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Tuesday, August 16, 2011

Reverse Mortgage: Beneficial Home Equity Loan for Seniors? Know the Benefits and Drawbacks.


This article was originally published on Factoidz. Republished here with permission.

Most of us have seen commercials marketed towards seniors who might be needing some extra help, financially.  These commercials advertise reverse mortgages, offering help to those seniors who own their own home and who otherwise might be having difficulty making ends meet.

What is a Reverse Mortgage?  A reverse mortgage is a type of home equity loan which is only available to seniors who own their own home.  It allows the homeowner to convert a percentage of their home’s equity into cash.  The release of the home equity (money given to the homeowner from the loan) can be either one lump sum payment or over multiple payments.

To Qualify for a Reverse Mortgage
  • The homeowner must be at least 62 years of age.
  • Own their own home outright, or
  • Have a low enough mortgage balance that it can be paid off with the proceeds of the loan.
  • Within the U.S., a reverse mortgage can be the only mortgage on the home.  No other mortgages/reverse mortgages can be obtained unless the reverse mortgage has been paid entirely.
  • The homeowner must live in the home.
  • Within the U.S., the homeowner must receive consumer information from a Home Equity Conversion Mortgage (HECM) counselor, which is approved through HUD.  This can be free but more often there is a charge of between $100-$125.  This is a safeguard to protect the homeowner and his her family.  (This applies to the primary reverse mortgage loan).
  • A pending bankruptcy may slow the process of getting a reverse mortgage.
  • (There are no minimum income or credit requirements). 
Not all home dwellings can qualify for a reverse mortgage.  The home must be a single family home or a 1-4 unit complex with one home being occupied by the borrower.  Some condos or manufactured homes may also be eligible, though often with special requirements.
How Much will I Get with a Reverse Mortgage?  This depends upon several factors:
  • Your age at the time of the loan.  Generally, the older the applicant, the more money he can receive.
  • The appraised value of the property, including any repairs or existing liens.
  • Within the U.S., the interest rate will be determined by the U.S. treasury.
  • How the money is taken.  For example, will the borrower get a lump sum or a monthly payment?
  • A set maximum amount.  This can depend upon the reverse mortgage loan product and due to the economy, may be decreasing.
There are 2 Reverse Mortgage Loan Products Available:
  • FHA - HECM:  This is by far the largest reverse mortgage product, making up more than 90% of all reverse mortgage loans.  It is also government insured.
  • Fannie Mae - Homekeeper: It offers different loans for seniors, meant to compete with FHA - HECM.
  • (Cash Account by Financial Freedom was once a popular Reverse Mortgage product but it was suspended in June, 2008.  Many sites still have this listed.)
How do I Get Paid with a Reverse Mortgage?  Different programs have different options available depending on your need.  The FHA / HECM gives five options:
  1. Tenure - Equal monthly payments for as long as one of the borrowers is alive and occupies the property as a principal residence.  This often allows for a lower interest rate and larger borrowed amount.
  2. Term - Equal monthly payments spread out over a fixed number of months.
  3. Line of Credit - Unscheduled payments or installments taken out at the time the borrower chooses until the amount borrowed is depleted.
  4. Modified Tenure - A combination of the Line of Credit along with monthly payments for as long as the borrower resides in the home.
  5. Modified Term -  A combination of the Line of Credit along with monthly payments for a fixed number of months as determined by the borrower.
Other programs also may sometimes allow for the loan to be received as one lump sum.  This tends to have the highest interest rates along with the smallest amount to be borrowed.
What are the Benefits of a Reverse Mortgage?
  • Unlike a traditional home equity loan, the borrower cannot lose his home in a foreclosure to the bank for not paying the loan.  (However, the borrower can still lose his home if he does not pay property taxes, though this can also happen if he does not have a reverse mortgage.)  FHA is looking into ways to help seniors pay their taxes.  With regular mortgages, this often happens in escrow.
  • The banks do not own the home.  Rather, they own a lien on the home.  The homeowner holds the title.
  • The loan on the home is not due payable until the borrower no longer occupies the home as a permanent residence.  This happens when the borrower either permanently moves out of the home, sells the home or dies.
  • Depending on the type of loan, the money can be used for most purposes and for most of the borrower’s needs.
  • With an FHA/HECM reverse mortgage, the mortgage is government (FHA) insured.  In addition, with this mortgage, the borrower can never own more than the value of the home nor can he pass on debts from the reverse mortgage to his heirs.
  • A reverse mortgage is NOT taxable income.  The IRS does not consider loan advances to be income.  Therefore, the money, in itself, from the loan will not be taxed.  (Any interest/dividends you get on this money can be taxed, though).
  • AARP conducted a survey of those who had taken out reverse mortgages.  93% said that they this had a mostly positive effect on their lives.
Any Drawbacks?  Oh yes.  These should be considered before taking out a reverse mortgage.
  • Cost - Getting a reverse mortgage can be very cost prohibitive.  These can easily cost more than $15,000 to get into.
  • Confusion - There is criticism that many seniors may not fully understand their loans.  Though again, 93% were happy with their reverse mortgage.
  • Compound Interest - This one can be a doozy.  Remember, the borrower is not making monthly loan payments.  Therefore, the interest which accrues is treated as a loan advance.  For each month of the loan, the interest is not only calculated on the initial amount borrowed but also on interest already assessed in the loan.  For that reason, the longer the borrower has the reverse mortgage, the less equity will be left in the home by the time the borrower moves or dies.  There may even be no equity left at that time.  (This brings me to my next point).
  • Inheritance - Though reverse mortgage companies love to say how, once you have moved or died, your estate will repay the loan along with any interest which was accrued, the truth is that there may not be much of an estate left if most or all of your home’s equity was used in the loan.  With the compound interest, a senior could easily use up all of the equity even if the initial loan was not terribly high.  *** The good news is that, with an FHA - HECM loan, the borrower’s heirs will not have to worry about owing more than the value of the property, nor can the bank come after the heirs for any other debts from the reverse mortgage.
  • Moving - Many borrowers may assume that they will never leave their home until they die.  The  truth is that they may need to move, perhaps to an assisted living community or in with relatives, at some point prior to the time that they may have chosen to pay off that reverse mortgage.  Anything which is still owed will be due once they move.  This means that they will need to make payments or lose their home to foreclosure once they are no longer living there.  Whereas this might not matter if they are moving into a nursing home or hospice, it might matter if they are still needing to have good credit, perhaps for another home.  The assumption cannot be made that their home’s equity will have increased enough to pay the reverse mortgage upon selling that home.  The longer they have the reverse mortgage, the more compund interest will be charged along with the loan.
  • Forgotten Fees -  Most of us pay our property taxes with Escrow from the mortgage, if we have a mortgage.  Otherwise, we must remember to pay those taxes once a year lest we lose our home in a tax auction.  This can be a high amount, especially if one is not making monthly payments.  Many seniors may not adequately figure in this amount when determining the reverse mortgage.  With so many people defaulting on their taxes, in part due to the poor economy, the government is starting to crack down.  Whereas you cannot lose your home to foreclosure due to the actual reverse mortgage loan, you can lose your home to foreclosure if you do not make your tax and/or insurance payments on time.  FHA and Fannie Mae have both been told they need to crack down on this, due to an extreme budget shortfall in reverse mortgages.  Most sites, even now, stress how the borrower cannot be foreclosed upon.  Obviously, this is not entirely true.  Any senior wishing to get a reverse mortgage should ask specifically about money for required insurance and property taxes, lest they lose their home.
If you or someone you know wishes to learn more about a reverse mortgage, a good first step might be to contact HUD about this. They should be able to answer your questions and help you find the right professionals.  In addition, it is worth looking into what the overall amount of the loan will be, with interest, 5,10 and 20 years down the road. 




Friday, February 25, 2011

When will America Trust Women?

A billboard in New York City - one of a series of similar billboards popping up across the country, is stating "the most dangerous place for African Americans is inside the womb."

Let's think about this for a moment.  As I asked in a comment in the article:

If the most dangerous place for African Americans is inside the womb, then how safe do they think African Americans are inside their mother's homes?  Or in African American neighborhoods?
Why does this sound like the next step would be to take African American children out of their homes because black women simply cannot be trusted to make sound decisions for their families?

If they cannot trust any woman to make sensible decisions about when or if we will have an abortion, how can we be trusted to make sensible decisions as parents, or in the workforce, or as politicians?

Is the only way we can be trusted is if we are forced to make decisions by those who have neither physical, emotional nor financial interest in our well-being?
This seems to be the trend.  As most of us all already aware. Georgia Representative Bobby Franklin introduced House Bill 1, aka the "prenatal murder" bill.   This would make any woman who miscarries guilty of the crime of murder, unless she can prove she did not have an abortion and does not know why she miscarried:
2011-2012 Regular Session - HB 1
Crimes and Offenses; prenatal murder unlawful; provide
First Reader Summary
A BILL to be entitled an Act to amend the Official Code of Georgia Annotated so as to provide that prenatal murder shall be unlawful in all events and to remove numerous references to such procedures; to amend Title 16, relating to crimes and offenses, so as to make certain findings of fact; to define certain terms; to provide that any prenatal murder shall be unlawful; to provide a penalty; to repeal certain exceptions to certain offenses; to provide for severability; to provide an effective date; to repeal conflicting laws; and for other purposes.
 The bill itself goes on to say:
(a) The State of Georgia has the duty to protect all innocent life from the moment of conception until natural death. We know that life begins at conception. After nearly four decades of legal human prenatal murder, it is now abundantly clear that the practice has negatively impacted the people of this state in many ways, including economic, health, physical, psychological, emotional, and medical well-being. These, too, are areas of legitimate concern and duty of this state. The General Assembly therefore makes the following findings of fact:
(1) A fetus is a person for all purposes under the laws of this state from the moment of conception;
(2) The Georgia Constitution, at Article I, Section I, Paragraph II, provides: 'Protection to person and property is the paramount duty of government and shall be impartial and complete. No person shall be denied the equal protection of the laws.' Because a fetus is a person, constitutional protection attaches at the moment of conception. It is therefore the duty of the General Assembly to protect the innocent life that is being taken;
(3) Justice Blackmun, writing for the majority in Roe v. Wade, 410 U.S. 113 (1973), wrote: 'when those trained in the respective disciplines of medicine, philosophy, and theology are unable to arrive at any consensus, the judiciary, at this point in the development of man's knowledge, is not in a position to speculate as to the answer [to the question of when life begins].'
(4) The General Assembly knows the answer to that difficult question, and that answer is life begins at the moment of conception;
(5) The Supreme Court's inability to determine what is human life cannot legitimately serve to prohibit Georgia from fulfilling its constitutional mandate to protect the lives of its citizens by prosecuting crimes against said person;
(6) The United States Congress has reserved to itself 'all legislative powers herein vested' according to Article I, Section I of the Constitution of the United States;
(9) Georgia has, therefore, reserved to itself exclusive jurisdiction over the definition and punishment of murder under Amendment X of the Constitution of the United States;
(10) The United States judiciary only has authority to hear cases or controversies 'arising under this Constitution' and then only if 'affecting ambassadors, other public ministers and consuls; to all cases of admiralty and maritime jurisdiction; to controversies to which the United States shall be a Party; to controversies between two or more states; between a state and citizens of another state; between citizens of different states; between citizens of the same state claiming lands under grants of different states, and between a state, or the citizens thereof, and foreign states, citizens or subjects';
(11) The definition and prosecution of murder within Georgia to protect its own prenatal citizens affects neither an ambassador nor other public minister or consul; is not a case of admiralty and maritime jurisdiction; is not a controversy to which the United States shall be a party; is not a controversy between two or more states, nor between the state of Georgia and the citizens of another state; is not a controversy between a citizen of Georgia and a citizen of a different state; is not related to citizens of Georgia claiming 61 lands under grants of different states; and is not a case between Georgia or its citizens and
another state and its citizens;
(12) The United States Supreme Court had no jurisdiction to hear or decide the case of Roe v. Wade or any other case pertaining to a state's punishment of the crime of prenatal murder;
(13) As it had no jurisdiction to hear the case, certainly the United States Supreme Court lacked the authority to pass, or order all states to strike or refuse to enforce, a law that is outside of its subject matter or federal jurisdiction;
(14) Even if the United States Supreme Court had jurisdiction, its authority is limited to the case or controversy before it, and its opinion extends no further than between the parties to the case or controversy;
So, after deciding that The Supreme Court has  no jurisdiction over a Georgia law, it then goes on to state that, while miscarriage (spontaneous prenatal death) is not "prenatal murder":
A report of spontaneous fetal death for each spontaneous fetal death which occurs in this state shall be filed with the local registrar of the county in which the delivery occurred within 72 hours after such delivery in accordance with this Code section unless the place of fetal death is unknown, in which case a fetal death certificate shall be filed in the county in which the dead fetus was found within 72 hours after such occurrence.
Said title is further amended by revising subsection (a) of Code Section 31-10-28, relating to institutions to keep vital records, as follows:
(a) Every person in charge of an institution shall keep a record of personal data
concerning each person admitted or confined to such institution. This record shall include such information as required for the certificates of birth and death and the reports of spontaneous fetal death and induced termination of pregnancy required by this chapter.
The record shall be made at the time of admission from information provided by the person being admitted or confined but, when it cannot be so obtained, the information shall be obtained from relatives or other persons acquainted with the facts. The name and address of the person providing the information shall be a part of the record."

Said title is further amended by revising subsection (a) of Code Section 31-10-29, relating privileged nature of disclosures, notification of local registrar of institutional deaths and fetal deaths, and notification of the board of voting registrars of adult deaths, as follows:
 "(a) Any person having knowledge or facts concerning any birth, death, spontaneous fetal death, marriage, induced termination of pregnancy, divorce, dissolution of marriage, or annulment may disclose such facts to the state registrar, and such disclosure shall be absolutely privileged and no cause or action may be brought or maintained against such
person for such disclosure."
(Strikethroughs in the above paragraphs are listed as their part of the bill.)

So, why would a report need to be filed for each and every miscarriage that occurs?   Why would "any person having knowledge or facts concerning any birth, death, spontaneous fetal death" be offered privileged disclose of such facts to the state registrar?  Unless....?

Having a miscarriage means that the woman may have committed murder and evidence needs to be gathered in order to prove she didn't deliberately have a miscarriage, aka, have an abortion.  Guilty until proven innocent.  The bill clearly states that doctors who may have committed actions that may have contributed to a miscarriage will have their licenses suspended until proven innocent and that they could be tried for murder.

Women, pay attention.  Any of you who have learned that it really wasn't just another late period you had (because you took an early pregnancy test) need to file a record with your state registrar attesting to "spontaneous abortion."  If this happens a few times, obviously there is a pattern of murder in your background.  Those of you who routinely have irregular, late or missed periods will need to follow this course of logic and take early pregnancy tests after 28 days in order to make certain you aren't pregnant.  That way, you can prove that you were only having a late period rather than a "spontaneous abortion" that might actually be proof of a deliberate abortion.  Hey, anything to keep those charges of murder from being filed.

Do you think he is going to ask that Sarah Palin be tried for murder?  After all, she did admit in her book that she experienced two miscarriages.

Somehow, I'm thinking other wingnuts are going to be given a free pass.

We should also consider that this bill is being introduced by the same wingnut who tried to redefine victims of rape and stalking as "accusers", whereas victims of any other crime were able to keep their "victim" status.

Why ever would a man do such a thing?

Of course, we are all seeing that this is the new trend by the Republican Party.  A law under consideration in South Dakota would make it a "justifiable homicide" to kill a person in order to "save the life of the unborn."

Why not just call it what it is, "open season on abortion providers"?  We have also seen Republicans in congress and the senate try to redefine rape so that women who are unconscious or otherwise unable to decide whether or not they want sex couldn't actually be "raped."  While this was done in an effort to further stop victims of rape from being able to get federally funded abortions, the reality is that it would mean women who were given the date rape drug and raped, or elderly grandmothers who were unconscious and raped in their nursing homes, wouldn't actually be considered to have been raped.

When this became blatantly unpopular, they decided to attack Planned Parenthood and cut off all funding, even though Planned Parenthood cannot legally be given money which pays for abortions unless it's to save the life of the woman or if she was a victim of rape or incest.  So, Republicans are really interested in stopping poor women from getting contraception (which would limit the number of abortions), STD screening, flu shots and physicals. 

Republicans must really hate us.  They certainly don't want us to have any control over our own bodies.

We're supposed to fear Al Qaeda and the Taliban.  I'm much more concerned about Al Cracker and the Wingnutoban.  Even Saudi Arabia and Iran gives women more leeway about birth control and abortions while accepting that miscarriages do not need to be investigated.
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