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Posts Tagged ‘senior’
Wednesday, October 21st, 2009
 Today’s Wall Street Journal featured a very interesting article on how Bank of America is using reverse mortgages to save senior borrowers. The cases include situations where Bank of America has taken a significant write down to allow the borrowers to stay in their homes. But not all borrowers may receive the same treatment as the borrowers highlighted in the article. As the story notes, most borrowers who received the modified reverse mortgage had taken out option ARMs.
Option ARMs (Option Adjustable Rate Mortgages) have become “the new subprime mortgages,” leading many borrowers into foreclosure. 32% of option ARM borrowers were delinquent or in foreclosure last month, compared with 48% of subprime mortgage borrowers. Unlike subprime mortgages, option ARM mortgages generally went to borrowers with good credit, including seniors with significant equity in their homes looking to refinance. The option ARMs have also proved difficult to modify, since the low interest rates on the loan often cannot be lowered any further. Lawsuits have been filed by borrowers claiming they were misinformed of the loan’s complicated structure, which in many cases can lead payments to balloon after a few years.
As a result of the lawsuits, as well as the settlement of a suit against Countrywide, which was since acquired by Bank of America, Bank of America has agreed to modify option ARMs and subprime mortgages where possible. While it appears that Bank of America has so far only issued about 20 reverse mortgages to borrowers with option ARMs, it looks like a good start to fixing a significant problem. Borrowers with option ARMs from Bank of America may want to talk to their servicer or the bank about a modification, perhaps with a reverse mortgage.
Tags: ARM, Bank of America, borrower, borrowers, Countrywide, foreclosure, lawsuits, Mortgage, mortgages, option ARM, refinance, reverse mortgage, reverse mortgages, senior, subprime, subprime mortgage, Wall Street Journal
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Friday, September 18th, 2009
 A column in The New York Times today revealed that nearly 30% of adult children contribute to their parent’s care, on average spending $2,400/year. The expenses can cover everything from unpaid medical expenses to daily chores like stocking a refrigerator. The time and expense of caring for an aging parent can be a large stress on adult children– financial and emotionally. However, as the article notes, there are many sources that can help reduce the burden.
For some seniors who continue to live in their homes, a reverse mortgage can serve as a possible solution, providing another source of income to help pay for medical bills, adult day care, and the like. Another important point raised in The New York Times column is that there are a number of other resources available to assist seniors and their families, which are often inadvertantly overlooked. The column talks about the services that can be provided by a geriatric care manager, who can help assess a family’s needs and put the family in touch with the appropriate resources. Lawyers and geriatric care managers can also be a resource to help families navigate the complex red tape and bureacracys that sometimes surround senior programs.
One of the biggest takeaways I gathered from the article is that there are a variety of programs that seniors can qualify for, even if their income is over $100,000. Another is the importance of planning ahead. The article discusses, power of attorney, for example. As seniors and their families think about the future, issues like power of attorney, long term care insurance, and wills should be addressed sooner rather than later.
Tags: adult children, elderly parent, family, geriatric care manager, long term care insurance, New York Times, power of attorney, reverse mortgage, senior, senior programs, seniors
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Tuesday, August 25th, 2009
 HUD announced that a new mortgagee letter will be coming in the next 60 days. The mortgagee letter will likely be about advertising, as HUD is apparently not pleased with advertisements that promote borrowers using the proceeds from a reverse mortgage for a vacation or expensive personal items.
However, reverse mortgage proceeds are for the borrower to spend at their discretion. While HUD has been very suspicious of borrowers using reverse mortgage proceeds for annuities or other insurance products, there is nothing to keep them from doing so. Further, a recent article actually promoted seniors putting money from a reverse mortgage into life insurance policies so as to be able to pass the money to their heirs tax-free–an interesting way to use a reverse mortgage for estate planning.
Ads in other countries with similar reverse mortgage programs also use advertising focusing on a vacation or luxury item. The philosophy is that the money is the senior’s to use at their discretion. These are some ways a senior might choose to do so. As a result, it will be very interesting to see what (if any) guidelines on advertising HUD releases with the next round of mortgagee letters. While a reverse mortgage is a loan like any other and does need to be taken seriously as a financial investment, one hopes seniors are still free to take out a reverse mortgage– regardless of whether they take it out for something serious (medical expenses, home repairs) or something more luxurious (yacht, vacation, car).
Tags: advertising, financial investment, hecm, HECMs, HUD, mortgagee letter, mortgagee letters, reverse mortgage, reverse mortgages, senior
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Friday, July 31st, 2009
 A report released in June by the U.S. Census Bureau predicts that people aged 65 and over will soon outnumber children under 5 for the first time in history. Furthermore, the population aged 80 and over is expected to increase 233% between 2008 and 2040, a phenomenon never before seen. The population aged 65 and over meanwhile is expected to grow 160 %, compared to 33% for the total population of all ages. These predictions encompass global demographics- not just those of the United States.
An increasingly older population presents many new challenges. Health care and social security are just two of the programs under increased scrutiny. Economic models may need to change as individuals spend larger portions of their lives in retirement. An older population may lead to labor supply issues, with the question of how the younger population will be able to support all their elders.
The report also points out that an increasing share of the elderly population will be located in developing countries in the years to come. This could pose a new set of challenges. The developed health care and social service networks of Europe and the United States have not yet come to many parts of the developing world. With chronic noncommunicable diseases are now the major cause of death among older people in both the developing and nondeveloping world, the global health care system faces a new problem of treating diseases like cancer and heart disease throughout the globe-and dealing with the aging populations once they do.
It is unsurprising that the population is aging, and that, in the years after the baby boom, the elderly population will soon be a larger proportion of the world’s population. As birth rates decline, especially in the developed world, it is also logical that the older members of the population may outnumber the younger ones. But the challenges that come from these problems remain to be resolved.
Within the reverse mortgage program, it will be interesting to see if, over time the minimum age of the borrower is pushed back to reflect the longer lifespan. One wonders if the percent equity available from the home will decrease to yield a more sustainable program as people live longer. And one expects the program to grow as an increasing number of seniors become eligible for it.
Tags: aging, developed, developing, elderly, Europe, global, Japan, older, population, program, reverse mortgage, reverse mortgages, senior, seniors, U.S. Census Bureau, United States, world
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Tuesday, July 21st, 2009
 Another component to aging in place safely is safe driving. Many suburbs and rural areas are not easily navigatable without the ability to drive. This means that when seniors lose their mobility and/or ability to drive safely, many of them are forced to move out of their homes. Other times, seniors who choose to stay become a part of a “homebound elderly” population, which does not make aging easy.
In the last week or so, AAA has announced a number of resources to help senior drivers stay safe on the roads. Programs like Carfit help ensure that senior’s cars are safe so that they are less likely to be killed in a crash. Drivesharp, one of the newest AAA offerings, is a computer software program that strengthens the brain’s ability to process what drivers see, so that they can focus better, keep track of more on the road, and react faster when driving. Many of these problems are more likely to plague seniors, and improvements in visual processing decrease crash risk. Roadside Review and I Drive Safely’s Mature Drivers Course are two other examples of programs targetted towards helping senior drivers improve their skills and abilities so that they can stay on the road longer, prolonging their ability to remain in their home.
For more information, visit www.aaa.com or www.aaaseniors.com.
Tags: AAA, accessibility, aging in place, Carfit, course, crash, driver, drivers, Drivesharp, driving, home, I Drive Safely, reverse mortgage, reverse mortgages, Roadside Review, safe driving, senior, seniors
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Monday, July 20th, 2009
 A kitchen in a universally accessible home. Aging in place is a goal of many seniors, for good reason. A reverse mortgage is one product that can help seniors remain in their homes, but if mobility concerns are an issue in a house that is not senior-friendly, aging in place can still be difficult. Now, some recent developments have come together nicely to make aging in place a little easier:
Suffolk County in Long Island, NY recently ammended its housing code to state that any affordable housing built with county funds must incorporate accessible design. Such design concepts include no-step entryways, 36 inch doorways and passageways, and an area in showers for grab bars. Other mentioned features include homes with elevators already built-in and doors that open with levers, not knobs.
While accessible design can help people of all ages in cases of accident, disability, or injury, it is an especially important issue within the senior community. If a property is built in a universally accessible manner, it is less likely that a senior would be unable to live there as they get older. According to Judy Pannullo, Executive Director of the Suffolk Community Council, it costs only $700 more to build a house with universal design principals, though the cost of renovating an existing home to conform can be much higher.
Finally, programs such as the HECM for Purchase program make it easier for seniors to purchase new homes, including those that might be more accessible than their previous homes. The HECM for Purchase program allows seniors to buy a new home providing only a down payment and paying for the rest using the home’s existing equity. As a result, they have no mortgage payments during their time in the home.
Tags: accessibility, accessible, aging in place, HECM for purchase, reverse mortgage, reverse mortgages, senior, seniors, suffolk county, universal accessibility
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Wednesday, July 1st, 2009
 Fox Hill outside Bethesda, MD A new concept for senior housing was profiled in the New York Times today. The article focused on Fox Hill, a new senior housing complex outside Bethesda, MD. Rather than only allowing seniors to rent rooms on a monthly payment or requiring them to pay a high entrance fee which is partially refunded when they either pass away or move out, Fox Hill allows seniors to own their homes. Yet they still receive many of the same benefits that come with living in a senior home, including communal meals, social activities, and access to health care. In home care is available at an additional fee, and assisted-living units are also within the same building, enabling couples to live close to one another while one requires more assistance.
Fox Hill, developed by Sunrise Senior Living, has had trouble filling all the condos. However, the concept seems interesting, especially because it appears that, assuming the condos are FHA approved, the HECM for Purchase program might enable borrowers to use a reverse mortgage to purchase their condos. The article also surmises that the number of seniors in all types of housing has slipped nearly 2 percentage points thus far this year, as seniors struggle to sell their homes. It wonders whether the concept will gain more traction once the market rebounds.
The concept seems valuable, especially when one considers the large numbers of seniors congregating in locations such as South Florida and Phoenix. There is something to be said for being a part of a community of one’s peers, and many seniors in those areas also own their homes. While the properties in Fox Hill are expensive, ranging from around $500,000 to just over $1 million, there are seniors who are willing to pay that much for a new home. And while, as the article notes, some seniors do not care whether or not they own their home, others note that they like that they are accumulating equity.
Tags: condos, Fox Hill, HECM for purchase, New York Times, reverse mortgage, reverse mortgages, senior, senior housing, seniors, Sunrise Senior Living
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Friday, May 15th, 2009
 more seniors are in the workforce According to a poll released by the Pew Research Center today, Americans over the age of 65 are suffering the least during the recession. Fewer seniors reported trouble making rent or mortgage payments or being forced to cut back on household expenses. In addition, only 7 percent reported trouble finding health care (a third of the percentage of younger adults), and only 23 percent reported losing more than 20 percent of their investments last year, well below the numbers of those younger.
Finally, the number of seniors with jobs increased by 3.9 percent. While the rise in the number of seniors in the workforce may indicate that some were forced back to work, at least they were able to find jobs. In fact, in the current economic climate, the younger the worker is, the least likely they are to be laid off.
Some analysts appear unsurprised that seniors have fared well. Their lifestyles are often already scaled back, and their investments are generally more conservative than their younger counterparts. Nonetheless, it is good news.
Tags: economic climate, jobs, lifestyles, recession, reverse mortgage, senior, seniors
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Thursday, April 30th, 2009
 Lisa Madigan, Illinois Attorney General At the NRMLA conference in Chicago, one of the speakers was Brenda Grauer, who works for the Office of the Illinois Attorney General. During her presentation, I learned that the government is available as a resource for seniors trying to avoid foreclosure.
As previously discussed, generally in order for a reverse mortgage to be used to help a senior avoid foreclosure, the borrower needs to get a short pay from the bank. The short pay reduces the amout the senior owes the bank, which can then be paid off through the reverse mortgage. But banks are often reluctant to grant short pays.
Ms. Grauer explained how the Attorney General’s office is working with many lenders to try and help seniors (and others) receive short pays so that they can stay in their homes. The office is getting stays on orders of foreclosure, and, as of when she spoke, none of the people they were working with had lost their homes. It seems that the Attorney General’s office is therefore a good place to go for seniors in search of resources or aid in avoiding foreclosures. While all states have different resources available, it is a worthwhile call to make with nothing to lose and much to gain.
The number for the Homeowner’s Helpline of the Office of the Attorney General in Illinois is 1-866-544-7151.
Tags: Attorney General, Chicago, foreclosure, foreclosure prevention, helpline, homeowner, Illinois, Lisa Madigan, NRMLA, Office of the Illinois Attorney General, resource, reverse mortgage, reverse mortgages, senior, seniors
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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
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Today’s Wall Street Journal featured a very interesting article on how Bank of America is using reverse mortgages to save senior borrowers. The cases include situations where Bank of America has taken a significant write down to allow the borrowers to stay in their homes. But not all borrowers may receive the same treatment as the borrowers highlighted in the article. As the story notes, most borrowers who received the modified reverse mortgage had taken out option ARMs.
