Chicago Tribune: Reverse Mortgages Becoming Better Options for Seniors

The “windy” city’s largest newspaper recently printed this article. I was just thinking how lovely it would be if our next national reverse mortgage lenders convention were in Chicago, they have some pretty amazing restaurants, not that they let us out much from seminars when we attend one of these conventions, maybe I could stay a little longer !  I like the citizens’ feistiness too, here is a picture of seniors protesting cuts to Medicare. We boomers and our protests….carry on!

If you are not interested in this article but would like to learn more about my 7 years of reverse mortgage experience and local Grass Valley Reverse Mortgage office click here:  http://www.SierraFoothillsReverse.com or even easier, just call me: 530-497-3010.

Ok, I’m back on task…Reprint form Chicago Tribune recent article:

Reverse Mortgages are Becoming a Better Option for Seniors

Elliot Raphaelson, Tribune Content AgencyThe Savings Game

In past columns, I have generally been skeptical of reverse mortgages. However, the Reverse Mortgage Stabilization Act of 2013 introduced more customer safeguards. And some lenders are offering better terms and lower upfront costs.

If you do your homework, you might find a reverse mortgage that provides you with benefits that other financing alternatives do not provide. A more reliable line of credit is one of the more important potential advantages.

I highly recommend “What’s the Deal with Reverse Mortgages?” (People Tested Media), a new book by Shelley Giordano, principal of Longevity View Associates, a reverse mortgage consulting firm, and chair of the nonprofit Funding Longevity Task Force. It will help you understand options such as fixed vs. variable loans, the nuances of using credit lines and all of the mortgage fees.

Giordano discusses the merits of home equity lines of credit (HELOCs) vs. those of home equity conversion mortgages (HECMs, FHA-insured open-ended reverse mortgages). HELOCs, she argues, have significant disadvantages. Borrowers have to repay principal and interest, whereas reverse mortgage borrowers are under no such obligation. Financial institutions can cancel HELOCs if they believe that borrowers have insufficient income or assets. Borrowers with a HECM line of credit don’t have this vulnerability.

In prior columns, I argued that one of the significant disadvantages of HECM’s was the high initial closing costs. Giordano says that some financial institutions are offering reverse mortgages with closing costs as low as $250. However, the tradeoff is higher interest rates. In my opinion, if you intend to maintain a line of credit for a long period of time, then the HECM has significant advantages over the HELOC, if you can obtain a HECM with very low (or no) closing costs. (Editorial Note: Come shop with Sierra Foothills Reverse Mortgage located in downtown Grass Valley and I’ll shop EIGHT of the largest reverse mortgage lenders in the nation for YOU, and I’ll present you with your interest rate and fee options!)

The Reverse Mortgage Stabilization Act of 2013 provides some safeguards for both consumers and lenders. The act introduced financial assessments as the basis for HECM loan approvals. These assessments were developed to ensure that individuals would have the financial wherewithal to maintain their homes, pay real estate taxes and homeowner insurance. Prior to this reform, reverse mortgages had a high rate of foreclosure. As long as individuals can meet these requirements, and maintain residence in the home, they will not face foreclosure.

The Act of 2013 also addressed a prior disadvantage. Previously, if the only individual named in the mortgage agreement died, the surviving spouse would have to repay the outstanding loan in order to remain in the home. Under the new provisions of the act, a non-borrowing status (NBS) was created that allows the widow(er) to defer due and payable status provided that within 90 days after the death of the last surviving borrower, he or she establishes legal ownership or other ongoing legal right to remain in the property.

For seniors looking to alleviate tight budgets, I believe that options other than reverse mortgages should be considered, such as downsizing or selling and renting an apartment. Consider your health. Reverse mortgages lose their primary advantage if you cannot stay in the residence over the long term. If it is important for you to leave home equity to your heirs, then reconsider using a reverse mortgage, because there is no guarantee that there will be any equity left after your death.

(c) 2015 ELLIOT RAPHAELSON. DISTRIBUTED BY TRIBUNE CONTENT AGENCY, LLC.

Copyright © 2015, Chicago Tribune

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