A reverse mortgage is a special type of loan that enables older homeowners to stay in their home and maintain a comfortable lifestyle. It allows these homeowners to convert the equity in their home to cash without selling the property or giving up title.
The loan is called a reverse mortgage because the direction of payments is reversed — the lender pays the borrower rather than vice versa. The loan provides funds to the homeowner as a one-time lump sum payment,a line of credit (the most popular method),or fixed monthly payments for life (called tenure) or a shorter period chosen by the borrower. The loan amount is based on the owner’s equity in his or her own house,the value and location of the property,current interest rates,and the owner’s age at the time of application. The older the borrower,the larger the loan amount may be. Single-family one-unit dwellings are eligible properties for all reverse mortgages. Some programs also accept 2-4 unit owner-occupied dwellings and some condominiums and manufactured homes. Cooperatives are ineligible.
There are no credit or income requirements to qualify for a reverse mortgage. Instead,the borrower must be at least 62 years old and,in general,the borrower must receive counseling or consumer education in advance. The maximum loan amount is larger if the home is debt-free or nearly so,but this isn’t required to obtain a reverse mortgage. Although age affects the size of a loan,medical history does not – applicants are NOT required to furnish medical records or undergo an exam.
A reverse mortgage does not have to be repaid until the death of the last surviving borrower,the home is sold,or a permanent move out of the home by the borrower. And the home does not have to be sold to repay the loan. The loan can be repaid using other sources of funds and the home kept,if the heirs or estate desire.
Several Products Available
Four types of reverse mortgage products are available today. These include:the federally insured Home Equity Conversion Mortgage (HECM);the Fannie Mae Home Keeper reverse mortgage;and the Financial Freedom Equity Guard and Cash Account Plans,two proprietary “jumbo”products. The HECM is a reverse mortgage,made by private lenders,that is insured by the Federal Housing Administration,an arm of the U.S. Department of Housing and Urban Development. First offered in 1989,the HECM is the oldest nationally available reverse mortgage product. More than 40,000 have been originated to date,including 8,000 in the federal fiscal year that ended September 30,1999.
The Home Keeper loan is a reverse mortgage product designed by Fannie Mae,a national company that invests in home loans. Fannie Mae is the largest investor in reverse mortgages and has a current portfolio of over 35,000 reverse mortgages. Of this total,about 90% are FHA HECMs and 10% are Home Keeper mortgages. Home Keeper mortgages offer some different features than FHA HECM loans and can be large in size,particularly for couples. Home Keeper mortgages are originated by private lenders.
Fannie Mae also offers a unique program called Home Keeper for Home Purchase. This allows a senior to obtain a Home Keeper reverse mortgage to help finance the purchase of a new home. The advantage of this arrangement is that a senior can purchase a new home with less out-of-pocket cash,keep more of the sales proceeds from the old house,and avoid taking on a monthly mortgage payment.
Established in January 1998,the National Reverse Mortgage Lenders Association is a non-profit trade association that represents lenders,financial services,and other professionals involved with reverse mortgages. NRMLA’s member firms originate and service more than 90% of all reverse mortgages. NRMLA promotes public awareness of the reverse mortgage product;keep its members informed of new legislative,regulatory,and market developments;represents the industry in Washington,DC;and holds periodic national conferences on reverse mortgage topics and trends. The Association held its first meeting in May 1998,in Chicago.
The Association has been actively involved in a number of legislative,regulatory,and market- oriented projects in its first year,with considerable success. Results include the passage of federal legislation making positive improvements to the federal reverse mortgage insurance program;steps toward enhancing the quality and availability of consumer counseling as it relates to reverse mortgages;and the creation of a Code of Conduct for Association members.
NRMLA’s Web site (see address below) has extensive information about reverse mortgages. Jim Mahoney,of Financial Freedom Senior Funding Corporation,Irvine,CA,is Chairman of NRMLA. Day-to-day operation of NRMLA is managed by President Peter H. Bell. 1625 Massachusetts Ave.,NW,Suite 601 Washington,DC 20036 Tel:202-939-1760 / 202-265-4435 (fax) Web site:http://www.reversemortgage.org For More Information:
Fannie Mae Toll-Free 800-732-6643. Consumers can obtain information on HECMs and Home Keeper mortgages and a list of lenders around the U.S. offering these reverse mortgages. Web site:http://www.fanniemae.com
Toll-Free 888-466-3487 Consumers can get information on reverse mortgages,specifically on the Home Equity Conversion Mortgage.
Web site: http://www.hud.gov
National Reverse Mortgage Lenders Association 202-939-1765
Consumers can find the names of reverse mortgage lenders in their state by calling NRMLA or checking the “Lenders List”on the Association’s Web site. The site also has detailed information on reverse mortgages. Web site:http://www.reversemortgage.org
Whether you’re thinking about buying or selling or seeking information,rely on RE/MAX Best Associates 800-391-BEST(2378) or 913-345-BEST(2378) to provide accurate up to date information about the marketplace. firstname.lastname@example.org www.kansascityehomes.com