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RMG NEWS : The FHA Steps Up In Times Of Need

Every time the HUD makes a change or looks at its financial stability, the question arises: Should the government really be involved in homes and loans? Some members of Congress would like to see the FHA taken out of the HUD and put into the private sector.

red tapeFor years, the HUD’s “government housing” options, specifically FHA loans, were perceived as problematic and heavily wrapped in red tape. But the HUD has stepped up  – by trying programs that the private sector hasn’t been ready to digest, and by introducing and standing by the country’s most popular reverse mortgage products.

In 2009, when money was tight and jumbo loans became incredibly difficult to find, the FHA became the safety valve for many mortgage brokers. Some lenders report that FHA loans make up nearly 40 percent of their business – nearly double the volume of the past five years combined.

While the dark side of the agency has surfaced periodically over time (there have been allegations that some programs were labeled “inept, detrimental and costly” by the Office of Inspector General/OIG), the HUD and other government agencies have been a critical part of the public housing landscape.Private Owners

The HUD believes that if the FHA went private, borrowers would be charged higher fees and interest rates than the FHA charges, resulting in fewer home ownership options. In addition, the sale of the FHA to private owners would not attract buyers offering a reasonable price.

The FHA insures loans so that if the borrower defaults, the lender is guaranteed to receive the outstanding mortgage amount. For the past 75 years, an FHA loan has been the primary low down-payment option for home buyers.

The FHA also has a home-improvement loan program, too, which has come in handy for those in need of cash and unable to get a home equity loan due to already high loan amounts or slumping home values. FHA Title 1 loans of up to $25,000 are available to owner occupants and investors who want to repair or improve their property. Up to $15,000 can be obtained regardless of the home value, and if you need $5,000 or less, no security is necessary.

First-Time Home BuyersA prime traditional FHA target – first-time homebuyers – are pushing the housing ladder. Many of them are new to this country, and analysts believe that the immigrants hold the keys not only to the residential building industry but also to the economy. That’s because many newcomers pay cash, reducing the concerns of escalating consumer debt, except in big-ticket purchases like homes. Therefore,  the HUD is the critical player at both ends of the housing finance ladder – first-time loans and reverse mortgages.

In 2009, the agency showed that it was the go-to player for all loans in between. It now has more than 5.2 million insured single-family mortgages and 13,000 insured multi-family projects in its portfolio.

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RMG NEWS : CCOA Announces Free HECM Counseling

Credit Counseling of Arkansas (CCOA) announced that it will be providing free reverse mortgage counseling to customers as of today.

An $18,000 federal government grant from the U.S. Department of Housing and Urban Development (HUD) will allow CCOA to provide free reverse mortgage / Home Equiy Conversion Mortgage (HECM) counseling (normally $125 per session) until the funds are exhausted.

Credit CounselingThe counseling is available at CCOA offices in Fayetteville and Bentonville, or over the phone. Sessions take about an hour, and clients simply seeking more information are welcome.

CCOA is a non-profit organization that has been providing Arkansas with free financial education, seminars, credit report reviews, debt management programs, and budget, credit, housing and bankruptcy counseling since 1995.  The organization has six locations across the state.
Customers looking for more information can click here to visit their website, or call (800) 889-4916.

If you are ready, start a HECM Application now.

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Reverse Mortgage Group Wishes You a Happy New Year!


To learn more about RMG, why not contact us now?
We’d love to answer your questions.

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RMG NEWS : Fannie Mae Updates 1009 Loan Application

Fannie MaeFannie Mae (FNMA) has updated its reverse mortgage loan application (1009).

The GSE updated the 1009 to comply with the Federal Housing Finance Agency (FHFA), and the Federal Housing Administration (FHA) requests to capture additional data during the loan origination/application process and loan delivery.

According to FNMA, the document has been updated to support loan originator ID and origination company ID.  The updated 1009 however, does include additional questions.

FNMA started supporting new data requirements in July 2009 and is now requiring that lenders use the new form as of July 1, 2010.

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Caregivers Can Be Helped By Reverse Mortgages

A study by the National Alliance for Caregiving and the AARP showed that nearly one third of the US population are caregivers, defined as providing unpaid care to an adult or a child with special needs. These caregivers spend an average of 20 hours a week providing unpaid care.

While the study included several different types of caregiving, a significant portion of those in the study was taking care of parents (36%).  The average caregiver was female (66%), 48 years old, and 34% of caregivers were taking care of two or more people. 51% were caring for adults aged 75 or older.

One of the major points of the study was that caregiving can place significant stresses on adult caregivers. Many had left jobs, passed up promotions, and cut back on hours to fulfill their caregiving responsibilities. CaregiverA significant number (53%) reported loneliness and isolation, cutting back on time with friends and family.

Although 66% of those caring for the elderly said it was easy to set up their care, a reverse mortgage can help increase this further.  Using a reverse mortgage can help pay for health care and other caregiving responsibilities; keeping parents out of assisted living and nursing homes, while reducing the stress on caregivers.

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Trading Home Equity for Cash

SeniorsIn this near-frozen credit environment potential borrowers still find most home mortgages tough to get; a major exception is reverse mortgages.  Available for homeowners over 62 years of age, reverse mortgages have been representing a growing market for the past decade.  Even in this recessionary year, the number of reverse mortgages has grown 4 percent.

Banks, brokers and savings and loans are happy to approve reverse mortgages because the FHA insures them, and so lenders will be repaid even if the value of the house falls below the balance of the loan. Many consumers also find reverse mortgages simpler to qualify for, because eligibility primarily involves a borrower’s age, home value and equity; not their income or credit history.

CongressEarlier this year, Congress raised the FHA’s maximum loan limit considerably, to $625,500 (the amount a borrower actually receives depends on their age and the home value, but cannot exceed that amount) which will remain through 2010. The agency also set tougher standards for those providing the mandatory credit counseling for applicants.

For seniors who want to remain in their homes, reverse mortgages can provide a lump sum, monthly checks, a line of credit, or a combination of these. The loan is repaid when they pass away or move and the house is sold.  In the interim, borrowers use the money for various purposes: they pay off their first mortgages and no longer face those monthly payments; they pay down other kinds of debt; they acquire a nest egg for emergencies or money for their everyday expenses; they invest in their houses or in other assets.  A lot of people are paying for home modifications.  They want to age in place, so they’re getting ramps, stair lifts, a bathroom downstairs so everything’s on one floor, curbless showers, etc. They’re preparing their homes for their long-term care.

Reverse mortgages can be a very useful tool for seniors, but should be handled with care. The FHA insurance makes them more expensive than conventional mortgages from a bank, so they are probably not suitable for short-term uses; ordinary consumer loans, for those who can get them, may prove cheaper.  People should consider the long-term consequences, not just their immediate needs; it’s not free money. If you use your house as an A.T.M., you could jeopardize not only your financial situation, but your ability to continue to live in the house.

Visit our FAQ page to find out more about reverse mortgages, or give us a call, on 888-820-2627

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RMG NEWS : Reverse Mortgage Amendment Passes the House with Overwhelming Support

Dina TitusFinancial Services Bill H.R. 4173 passed in the House of Representatives this afternoon by a vote of 223-202.  Included with it was the Reverse Mortgage Amendment proposed by Congresswoman Jan Schakowsky and Congresswoman Dina Titus.  The Amendment passed overwhelmingly by a vote of 277-149, indicating bi-partisan support.

Jan SchakowskySchakowsky released a press release today saying, “We have an obligation to protect our seniors from malicious fraud and prosecute anyone who means to do them harm… Many seniors are turning to reverse mortgages and they need to feel safe and secure in their decision. We must do everything in our power to ensure the fidelity of the system and shield our parents and grandparents from being cheated or misled.”

With the passage of the bill, the Consumer Financial Protection Agency was approved and given the authority to regulate reverse mortgages; one of many of the characteristics in the extensive financial services bill.  In order to become law, the bill still must pass the Senate and be signed by the President.

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RMG NEWS : FHA Developing Mathematical Method to Determine Reverse Mortgage Eligibility

Meg BurnsIn the coming months the Federal Housing Administration will issue preliminary regulations that will be the first step in developing a method to mathematically determine a borrower’s eligibility for a reverse mortgage, according to Meg Burns, director of Single Family Program Development for the FHA.

The administration recently implemented a new set of standards for Home Equity Conversion Mortgage counselors which established a roster and testing standards to qualify counselors.  Counselors will also have to follow a set of protocols to help determine whether a reverse mortgage will help a borrower.  Burns told the NY Times, “We’ll be weeding out the bad counselors going forward.”

GAOThe changes come after a report from the Government Accountability Office, which sent investigators posing as borrowers to 15 reverse mortgage counseling sessions.  According to the report, none of the counselors covered all of the required topics, and some overstated the length of the sessions in records provided to the government.  Read  the new rules for counselors (NY Times)

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RMG NEWS : HUD Extends Higher Loan Limit for FHA Reverse Mortgage Program

The US Department of Housing and Urban Development (HUD) officially extended the loan limits for its FHA-insured reverse mortgage program with Mortgagee Letter 2009-50. The changes are effective immediately for loans closed on or after February 24, 2009.

According to the Mortgagee Letter, FHA will allow HECM loans that received case number assignments but did not close prior to the effective date of the Mortgagee Letter to be closed using either the old limit that was used to originally calculate the loan, or the new limits as described in the Mortgagee Letter. An option will be made available in FHA Connection for the lender to choose which rate to use until April 30, 2009.

ML 09-50 provides notice of the 2010 comprehensive update to the Federal Housing Administration’s (FHA) single-family loan limits, under the authority of the recent passage of the Continuing Resolution, 2010 (CR) as part of the Department of Interior, Environmental, and Related Agencies Appropriations Act, Public Law 111-88.

The current CR mandates that the revised FHA loan limits for 2010 are set at the higher of the loan limits established under the Economic Stimulus Act of 2008 (ESA) or those loan limits otherwise established for 2010 as amended by the Housing and Economic Recovery Act of 2008 (HERA).null

Under provisions of the recent CR, the national FHA loan limit for the HECM program in 2010 remains at $625,500 (150 percent of the national conforming limit). In the special exception areas (AK/HI/GU/VI), the maximum claim amount on HECM reverse mortgages is the same limit.

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RMG NEWS : Reverse Mortgages Face The Music

In the last fiscal year, mortgage lenders funded 114,692 reverse mortgages under the FHA’s HECM program. Five years ago just 43,000 of reverse mortgage loans were written.
Until a year ago, the reverse mortgage niche looked like a safe bet for mortgage bankers seeking a haven from the carnage in the industry.
After all, what could be safer than lending money to “The Greatest Generation” and older baby boomers who were good savers and had a ton of equity in their homes?

But now…

With home prices still under pressure and fears of a double-dip recession rampant, reverse mortgages no longer look so safe. Moreover, new government underwriting guidelines are likely to crimp the market’s stellar growth.

According to a survey by the National Reverse Mortgage Lenders Association, of the year-to-date loans booked by the three largest lenders, had the October 1 changes been in effect for the entire year, one out of five borrowers would not have qualified for their loans because the amount of equity available to them would have been less than what was still owed.

HouseDeclining home prices have had a major impact on the reverse mortgage industry and seniors who are considering their financial options. Currently, a potential customer doesn’t know if a reverse mortgage will work for them until the appraisal comes in.
Once homeowners get an appraisal, they may find out that it was appraised for less money than expected; they may not receive enough reverse mortgage proceeds to pay off an existing mortgage or to handle another financial issue.

During these tough times, reverse mortgage servicers also have to keep an eye on borrowers to make sure they are maintaining their real estate tax payments and home insurance payments. On a traditional mortgage, these payments are often escrowed and the servicer automatically pays them. But the borrower is responsible for making these payments on a reverse mortgage.

As a result of weak home prices it is difficult for people to know what their homes are worth and if a reverse mortgage will get them enough proceeds.
There is hope, however, that the economy and consumer confidence will recover. As home prices and retirement assets stabilize, we’ll get back into a healthy phase of growth, people will reassess their retirement/home situations, and will include reverse mortgages in their financial plans.

Read the full article here

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