Your Questions About Reverse Mortgage

George asks…

In California, if property is held in a trust, can you do a reverse mortgage?

If we put our property in a trust, (my wife is not yet 62) can we do a reverse mortgage and if so, does she have to sell the house when I die?

admin answers:

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William asks…

Will my home be foreclosed on (reverse mortgage)? What is the Procedure? Do I have any recourse?

I have been living in another state with my new wife. I do not want to give up my house here in OH which has a reverse mortgage. One of the requirements of the mortgage is that you must live in your home most of the year or you could be foreclosed on. Has anyone had any experience ]with this situation?

admin answers:

The FHA requires (let me stress that: REQUIRES) that at least one of the owners is living in the house. If you are the only owner, that means you. This was made clear when you got the reverse mortgage. If you are gone for 12 consecutive months, your mortgage is due. It’s fine if you spend 6 months in Florida and 6 months in Michigan, but if you’re gone 12 consecutive months, it’s time to pay the loan. This goes for a long term stay in a nursing home or if you move in with your daughterbecause the purpose of the loan to to help people stay in their homes.

You do have options but you might not like them:

1. Go home and live there.
2. Sell it and pay off the loan.
3. Refinance the loan into a regular forward loan.
4. Get foreclosed on.

If you owe more than the value of the house and don’t plan to live there, you might as well let it go. Even if the lender doesn’t know yet, the clock has already been ticking since that 12th month. With a regular mortgage if you owe too much and still make the payments, everything is fine. This isn’t an option here. Live there or pay the mortgage off.

If you owe less than the value and don’t want to live there, sell it. At least you’ll get some money out of it.

The bottom line is that we have no leeway in this, no wiggle room, no “how do I get around” answers. These are FHA requirements and the individual lender can’t change them.

Carol asks…

Does reverse mortgage give away your home?

My mother recently got a letter about reverse mortgage of her house. (She’s not far off of retirement age). In the letter, it says that basically, they would take over her mortgage, and possibly pay a stipend, but that when she passes, the house goes to her heirs (if she has any) and they would be responsible for paying back the amount paid (with interest, I’m sure). However, I have also heard from another source that the company takes the home when she passes.
Does anybody know if this is true?

admin answers:

It’s not necessarily a Bad Deal, and the lender does not necessarily take the house.

Basically, in a reverse mortgage, your monthly payments are set to be lower than the amount needed to pay off the loan. As a result, the amount you owe either stays the same or actually goes up. (It will go up if your payments don’t include the full amount of interest falling due.)

These programs are required to meet certain Federal standards and laws in order to help prevent fraud.

A reverse mortgage is useful for someone who needs a home but can’t afford the high payments of the standard, fixed-rate, 20 or 30-year mortgage plans (“conventional mortgage”). When he sells the house, he will have to then pay off the FULL amount of the loan and he might not have any equity in the house–but usually, house values go up in the long run, so he might earn some equity that way.

There are special programs, regulated by Federal law, aimed at the elderly. Under these programs, the elderly can borrow against the equity in their house and not make ANY payments at all as long as they own the house. So the mortgage will consist of both the borrowed principal, and the unpaid interest on the amount borrowed. If the owner is elderly and on a small, fixed income, this can be a very helpful program, because it’s a way for that person to have more income but not have higher expenses. If the house is sold, or if the owner dies and the heirs inherit the house, then the accumulated principal and the accumulated interest must be paid off then–but only then.

This particular kind of program, aimed at the elderly, is called the “Home Equity Conversion Mortgage” (HECM), and is sponsored by Fannie Mae. A list of approved lenders is availble by calling 1-800-7FANNIE.

It means the heirs inherit less. But so what? It allows the elderly owner to have a better life than a small fixed income would have allowed.

The Federal Deposit Insurance Corp. (FDIC) has an excellent article in its Summer, 2002 “Consumer News” about “High Cost Predatory Home Loans: How to Avoid the Traps” which may help you on your concerns. Go to: www.fdic.gov/consumers/consumer/news

Sandy asks…

We own home in adult community paid cash 120000 for home five years ago. Can’t get reverse mortgage because?

home is considered track home in trailer park. We pay ground rent and taxes yearly. Is there a bank that would give us a reverse mortgage under these conditions. Help in Pennsylvania.

admin answers:

Unlikely. You have a 2-part question. You say you have a track home and you pay ground rent.

Depending on how you define track home, a reverse mortgage is very specific on loans on manufactured homes, i.e. It must be built after 1976, still have its FHA plates affixed and must be attached to the ground permanently, among other things. If your home has all 3, the home may be eligible. However, part 2 comes in.

You also say you pay taxes yearly, but I am guessing you are referring to income taxes – not property taxes since you are renting the land. Reverse mortgages do not look at income or credit scores in order to qualify. Typically, Reverse mortgages require you own the land but they can be done on leasehold property wherein you do not own the land, but you must have a lease good through the youngest borrower’s 150th birthday (even assuming they have long gone) or good for 99 years, as is common in places like Hawaii. I somehow doubt that is what you have in PA where you are most likely on a month to month or an annual lease.

As a suggestion, you may be able to get some other kind of loan on the home like they do for cars as collateral (hard money), but it wouldn’t be a reverse mortgage and you would want to read the fine print very very very well. These loans are typically very short term with high interest and usually used as temporary bridge loans or for desperate times.

I have one more suggestion. I am assuming your home is no longer worth $120,000, since you would have bought it in 2006 during the real estate bubble. Would you be willing to move and upgrade? Assuming you are over 62 years old (mandatory for a reverse mortgage), you may want to consider selling what you have, even if at a loss, and using that as a down payment to BUY another primary residence using a reverse mortgage. For the same reason your current home is not worth what it once was, you can probably now upgrade to a better home, to include the land, for probably what you paid in 2006 since the better homes have also gone down in value. Since 2009, FHA allows a senior to purchase a primary residence using a reverse mortgage, but you will need a sizeable down payment (how much depends on your age). Hopefully, the proceeds from the sale of your track home would give you that. However, the good news is that once you get the reverse mortgage and purchase the new house, you will not have any mortgage payments for as long as it is your primary residence. But, since you now own home AND land, you will now have to pay property taxes and continue to pay homeowners insurance. Hope this makes sense.

Joseph asks…

I’m 63 yrs old intersted about reverse mortgage. What is the advancetage and disadvancetage in my part?

This reverse mortgage is for me or not?

admin answers:

==> A Reverse Mortgage may be right for you if:

you have a regular need for additional living funds;

you live on a fixed income, and your only asset is your home equity;

you do not plan to leave your home to your children or others who will inherit from you.

==> You might want to consider alternatives to a reverse mortgage if you want to leave your home, free and clear, to your children or others who will inherit from you; or you have another, less costly means to reach your financial goal. A reverse mortgage can be an expensive way to borrow money.

==> Advantages:
A reverse mortgage can help you maintain your financial independence and anadequate standard of living.

It allows you to remain in your home and retain ownership.

The money you receive from a Reverse Mortgage is tax-free and doesn’t affect social security or medicare benefits.

==> Disadvantages:

This is more costly to set up than other types of loans;

Although the proceeds are tax-free, a reverse mortgage may impact upon your eligibility for certain “need based” public benefits such as Medicaid,Supplemental Social Security Income (SSI) and MediCal benefits.

In the event of your death or your spouse’s death, if your heirs are unable to pay back the loan when it becomes due, your family may lose the house entirely and it’ll likely be sold on the open market.

==> You should ask yourself:

How much money do I need?

Is there a way to meet my needs that does not involve getting a Reverse Mortgage?

Will a Reverse Mortgage make my partner or me ineligible for any governmentbenefits, currently or in the future?

Do I qualify for this Reverse Mortgage?

How much can I borrow through a particular Reverse Mortgage product?

How much will it cost me in fees and interest to borrow this money even if Idon’t have any “out of pocket” expenses?

Will I have to sell my house before I die to pay off this Reverse Mortgage?

What happens if I die, and my partner is still alive and living in the home; will he or she have to leave or pay the loan off?

What happens if I have to go to a nursing home; will the loan become due and payable?

What will I or my heirs have left after the loan is paid off?

Are there any early-repayment penalties?

What are my obligations under the Reverse Mortgage, such as home maintenance, property taxes and insurance?

==> These agencies provide free, local Reverse Mortgage counseling and areapproved to give mortgage counseling by the federal Department of Housing andUrban Development (HUD).

U.S. Department of Housing and Urban
Development (HUD): toll free
(888) 466-3487.

Federal Trade Commission (FTC): write to obtain a free brochure, “Reverse Mortgages Fast Facts.” Consumer Response Center, FTC
600 Pennsylvania Ave. N.W.
Washington, DC 20580
Or call, (202) FTC-HELP

American Association of Retired Persons (AARP): write to obtain a free guideon Reverse Mortgage borrowing:
Home Made Money
AARP Home Equity Information Center,
601 E. Street N.W.
Washington, DC 20049

Fannie Mae: Call (800) 732-6643 for a free guide, “Money from Home: A Consumers Guide to Reverse Mortgage Options.”

National Center on Home Equity Conversion (NCHEC) offers a current list of all public and private sector Reverse Mortgage lenders. Send $1.00 and a self-addressed, stamped, envelope to Reverse Mortgage Locator, Suite 115, 7373147th Street, Apple Valley, MN 55124. Also available, “Your New Retirement Nest Egg: A Consumer Guide to the New Reverse Mortgages,” call (800) 247-6553 for information.

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