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Posts Tagged ‘bank’
Friday, June 26th, 2009
Some reverse mortgage questions get asked over and over again. In honor of that, answers to some common reverse mortgage questions are below. More questions will be posted at a later date:
Q: Can my heirs still inherit my home?
Yes. In a reverse mortgage, the estate is still passed to the heirs. Often, the heirs choose to sell the home with the proceeds going towards repaying the reverse mortgage. The lien cannot be for more than the home is sold for, so if the home is sold for less than the value of the lien, the lender must make an insurance claim for losses to the FHA. Once the home is sold, the estate owes nothing.
If, however, the heirs wish to keep the home, they can pay back the reverse mortgage through cash or other assets. They can also refinance the reverse mortgage into a conventional forward mortgage.
Q: Can I outlive a reverse mortgage?
No. A reverse mortgage is not due until the death of the borrower or until the borrower sells the home or moves to permanent care. There is no limitation, so if you live in your home for another 50 years, the reverse mortgage will still not become due until your death.
Q: Will my Social Security and Medicare be affected?
While government entitlement programs such as Social Security and Medicare are not affected by a reverse mortgage, need-based programs such as Medicaid may be. The pace of the fund withdrawal must be limited to remain eligible. Talk with your loan officer to make sure your payments for the reverse mortgage do not jeopardize your eligibility.
Q: What are the downsides?
The costs of a reverse mortgage can be high and are higher than the costs of a conventional mortgage. If the proceeds are not withdrawn correctly, a reverse mortgage can hurt one’s ability to qualify for Medicaid and other need based programs. If a person’s home has a high value, they may not be able to get enough money out of their home to make a reverse mortgage make sense. If one spouse is under the age of 62 and taken off the title for the purpose of a reverse mortgage, the reverse mortgage will become due upon the death of the older homeowner, which might prove to be a problem for the spouse. Lastly, for homeowners who want to pass their home on to their children or grandchildren, a reverse mortgage may not be the best idea.
Q: I’m selling my home to the bank, right?
No. The deed and title to the home stay in the borrower’s name. Like with any mortgage, the lender adds a lien to the title for the amount borrowed so they can guarantee it gets paid back.
Tags: bank, downsides, frequently asked questions, heir, medicare, reverse mortgage, reverse mortgage faq, reverse mortgage frequently asked questions, reverse mortgages, social security
Posted in Consumer News | No Comments »
Friday, June 5th, 2009
 Reverse Mortgage Daily wrote a blog post today focusing on the case of a man in Minnesota who pleaded guilty to swindling his mother and was sentenced to the maximum thirty days in jail and five years of probation. Amongst the ways the man swindled his mother was through a reverse mortgage, and the writer wondered if there was a way to protect seniors from such crimes without harming the reverse mortgage industry.
I think the answer is yes.
Every year there are several stories of individuals who have been swindled out of their life savings. We could protect those individuals without harming the reverse mortgage industry by allowing them to buy insurance that would protect their life’s savings if someone has been convicted of defrauding or swindling them, allowing them to replace a portion of the money they have lost and ensuring that they still have money to live on in their old age.
Private companies and/or states could offer insurance against swindling/financial fraud. The insurance could be either mandatory or optional, and could taken out by the policy holder at any point throughout their life. In the same way the FDIC ensures up to $100,000 of each individual’s money in case of a bank failure, the financial fraud insurance would serve to protect an individual’s life savings against instances of swindling, theft, or fraud. While the policy would not necessarily be unlimited, policies of even up to $100,000 could do a lot to ensure that individual’s life savings are protected. Although cases of fraud are not incredibly common, they can be catastrophic to the individuals involved when they do occur. These policies would benefit those involved in something like the Madoff scandal as well.
The only way to collect on the insurance policy would be to show that an individual and/or corporation had been convicted of swindling the policy holder. In this case, the guilty plea from the son would be sufficient to guarantee the mother her pay out. If such insurance existed and the mother was able to collect on it, she would be left with more than the eighty dollars currently remaining in her bank account.
Correction: The man was sentenced to thirty days in jail, not thirty years.
Tags: bank, elder abuse, FDIC, financial fraud, fraud, insurance, Madoff, money, reverse mortgage, Reverse Mortgage Daily, reverse mortgages, savings, swindling, theft
Posted in Consumer News, Industry News | No Comments »
Wednesday, June 3rd, 2009
 While the Obama Administration’s Home Loan Modification Program was supposed to help homeowners who have lost their jobs and are having trouble making their mortgage payments, the NYTimes wrote an article today highlighting the many people whom the banks have been unwilling to help because they have never been late on a mortgage payment before. Some of these homeowners are upside down on their mortgages–others are having trouble simply due to the circumstances of the recession.
Although it is often dangerous to make generalizations solely based on the case highlighted in the story, it is extremely plausible that banks are unsure how to handle customers with good payment histories who are now running into financial difficulties. The banks and government programs seem to be waiting for people to get into a lot of trouble before bailing them out, rather than helping prevent those problems in the first place.
Furthermore, the number of subprime and Alt-A mortgages refinanced in May fell 11 percent from April, according to research by Alan White at the Valparaiso School of Law. Given the record number of homeowners behind on their mortgage payments or facing foreclosure, this statistic is problematic and disturbing.
Many of those affected include seniors. The woman profiled in the article, Eileen Ulery, is 63, old enough to qualify for a reverse mortgage. However, her property is upside down, meaning she would be likely to face a shortfall.
While I agree that on a scale of priorities we should be helping those whose circumstances are most dire first, it does not seem to correlate that homeowners who have been responsible are being penalized. Bank of America Home Loans is quoted in the article as saying they are still putting the programs in place for those not facing a severe threat of foreclosure. I would hope that those programs are as inclusive as possible, and put together soon so that these individuals do not end up in a dire situation before they can get help.
Tags: Alt-A mortgage, bank, Bank of America, bank of america home loans, banks, foreclosure, foreclosures, Home Loan Modification Program, homeowner, homeowners, loan, loan modification, Mortgage, mortgages, New York Times, Obama, reverse mortgage, reverse mortgages, subprime mortgage
Posted in Consumer News, Industry News | No Comments »
Monday, May 4th, 2009
 The Wall Street Journal published a fun piece this morning about how a number of towns in CA, Indio, CA in particular, have made it a criminal misdemeanor for lenders not to keep up with foreclosed properties. The law goes after banks that have allowed properties to fall into disrepair, with concerns such as high weeds, algae in pools, and dead grass. Apparently, it has generally been effective. After at first only writing checks to pay the fines, it seems that lenders such as Countrywide, Washington Mutual, and Fannie Mae are coming into compliance.
Reverse mortgages are often a great way to potentially keep people in their homes and help avoid foreclosure, but when foreclosure is unavoidable, it is nice to see a community holding the lenders responsible for picking up the pieces.
At the same time, the Associated Press released an article on the increasingly high number of vacant homes in the Midwest, where vacancy rates in some areas are over 40% empty. Brian Bernardoni, Policy Director for Chicago’s Board of Realtors, was quoted today in the Associated Press as saying that vacant homes hurt a neighborhood’s “curb appeal,” making it that much harder for the neighborhood to recover. However, if lenders take care of vacant and foreclosed homes, preventing them from becoming refuges for squatters and keeping up the outer appearance of the buildings, the neighborhood may not suffer as much damage–in both the short and the long run.
Tags: Associated Press, bank, banks, California, Countrywide, fannie mae, foreclosed properties, foreclosure, homes, Indio, Midwest, real estate, reverse mortgage, Wall Street Journal, Washington Mutual
Posted in Consumer News | No Comments »
Wednesday, April 29th, 2009
 Senator McCaskill in DC At first, I was inclined to be in favor of the new “cross selling” restrictions. However, after learning more about them, I have changed my view.
One of the most popular and well-publicized examples of reverse mortgage fraud comes from lenders selling a senior a reverse mortgage, then convincing them to use the proceeds to buy an annuity or long term care insurance. This practice is known as “cross selling.” The annuity could perform poorly, the money could be invested for the gain of the broker, or the terms of the insurance could be highly unfavorable. And in many of these cases, seniors could be taken advantage of.
Hence the new series of “cross selling” restrictions that are passing through state legislatures and the federal government. The federal government’s restriction, in the McCaskill amendment to the Housing & Economic Recovery Act of 2008, is arguably the most stringent one. The amendment states that the mortgagee “shall not participate in, be associated with, or employ any party that participates in or is associated with any other financial or insurance activity;” This language can be extended to include tellers and savings accounts, let alone all insurance products and 401(k)s. There is an “or,” however, which states that the mortgagee can do the above if they prove to the Secretary that the mortgagee maintains firewalls and safeguards to ensure that the originator has no incentives to provide the mortgagor with any other financial product and that the mortgagor does not need to purchase any other product as a condition of the reverse mortgage. This means that, provided that it can be proven adequately that safeguards are present, other financial products may be able to be sold by mortgagee.
The principle of the law is correct. Clearly it is important to protect seniors from fraud. Cross selling can prove disadvantageous for seniors, especially when the mortgagee is being compensated for the other products–something the senior may or may not be aware of.
However, there are other instances where cross selling may be advantageous. A senior may wish to place the money in a savings account or open up a credit card with the bank behind their reverse mortgage. They may decide to purchase a long term care insurance plan. These products can be favorable, and seniors should be able to purchase them.
The current law means that reverse mortgage lenders can only discuss a reverse mortgage with their client. If the client asks them about other options, they are not permitted to answer. Many seniors have long-term relationships with their banks or financial advisors. These seniors should not be forced to go to a variety of sources, leaving the person whom they trust and have a long-standing relationship with, just because they are considering a reverse mortgage. Such a policy has a potential to cause more harm than good.
Seniors have the right to evaluate all their options. Hopefully HUD’s interpretation of the McCaskill ammendment will still enable seniors to discuss alternatives to a reverse mortgage with their financial advisors and/or discuss options for what to do with the money, if they wish to do so. Cross selling could be prevented by a more narrow law. But the McCaskill ammendment takes it too far.
Tags: annuity, bank, Cross Selling, financial advisor, government, Housing & Economic Recovery Act, HUD, law, long term care insurance, McCaskill Amendment, mortgagee, mortgagors, reverse mortgage, reverse mortgage fraud, reverse mortgage lender, reverse mortgage scams, reverse mortgages, senior, seniors, Washington
Posted in Consumer News, Industry News | No Comments »
Wednesday, March 18th, 2009
 The new reverse mortgage rates have been released for the week This week’s new Reverse Mortgage rates are listed below.
Tags: bank, hecm, LIBOR, rate, rates, reverse mortgage, reverse mortgages, treasury, weekly
Posted in Industry News | No Comments »
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