Using a home equity line of credit, David Casey and his wife, Joyce, made some much-needed improvements around their house. New carpet and updated plumbing to name a couple.
Read the rest of this entry »
How are baby boomers - millions of whom are still carrying hefty first and second mortgage loans - ever going to pay them off?
Read the rest of this entry »
What are subprime mortgage specialists looking for employment to do? In this struggling market, many are turning to the world or reverse mortgages.
Read the rest of this entry »
Question: “I have a reverse home mortgage. I understand that I cannot deduct interest on my home mortgage on my income tax return until I actually pay the interest. ”
Read the rest of this entry »
Amid continued upheaval in the housing market, experts believe Bank of America’s foray into the arena of reverse mortgage lending is about the safest bet the home mortgage company can make.
One of the nation’s biggest banks and mortgage lenders is turning to a Bellevue, Wash., home mortgage company to help broaden its reach with older Americans.
Reverse mortgages have been a boon to older homeowners, as well as the mortgage industry. However, the product’s popularity has brought some complications.
The helpful home loans allow people age 62 and older to draw on the equity in their primary residences, with monthly payments that continue as long as the borrower remains in the home.
People have migrated in record numbers to such mortgage loans, according to the Reverse Mortgage Lenders Association, a trade association in Washington. Borrowers last year took out nearly 86,000 Federal Housing Administration home equity conversion mortgages, the dominant reverse mortgage product, compared with just 48,500 in 2005.
In fact, the home loans have grown so popular that they run the risk of outstripping federal limits.
As of last week, mortgage industry officials said they feared they would be forced to suspend their federal reverse mortgage programs because the government had agreed to insure only 275,000 such loans - a number that is rapidly being approached.
Peter H. Bell, president of the National Reverse Mortgage Lenders Association, said it was likely that Congress would lift the loan limit, at least temporarily, by the deadline, which is this week.
“We’re moving along, but I won’t breathe easily until it’s passed,” Bell said.
Bell said home loan lenders were issuing reverse mortgages at a monthly rate of about 8,000, compared with roughly 6,000 a year ago.
“The product is somewhat counterintuitive, and as a result some people are leery about it,” he said. “But as more people have these loans, more people know someone who has one, which fuels the growth.”
SOURCE: New York Times
Tapping into your home equity isn’t easy - especially if you want to keep living there.
Reverse mortgages, which pay money to home owners based on the values of their homes, seem like a good answer. These loans, however, come with strings … not to mention costs.
Now, however, there’s a new twist from Circle Lending - one where the lenders are family or friends.
How much money will you need in retirement?
Reverse mortgage are growing in popularity. According to the Federal Housing Authority, these mortgage loans tallied just 6,640 in 2000, but rose to 74,412 in 2006.
In conventional, federally insured reverse mortgages, homeowners receive either lump-sum payments or monthly checks from lenders. Repayment of the money borrowed, plus interest, is delayed until the homeowner dies or sells the house.
Homeowners like reverse mortgages because they can stay in their homes as long as they are able. But the loans have several drawbacks and limitations:
Circle Lending calls its version of reverse mortgage Family Advantage and describes it “as a line of credit funded by the relatives or friends of a homeowner and secured by real estate.”
The arrangement retains the advantages of conventional reverse home loans and eliminates many of their costs, restrictions and drawbacks. Using Family Advantage, homeowners pay just $3,999, a big savings compared with conventional reverse mortgages.
With a convential loan, a 72-year-old homeowner living in a metropolitan area in a house valued at $560,000 would be able to receive up to $226,000. The fees would come to $7,230 for the origination fee, $7,230 for the insurance, $4,000 in closing costs and $30 a month for servicing.
That’s a total of $18,460.
With Family Advantage the homeowner could get as much as the entire $560,000 if the lender agrees. It would cost just the flat fee of $3,999, plus a charge of $19 for each disbursement made, which could be a one-time payment or done monthly, quarterly or annually.
Under Family Advantage, there are also no age restrictions and can be made on second homes.
Wells Fargo Home Mortgage, the nation’s originator of reverse mortgages, will trim the margin it charges on a government-insured reverse mortgage product and begin offering the federally insured, variable Home Equity Conversion Mortgage (HECM) product using a lower margin for home loan applications taken on or after Febuary 5, 2007.
In addition, effective February 6, 2007, seniors who have already applied for a reverse mortgage with Wells Fargo will be offered the lower margin. Company officials say this change will save borrowers money over the life of their home loan and give them greater access to their home equity.
“A reverse mortgage is about making the most of the equity that seniors have built into their homes,” said Jeff Taylor, vice president of Wells Fargo’s Senior Products Group.
“By lowering the margin, we are lowering the home loan rate charged on a reverse mortgage. This means more seniors will be able to use the reverse mortgage program, giving them the ability to turn their home equity into additional retirement funds.”
As part of the new program, Wells Fargo is cutting the margin on its variable home equity conversion mortgage by 50 basis points.
It’s a move that executives feel will give seniors greater access to their home equity. As an example, a senior who is 70 years old with a home valued at $300,000 could get approximately $14,100 more in borrowing capacity than with a higher-margin HECM loan.
The HECM reverse mortgage is the most popular reverse mortgage in America today. Through the revamped program, the U.S. Department of Housing and Urban Development (HUD) insures mortgages that allow homeowners age 62 or over to convert their home equity into tax-free income.
The program has insured over 200,000 reverse mortgages since 1990. Wells Fargo Home Mortgage helped senior Americans secure nearly one-third of all reverse mortgage loans originated in 2006.
With a HECM, a senior homeowner receives proceeds from a mortgage lender - either in a lump sum, regular monthly payments, a home equity line of credit or a combination of the above.
When the house is sold, or the last remaining borrower dies or moves out of the home, the principal amount plus the accrued interest is repaid. The borrower can’t owe more than the value of the home.
The number of federally insured reverse mortgages made in the United States last year jumped 77 percent, and legislators and lenders are bracing for another huge increase in 2007.
According to the Everett (Wash.) Herald, the U.S. Department of Housing and Urban Development insured 76,351 Home Equity Conversion Mortgages (HECMs) in 2006 compared with 43,131 for 2005.
A home equity conversion mortgage is the most popular reverse mortgage program - and studies say accounts for nearly 85 percent of the growing reverse mortgage market.
A reverse mortgage is a loan against a home that is not payable until the homeowner dies, sells the home, or permanently moves out of the home. It allows homeowners age 62 and older to turn the equity in their home into cash without having to move or make a monthly mortgage payment.
There is no minimum credit or income requirement to qualify for a reverse mortgage.
“More seniors are recognizing that traditional retirements tools, such as IRAs, pensions and 401(k)s are not providing sufficient income to help fund everyday living expenses and health care,” said Peter Bell, president of National Reverse Mortgage Lenders Association.
The U.S. House of Representatives recently passed a bill that would suspend the cap (temporarily), on the number of HECMs that can be insured by FHA. A companion bill in the Senate is expected to be considered soon.
Currently, the government cannot insure more than 275,000 FHA loan HECMs at any one time - and some industry officials say 120,000 new reverse mortgages this year is a realistic number.
In an effort to capture even more reverse mortgage customers, BNY Mortgage has introduced a new product nearly identical to the current HECM with a slightly lower mortgage interest rate.
The company’s HECM 100 product allows a homeowner 70 or older with a home valued at $300,000 to receive approximately $13,000 more in borrowing capacity than the traditional HECM loan. Given today’s mortgage rates, the homeowner will save approximately $28,000 in interest costs over the expected life of the average loan.
“BNYMC’s introduction of the new HECM 100 product is wonderful news for senior homeowners because it offers the consumer more money at lower costs,” said Meg Burns, HUD’s director of single family program development. “This is exactly the kind of product innovation the reverse mortgage industry needs in order to help older homeowners live a more comfortable and financially secure life.”
The Santa Ana, Calif., metropolitan area displaced Los Angeles as the top market in the country for reverse mortgages with 5,825 loans funded (compared with 3,067 in 2005), followed by:
NRMLA, which has seen its membership grow from 370 mortgage lenders in 2005 to 500 in 2006, attributes the explosive growth in reverse mortgages to several factors.
Topping the list is the a decade-long run-up in home appreciation rates in many parts of the housing market, allowing seniors to access greater amounts of equity.
Brian Montgomery, who serves as FHA commissioner and assistant secretary of Housing at HUD, said that he anticipates a reverse mortgage will one day be as commonplace as 401(k)s and other retirement planning tools.
“HUD has gone to great lengths to educate community leaders and senior advocates about the potential benefits of reverse mortgages, which has helped make more people comfortable with recommending the product to their elderly clients,” Bell said.