September 9, 2008

Reverse mortgages
in the U.S.

Though reverse mortgages have been available in the U.S. since the 1960s, they have gained increased popularity in the past decade. The 2006 Statistical Data Report, published by the U.S. Federal Housing Administration, reported the following:

10x - Growth in the use of reverse mortgages since 1990

6,637 - Number of seniors who secured a federally insured reverse mortgage in 2000

76,000 - Number of seniors who secured a federally insured reverse mortgage in 2006

9.5% - Rise in dollar value of reverse mortgages in the second half of 2006 compared with the first six months of the year.

28,990 - Reverse mortgages in Florida in 2006

16,671 - Reverse mortgages in New York in 2006

14,790 - Reverse mortgages in Texas in 2006

3,601 - Reverse mortgages in Indiana in 2006

90% - Percent of reverse mortgages insured by the Federal Housing Administration

On July 30, 2008, President Bush signed into law The Housing and Economic Recovery Act of 2008 . The law affects reverse mortgages in the following ways:

• Requires borrowers to receive "adequate counseling" from a third party not associated with the lender

• Allows the government to create a new counseling program funded by mortgage insurance premiums
  
  
• Forbids lenders from selling insurance, annuities or other financial products that may be a conflict of interest
  
  
• Places a $6,000 cap on reverse mortgage origination fees.

Reverse Mortgage Pros & Cons for Older Adults
	Image Credit: Businessweek.com

With the slowing economy, many seniors are considering taking out reverse mortgages on their homes -- often at the suggestion of determined salespeople and the popular media. Reverse mortgage is a home equity conversion process that allows adults age 62 and older to convert value in their homes to available income. In fact, the housing bill signed by President Bush in July raises the amount seniors can borrow and lowers the cost of getting the cash. While this seems like a good idea, reverse mortgage may not be for everyone.

If the seniors you work with tell you they are thinking about reverse mortgage, encourage them to engage in careful consideration before tapping into the equity in their home. You might share with them the Top Ten Things to Know if You're Interested in a Reverse Mortgage.

As a provider of services to the aging, the following is some basic information you might want to know about reverse mortgage.

Why reverse mortgage might be a good idea
Bankrate.com , a leading website designed to help consumers make informed decisions about personal finance matters, offers these pros for choosing a reverse mortgage:

• Viable source of income for those with limited resources
• Creates available cash to pay for home repairs, health care bills and other "big ticket" items
• No payments required until the borrower dies or moves out of the home

Why reverse mortgage might not be a good choice

• High up-front costs, including closing costs
• Homeowner still responsible for real estate taxes, homeowners insurance and mortgage insurance
• May interfere with Medicaid eligibility

Payout options
There are four basic payout options:

• Single lump sum of cash
• Regular monthly cash advance, either for the duration of the equity in the home or for a specified period of time
• "Credit-line" account that lets the homeowner decide when and how much of the available cash is paid out
• Combination of the above payment methods

Types of reverse mortgage
The National Reverse Mortgage Lenders Association (NRMLA) offers a description of the three types of reverse mortgages that are available to Hoosier seniors.

• Home Equity Conversion Mortgage (HEMC)- insured by the federal government through the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development.
• Fannie Mae Home Keeper (FMHK) -- for seniors with higher property values, condominium owners and seniors wishing to purchase a second home
• Conventional Reverse Mortgages/Jumbo Loans - offer no or very high (into the millions) loan limits

Protecting seniors' interests
As with all industries that identify older adults as consumers, there will be unscrupulous vendors who try to prey upon seniors for illegal and unethical profit. For that reason, financial counseling is required before a reverse mortgage can be acquired.

A list of HUD-approved agencies that provide HECM counseling in Indiana can be found here. Your clients can also call AARP at 1-800-209-8085 and ask for a reverse mortgage counseling referral.

Other alternatives
On its website , AARP encourages seniors to investigate other alternatives to reverse mortgage. Those include:

• Refinancing and other private loans
• Public programs that offer assistance with utilities and home repair
• Selling the home and relocating to a home that costs less or requires less upkeep

Thanks to Darrell Nickolson, MS, ASEE, EWB, IDEC, CAC graduate and lecturer of Architectural Technology & Interior Designat the Purdue University School of Engineering and Technology at IUPUI, for his contributions to this article.

Online information resources about reverse mortgages

If your clients want more information about reverse mortgages, or if your organization wants to provide education on the topic, the links below might come in handy.

AARP Reverse Mortgage Center - Includes basic reverse mortgage information, a reverse mortgage calculator, 5 questions to ask, and comparing the options of selling a home vs. reverse mortgage

Federal Trade Commission's Bulletin "Reverse Mortgage: Get the Facts Before Cashing in on Your Home's Equity"

U.S. News and World Report: "How the Housing Law Affects Reverse Mortgages: Most Seniors Should be Cautious"

News you can use

Voter registration deadline is October 6

Remind your clients -- and your co-workers -- that the last day to register to vote in the November elections is October 6. For more information on how to register, visit http://www.in.gov/sos/elections/vote_reg.html

Research participants wanted for falls study
The Krannert School of Physical Therapy/ University of Indianapolis is seeking participants for a study to better understand the factors that may contribute to higher rates of falls among older adults.

All testing will be conducted on the campus of the University of Indianapolis/ Martin Hall and will require a single visit lasting approximately 2 hours. Testing will include measuring neck and back range of motion and strength as well as performance on commonly used clinical balance tests. Finally, movements of the head and trunk will be recorded while participants undergo a series of mild nudges. This study has been approved by the University of Indianapolis' Institutional Review Board. This is a non-funded study and participants will not be compensated for their time.

Eligibility requirements: You may be eligible to participate if you are 60 years or older, in relatively good healthy, can walk household distances without assistance or if you have not had a recent fall, recent surgery or significant injury to the back or legs.

To participate: Contact Dr. Dyer Diehl at (317) 788-8012.

Put in your two cents

The U.S. EPA Aging Initiative, in partnership with Generations United and the Rachel Carson Council Inc., invites public voting for submissions for the Second Annual Rachel Carson Sense of Wonder Intergenerational Poetry, Essay and Photography Contest. To cast your votes, click here.

Call for Proposals: Pioneer Network 9th National Conference

The Pioneer Network, dedicated to creating a culture that honors and respects elders in LTC, is seeking session proposals for its 9th National Conference, to be held August 12-14, 2009 in Little Rock, Arkansas. View the RFP and submit your proposal online at www.pioneernetwork.net. Deadline for proposals is October 17, 2008.

Grants to go for

The Allstate Foundation -- supports national and local programs that fit within three focus areas: safe and vital communities; tolerance, inclusion, and diversity; and economic empowerment.

Application Deadline: The foundation has no deadlines for submission. Proposals may be submitted throughout the calendar year.

Who May Apply: The foundation makes grants to nonprofit, tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code.

Contact Information: Grants to organizations with local programs are managed through field-office grant committees, which meet regularly to review requests. For Indiana grants, contact the North Central (Indiana, Michigan and Ohio) representative: Lee Ann Welsh, Allstate Insurance Company - North Central Region, P.O. Box 9227, Farmington Hills, MI 48333-9227, (248) 994-9389.