First Reverse, the Reverse Mortgage company that was acquired by Wilmington Savings Fund Society (WSFS) a Delaware Bank in 2008 is being "wound down" because they were still losing money (although much less than last year) and the bank had a bad quarter.
This stinks because (as I had posted earlier) First Reverse was one of only two lenders that were offering the Jumbo Reverse Mortgage loans for properties that were worth over $2 million dollars.
I wonder if some other entity will pick them up.
Congress is discussing extending the $625,500 limit out at least another year (Thank God) but in the same breath lowering how much borrowers can get. This is coming primarily because HUD recently asked Congress for an additional $800 Million because of possible future losses from possible increases in claims.
There was also discussion about increasing the Home Equity Conversion Mortgage (HECM) limit to $729,000. This would be fantastic, but if loan amounts get lowered, it would be tough to determine if we would be better off or not.
I can say without a doubt that almost every piece of recent legislation concerning the mortgage insustry has not come close to accomplishing it's objectives (e.g. Hope for Homeowners, HVCC, etc.) and that it seems clear to me that Congress as a whole does not have a clue as to what is in the best interests of the homeowner or taxpayer.
Who knows where we will end up in October (FHA Fiscal year starts in October) but I hope the legislators are geting the correct information.
I know I've posted a lot about how great Reverse Mortgages are, but the truth is that every situation is different. I have a Reverse Mortgage ready to close and the borrower now wants to explore taking a regular "forward" mortgage. My first instinct was to convince them that a Reverse was better, but the truth is that in this case I just can't figure out what is better for him.
Here is the situation: The Borrower owes about $175,000 on a house worth about $900,000. They can qualify for about $400,000 from a Reverse. They only need about $50,000 right now for some expenses.
Assuming they can qualify for a $400,000 regular mortgage, the borrowers are telling me that they would prefer to take that because as they make payments their equity will grow, as opposed to a Reverse where their equity will decrease.
I analyzed both loans after ten years and this is what I came up with:
With the Reverse, if they only took the $50,000 (plus the $175K to pay off their loan and closing costs) out, after ten years, they would owe about $500,000. I assumed that rates would stay near their historical norms and averaged them about 3% higher than today's.
With the Forward, they would get about $210,000 today, but they would pay almost $270,000 over the ten years in monthly mortgage payments. After ten years they would still owe about $330,000.
I am not sure what is better for them.
Any thoughts would be appreciated
My last post was about people in forclosure who are being helped with a Reverse Mortgage. I received a few comments about why the people were in foreclosure if they had equity - Why didn't they just sell the property?
The reality is that for elderly people, selling is not what they want to do. Every survey shows that elderly people want to stay in their homes for as long as they can, with some surveys showing over 85% of the respondents wanting to stay.
Obviously, any of us that have spent a good portion of our lives living in one place would feel a strong attachment to it, but if you add the fear and experiences that many of elderly people have gone through, including the depression and for many, a current foreclosure, and you can see why so many of them do not want to sell or leave before they die.
Reverse Mortgages, many times, are the only option that allows them to stay in the home for as long as they want to.
I'm helping out someone who is in foreclosure and getting a Reverse Mortgage to pay off his loan and stay in his home.
He paid some place $3,000 to get him a modification and in the process, the loan got sold to another investor that does not do modifications whatsoever.
The bozos from the modification company callled me three times telling me that the borrower will lose his home if he takes a Reverse Mortgage. They literally had no idea what they were talking about and I had to explain it to them as they said "I know how a Reverse Mortgage works." I explained that the borrower keeps the property and that a Reverse Mortgage is probably the best end result of a foreclosure situation, where the borrower keeps his home, the lender gets paid off (sometimes not all of what they are owed, butin this case, every penny) and the borrower never has to make another monthly payment, get harrasing phone calls or get another lawyer's letter again.
I still cannot believe how much misconception there is about Reverse Mortgages. Hopefully, more and more people are getting educated every day.
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