ABC News Runs Reverse Mortgage Feature

NewImage.jpgABC News Good Money ran a segment on reverse mortgages earlier this week.  ABC’s Tanya Rivero says that while the loans have been around for nearly 50 years (not quite), they’re just starting to catch on with homeowners across the country.

She talks with Eric Tyson, author of personal finance for seniors for dummies and asks him loads of questions.  The segment is over 5:00 minutes and does a good job explaining the product.

Specifically Tyson discusses says a borrower needs to look at how many years they plan to remain in the home.  “If you end up not holding onto the reverse mortgage for many years, the effective interest rate can be quite high,” he said.

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First time I’ve heard that being discussed in the national media.


Reverse Mortgages

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  • The family reverse mortgage sounds like a great idea but if all family heirs do not participate in proportion to how they will inherit or if some members will be hurt by participation, the idea can devolve into one of the worst decisions, seniors will ever participate in.

    If the balance due grows to be greater than the value of the home and no family member wants to keep the home, chances are, the family unnecessarily bore a risk that reduced the estate further than if the parents had simply taken a reverse mortgage from an unrelated commercial lender.

  • The_Critic's last comment is incorrect. A reverse mtg is a non-recourse loan. The only source of repayment is the value of the home. No other assets are affected. At closing the borrower sign a doc stating that they are not “personally liable” for the loan.

    With variable rates starting at around 2.5% not many early payoffs get the yield over 10%. He did not mention the recent elimination of origination fees and monthly servicing fees. That was huge….most borrowers received $6-11,000 more because of that. He also did not mention that counseling is mandatory.

    Another troubling comment he made was that your home “must be free of debt” and that any mortgage must be paid off. That was misleading. In these days I am seeing over 60% of my loans paying off some mortgage debt. Maybe it's a good thing that most seniors only watch Fox News;).

    • OnTheRiver,

      What?? All of your pronoun references are to me. Nothing in your last last two paragraphs relate to anything I have said. Please correct your references. You can edit.

      Also you are absolutely incorrect about family “reverse mortgages.” A reverse mortgage offered by a commercial lender is nonrecourse as to all members of a family and their estates. However, as a practical matter, a family reverse mortgage is not nonrecourse as to the family as a whole and all of their estates combined.

      For example, if the borrower owes $440,000 on their loan at termination to an unrelated third party, but their home is only worth $300,000, the borrowers are forgiven $140,000 and no one else in the family suffers. However, if the lender was a family member, while the borrower avoids paying the $140,000, the family member who lent the money does not receive $140,000. In the first case the family members as a whole save $140,000 because either the investor endures the loss or FHA but in the second case the borrower family member saves $140,000, but the other family member loses $140,000. There is no FHA insurance in a family reverse mortgage setting.

      Family reverse mortgages mean any losses stay in the family. No one pays the family lender for any loss. It seems you do not view accrued interest or principal due the other family members as an asset to those family members. Assets are much greater than cash or home values.

      If you still believe I am wrong, please explain how. Your imprecession has not created a happy camper. You can do better.

  • As a senior I find the comment of OnTheRiver about seniors to not only be bigoted but also terribly offensive. To say that MOST seniors ONLY watch Fox News is nonsense. He/she needs to keep his/her biased opinions to himself/herself. No doubt there is a segment of US seniors that may be true of but it is not MOST seniors, even US seniors. I hope he/she will think before writing such garbage in the future.

  • OnTheRiver,rnrnWhat?? All of your pronoun references are to me. Nothing in your last last two paragraphs relate to anything I have said. Please correct your references. You can edit. rnrnAlso you are absolutely incorrect about family “reverse mortgages.” A reverse mortgage offered by a commercial lender is nonrecourse as to all members of a family and their estates. However, as a practical matter, a family reverse mortgage is not nonrecourse as to the family as a whole and all of their estates combined.rnrnFor example, if the borrower owes $440,000 on their loan at termination to an unrelated third party, but their home is only worth $300,000, the borrowers are forgiven $140,000 and no one else in the family suffers. However, if the lender was a family member, while the borrower avoids paying the $140,000, the family member who lent the money does not receive $140,000. In the first case the family members as a whole save $140,000 because either the investor endures the loss or FHA but in the second case the borrower family member saves $140,000, but the other family member loses $140,000. There is no FHA insurance in a family reverse mortgage setting.rnrnFamily reverse mortgages mean any losses stay in the family. No one pays the family lender for any loss. It seems you do not view accrued interest or principal due the other family members as an asset to those family members. Assets are much greater than cash or home values.rnrnIf you still believe I am wrong, please explain how. Your imprecession has not created a happy camper. You can do better.

  • As a senior I find the comment of OnTheRiver about seniors to not only be bigoted but also terribly offensive. To say that MOST seniors ONLY watch Fox News is nonsense. He/she needs to keep his/her biased opinions to himself/herself. No doubt there is a segment of US seniors that may be true of but it is not MOST seniors, even US seniors. I hope he/she will think before writing such garbage in the future.

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