The good news is FHA case numbers issued after that date will still have access to the HECM Fixed Saver Program. While the Fixed rate HECM Saver Program offers a slightly lower maximum loan limit compared to the Standard HECM it offers a much lower MIP Mortgage insurance Premium making it an attractive loan for many who want to minimize cost associated with the loan. MIP cost only 0.1% of the Home Value, Purchase price if a Purchase Reverse Mortgage or Max Claim amount on the loan in comparison to the 2% charged on the Standard HECM.

Maximum loan amounts of the HECM Standard are still available on the HECM LIBOR adjustable rate program that offer lines of credit and other distribution options, these may be a better option for both borrowers who need to pay off a current conventional mortgage balance or simply prefer to leave a portion of the funds in an interest earning line of credit until they actually need to access the funds ( a preferred option among financial advisors). As of this date there is no limit on the amount that can be drawn on the initial line of credit at closing.

The take away here is If you have your mind set on the HECM Fixed Rate Standard financing get your HECM counseling and application submitted prior to the April 1st deadline.

www.golocalreversemortgage.com educates & connects seniors to reverse mortgage lenders nationwide

We have been hearing about comprehensive reverse mortgage changes for 2013 and industry experts say “ This time it’s for real”

I actually wrote about the financial assessment changes back in January 2012 titled “Changes on the Horizon for Seniors Seeking a Reverse Mortgage”. Once again the assessment is in review and expected to be rolled out in the coming few months.

Before exiting the reverse mortgage industry Met-Life actually implemented a financial assessment which reduced the borrowers who qualified and slowed the loan process – they eventually stopped the assessment and as we know eventually exited the industry altogether. Hopefully HUD and FHA can come up with a plan that does not stall reverse mortgages and at the same time stabilizes the plan so that it will benefit seniors enough to still have an interest in the reverse mortgage loan program.

So what is the financial assessment exactly and why these comprehensive reverse mortgage changes now?
Primary purpose according to HUD and the review by the Consumer Protection Bureau (CFPB) is to prevent reverse mortgage loan defaults many of which were a result of borrowers failing to maintain the property condition (upkeep), property taxes and home owners insurance. According to CFPB’s report an estimated 54,000 HUD insured reverse mortgage borrowers — or 9.4 percent– are in default for this reason. We have seen a drop in the FHA loan volume in recent years but according to the HUD actuarial review of the HECM Mutual Mortgage Insurance (MMI) fund to have an economic value of negative- $2,799 million at the end 0f 2012 mostly as a result of the following:

• High number of reverse mortgage loans completed during the years of 2003-2008
• Higher numbers of borrowers taking out reverse mortgages at younger ages 62-68
• Borrowers are living longer and keeping the loans longer and resulting in loan balance exceeding home value.
• More Homes being conveyed to FHA rather than sold – mostly due to economic conditions
  Resources:
• HUD actuarial Review of FHA Mutual Mortgage Insurance Fund HECM Loans
  ConsumerUnion.org Comments to Consumer Protection Bureau

Economic value stands basically for “cash available to the fund” The goal is to recover this fund through new endorsements, economic improvement’s, higher house appreciations and higher mortgage insurance premiums to bring it back to positive. The current approaches being reviewed for the 2013 changes include:

• Limiting the amount borrowers can draw at closing- this could reduce or eliminate the Standard HECM – According to HUD 70% of borrowers take the lump sum standard HECM
• Create a Financial Assessment that helps qualify borrowers and are income worthy to cover taxes and insurance- up until it changes loan approval has primarily been determined by the borrowers’ age and equity, and not having Federal Tax liens with little or no impact from credit or income
• Establishing a Set aside or escrow for taxes and insurance to ensure they are paid in a timely manner- currently this is the biggest issue at hand for default
• Disallow Non Borrowing Spouses on new loans going forward- Up until Jan 2013 a borrower could/can still precede with a reverse mortgage loan even if the other (spouse) borrower was too young to qualify-( already in motion with some lenders)

While this may all seem like impending doom for reverse mortgage borrowers and the consultants that serve them, the real goal of HUD is to obtain the authority from Congress to better manage the reverse mortgage programs and prevent defaults and ensure the HECM programs long term viability for senior borrowers.

While there will likely always be mortgage defaults it is imperative that we as reverse mortgage consultant and HECM counselors act as fiduciaries and clearly educate and design a program around the client’s needs and explain the potential risk of taking out a lump sum reverse mortgage at an early age if they do not have other credit lines to or debts to extinguish. A reverse mortgage can be part of a smart financial planning strategy to make living at home and aging in place as most seniors desire but only if used in a financially suitable and responsible way that the borrower won’t spend through the funds too quickly.

www.golocalreversemortgage.com educates & connects seniors to reverse mortgage lenders nationwide

The answer varies for each individual and personal situation but begins with the age of the borrower more specifically the youngest borrower and the “lesser” of the FHA reverse mortgage loan limit ($625,500 in most areas) or the appraised value and the current interest rate. This starting point can provide an initial idea of what the borrower can qualify for and is referred to by HUD as the Principal Limit Formula which uses a table almost like an insurance mortality table to determine the principal limit.

Other factors that may play a role in the reverse mortgage loan amount include, whether there will be a payoff of an existing lien and the loan fees that are included within the loan. The loan program the borrower chooses such as the HECM Standard or the HECM Saver. Each HECM offers different reverse mortgage loan limits and fees. The HECM Saver provides lower loan limits but also lower Mortgage Insurance Fees making it an attractive option for those who have lower home values.

Borrowers who have outstanding payments due on their taxes or home owners insurance, judgments or liens against their property will also be required to pay these through the loan, additionally if the home is found to be in need of repairs that are referenced by the FHA appraiser these items will need to be repaired or replaced either in advance or with proceeds from the reverse mortgage and invoiced prior to closing.

Older Reverse Mortgage borrowers find that they qualify to access more of their reverse mortgage equity making the mid-70 age range one of the most optimal times to complete the reverse mortgage.

Reverse mortgage calculators can provide a basic estimate of the amount of equity that a borrower can access. Here are two examples of A $200,000 home value at age 62 & age 75 documenting both HECM standard and HECM Saver.

www.golocalreversemortgage.com educates & connects seniors to reverse mortgage lenders nationwide

 

Local Tampa Florida Reverse Mortgage Specialist Chris Beard divulges the details on a  this website that is full of free mortgage information and free reverse mortgage calculators.

A reverse mortgage is a loan that enables senior homeowners to convert part of the equity in their home into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment.  Reverse mortgages are generally limited to individuals 62 years and above who own their outright or have only a small loan balance remaining that can be paid off with the reverse mortgage.

“The only way for consumers to make an educated decision is to have all of the facts. Let’s face it most consumers are simply uneducated when it comes to obtaining the right reverse mortgage product to fit their financial needs and goals.” says Chris Beard, a  Tampa Florida reverse mortgage specialist .

Go Local Reverse Mortgage’s goal is to create a both a resource for seniors investigating the reverse mortgage options through articles like “ 15 reverse mortgage misconceptions clearing up the confusion” as well as provide a non-invasive method of contact including our Ask a Reverse Mortgage Advisor link where the consumer can simply ask a specific question or even complete a short form to determine instantly approximately how much cash they can potentially qualify for and be contacted from only one approved reverse mortgage advisor licensed to offer reverse mortgages in the customers state of residency, contact can include a free no obligation customized proposal and HUD counseling list from a Federally Approved Counseling Agency to determine if the reverse mortgage is a good choice for the consumer

Helpful Links:
www.tampagov.net/information_resources/user_guides/for_seniors/
www.agingflorida.com/
www.stateofflorida.com/elderaffairs1.html
www.visittampabay.com/

www.golocalreversemortgage.com educates & connects seniors to reverse mortgage lenders nationwide

The Need for Long Term Care Insurance

The need for LTCI is higher than ever before, the population of seniors 65 and older is soaring and in turn swelling both the need for care and the cost of coverage for everyone as people rely too much on Federal and State Medicaid programs.  According to 2010 data from the MetLife Mature Market Institute:

• The national average hourly rates for home health aides ($21)
• The national average daily rate for adult day services rose 4.5% from $67 in 2010 to $70 in 2011
• The national average daily rate for a private room in a nursing home rose 4.4% from $229 in 2010 to $239 in 2011 or  annually   $83,585.
• More than 6 million elderly Americans need assistance from family or friend caregivers if they are to live at home
• At least two-thirds of all home-care assistance is provided free by family members and friends
• Of people turning 65, 69 percent will need some long-term care before they die
• More than half of the U.S. population will require some type of long-term care during their lives (nursing home care, home health care, assisted living, or rehabilitative facility care
• The average nursing home stay is approximately two and a half years

So considering these statistics and that only about 10% of the elderly population has private long term care insurance and the fact that government and state resources may not be able to cover theses cost for all seniors in the years to come , why are people still not obtaining coverage?  Here are a few reasons:

• They still believe LTC will be covered by Medicare or MediGap Plans
• They underestimate the probability of needing LTC, and what self-funding may actually cost
• They believe they don’t have any real assets to protect
• They believe that family , or friends will provide care for them
• They wait until a health issue arises and they can longer qualify  for coverage
• They cannot afford premiums on fixed income

Who will Pay for Long Term Care and How Much will They Pay?

To clarify Medicare only covers only a portion of the first 100 days in a skilled nursing facility, Medicaid is for is for the aged, blind, or disabled whose incomes are below the federal poverty level or who incur devastating medical expenditures. It is designed to give medical care to those with no resources of paying for care. This means that to be eligible to receive Medicaid benefits for LTC, recipients must first spend down the assets through voluntary impoverishment having no more than about $2000 in assets. Unfortunately, those who must spend down to have Medicaid pay for their long-term care stand to lose more than just their assets. They can lose their independence, control, choice, and dignity. Medicaid beneficiaries are likely to feel humiliation for not having planned for their own care financially.

What is even more saddening is that after a senior has spent down their assets enough to qualify for Medicaid and is receiving care in a nursing home, they are so impoverished that they will be forced to remain in the nursing home for the remainder of their life.

Seniors have tried to transfer assets to other family members however state agencies may conduct a “look back” through this period to evaluate a Medicaid applicant’s financial transactions. This look-back period is 5 years.If, during the 5 years before applying for Medicaid, a non-allowed transfer of an asset was made, they will be penalized for a waiting period that they will not be able to receive care from Medicaid.  For those who do not qualify for Medicaid the only options other than Long Term Care Insurance is to self-fund or burden a family member.

Should You Buy Long Term Care Insurance?

Long Term Care Insurance is certainly not for everyone’s situation. For those with limited fixed incomes and little or no assets  it would not be wise to take on a LTC policy premium, Additionally those who have great wealth may see it as a risk they can afford to cover when the time comes, but for the middle class that don’t qualify for Medicaid, Long-Term Care Insurance can provide control over what type of care and protect themselves, their families, and their assets against the potentially catastrophic cost of extended long-term care by providing the funds to meet LTC expenses when the time comes.  I have outlined two resources that may provide an insightful way to establish both the protection of assets and a more control for seniors facing the need for LTC services. Following are the biggest objections noted from those who both need and qualify for LTCI:

1.  What if I never require any long term care service?
2. What if the long term care premium is increased and I cannot afford to keep the policy in force.

Here are a few creative options using a reverse mortgage to both off-set the funding of long term care insurance and prevent depleting your assets all while giving you more control over how you receive care.

Line of Credit Reverse Mortgage

Option1:

A line of credit reverse mortgage simply converts a portion of your home equity to liquid line of credit. Until the funds are actually withdrawn from the LOC they earn approximately 3-5% interest compounding, Essentially a cash account that the borrower has access to if needed.

Example: Lois age 65 has a home valued at about$ 265,000 she takes out reverse mortgage line of credit providing a line of credit of $143,066 she never has to make another payment on the mortgage as long as she remains in the home as a primary residence.

The initial LOC is $143,066 and grows at a rate 4% as seen below in the illustration

year 2:       $151,001 = $7935

Year 3:       $159,376 = $8374

Year 5:       $187,391 = $28,015

Year 10:     $245,450 = $58,059

Here is one solution to offset the cost of the premiums of long term care by utilizing the growth of the credit line the insured can offset the cost associated with Long Term Care premium all while staying in their home and have more choices in regards to the type of care they can receive. If the annual premiums were $4,000 they have more than doubled this each year since taking out the line of credit.

Option 2:

The Hybrid Long Term Care Policy is another option for creative financing of the Long Term Care Premium. In this example Lois takes out the same reverse mortgage line of credit and places $50,000 in a single premium hybrid LTC policy the policy would provide the following benefits:

$261,579 in Long Term Care Coverage if she needed it

$87,193 Immediate Death Benefit to her family if she dies

$50,000 money back guarantee if she decided to surrender the policy- minus any loans, withdrawals or taxes

As you can see in many cases, the single premium Hybrid policy can provide you with up to five times / 500% the dollars invested, significantly increasing your long term care insurance protections. By leveraging inactive assets from the equity in the home you have removed the risk associated with long term care provided yourself more control over how you receive care and established a death benefit that will go to your heirs.

Request a Complimentary Guide to Paying for Long Term Care 

www.golocalreversemortgage.com educates & connects seniors to reverse mortgage lenders nationwide

Florida’s state-backed last resort property insurer, Citizens Property and Insurance Corporation recently announced and approved by the board will ask the state for 10.2% rate increase statewide. Insured’s can expect a rate increase between 8 to 10% for 2013. Other large carriers either already have or will follow suit including All-States subsidiary -Castle Key, Universal Property and Casualty and State Farm Florida Insurance Co. who recently asked for 14.9% increase to their homeowners’ line. (Best’s News Service, June 29, 2012). State farm had five separate rate increase over the past 2.5 years causing many seniors to shop rates elsewhere after years of coverage.

Some seniors have premiums upward of $4,000 to $12,000 annually including flood and or windstorm not including deductibles should they have a claim and sinkhole coverage which is now an additional cost on your premium. Additionally homes near the water and older homes constructed of wood rather than block are more expensive to insure.

Since many Florida’s senior homeowners own their homes free and clear, they have the option to legally cancel their homeowners insurance and many have done just that because they simply cannot afford the premiums on a fixed income with other expenses of living, home repairs, and health care cost. Florida seniors don’t like the idea of lapsed coverage and it’s a big risk for them to accept.

Some senior homeowners may consider a FHA HECM reverse mortgage line of credit option to allow the home to pay for the home’s expenses as these cost are usually unexpected like roof replacements, water heaters, homeowners taxes, and of course homeowners insurance. This could allow them to keep coverage and peace of mind without any additional cost added to their monthly expenses.

www.golocalreversemortgage.com educates & connects seniors to reverse mortgage lenders nationwide

We get a lot of calls regarding  FHA reverse Mortgage Eligibility on manufactured homes and mobile homes FHA imposes some restrictions on these types of properties typically manufactured homes are eligible for a FHA insured reverse mortgage but in order To be eligible all manufactured homes must comply with the following:

• Minimum Size- At least 400 square feet minimum floor area
• Permanent Foundation- Built and remains on a permanent foundation and approved by HUD
• Engineer Inspection – Inspection of structure an competed certification must be completed by a licensed professional structural engineer  to insure it meets  PFGMH Permanent Foundations Guide for Manufactured Housing (HUD-4930.3G), updated September 1996
• Age of Home – Built after June, 15 1976, to the Federal Manufactured Home Construction and Safety Standards and evidenced by an affixed certification label.
• Taxed as Real Estate- Property and land which attached is classified and taxed as real estate and is designed to be used as a dwelling with a permanent foundation built to FHA requirements.
• Mortgage- covers both the unit and its site, and has a term of not more than 30 years from date that amortization begins.
• Elevation -Finished grade beneath home is at or above the 100-year flood elevation.

To simplify Step one is to verify your manufacture home is over 400 square feet and was built after June 15^th 1976 and you own the land the home is attached to your off to an acceptable start for a FHA reverse Mortgage Approval.  The loan officer can do this or you can review the county appraiser’s website if you’re not sure.

Step two is to have a structural Engineer complete an inspection of the foundation and verify that it meets FHA requirements. Chances are if it’s not that you need to update it anyway for safety measures. The Inspection can cost $200-$400 but probably worth the cost to qualify for the reverse mortgage.

Step Three verify with your insurance agent or a flood certification and or survey documenting that the finished grade beneath the home must be at or above the 100-year flood plain elevation requirement.  A flood certification will determine whether the home is located within the 100-year flood zone elevation.

www.golocalreversemortgage.com educates & connects seniors to reverse mortgage lenders nationwide

Prior to February 2010, spot approval enabled an FHA loan for a single owned condominium unit to be possible even if the entire Condo project was not on FHA’s list of approved properties.  (See MORTGAGEE LETTER 2009-46 A &, MORTGAGEE LETTER 2009-46 B )

At the present an entire condominium development must apply to HUD and be granted FHA Condo approval before a buyer can purchase a unit in an association with an FHA loan or before an existing unit owner can refinance into an FHA loan which includes all FHA HECM Reverse Mortgages.

Additionally to address concerns involving the instability in the condominium market,   the Federal Housing Administration implemented the following updated guidelines to better monitor the condo approval process and prevent defaults and condos that may be outside of FHA minimum requirements for insuring reserve fund requirements, legal disputes, insufficient insurance coverage and high investor ownership Some of the changes that occurred were:

• No more than a 30% concentration can have FHA insured mortgage
• 50% or more of the units must be sold prior to approval.
• 50% must be owner occupied units, (2^nd homes are not considered owner occupied )

• No more than 15% of the units can be 30 days delinquent with HOA dues

Many feel that the new guidelines are too strict and do not encourage new condo purchases or stimulate the real estate market. Real estate professional organizations have pressed FHA to reevaluate its guidelines concerning the  FHA condo approval process, particularly in light of the current economic conditions.

Considering that 90 plus percent of reverse mortgages are FHA HECMS and that the number of FHA HECM endorsements is expected to grow as more and more boomers come of age to qualify in addition to the roll out of the 2010 purchase reverse mortgage seems logical to reevaluate  the requirement’s  Property managers and condo associations should take a closer look at the approval process for both current residence and potential buyers.

What is the process for FHA Condo Approval?

• Hire a FHA condo approval processing company or attorney that specializes in FHA Condo approvals the cost can be anywhere from $1000 to $1500.
• Contact us to see if your condo is currently approved or for a list of the HRAP HUD Review and Approval Process if we determine that your condo can qualify with a few simple questions we can assist in the streamline process to get your condo fully approved.
• We work with National Reverse Mortgage lenders Nationwide and will work to get your  FHA condo approval  and your loan funded.

www.golocalreversemortgage.com educates & connects seniors to reverse mortgage lenders nationwide

www.golocalreversemortgage.com educates & connects seniors to reverse mortgage lenders nationwide

What is Reverse Mortgage Video

www.golocalreversemortgage.com educates & connects seniors to reverse mortgage lenders nationwide