“River” Joni Mitchell
“It’s coming on Christmas
They’re cutting down trees
They’re putting up reindeer
And singing songs of joy and peace
Oh I wish I could find a river I could skate away on….”
I don’t know about you, but I always get a bit melancholy around the holidays, (fire up Joni Mitchell’s “River” from her 1971 album “Blue” and I can get a serious melancholy on). Call it the cost of getting older if you will, I’m newly minted as 61, many of us may have experienced the loss of a loved one during the holidays, (a special person in my life perished in a plane crash), and yet every year we also can chose to adjust the “sight prisms” we see things through so that we see ways to give back to our communities to those less fortunate, celebrate the loved ones and dear friends who surround us in the here and now, and look to the new year for a promise of re-newed hope and beginnings.
This year has been a challenging one for the HUD supervised and FHA insured reverse mortgage program, and yet what we have to celebrate is that the program still here, viable, and raring to go for 2014, albeit with some changes, and yet still providing an important, I repeat, important, safety net for seniors to allow them to age in place and enhance their retirement experience.
I have completed close to 400 reverse mortgages in my 5 year career in the industry and the feedback I consistently hear from clients is: “Before we did the reverse mortgage we had more month than money, now that our mortgage is paid off we can go out to eat in a nice restaurant once and awhile and even travel to see our grandchildren more often”, or for the more affluent, “We may never need the line of credit, but we sleep better knowing it is there, set up, and ready to go if we need it.”
No mortgage program, even the government backed reverse mortgage loan program, is invincible to the collapse of home values experienced in many states. As a multi-stated loan officer I worked with borrowers in many states but in particular in California, Florida, Indiana, and Texas: I struggled to get loans completed for my clients having to work with the devastated home values that appraisals were bringing in. So it is no surprise to me that this year HUD swooped in and reduced the formula we loan officers work with so that the dollar formula amount borrowers will qualify for is reduced. It had to happen, I knew it was coming.
And yet, the fabulous “no recourse” feature of this loan is, quite frankly, remarkably still in place, even though, as a result of decreased home values in many states, we saw the FHA insurance fund somewhat depleted out over the last 5 years, it too is still going strong. For example: a Floridian that passed away in the last few years, may have left a home whose appraised value was now ½ of what it was when the loan had been funded say back in 2006 when home values were at their peak. Heirs, as is their right under the “no recourse” loan provision of a reverse mortgage, would then notify the lender of the “gap” between the ultimate sales price in today’s market and what was owed on the reverse mortgage. The lender in turn would look to the FHA insurance pool for reimbursement of the “gap” monies for a full payoff on the loan.
This scenario in some states such as Florida, Indiana, Georgia, Alabama, Louisiana, and even “golden” California, to name a few, was repeated over and over as lenders asked FHA to make them financially “whole” and fill in the monetary gap for the difference between the final sold price of the home and the reverse mortgage loan payoff amount. Thus, in my opinion, this year’s HUD formula reduction on what can be borrowed with a reverse mortgage is a GOOD thing because it decreases the mortgage debt to equity ratio, thereby reducing the likelihood in the future that the FHA insurance fund will be frequently tapped. We want this program around for a long time, and the continued health of the FHA insurance fund will help that goal.
If you would like to know how the new reverse mortgage formula changes affect your qualifying numbers, and how the next change to the program slated for January 2014 will affect you, (and there is one important change coming in the future), please feel free to contact me, I listen with great care to your retirement goals, and as you’ll see, or have seen, I love this program and the positive influence it has towards and improved retirement experience for my clients.
Loan Officer, Real Estate Broker
NMLS #271335 BRE #00585530
or by phone
Sierra Foothills and Sacramento area: (530) 497-3010
Sonoma, Marin and Napa Counties (707) 634-7070
If you need to get a little melancholy on:
Joni and “River”…
In the interest of equal opportunity if you have no need for melancholy and want to go straight to holiday cheer:
Alvin and the Chipmunks (Who remembers Hula Hoops??)
Peanuts and the Holiday Lights Song
Enjoy and music links courtesy of : www.youtube.com
Shawna McDonald, Loan Officer/Real Estate Broker
Specializing in Reverse Mortgages
Office Location: 412 East Main Street, Grass Valley
( Take the Highway 80 Idaho Maryland Off Ramp and carefully go west out of the round about, office is immediate right)