Tag: Retirement

Unprecidented Changes Coming to FHA’s Reverse Mortgage Program

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage

Reverse Mortgage guidelines will change dramatically March 2, 2015.

Under current guidelines, age (62 or older) and equity are the basic Reverse Mortgage qualification requirements.

However, starting in March, verification of income, assets, monthly expenses, indebtedness, and an acceptable credit history will be taken into account. New guidelines do permit the factoring in of certain extenuating circumstances.

Needless to say, for many in their retirement years the new rules will make qualifying for a Reverse Mortgage notably more difficult.

Part of the Reverse Mortgage process is completion of an informational counseling session  with an FHA-approved housing counselor. (For an overview of the counseling process, see:  http://services.nrmlaonline.org/NRMLA_Documents/Preparing_For_Your_Counseling_Session.pdf )

Severe congestion is anticipated in counseling availability as the new guidelines draw near. Because an FHA case number cannot be issued until receipt of the Certificate of Counseling, few counseling appointments may be available in the weeks prior to the guideline change.

This means anyone considering moving forward with a Reverse Mortgage may be well advised to complete counseling as soon as possible. To find a counselor near you, FHA’s counselor search site can be accessed at: https://entp.hud.gov/idapp/html/hecm_agency_look.cfm. You may also give me a call and I can provide you with a list of both locally- and nationally-available Reverse Mortgage counselors.

Guideline changes coming in 2015 are the most dramatic in the program’s history, and may put a Reverse Mortgage out of reach for some seniors who previously would have qualified.

If you or someone you know is considering a Reverse Mortgage, now may indeed be the time to move forward.

Call at any time. I always love hearing from you.

Laurie

Laurie MacNaughton [506562] is a freelance writer and Reverse Mortgage Consultant with Southern Trust Mortgage.

She can be reached at 703-477-1183 Direct or LMacNaughton@SouthernTrust.com

How the “Back End” of a Reverse Mortgage Works

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage
Laurie MacNaughton and Neil Sweren © 2014

Realtors, home owners, and family members frequently have questions regarding how the “back-end” of a reverse mortgage (or HECM) works. The answer to the question depends upon whether the property with the reverse mortgage is underwater at the time the last person on title permanently vacates the home.

Selling the home if the house is NOT underwater

If the loan balance is less than the current property value, the sale is handled like any other home sale. There is nothing unusual about paying off a reverse mortgage with one exception: there are certain time constraints the lender MUST follow once the last person on title no longer occupies the home as his/her primary residence.

If the property is not underwater the reverse lender provides a written payoff statement. At closing, the loan balance is paid off – just as would be the case with any other mortgage.  After the loan is paid off, any and all remaining equity goes to the seller, which typically is the borrower’s heirs or estate.

Selling the home if the property IS underwater

If the loan balance exceeds the property value the process is a little different.

HECM payoffs are not negotiated like other short sales or short payoffs.  The lender must accept as satisfaction of the lien the first offer that is at least 95% of the home’s current appraised value.

HECM loans are non-recourse in nature, so the borrower and his/her estate CANNOT be held responsible for any shortfall.  This is true even if the borrower has millions in other assets.  The house repays what it can, and any shortfall is covered by the FHA insurance fund.

It is important to understand this is not a short sale, and that there is no negotiation required or permitted. The lender is prohibited by HUD from accepting less than 95% of the home’s appraised value.

What if the heirs want to keep the home?  

The lender does not care how the reverse mortgage is paid off, only that it is paid off. If the family desires to keep the property, the loan can be satisfied by refinancing or by paying off what’s due.

In an underwater situation, the 95% figure noted above holds true for family members who want to purchase the home: heirs can buy the home for 95% of the appraised property value – which is not the full loan amount.

Important note on time frames

It is important to note there are mandated time constraints placed upon the lender, and the clock starts ticking the day the last surviving borrower no longer occupies the property. Once the home is unoccupied, the borrower or his/her estate have six months to pay off the loan. In addition to the initial six months, up to two three-month extensions can be requested (for a total of one year) if more time is needed.

Extensions are not automatic; documentation that the home is listed for sale, a sale is pending, or that a family member is applying for financing on the home will be required in order for an extension to be granted.

Communication is key

The loan servicer should be contacted immediately once the home is vacant. Reverse mortgage servicers deal with “back-end” situations every day and help borrowers and family members through the process. However, they can’t help if they don’t hear from anyone. All reverse mortgage servicers send monthly loan statements to borrowers. Those statements contain all loan and contact information necessary to make contact with the lender.

If you have questions regarding an FHA-insured reverse mortgage, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [506562] is a freelance writer and Reverse Mortgage Consultant with Atlantic Coast Mortgage.

She can be reached at 703-477-1183 Direct or Laurie@MiddleburgReverse.com

Forward-thinking – In Reverse

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage

Some analogies are hard to miss. This week two events came together to create just such an obvious pairing.

The first element of the analogy was a piece in the New York Times. The article, with a title that at best sounds like damning with faint praise, is entitled “Love Them or Loathe Them, Reverse Mortgages Have a Place.” Ron Lieber, author of the piece, writes:

[Criticism is easy] when you have enough savings or pension and Social Security income to get by. But given that older Americans’ homes are worth, on average, more than their other combined savings, there is a begrudging inevitability about reverse mortgages. As more people enter retirement in the coming decades with modest savings and no private pension, they’re going to need some of that home equity back during their increasingly long lives. (Emphasis added)

Note what he’s saying: life expectancy has dramatically climbed. Pensions have gone away. Savings may be meager. But the one investment most Americans faithfully fund is their home. And they’re going to need to draw upon that investment in retirement.

Now enter element two of my hard-to-miss analogy: today I met with a delightful couple. Well educated professionals, within the next two years they would like to retire from their careers as contractors with the federal government. They moved to the area 16 years ago and still have 14 years to go on their conventional mortgage.

The math isn’t hard. Their monthly mortgage payment is going to lug their retirement finances. However, if they go into retirement without a monthly mortgage payment their retirement income, investments, savings, long-term care insurance and Social Security will likely be more than adequate to meet their current and future needs.

This couple is very typical of what I call my “Forward-thinking Reverse” clients. They are not in distress. They are not lacking options. They do not see a reverse mortgage as a miracle product. Rather, they have done their research, they have run the numbers, and they have carefully planned for their retirement years.

And part of this planning involves a reverse mortgage. “It’s only been in the past year we started to understand what reverse mortgage really was,” the husband told me.

Which leads me back to Lieber’s New York Times piece.

“Many of the people entering or examining the reverse mortgage business now describe their interest in [reverse mortgage] as a sort of conversion. …Michael Gordon, BNY Mellon’s head of retirement and strategic solutions…thinks that many retirees…are unaware of their true asset allocation. After all, their home equity is an asset too,” Lieber writes.

As I’ve said many times, in retirement no one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.

If you would like to explore how an FHA-insured reverse mortgage might help with your retirement plans or those of your loved ones, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [506562] is a freelance writer and Reverse Mortgage Consultant with Southern Trust Mortgage.
She can be reached at 703-477-1183 Direct or Laurie@MiddleburgReverse.com

Reverse Mortgage : A bad idea whose time has come? Hardly.

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage

By all accounts, my dad was a funny guy. Looking every bit the part of the aerospace engineer he was by profession, no one ever expected him to have a piercing sense of humor or the ability to capture just the right turn of phrase – but he had both, and his humor was often profound.

One funny phrase he used occasionally was “a bad idea whose time has come.” He did not say this often, but an example of something fitting into this category might have been the Stuxnet software worm, if he had lived long enough to see it.

So why in the world do I bring this up?

This past week I received a call from a private wealth advisor who referred a client. While on the phone the wealth advisor said, “I always thought a reverse mortgage was a bad option people turned to when they were desperate. But during this month’s advisors’ meeting, reverse mortgage was suggested as a potential element of a well-rounded, long-range retirement plan.”

Bingo, my friend.

And more than ever, right now there are truly profound reasons to consider a reverse mortgage.

First is this: few financial experts anticipate interest rates will stay low. With a reverse mortgage, there is not a monthly mortgage payment, so that’s not how rates figure in. However, interest rates impact how much money the client receives – and even a small rate increase negatively impacts how much money the homeowner can access. In fact, if rates go up to 4.06% – which for much of history would be a modest rate – there would be a 26% drop in funds available to someone aged 68. That’s a hefty reduction.

A second consideration is that a reverse mortgage may enable a senior to delay drawing Social Security until age 70, when benefits are maximized. Most of us have seen the charts and know how much money we walk away from if we start drawing benefits at 62; less well-known are strategies available to help avoid an early draw.

A third thing to consider is this: there is an automatic growth rate associated with a reverse mortgage line of credit. This, in my opinion, is the least-known element of a reverse mortgage – and that’s a darn shame.

Each month, the unused portion of a reverse mortgage credit line grows bigger. This means that if you establish a line of credit now and let it sit until you need it, month over month the credit line will be bigger than it was when you originated.

Right now, more than ever, a reverse mortgage is a good option – whose time has come.

As I’ve said many times, no one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.

If you would like to explore how an FHA-insured reverse mortgage might help with your retirement plans, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] is a freelance writer and a Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183, or Laurie@MiddleburgReverse.com

 

Weekly Scenario

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story
Steven E. Shane, Esq. | © 2014 Offit Kurman, Attorneys At Law | Used by permission                                

Question:  My son lives across the country but is my health care agent.  He has a copy of my advance medical directive.  I’m concerned that if I am admitted to the hospital suddenly, or there is a medical crisis, he may not be able to quickly deal with the situation.

Answer:  An advance medical directive gives instructions as to the type of medical care you would like to receive in the event you cannot express those wishes yourself.  The document can also give another person the ability to make medical decisions for you.

The document, however, is not helpful if it is locked away at the bank or in your attorney’s office.  One solution [for dealing with this problem] is with a new app called “My Health Care Wishes.” This app allows one to import and store important health care documents on a smartphone so they are accessible when needed.

So in this scenario, your son could keep the information on his smartphone.  If there were an emergency, you would have a “My Health Care Wishes” wallet card stating your son has your medical proxy documents.  He would access and send that document quickly, and then have the authority to speak with the medical facility and make decisions.

Two other apps available are DocuBank and MyDirectives.  I have also seen articles which advise using a phone or tablet to simply store documents in a cloud-based storage system.

Comment:  One issue to be wary of is the security of these legal documents.  My hope is that these apps have worked on the security issues, but I can’t comment on whether that has actually taken place.

As always, if you have any questions or would like to learn more, please let me know.

Steven E. Shane                                            
Principal Attorney                                              
Offit│Kurman®
Attorneys At Law

www.offitkurman.com
8171 Maple Lawn Blvd. | Suite 200 | Maple Lawn, MD 20759 | 301.575.0300

 

Please note the above material discussed is intended to provide only general information.  Do not, under any circumstances, solely rely on this information as legal advice. Legal matters are often complicated.  For assistance with your specific legal problem or inquiry please contact me directly.

Low Interest Rates, Low Inventory, and a Slow Market? Huh?

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story

Laurie MacNaughton [NMLS# 506562]

Low interest rates, low housing inventory, and a slow housing market? In what kind of crazy world do these three conditions exist simultaneously?

At last week’s 2014 Finance Summit, hosted by Northern Virginia Association of Realtors (NVAR), Joseph Minarik, research director for the Office of Management and Budget, explained how we got where we are.

According to Minarik, interest rates have been so very low for so very long most people who were going to refinance have done so. Additionally, some buyers moved up their home purchase to take advantage of historically low rates. So in effect, very low rates caused the market to borrow homebuyers from the future. Now rates have edged up slightly, and homeowners are loath to purchase a new home and forfeit their low rate. This not only impacts the sale of previously owned homes, but since fewer people are willing to move, it also impacts new home starts.

And how has this impacted the housing market? Basically since the middle of 2013, the pace of home purchases has been stalled. This includes new home starts.

But there was good news out this week: for the first time all year, April’s home sales were up.

Several factors have come together to create a better housing market, according to Steve Farbstein, Chairman of the Mortgage Executives Committee of Virginia Bankers Association. One such factor is the loosening of lending standards by some lenders. Additionally, certain loan products that had been unavailable have started to reappear, giving borrowers with unusual circumstances a better chance of qualifying.

Though a loosening of lending standards may help homebuyers who are in their working years, many senior homebuyers still cannot qualify for a traditional loan. Often this is not because they have adverse credit issues. Rather, it can be next to impossible to get a loan if the applicant is not actively employed.

But here’s the thing: it’s not that seniors are unemployed. They’re retired. But either way, in many cases they’re still not getting that loan – and as a reverse mortgage specialist, it’s the retired, or those who are planning to retire soon, I’m concerned about.

There actually is a purchase loan just for seniors. It’s called the HECM for Purchase loan, and it was designed specifically with seniors’ needs in mind. With the FHA HECM for Purchase there is a down payment, but there is never a monthly mortgage payment due. And, though guidelines will soon tighten, as of right now qualifying for a HECM for Purchase loan is based upon the borrower’s age and the purchase price of the home. Also, in many cases it’s ok if there is still an “exit” home that has not yet sold. This gives seniors time to make any necessary repairs or upgrades to the “exit” property after they have moved into their new home.

The housing market is starting to budge, and there is no reason seniors should be left behind. Now while rates are low it’s a great time for seniors to get into a home configured to suit their needs in retirement.

Give me a call and let’s talk. I always love hearing from you.

Laurie

Laurie MacNaughton[NMLS# 506562] is a freelance writer and a Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183 Direct, or Laurie@MiddleburgReverse.com

 

 

 

Weekly Scenario

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story

Question:

My wife and I recently looked into doing a reverse mortgage, but were told we don’t qualify for enough to pay off our existing mortgage. Do we have any options?

Answer:

This situation is called “short to close,” and it refers to the exact scenario you are encountering, namely one in which your current “forward” mortgage is too large to be paid off by the proceeds from the reverse mortgage.

You do still have options. The most common solution is to bring money to closing to cover the shortfall.

Here’s an example in real numbers:

John and Dianne are each 64, and their plan is to retire within the next 6 months. Their home is appraised at $400,000, and they owe $203,000 on their current mortgage.

Assuming current interest rates and average closing costs, the amount they qualify for leaves them about $5,000 short of what they need in order to fully pay off their forward mortgage.

They are allowed to bring that $5,000 to closing in order to make the reverse mortgage work. The funds to cover the shortfall can come from any non-loan source, including savings, sale of an asset, or a gift from adult children.

And what is the benefit of doing this? The obvious benefit is that they have no more monthly mortgage payment. Since most Americans’ largest monthly expense is their mortgage payment, eliminating that expense frees up a significant amount of money on a monthly basis.

But there are side benefits as well, including safeguarding the home in the event one spouse dies and the surviving spouse loses the retirement income generated by the late spouse. Even with the loss of income, no payment on the loan is due until the last person on the home title moves, sells the home, or dies. At that point the heirs have up to one year to decide whether to sell or to refinance the home.

If you have reverse mortgage questions, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] is freelance writer and Reverse Mortgage Consultant with Middleburg Mortgage. She can be reached at 703-477-1183, Direct, or at Laurie@MiddleburgReverse.com
 

Middleburg Mortgage ∙ 8190 Stonewall Shops Square ∙ Gainesville, VA ∙ 703-477-1183 Direct Laurie@MiddleburgReverse.com ∙ www.MiddleburgReverseLady.com

 

Weekly Scenario: What Happens to the Home When we Move?

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse for Purchase, Reverse Mortgage

Scenario:

My wife and I want to work until we’re both 70, and then move to North Carolina. If we do a reverse mortgage now, what happens to the home when we move?

Answer:

Let’s put aside the concept of reverse mortgage for a moment and just think about a traditional mortgage, also called a “forward” mortgage.

What happens with a forward mortgage when you sell your home?

We all know the answer: your home sells, and when you go to settlement the forward mortgage is paid in full, and you pocket the difference between the sales price and the amount due on the mortgage.

With a reverse mortgage the formula is the same, and looks like this:

Sales Price of the Home – What’s Due on the Loan = What You Pocket

When you meet with your reverse mortgage specialist, one of the mandatory disclosures will be an amortization schedule showing approximately how much you can expect to realize from the sale of your home in any given year.

Just as with a forward mortgage, the sales price of the home will be a major factor in how much you pocket from the sale.

As a side note, when it’s time to buy your new home you can purchase it using a Reverse for Purchase loan, also called a HECM for Purchase. You will make a down payment of approximately 50% of the purchase price, and the Reverse for Purchase loan will make up the difference.

With HECM for Purchase you never have a monthly mortgage payment, which frees up your monthly income for other purposes. It also allows you to retain more cash from the sale of your previous home.

If you have questions either about a reverse mortgage on the home you’re in, or questions about HECM for Purchase, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] is freelance writer and Reverse Mortgage Consultant with Middleburg Mortgage. She can be reached at 703-477-1183, Direct, or at Laurie@MiddleburgReverse.com
 

Laurie MacNaughton ∙ Reverse Mortgage Consultant, President’s Club ∙ Middleburg Mortgage ∙ 8190 Stonewall Shops Square ∙ Gainesville, VA ∙ 703-477-1183 Direct ∙ Laurie@MiddleburgReverse.com ∙ www.MiddleburgReverseLady.com

 

 

 

Weekly Scenario – Reverse Mortgage and Divorce Settlements

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story

I frequently find myself answering the same questions, so I have decided to begin a “Weekly Scenario” post. If you have a question, let me know and I’ll address it in a future “Weekly Scenario.”

Question:

I am going through a divorce and want to stay in the home where I raised my children. However, I don’t have enough money to pay off my ex-husband’s “portion of the marital share.” Can a reverse mortgage potentially help me?

Answer:

Yes. Here are some things to note:

1)    There are no restrictions on how you use the proceeds from a reverse mortgage. You may indeed use the proceeds to pay the portion of the marital share due your ex-husband.

2)    Under today’s guidelines, to make a reverse mortgage work the homeowner must have a minimum of approximately 50% equity in the home. However, depending upon the terms of your Property Settlement Agreement you might need to have a home that currently has a small outstanding “forward” (traditional) mortgage.

3)    Many family law attorneys are not familiar with the reverse mortgage program. It may be of benefit for you to ask your attorney to speak directly with your reverse mortgage loan officer.

If you have questions regarding reverse mortgage, give me a call or shoot me an email. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage · 8190 Stonewall Shops Square · Gainesville, Virginia 20155 · 703-477-1183 Direct · Laurie@MiddleburgReverse.com

Visit me on Facebook at www.facebook.com/MiddleburgReverseMortgage

Licensed in: Maryland (MD), Washington, DC, Virginia (VA), Pennsylvania (PA), Delaware (DE), North Carolina (NC), South Carolina (SC), Georgia (GA), Tennessee (TN), Florida (FL)

 

 

Guilty as Charged

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, Retirement Planning, Reverse for Purchase, Reverse Mortgage
Laurie MacNaughton [506562]  © 2014

I could hear it in her voice, I could see it in her eyes – the fear, the sublimated guilt, the tears lurking just beneath her every word.

Her sin? Old age.

Her crime? The loss of her husband of 58 years. And, with his death went fully 50% of her household income.

And now a new challenge: she has suffered a stroke, and though her recovery is steady, it is slow, and the long-time family home is simply no longer appropriate.

I met with “Mrs. Jones” last night. Her darling middle-aged daughter joined us, and mentioned it was a realtor who had given them my name. After speaking with both mother and daughter it became clear just how good a call it was on the part of the realtor: Mrs. Jones needs out of this big house, and to get into a home appropriate to aging in place.

HECM for Purchase

HECM for Purchase (also known as Reverse for Purchase) is an FHA-insured home-purchase loan available to seniors aged 62 or older. The purchaser provides a down payment – often derived from the sale of the exit home – and the HECM for Purchase loan provides the rest of the purchase funds.

Punto. That’s is. That is the last mortgage payment the home buyer will make on that home until s/he permanently leaves the home. At that point the loan will be repaid from the proceeds of the sale, and the remaining equity will belong to the homeowner, or to the heirs.

Property taxes (if applicable), homeowners insurance, and routine upkeep of the home are still required.

Are you in a home too big, or with too much upkeep, or with too many stairs? Have your longtime neighbors moved, leaving you in a neighborhood you no longer recognize? Has traffic become such an ordeal you are afraid to leave your house?

Give me a call and let’s talk. Include your adult children on the conversation. And together, let’s explore your options. You may have far more than you know.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · Laurie@MiddleburgReverse.com

   Visit me on Facebook at www.facebook.com/MiddleburgReverseMortgage

Licensed in: Maryland (MD), Washington, DC, Virginia (VA), Pennsylvania (PA), Delaware (DE), North Carolina (NC), South Carolina (SC), Georgia (GA), Tennessee (TN).