Reverse Home Loans
FHA home loans are rising in popularity again and consumers across the country are excited about the opportunity that the FHA offers to become a homeowner. Do you want to join the millions who are fulfilling the American dream of homeownership, but are being held back because of limited income? A reverse loan insured by the FHA and processed by SHML could be the ideal solution!
31% of Seniors Have $100K in Mortgage Debt Almost one-third (31%) of seniors are carrying $100,000 or more of mortgage debt, according to a survey of seniors aged 62-75 from Financial Freedom Senior Funding Corp., a reverse mortgage lender based in Irvine, Calif. More than half, 56%, said they expect it to take 10 years to pay off the mortgage debt, and 11% said they never expect it to be paid off. The findings come from Financial Freedom's Senior Sentiment Survey, which explores the financial, social, and quality-of-life attitudes of older Americans. The company, a subsidiary of IndyMac Bank FSB, can be found online at http://www.financialfreedom.com.
About 40% of Seniors Aware of Reverses
Nearly four in 10 seniors have heard, read, or seen some information about reverse mortgages, according to the 2007 Financial Freedom Senior Sentiment Survey. Financial Freedom is the reverse mortgage lending unit.
Most of the respondents who had heard of reverse mortgages had a favorable opinion of them. On the negative side, more than half said they haven't heard, seen, or read anything about reverse mortgages or considered taking out a reverse mortgage in the last year. Roughly one quarter had an unfavorable opinion of reverses and almost half, 44%, said they have heard of them but don't know enough about them to offer an opinion. "As an industry, we've come a long way in a short time when you consider that the industry has grown from 7,000 to over 100,000 loans in just a few years," said Michelle Minier, chief executive of Financial Freedom. The data also reveal "a tremendous opportunity for reverse mortgage lenders and brokers to connect with seniors by showcasing their expertise," she said.
Groups Warn Seniors: Beware of Reverse Mortgages
The U.S. senior community is warming up to reverse mortgages, but the product's increasing popularity also is breeding a new crop of unscrupulous brokers, lenders, and loan agents who are taking advantage of the nation's elderly.
In general, reverse mortgages allow home owners who are 62 and older to borrow against their home equity without having to repay the money until the home is sold or the borrower dies or permanently moves out.
But the mortgages have some groups concerned. Speaking at a recent hearing before the Senate Special Committee on Aging, legislators and consumer advocates warned that, without better loan counseling and tougher government oversight, a flood of older home owners could be pressured into taking out inappropriate loans ó just as millions of mortgage borrowers were persuaded to accept subprime loans that are now going into default at a rapid clip.
"We have gone through a savings and loan collapse, a stock market bubble and are currently in the middle of a lending mess," noted Sen. Claire McCaskill (D-Mo.) at the hearing. "Our goal is to make sure that the reverse mortgages don't become the scandal of the next decade."
National Reverse Mortgage Loan Association President Peter Bell says the perceived problem may be somewhat overblown. But he concedes that some sales agents who are finding themselves unemployed due to the housing downturn could be picking up jobs in the reverse mortgage sector but may have "a different type of mentality about moving transactions through quickly."
What is a Reverse Mortgage?
A Reverse Mortgage is a national program which typically is offered to homeowners 62 years and older. Reverse mortgages enable homeowners to access to their equity with cash back coming to the borrower as a monthly income. The cash out received by the senior homeowner is typically tax-free and does not affect Social Security benefits or Medicare. There are very little credit requirements and income documentation is rarely needed to qualify.
Does the mortgage lender take over the title to my home?
No, you retain the same vesting info for title and ownership that you presently have. The mortgage lender adds a lien on your home like a second mortgage, which is paid off when you sell your property, or when you pass and your heirs inherit and they can pay off the loan with another loan or other funds.
When does the Reverse Mortgage need to be paid off?
When you sell the property or no longer occupy your home as your primary residence for a period of twelve months or longer.
Will my heirs still receive an inheritance?
Yes, after the balance of your reverse mortgage is paid off, all remaining equity will go to your heirs. One of the forms we provide you with before you close your loan is an amortization schedule so you will always know the principal balance of your loan, year by year. How much equity will remain will vary depending variables as how much cash you access, how long you stay in your home and increases in home value.
How can I choose to take the reverse mortgage loan proceeds and are there any restrictions on what I use the funds for?
This is one of the great features of the loan...you have choices!
- Lump sum, offering all the cash up front.
- Monthly Income as a monthly check
- A Credit Line which increases monthly on the unused portion
- A combination of any of the above, cash, income and line of credit
- We need to know your date of birth. How much you qualify for is determined by the age of the younger of two borrowers (or the single borrower if only one), your property value and the location of your property within HUDís designated areas.
- The approximate value of your home. If you know of any homes in your immediate area that are similar to yours that have sold recently, that information is helpful.
- If you have a current mortgage, we need to know the amount you currently owe.
- We need your Zip Code for HUD lending limit determination.
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