Reverse Mortgage Resources

 The U.S. Consumer Financial Protection Bureau offers resources for older Americans on reverse mortgages. 

Reverse mortgages are one way an older homeowner can continue to live in their home without making monthly payments. However, a reverse mortgage is a loan, and a complicated product with ongoing responsibilities. 

• Reverse Mortgage Discussion Guide: A guide providing an overview of key concepts of reverse mortgage loans for older homeowners considering a reverse mortgage.
• You have a reverse mortgage: Know your rights & responsibilities: A guide on the ongoing responsibilities of a reverse mortgage loan for older homeowners who already have a reverse mortgage.
• Reverse mortgage resource page: A webpage of reverse mortgage resources, including a short video explaining the product.

Reverse mortgages for seniors

 The Consumer Financial Protection Bureau just released a new guide for older homeowners called You have a reverse mortgage: Know your rights and responsibilities. The new guide is the latest tool in the CFPB’s suite of reverse mortgage resources, which provides easy-to-understand information for prospective and current reverse mortgage borrowers.

The guide is designed to assist reverse mortgage borrowers meet their ongoing responsibilities under a Home Equity Conversion Mortgage, the most common type of reverse mortgage loan. 

Topics include:

• The reverse mortgage loan requirements
• How a borrower may pay-off their reverse mortgage loan
• What happens after the borrower moves out of the home or dies
• What default means and how a borrower may find help
• What heirs may need to know

The guide also includes a glossary of commonly used terms and a list of resources that borrowers can use to find help.

The CFPB’s reverse mortgage resources are free and available to download or order.

For more information on reverse mortgages, visit consumerfinance.gov/reversemortgage.

Although the You have a reverse mortgage: Know your rights and responsibilities guide does not address protections for reverse mortgage borrowers affected directly or indirectly by COVID-19, you can learn more about these protections by visiting the Unified Housing Hub.

A negative view of reverse mortgages

 

Economist Laurence Kotlikoff offers an alternative to a reverse mortgage for the house-rich and cash-poor senior homeowner. He is not a fan of the Home Equity Conversion Mortgage, or HECM. "An HECM sounds like a great financial product. It lets people 62 and older, many with little if any financial assets, tap into their home equity to get either immediate or monthly cash payments to help pay bills." Kotlikoff objects to the high fees and potentially high variable interest rates that lender charge on HECMs. As an alternative he suggests that a senior homeowner take out a mortgage and use the funds to buy a life-time annuity. If you are considering a HECM, read his opinion at: http://www.seattletimes.com/business/a-reverse-mortgage-sounds-great-but-there-are-risks/

Reverse Mortgage Lenders Fined for Deceptive Advertising

"American Advisors Group, Reverse Mortgage Solutions and Aegean Financial are the latest names to face the wrath of the Consumer Financial Protection Bureau due to deceptive advertisements in reverse mortgage lending. Collectively, the bureau ordered the three reverse mortgage lenders to pay a civil penalty of $790,000."
A reverse mortgage allows homeowners 62 and older to tap the equity in their home and put off repayment until they sell the house and move or die, essentially living off the equity to fund retirement. Federal laws "prohibit misleading claims in mortgage advertising and institutions from engaging in deceptive acts or practices." These three lenders violated federal laws and will pay a very small penalty. With the future of consumer protection legislation in jeopardy under the coming anti-regulation administration, who knows what the future holds for consumer protection.
Details at: http://www.housingwire.com/articles/38699-cfpb-fines-three-reverse-mortgage-lenders-over-deceptive-advertising

Considering a Reverse Mortgage?

If you are considering a reverse mortgage to help finance retirement, information on the newest programs and government regulations are available in a book by renowned retirement researcher, Wade Pfau: "Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement."
http://www.chicagotribune.com/business/success/savingsgame/tca-how-a-reverse-mortgage-can-benefit-retirement-20161019-story.html

HELOCs versus Reverse mortgages

For senior homeowners facing large expense such as roof replacement or needing extra cash tomake ends meet each month, home equity lines of credit are one option; reverse mortgages another. Learn the pros and cons of each at https://www.thestreet.com/story/13698522/1/helocs-vs-reverse-mortgages-which-is-right-for-seniors-facing-a-financial-emergency.html

Reverse Mortgages

Reverse mortgages can help older homeowners use the equity in their homes to help finance their retirement.  The basic criteria are:

• At least one borrower must be 62 or older
• Own your home or have significant equity
• Home must be your primary residence
• Participate in an information counseling session with HUD
• Home must be well-maintained
• All property taxes and insurance must be paid

The required counseling is available from the USU Family Life Center Housing and Financial Management program. For more info: 435-797-7224
Find out if a reverse mortgage might be suitable for your circumstances at: https://www.lendingtree.com/reverse-mortgage-index

Reverse Mortgages

A new booklet from the Center for Retirement Research at Boston College explains reverse mortgages and the role they can play for promoting financial security in old age (age 62 is minimum age for a RM). PDF available at: http://crr.bc.edu/wp-content/uploads/2014/09/c1_your-house_final_med-res.pdf

"The booklet’s key points are:

• Home equity is the largest store of wealth for retirees and, with reduced support from Social Security and pensions, many more will need it for retirement income.
• The two ways to tap home equity are downsizing and a reverse mortgage.
• Downsizing:
• Adds to your savings, which boosts income from savings.
• Frees up more income by reducing taxes, insurance, and upkeep.
• A Reverse Mortgage:
• Allows you to stay in your home.
• Provides income through a line of credit, lump sum, or monthly payments."