Promoting The Reverse Mortgage
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(There is obviously a plethora of mortgage available for a variety of borrowers today.) Many of the “nontraditional” mortgages are designed to cater to borrowers with specific needs and can become hazardous if someone takes one of these mortgages out that should not in the first place. Payments may balloon and the term length may not be suitable to one’s lifestyle.
That’s why when you apply for a mortgage you must do a lot of research and homework on your own prior too even contacting a lender. He or she may not know your future financial or family plans which could alter which mortgage is best suited for you.
With that in mind, older American homeowners have a mortgage designed specifically for them if they are low on funds and have a substantial amount of home equity built up.
Lew Sichelman explains how reverse mortgages are being promoted to those who qualify and could enjoy its benefits, in his article, “Agency Gives Reverse Loans a Boost,” which was posted November 15, 2006 in Realty Times.
“A little-known federal agency is taking steps to bring down the cost of government-insured reverse mortgages and perhaps convince more lenders to make them available to older home owners who are house-rich but cash-poor.”
A reverse mortgage allows home owners 62-years old and older to convert the equity built up in their homes, over the years, into cash while continuing to live at the home for as long as they wish.
“Borrowers continue to own their homes, and do not need to make any monthly payments. Instead, they can choose to receive the funds as a lump sum, line of credit, or monthly payment. Hence, the name ‘reverse.’”
The reverse mortgage total balance only becomes due upon the homeowner moving out or death.
There are currently only two types of reverse mortgage offered; ones that are sold by lenders to Fannie Mae and others that are insured by the Federal Housing Administration (FHA).
The more popular of the two is the FHA's Home Equity Conversion Mortgage (HECM). “And now, the Government National Mortgage Association is ready to turn pools of HECMs into securities for sale to investors worldwide.”
“We are confident the Ginnie Mae security will foster a robust secondary market for reverse mortgages,” said Ginnie Mae president and chairman of the Mortgage Bankers Association, Robert Couch.
Couch continued to explain the importance of the HECM as home values have grown. The HECM allows many senior citizens to continue living in their current homes and maintain rightful ownership while receiving a substantial monthly income. Otherwise, many of these home owners will struggle to meet monthly expenses and may ultimately be forced into assisted or lower-income housing.
“‘The HECM program is clearly a key growth area for FHA,’ said Federal Housing Commissioner Brian Montgomery. ‘We're working hard to ensure that we keep pace with the needs of our low-to moderate-income borrowers, making programmatic changes to keep up with the times.’”
Many reverse mortgage borrowers have significant amount of equity built up, especially after the most recent housing boom which consequently ended last year.
The majority of these borrowers can afford to withdraw several thousands of dollars from their homes, while still keeping a large profit in the house once they sell or die, leaving the still worthy inheritance to their children, etc.
