Saturday, March 28, 2009

Selling Reverse Mortgages

Funny thing about reverse mortgages. They are harder to get when needed more. With 401ks downgraded to 201ks and 101ks people are looking to supplement their retirements with something else. And while we do not like reverse mortgages - the demand is still rising. Unfortunately while the demand is increasing those qualifying are decreasing. One solution found in the following article from the Orlando Sentinel titled Reverse mortgages a lifesaver for some, but beware of shady lenders is to sell the reverse mortgages yourself. Lets take a look -

More than 112,000 [Reverse Mortgages] were sold in 2008, up nearly 50 percent from 2006, the trade group reported. Orlando now ranks seventh nationwide in reverse-mortgage sales, with more than 3,500 in 2008, according to federal regulators.

At its best, a reverse mortgage offers people 62 and older a sweet source of cash as a monthly payout, line of credit or lump sum. The money is tax-free, and the loan doesn't have to be paid until borrowers die or sell their home. Most reverse loans are also federally insured, which protects the payout even if the lender goes under.

But at their worst, reverse mortgages may come with confusing terms, high-pressure sales tactics and expensive fees. Such practices have tainted reverse mortgages in the past, as some lenders were accused of trying to manipulate older homeowners into squandering their home equity.

Don Mulcahy says his finances have run a lot smoother since he put his mortgage in reverse a few years back.

The 68-year-old former telephone salesman from Orlando used the proceeds to pay off his regular mortgage and save almost $1,000 a month. He liked the idea so much he started selling reverse mortgages himself.

"Unfortunately, we find a lot of seniors coming to us now in need of getting a reverse mortgage because otherwise they're looking at personal bankruptcy," [Richard Schram, an executive with the Consumer Credit Counseling Service of Central Florida]said. "If they don't have their home paid for, they're trying to get out from under the monthly mortgage payments to avoid insolvency, save their homes and have money to pay other bills."

That is one of our big fears. People use what little equity they have left now and get into even more trouble in the future. Extracting all, or what little, equity one has left to pay off the now will be very short-sighted in the long run. We are living longer and to have a growing group of aged individuals in their 80's and 90's virtually destitute is a scary future. We understand that their will be some people who will understand the complexities and may have funds or families to fall back on if the future becomes bleak.

But to take virtually all of your savings now when one may have another 20 to 30 years of retirement left does not sound like good judgment in any way. This may be one of the saddest and scariest parts of the housing bust - the future of our seniors.

1 comment:

Seascapecapital said...


the Reverse Mortgage is a financial instrument set to explode with the wave of retiring baby boomers. It can be a lifesaver for some, but is not for everyone. This factsheet will show you how it works. Thanks a lot...

Mortgage Note Buyer