Making Reverse Mortgages Part of Older Americans Month

Saul Friedman is back writing about reverse mortgages as part of Older Americans Month, which the Obama Administration says is part of the theme of “Age Strong, Live Long.”

Friedman writes that there is a way for older Americans to protect themselves against too many medical bills, high property taxes and the downers in your retirement savings plans by using a reverse mortgage.

I am referring to the federal government’s reverse mortgages which too many beleaguered older Americans have ignored. Some don’t want to mortgage a home that’s free and clear; some are discouraged from tapping the equity in their homes by children who are waiting for their inheritance.

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So here’s some welcome news for older Americans who own their homes and can use some extra income and cash. The up-front costs for many FHA-guaranteed reverse mortgages have gone down, which means the possible proceeds will go up by as much as $10,000.

I’m referring to the most popular and safest reverse mortgage, the Home Equity Conversion Mortgage, fondly known as the HECM. It is the safest for the lender as well as the homeowner-borrower because it is backed, insured by the Federal Housing Administration which has never defaulted on a mortgage that it has guaranteed.

Indeed, of all the mortgages that have fallen on hard times, or have been the subject of scandalous behavior by bankers and investors, the HECM has been largely untouched by these troubles. Last year, the Department of Housing and Urban Development raised to $625,000 the value of a home that could qualify for a HECM.

He continues to discuss about the latest costs changes associated with the product.

GRAY MATTERS: Safest Reverse Mortgage

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  • How in the heck can the Obama Administration say that that their theme for this month is “Age Strong, Live Long”, when Congress and HUD are doing just about anything they can think of to bring down the HECM program?

    I just don't get this huge disconnect, or maybe it's like so many other things in the Obama Administration…not walking the talk.

    That said, I sure hope Saul Friedman'a article gets a lot of play in the media, and a constituent NRMLA member of Senator McCaskill should hand deliver it to one of her staff members.

    • reversemaniac,

      Congress is not responsible for the budget. That is OMB, the budget arm of the White House.

      It is the Administration which forced HUD to do what it is doing. HUD cannot overrule the Administration when it comes to the budget. OMB forced the disputed home appreciation rates down the throats of HUD. HUD is simply working with what they were given.

      What we need is legislation that codifies the budget process that Congress informally mandated HUD to do in determining home appreciation rates for the budget a few years ago. When HUD used the Congressional method last year, the HECM program showed a negative credit subsidy. Unfortunately OMB overruled the method HUD used and instead mandated the home appreciation rate which resulted in the large positive credit subsidy.

      You can read about it on Page 31 of the July 2009 CBO report on Reverse Mortgages at http://www.gao.gov/new.items/d09836.pdf. WARNING: You might want an antacid first.

      I understand why it may be a little difficult for the majority in Congress to ignore the pleas of a program that is supposedly self-substaning. It is crazy that we are forced to plea for a subsidy we will probably never need.

  • If our friends show so little knowledge about our products when they write about them, it is no wonder those who are against us are so severly wrong. After 20 years, why have we not better educated our friends? The industry claims to educate but every time I read an article by a friend of the industry there is at least one glaring FACTUAL error.

    So what am I referring to? “Last year, the Department of Housing and Urban Development raised to $625,000 the value of a home that could qualify for a HECM.” How wrong could this get? True HUD did allow the LENDING LIMIT to go to $625,500 (I forgive a $500 typo), but it was Congress and the President that raised the limit.

    But the basic problem is that somehow it is just now that a home of an appraised value of $625,500 now qualifies for a HECM. It is not the home that is the issue it is the value that can be used in computing the principal limit that changed. A home valued at $625,500 has qualified since program inception unless the home needed extensive repairs, was located in inappropriate zoning area, etc.

    Like so many other articles prove, our friends are significantly wrong about the HECM program in some fundamental way or another. As an industry we need to do better, much better.

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