Reverse Mortgage Warning

[SHELLY]

I just read an article about the Reverse Mortgage business that I found disturbing and felt the need to pass along. For those on the board who are, or who have loved ones who are, eligible for reverse mortgages (at least 62 years old) take note!

Ex-subprime loan officers eye booming senior market

NEW YORK (Reuters) - Jobless subprime mortgage specialists are looking for employment in the booming market for loans to senior citizens, mortgage market executives said on Tuesday.

Between 12,000 to 15,000 displaced mortgage lenders may begin to seek employment in the growing market for reverse mortgages, an increasingly popular home equity loan for homeowners who are 62 years old or older, Goldman, Sachs & Co. (GS.N: Quote, Profile, Research and Wells Fargo Home Mortgage executives said at a mortgage conference.

"A percentage of them will migrate into the reverse mortgage business, but it's very specialized," Jeffrey Taylor, Wells Fargo's vice president of senior products, said during a Mortgage Bankers Association conference in New York.

Some bankers worry the market's rapid growth may make reverse mortgages vulnerable to fraud and increased litigation, which has plagued subprime loans -- mortgages to those with weak credit histories.

"As you look at what's going on in the subprime market, are those the types of folks who are really appropriate for pursuing reverse mortgages?" asked Rolf Edwards, a vice president at Goldman, Sachs & Co. in New York.


LINK: http://www.reuters.com/article/gc06/...DOUBLEFEATURE_

[Mango]

I have some friends that attended this meeting.
I am not sure if Jeff is misquoted or this is all he said, but I am betting that he said more.

"A percentage of them will migrate into the reverse mortgage business, but it's very specialized," Jeffrey Taylor, Wells Fargo's vice president of senior products, said during a Mortgage Bankers Association conference in New York.



Wells Fargo is one of only a few Lenders that aggressively touts this product to their Brokers. I do want to add though that Wells ultimately makes the decision on the loan and signs off on the underwriting.

Here's a good link for anyone considering this type of mortgage. It also includes a list of partners that Fannie Mae recommends.
Fannie Mae ( a government agency) purchases loans from Banks and Bankers, so this is a good place to look for a referral.

[Smiling JOe]

I've never understood the betting on the reverse mortgage. It would really stink to live longer than the average, because you will be screwed.

[Mango]

I've never understood the betting on the reverse mortgage. It would really stink to live longer than the average, because you will be screwed.

What's the most you can owe?

You can never owe more than the value of the home
at the time the loan is repaid. Reverse mortgages are
generally "nonrecourse" loans, which means that in
seeking repayment the lender does not have recourse
to anything other than your home. Not your income, your
other assets, or your heirs.

So even if you receive monthly loan advances until you
are aged 115, your home declines in value between now
and then, and the total of monthly advances becomes
greater than your home's value - you can still never owe
more than the value of your home. If you or your heirs sell your home in order to pay off the loan, the debt is generally limited by the net proceeds from the sale of your home.

[spinDrAtl]

I've never understood the betting on the reverse mortgage. It would really stink to live longer than the average, because you will be screwed.

Wrong, at least for Fannie Mae, if my interpretation of your definition of 'screwed' means the homeowner would owe more than the house is worth. Straight out of the Fannie Mae guide for HECM and Home Keeper programs:

HECM - "At that time [meaning death, sale, etc.] you or your estate will owe the loan balance or the market value of your property, whichever is the lesser amount."

Home Keeper - "The amount due when your Home Keeper Mortgage becomes payable will always be the lesser of your loan balance or the market value of your property. This means that even if the amount you have borrowed eventually exceeds the value of your home, you will never owe more than the value of your home. On the other hand, if the proceeds from the eventual sale of your home exceed the amount you owe the lender, the excess proceeds will belong to you or your estate.

[Smiling JOe]

I wasn't aware that they would loan you more money than your house would appraise. Surely they will not keep writing you checks after you take out 100% of the value of your home, if the lender knows it doesn't have to be repaid. That is not good business. Am I understanding reverse mortgages incorrectly?

[spinDrAtl]

I wasn't aware that they would loan you more money than your house would appraise. Surely they will not keep writing you checks after you take out 100% of the value of your home, if the lender knows it doesn't have to be repaid. That is not good business. Am I understanding reverse mortgages incorrectly?

It seems so. The monthly checks go on until the borrower passes away, sells the house, conveys title, or does not occupy the house for 12 months. If for some reason the lender stops sending the checks, Fannie Mae steps in.

[SHELLY]

It seems so. The monthly checks go on until the borrower passes away, sells the house, conveys title, or does not occupy the house for 12 months. If for some reason the lender stops sending the checks, Fannie Mae steps in.

Mark my words...if the sleazeball-out-of-work-subprimates find their way into the reverse mortgage market, it won't be long till we'll be seeing Geraldo comforting teary-eyed grannies and congress calling for hearings to find out "what the hell happened?"

You've all now got front-row seats to watch a trainwreck in the making.


/

[Donna]

With all due respect, Shelly, do you ever have a good day? I am amazed that you can get out of bed in the mornings with such an attitude.
Chicken Little was not necessarily right, you know.

[SHELLY]

With all due respect, Shelly, do you ever have a good day?

Yes....as I recall it was March 12, 2001.


I made it my mission to present the "Yang"....it makes some people go, hummm


.

[Mango]

Mark my words...if the sleazeball-out-of-work-subprimates find their way into the reverse mortgage market, it won't be long till we'll be seeing Geraldo comforting teary-eyed grannies and congress calling for hearings to find out "what the hell happened?"

You've all now got front-row seats to watch a trainwreck in the making.


/

Shelly, these are mortgages backed and insured by HUD. The Housing and Urban Development Corporation is wholly owned by the government.
The only type of "fraud" that can happen is if a loan officer is in collusion with an estate planner who can receive fees for referring these loans, and those that push for the programs with a large draw initially.
But HUD has intervened and made this difficult.
http://www.mortgagealmanac.com/artic...mtgescams.html

[spinDrAtl]

In addition, borrowers are required to take HUD approved counseling by someone other than the lender or broker - such as a non profit or public agency or from a Fannie Mae counselor. This is a condition of eligibility.

[scenethief]

With all due respect, Shelly, do you ever have a good day? I am amazed that you can get out of bed in the mornings with such an attitude.
Chicken Little was not necessarily right, you know.

AMEN, Donna.

Shelly, your post is based an article that is entirely speculative.

[Paula]

I've never understood the betting on the reverse mortgage. It would really stink to live longer than the average, because you will be screwed.

Heck, SJ, I'm really hoping to live longer than average and I don't expect to be screwed financially, in part, because we've had 4 wonderful realtors (and others in the business) help us find great (and grayt) places. In our case, our children will thank us someday and, ideally, will be happy to have us hanging around longer than average. I think for women the average life span is around 85 or so and I'm going for at least 96 (I'm knocking on wood right now -- is there a smiley for that?). Who wants to plan the 2050 SoWal hodown with me? I'll bring the bocce game.

Log onto http://www.realage.com and learn what your real age is (based on health habits rather than chronological age) or http://www.livingto100.com and find out how long you're expected to live based on your health habits.

[SHELLY]

In addition, borrowers are required to take HUD approved counseling by someone other than the lender or broker - such as a non profit or public agency or from a Fannie Mae counselor. This is a condition of eligibility.

Hey Spin,

Would you happen to know the Atlanta Mortgage guy called Kal Wayman (http://gotkal.3gmedia.com/)

His commerical is...well....priceless. Is this a sign of the times?



.

[spinDrAtl]

Never heard of him, his company, or his commercial. It's 3 minutes so it's not running on any regular shows - must be a late night thing mixed in with all those chat line ads.