Almost two months ago monies were being spent in the stimulus package that went to things like tunnels for turtles, guard rails for dried lakes, rehabs for airports that saw very few customers, repairs to train stations that had been closed for decades and much more, but we were appalled that Congress was considering Bills which would make our seniors carry the cost of the HUD reverse mortgage program.

We felt that if Billions and Trillions of dollars could be used for these and other projects like skate board parks, hundred million dollar court house renovations, scientific grants for laser beams and wetlands preservation, that surely Congress could find the money to help our seniors continue to utilize the HUD Home Equity Conversion Mortgage (HECM or “Heck-um”) program to continue to stay in their homes. Unfortunately, it looks like we were wrong!

Just yesterday a news item came out that we were going to send $36.7Billion in foreign aid to wealthy countries and countries who don’t like us. That’s right, we can find almost $40Billion for countries who are already wealthy or would like to see us fall into the ocean, but we don’t have the money to fund a program that helps our senior homeowners stay in their homes without cutting the benefit amount to those senior homeowners. Our mothers, fathers, grandmothers and grandfathers aren’t as important as the money we will send to North Korea, Cuba, Venezuela, Libya, Bolivia, Russia and others.

It seems that not only do we have money for all these pet projects, but we have money for healthcare reform that by all accounts may further cut benefits to seniors in the form of cuts to Medicare and Medicaid. And just today HUD announced with Mortgagee Letter 2009-34 that Principal Limit Factors are being changed effective October 1, 2009 to “assist with the viability of the program”.

It seems that the HECM program was never intended to operate with a credit subsidy as was explained by the Commissioner, David Stevens, in a call to the Reverse Mortgage Lenders Association (NRMLA). He remained open to re-engineering the mortgage insurance premiums or making other changes but indicated that there was nothing HUD could do since the program needed to operate without need of a subsidy.

According to the notice issued by the NRMLA yesterday, several of the larger reverse mortgage lenders did an analysis on the portfolios of loans they have done year to date and that 10% reduction of benefits under the program (this is the amount HUD intends to lower the benefits) would have left approximately 21% of all the borrowers with too little proceeds to pay off the existing loans on their homes. In other words, more than one fifth of all reverse mortgages done would not have been able to be closed unless the borrowers had additional cash they could bring in to closing!

This means that all the borrowers who barely paid off their liens to keep their homes during these extremely tough financial times would be forced to move or even worse, if they were currently delinquent on their home mortgages may have been foreclosed upon if they didn’t have the extra money to cover the reduced benefit amount.

We did more than two dozen loans at this company alone year to date for senior homeowners who were behind on their current mortgage due to the financial climate who would have not have been able to close and would not have been able to keep their homes under the proposed changes. At least a dozen were currently in foreclosure and definitely would have lost their homes with these changes.

Seniors already pay a large portion of this program since the single largest fee in any reverse mortgage transaction is typically the HUD mortgage insurance at closing. On the largest of transactions, this is over $12,500 per borrower to HUD. Then all borrowers also pay one half of 1% for monthly mortgage insurance on their loans. I have no way of knowing what claims have been paid due to the mortgage market crash, but surely the HECM loans are no worse off than the forward or regular loans that HUD has insured through FHA.

The office of Management and Budget (OMB) came up with the numbers to determine the projected shortfall in the program and I for one do not know how they were derived and maybe would take exception with their figures. But to make our seniors pay yet again while we cover the billions and trillions in costs for superfluous programs and projects while our seniors need our help and support is criminal! This is just one more cut to the senior community while we spend for pet projects and for things few can justify and yes, seems we even the found the money to give Congress a raise.

I ask everyone, even if you are not a senior yourself, to contact your representative at http://www.usa.gov/Contact/Elected.shtml and tell them that you strongly urge them to find a way to fully fund the HUD HECM program and instruct HUD to revert back to the existing benefits so that our seniors do not have to foot the bill by way of reduced benefits.

It’s amazing that HUD or Congress would even consider a change at this time when our seniors need their help more than ever and I hope that the Congress hears from a lot of concerned citizens before it’s too late. How about if we renovate one less useless airport, leave out a few guardrails for dried lakes, build one or two less skateboard parks or just send a little less money to the nations who are already wealthy or want to do us badly anyway in the name of our parents and grandparents so that they can stay in their homes? I for one don’t think that’s asking too much.

To comment on this article visit http://www.allrmc.com/articles/HUD_-_Congress_Hack_Reverse_Mortgage_Limits.php

If you or someone you know is over 62 and a homeowner, you have a unique opportunity to get significant, spendable value from your home, even if you still hold an existing mortgage.

Senior homeowners have spent years, often decades, building up equity in their homes. An increasingly common practice of homeowners over the age of 62 is to obtain a reverse mortgage (also known as a HECM, a home equity conversion mortgage), which gives qualified senior homeowners a proven solution to help fund their retirement needs. In addition, and importantly to most independent seniors, a reverse mortgage allows them to live in their home as long as they wish.

As a Member of the Top 5 in Real Estate Network, people often ask me if reverse mortgages are a good option to consider. For some, it can be, but before moving forward, it’s important to fully understand how they work.

Here are five facts you need to know about reverse mortgages:

1. Reverse mortgage candidates must be at least 62 years of age, have significant equity in their property and be looking for a reverse mortgage on their primary residence only.

2. Anyone who intends to apply for a reverse mortgage is required by law to complete a 45-minute counseling session with a HUD (Housing and Urban Development) approved counselor.

3. The sum from a reverse mortgage can be paid to you in a couple of different ways: all at once in a single lump sum of cash; as a regular monthly loan advance; as a credit line that lets you decide how much cash to use and when to use it; or you may have the option to choose a combination of any of these payment plans.

4. The amount of cash you can get from your home’s equity is determined by a number of factors including your age, your home’s value and location, and current interest rates.

5. Reverse mortgages may have tax consequences, could affect eligibility for assistance under Federal and State programs, and may have an impact on the estate and heirs of the homeowner.

If you would like to look into a reverse mortgage for yourself, a friend or a loved one, please e-mail me and I can assess your particular situation to see if it is indeed a good option. Please also forward this article to anyone else you know who may benefit from a reverse mortgage.

Myth 6

6 – Wait a few years and you will get more money. This is a new myth circulating among well intentioned but ill informed friends, relatives or advisors.  It’s beginning to look like waiting is a very poor strategy even though calculations are partially based upon age.

Legislation before both the House and Senate propose changes to HUD’s Home Equity Conversion Mortgage program that would reduce the loan to value ratio (principal limit) seniors might expect.  The bill before the House proposes a 10% cut.  Legislation proposed by the Senate appropriations bill would limit the cut to 5%.  In either case, the result is the loss of tens of thousands of dollars to most seniors.  The Senate version also rolls back the $625,500 lending limit to previous levels.  Seniors with higher value homes would lose even more money under this proposal

These bills still need to go before a conference committee to work out a compromise.  But the sentiment among lawmakers is clearly to reach a ‘net zero subsidy rate’ goal for HUD.  A request for $800 million by HUD to subsidize possible future losses triggered this and the legislators will “fix” the problem by lowering dollars seniors can receive.

Another proposal is to increase the mortgage insurance premium paid to FHA to .75% monthly.  3/4 of a point would be added to the interest rate in order to supplement the mortgage insurance fund.  The rate is currently 1/2 point.

Add to this the continued decline in home values in most regions and it becomes clear that waiting is a very bad strategy.  I see it every day and it is heartbtreaking…seniors who wait too long and when they are finally ready to move forward with a reverse mortgage find that they do not qualify because their home value is too low and their mortgage balance is too high.

A reverse mortgage is a home loan that lets you convert the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. FHA’s Home Equity Conversion Mortgage provides these benefits. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.