (along with accrued interest and anyfees) and any remaining equity goes to you or your heirs.

Can I qualify for a reverse mortgage if I already have a home loan (or two)? Absolutely, IF you qualify for enough reverse mortgage funds to pay off your existing mortgage(s) or are willing to provide any shortage. I have had homeowners willing and able to bring funds to closing in order to obtain the benefit of no more mortgage payments! Bye bye house payment!

Will my income or credit score affect my eligibility for a reverse mortgage? Not really. Because you don't make monthly payments on a reverse, your income and credit score are NOT required. HOWEVER, you must not have a recent foreclosure or any defaulted federal debts or have a non-discharged bankruptcy.

What if I outlive the Reverse Mortgage? Not to worry, you cannot outlive a reverse mortgage. The actual due date is 150 years from the date of the youngest borrower OR when the last remaining borrower no longer lives permanently in the home. No matter if you run out of equity, use all the available RM funds, or become “underwater” on the debt, owing more than value. Your obligation remains the same - Live in the home, maintain the home, keep the property taxes and insurance current.

HECM Reverse mortgage are a safe, secure FHA Insured mortgage that allows a senior to tap into their home equity without the burden of monthly mortgage payments, ever. The loan proceeds may be taken as lump sum, tenure payments, line of credit, term payments or any combination. Fixed rate HECM loans are available, but only have the lump sum disbursment option.

Deborah Nance

Your Local Southern California Reverse Mortgage Professional

Riverside Reverse Mortgage Story

Tue, 16 Aug 2011 22:45:13 -0700

Bob & Sally have been married for over 70 years! 88 & 94, and incredibly young for their age.They had their home paid off, but a few years ago they took out a loan on the house in order to go into business with one of their grown children. Bob, in his 80’s, still wasn’t ready to retire! Enter the recession. Boo, hiss! The hopes and dreams for the new business crashed and Bob & Sally found that maintaining their new mortgage payments put quite a strain on their finances, depleting their savings, stressing their lives and affecting their health.

They went through the mortgage modification process to reduce their monthly home payments and during that process one of the professionals they ran across asked them if they had ever heard of reverse mortgages. They had not. To make a long story short, they were referred to me and after meeting with them and their adult children (their kids are old enough for a reverse mortgage), they applied for, were approved and signed their reverse mortgage closing documents.

I received a call from their grown daughter who was in tears because the financial relief provided by the reverse mortgage has changed their lives! No more monthly house payment, $6500 in cash to pay off a vehicle & do some home improvements AND a line of credit of over $70,000 to use for emergencies, pay the property taxes and provide peace of mind. The family is happy, everyone feels secure and I feel so lucky to have been given the opportunity to help another family. Don't you just love happy endings?

Deborah Nance

Your Local Southern California Reverse Mortgage Professional