Posted on 04/14/2013 10:37:05 AM PDT by blam
Landing A Reverse Mortgage Just Got Tougher
Mark Koba, CNBC
Apr. 14, 2013, 9:20 AM
Seniors looking for a big cash payout from a reverse mortgage will have to look elsewhere for needed funds.
A small but increasing number of defaults on the loan product has prompted a crackdown by the Federal Housing Administration (FHA) on the biggest payout loan to homeowners.
The basic theory behind reverse mortgages — you must be 62 or older to apply — is that instead of making payments to a lender like in a traditional mortgage, the borrower receives non-taxable money from the lender, which does not have to be paid back for as long as the person lives in the home.
Borrowers are now restricted in how they get one type of reverse mortgage known as the standard fixed rate Home Equity Conversion Mortgage Loan, or HECM.
The HECM has been the most popular with borrowers because it yields the greatest amount of money — often in the hundreds of thousands of dollars — in one lump sum. HECM loans are still available — but instead of having fixed mortgage rates, they are offered only with variable rates, which yield less immediate cash.
"The standard HECM loans have proven to have an unusual number of defaults," said Delores Conway, associate dean and professor of real estate at the University of Rochester. (Read more: Obama's Budget Could Cap More IRAs in Future Years)
"By taking so much cash up front, homeowners have less money in later years to keep up with property taxes and other housing expenses they have to pay even with a reverse mortgage," Conway added. "That, and falling property values, have increased defaults."
Financial Lifeline
(snip)
(Excerpt) Read more at businessinsider.com ...
reverse mortgages are a huge ripoff
I’ve lost a bit of respect for Fred Thompson (former GOP Senator and actor) in the TV commercial he does promoting reverse mortgages. Dave Ramsey is dead set against them—take his advice instead.
I’d like to know why the Federal government is guaranteeing these things. The banks should be taking the hit if they don’t work out. This is more evidence of crony capitalism.
The first commercial he did he insulted people when he said “Like me, you’re probably too damned dumb to know what a reverse mortgage is”. Not an exact quote.
I wonder how much he gets for each mortgage sold.
Same with Robert Wagner.
I'm retired now - car and home paid off and am astounded on how little I need to get by. Then these Reverse Mortgage hustlers show up. It's as if no one can stomach people owning their own homes.
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