User Comments

1. 

   9/26/08

   riverstyxxx

   Is that like a reverse cowgirl?

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   1. 

      9/26/08

      offendedblogger

      Oh snap!
      
      I mean, as a cowgirl I am highly offended you bastard. Take it back!
   2. 

      9/26/08

      ModelElaine

      riversty,
      
      you are too young for a reverse mortgage, but what the heck in a reverse cowgirl?
   3. 

      9/26/08

      riverstyxxx

      Make me
2. 

   9/26/08

   offendedblogger

   Reverse mortgages are great in the right circumstance. So are adjustable rate mortgages, but unfortunately too many people are using these who have no business doing so and in the end, the banker ALWAYS wins.

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   1. 

      9/26/08

      ModelElaine

      Unfortunately not many people who seek a reverse mortgage realize the consequenses. Do you know anyone who has obtained and later regretted obtaining a reverse mortgage?
   2. 

      9/26/08

      offendedblogger

      Nope, everyone I know who might use one planned well for retirement and are now doing rather well rather than using a reverse mortgage.
3. 

   9/26/08

   ZombieEconomy

   Reverse mortgage bad. Reverse Cowgirl good.
   
   Don't risk your home, unless of course there's some emergency and you have no other way to cover it. The you in five, ten or twenty years from now will be glad you left your equity alone.

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   1. 

      9/26/08

      bradhart

      This is why only old people with limited life left should even be thinking a reverse mortgage.
4. 

   9/26/08

   bradhart

   Reverse mortgages are great for some people especially if you get them when the market is just right like my grandma did. The estimate on the house was almost double what it was worth under normal circumstance and no one is going to be fighting over the house when she is gone.

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5. 

   9/26/08

   gloriaboone

   As someone who has been in real estate finance for 28 years, and specialized in reverse mortgages for the last 5...all I can honestly say is that they are perfect for some seniors.
   
   Through FHA they really are safe and secure, and the senior is protected and never has to leave his/her home until they want to.
   
   True, when a reverse mortgage is on the property the owner is spending the equity they have built up in the house for years and years...and so there is less for the heirs. But if parents have to use that equit...the heirs have a choice: help their parents now and inherit more, or let the parents retain their financial independence and not need the kids money.
   
   But, if a senior is not mentally capable, then they need to have their kids, or other trusted advisor with them, at application.
   
   I've just never had one client express regret; even years after they are still feeling safe and relieved.

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6. 

   9/26/08

   cooper

   If you know your going to be dead in a certain amount of time and don't want to leave your home to anyone and have no money to live on they are great, otherwise I can't see the purpose. They love to push these things on the elderly because in the end the bankers make a profit.

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   1. 

      9/26/08

      bradhart

      The sole purpose of any loan is to make a profit. That is why companies make them.
7. 

   9/26/08

   gloriaboone

   Well...I have to say that the purpose of any product is to make a profit...loans, houses, clothing, jewelry, autos.....that's the capitalistic system.
   
   Cooper: We don't push them on the elderly; as a matter of fact a decent reverse mortgage professional encourages seniors to take their time, to get the mandtory counseling, to have a family member or trusted advisor or attorney with them...because we don't want to screw them. Even if you just believe that what goes around comes around...when you're old you're going to want to trust someone.

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8. 

   9/26/08

   cooper

   And we've seen how well banking and mortgage companies look out for others haven't we?
   
   I have a friend who councils the elderly financially usually after they have been mislead and given information they sometimes did not understand, and this kind of thing may be something you don't do, but it is evidently pretty common.

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9. 

   9/26/08

   gloriaboone

   Exactly. There have been a bunch of crooks out there.
   
   I am working with one oouple now (76/78) who were really taken advantage of by a slime ball that gave them a loan at a low rate for 2 years. The the rate jumped 4%, and it now adjusts every 6 months. Their payment went from 1700, to 2400 to 2700 and is now over 3400. But until the new reverse mortgage comes out at $417,000 they don't qualify for enough to pay off the mortgage...and the lender won't take less. The lender told me to tell them to sell the property (short sale) or go into foreclosure. Then the could move to a new house! I was so F'n furious. If their house has gone down in value since spring (when we started this) and even with a higher mortgage limit - if they still can't qualify I'm going to help them get an attorney, do a BK and stop a foreclosure, until the judge and attorney make the crappy lender take less and leave these sick, very old people alone.
   
   You don't do this kind of thing on a regular forward mortgage....reverse mortgage culture is totally different.

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   1. 

      9/26/08

      ModelElaine

      thank you for sharing this story
10. 

    9/27/08

    jackpayne

    In this chaotic RE market reverse mortgages are suicide. In many areas of the U.S. now, housing prices are in virtual free fall.
    
    In the big rise of, say, 3 years ago, they had some appeal--mainly that the monthly income would be tax free (last sale of a home). But, killer has always been the heavy up-front load. I priced one out 3 years ago on my home, and total up-front fees came to 15% of the appraised value of my house. That killed that deal and I never looked back.

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    1. 

       9/27/08

       ModelElaine

       I think so too. I just mentioned something to that affect in this latest post mortgage-refinance-and-loans.blogspot.com/2008/09/retirement-in-economic-re...
11. 

    9/27/08

    gloriaboone

    Model Elaine:
    You said " Another question is, how will the current decline in the home values affect homeowners who are living off of the reverse mortgages if the lending institutions go out of business?"
    
    The FHA reverse mortgage people put a lot of thought into their program. In this case, because all the government reverse mortgages have FHA insurance, here' what would happen. If someone got a reverse mortgage from a lender that went out of business, the reverse mortgage would be assigned to FHA, who would continue to honor the contract as originally written. Nothing would change for the borrower.
    
    Most of the time, tho, the lender who does the reverse mortgage sells it off to Everbank, Financial Freedom, who end up doing the servicing of the loan. In fact, even tho Indymac is gone, FDIC had kept their subsidiary, Financial Freedom running, and FF is still doing both wholesale and retail reverse mortgages.
    
    As for you, Mr. Payne, I don't know where you got 15% in fees. The most I've ever seen is 2% for MIP, 2% for origination and about 1.5-2% for the standard title insurance, recording, appraisal, etc. fees. If you are adding in the cost of the interest, the MIP for the entire time of the loan and, or the cost of servicing for the entire time of the loan that could change things upwards; however, it wouldn't be real, since you don't know how long you'll have a loan; don't know the interest rate adjustments for the period of the loan.
    
    So, given any set of numbers almost anything can be done with them: For instance on a $100,000 loan at 6% for 30 years and (P & I payment)of $599.55/monthly, (which seems very reasonable) you'd end up paying back $215,838.19. And what if the house didn't keep up in appreciation. Is that a bad deal for the homebuyer? It would be possible to scare the hell out of the borrower if you said to them, "here's $100,000, and all you have to do is pay back $215,838.19 or over 100% of the loan.
    
    But, if you'd like to tell me who gave you costs that equalled 15% of a reverse mortgage, I'd like to analyze it.
    
    Thanks

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