Reverse Mortgage Update for 2011
Reverse mortgages just became a lot better for seniors. The reverse mortgage is available for seniors who are cash-poor and have home equity. This special type of loan allows the borrower to tap the equity in their home and get cash without the need to make mortgage payments. the senior can use the loan for anything. But most older borrowers need the funds to help defray support and medical expenses.
You?ll recollect that a reverse mortgage allows for people who are sixty two years of age or older to borrow against their home equity. However unlike typical home loans, no payment is due on a reverse mortgage until such time as the homeowner moves, sells the property or passes on. If the house is sold, any equity that is left after the reverse mortgage is payed back is distributed to the borrower or the borrower's heirs. The amount left can't exceed the value of the house.
In the past, fees for reverse mortgages were noticeably more than conforming mortgage loans, and other incentives to sell them took advantage of older borrowers. So the Housing and Economic Recovery Act of 2008 took steps to help seniors by curtailing those fees and any improprieties associated with reverse mortgages.
Significantly, the law cuts costs on reverse mortgage loans. the law contracts the origination fee to 2% of the first $200,000 borrowed and 1 percent for any amount after that. The maximum origination fee can't surpass $6,000. The fee is currently capped at 2% of the loan limit or of the house value. The law does allow for the cap to vary, based on the annual percentage increase in the consumer price index.
Another change is the creation of a new reverse mortgage, called the Home Equity Conversion Mortgage Saver option, or HECM Saver. It has a cheaper upfront mortgage insurance premiums, or MIP, compared with the established HECM reverse mortgage, now known as the standard option. The trade-off, due to the lower insurance premium for the senior and other platform modifications, is a 10 percent to 18% reduction in the highest loan amount provided on the saver option, and 1% to 5% on the standard option, in accordance with the borrower's age and prevailing interest rate. The lower loan amount granted on the saver option means the FHA's risk exposure is lessened.
Mortgage insurance insulates lenders from loan losses, though borrowers pay the cost. Most reverse mortgages are insured through the Federal Housing Administration, or FHA, a division of the Department of Housing and Urban Development.
The 2008 housing act also has a provision for reverse mortgages partly because of cares that seniors were unsuitably being sold other financial products with the mortgage proceeds. In some cases they were encouraged to use their reverse mortgage funds to purchase annuities or long-term care insurance.
The Financial Industry Regulatory Authority (FINRA), which regulates the securities industry, has issued some admonitions about reverse mortgages, in particular cautioning seniors about transacting with sellers who urge them to get a reverse mortgage in order to buy a certain investment product.
So except for title, hazard, flood or other such insurances related to the home, lenders are forbidden from requiring borrowers to buy insurance, annuities or other similar products as a condition for obtaining a reverse mortgage. The law also restricts lenders who are originating reverse mortgages from working with, employing, or providing bonuses to other professionals trying to sell seniors other financial products in connection with the application process.
Additionally,Also under the law, the sum a senior may borrow by way of an FHA guaranteed reverse mortgage has been raised to $625,000 until 9/30/11.
http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.3221.ENR:
HYPERLINK "http://www.FINRA.org" www.FINRA.org
Department of Housing and Urban Development http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-50ml.pdf
"The reverse mortgage is available for seniors who are cash-poor and have home equity. This special type of loan allows the borrower to tap the equity in their home and get cash without the need to make mortgage payments. the senior can use the loan for anything."
According to the Federal Reserve, the new regulation has two core components.
1. The rule prohibits a creditor or any other person from paying, directly or indirectly, compensation to a mortgage broker or any other loan originator that is based on a mortgage transaction’s terms or conditions — the only factor determining pay is the amount of credit extended. The rule also prohibits any person from paying compensation to a loan originator for a particular transaction if the consumer pays the loan originator’s compensation directly.
2. The rule prohibits a loan originator from steering a consumer to consummate a loan that provides the loan originator with greater compensation, as compared to other transactions the loan originator offered or could have offered to the consumer, unless the loan is in the consumer’s interest. The rule provides a safe harbor to facilitate compliance with the prohibition on steering.
i dont know where to begin. i am interested in a reverse mortgage as my husband died on dec 24,2011. my income was cut exactly in half. i cannot draw his social security as my pension is higher. i pay 460.00 for a manufactured double wide home and 365 park rent half of my pension of 2100 per month, can anyone please help me find a company that will do a reverse mortgage on a double wide manufactured home but on rented land. thank you very much
Reverse mortgages are a problem today that local authorities should deal with. Because of the financial crisis, the housing business has taken a dive which put a lot of people in a lot of trouble. Retired people should be one of the priorities because they have already done their "duty" for the community and could end up homeless after a life of hard work. Now ask yourself: is that fair?
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