Milwaukee Reverse Mortgage

For many of today's retirees their home must seem like a savings account with no way to access the funds. No key or password just a lot of money that is appreciating every year. Unless a senior is willing to sell their house and all the memories they have there, they will never be able to see any of that savings they have built up. It can be really frustrating when a senior needs some extra income each month or liquidity in assets and they have it just sitting there and it is totally inaccessible. There is a way to tap into those record profits- a reverse mortgage! "Many seniors are sitting on more equity then they ever thought they would have" says Wisconsin reverse mortgage expert David Forer. "Many seniors are tapping into that savings account called home equity in record numbers."

An aging population is tapping into this product more aggressively in recent years. The amount of reverse mortgages has doubled since 2003, and keeps growing every year. why such a recent growth spurt? To understand the popularity we must go back and explain reverse mortgages and how they came about.

The National Association of Reverse Mortgage Lenders (NRMLA), whose job It is to educate consumers in addition to being the national voice for Lenders and investors, says "A reverse mortgage enables older Homeowners (62+) to convert part of the equity in their homes into tax-free Income without having to sell the home, gives up title, or takes on a new monthly mortgage payment."

Reverse mortgages have been around since 1961 when Nelson Haynes of Deering Savings and Loan gave a reverse mortgage to Nellie Young, the widow of his high school football coach. Then in 1963 the first property tax deferral program was offered in Oregon and was considered a reverse mortgage. in 1977 the first reverse mortgage program was offered by Arlo Smith of Broadview Savings and loan and was called "Equi-Pay". In 1977 Wisconsin offered the first statewide deferred payment loan program through WI Dept. of local Affairs. In 1979 the first national" reverse Mortgage Development Conference" was sponsored by WI Bureau on Aging in Madison, WI. In 1986 AARP gets involved heavily in Reverse Mortgages and urges enactment of federal insurance for reverse mortgages. President Reagan signed the legislation to allow HUD to insure them in 1988 on their Home Equity Conversion Mortgage (HECM). It wasn't till the early 90's that these mortgages started to be used by seniors. So why the sudden stir and what makes this mortgage so unique? The baby boomer population that we've all been hearing that is about to start retiring, begins to do so as of January 1, 2008. What this means is that America will have an unprecedented number of people retiring with many having their main asset being their homes. Gone are the days of the American worker working to the age of 62, retiring with a pension and social security, and then passing by age 70. People are living longer and fewer are retiring with adequate income provided to meet their life needs. The huge appreciation most properties have experienced allows seniors an avenue to augment this growing need for income.

as an example a 75 year old with a paid off 250,000 home in Milwaukee, WI might receive about 917 dollars a month. Or the homeowner would qualify for a line of credit of about 140,000 dollars. the line of credit is a little more popular these days as it provides more flexibility and better access to cash for emergencies etc. The money can be used as you want and doesn't have to be paid off till you sell your house.

The Truth About Reverse Mortgages
By Valerie VanBooven

One of my jobs for a very long time included working very closely with a financial advisor and an elder law attorney. I learned a lot from both of them. The most important thing I learned is that long-term care isn't just about picking a nursing home or a home care agency. Long-term care is also about the legal and financial matters that almost always come up when families are trying to help an aging loved one make choices.

Most families cannot afford to privately pay for nursing home care or in-home care for very long. This wasn't planned for or budgeted for prior to retirement. Planning ahead is getting more popular, but for our older generations, it wasn't an option for various reasons.

Because of this I try to make sure I know what all of the financial options are for seniors and their family members. One of them is something that not many of us understand very well- a reverse mortgage.

Reverse mortgages have received a lot of press lately. NBC Nightly news, ABC, CBS....they have all run stories. Of course there are pros and cons to reverse mortgages, but interestingly enough, two large organizations support and advocate them, especially for seniors who need long-term care. The National Council on Aging and AARP both support the use of reverse mortgages in certain circumstances.

A study released by The National Council on the Aging (NCOA) shows that reverse mortgages can be used by over 13 million Americans to pay for long-term care expenses at home, allowing many to remain independent and in their homes longer. The "Use Your Home to Stay at Home: Expanding the Use of Reverse Mortgages to Pay for Long Term Care" report, funded by the Centers for Medicare and Medicaid Services and the Robert Wood Johnson Foundation, also shows how reverse mortgages can alleviate financial pressure not only for individuals and families, but also for state Medicaid programs and the federal government. Increasing the market for reverse mortgages could save Medicaid $3.3 billion (with a four percent take up rate) annually by 2010.

A reverse mortgage is also called a home equity conversion mortgage. These loans are backed by the federal government (HUD and FHA). Seniors 62 and older are eligible to use this federal program. This is a "non-recourse loan", which means that the heirs of the seniors are not responsible for repaying the loan. In fact, a reverse mortgage is a loan that does not have to be repaid unless both homeowners (assuming a couple) leave the home permanently, or pass away. No monthly payments are required. The senior is the one who gets paid.

Finally, the money seniors receive from a reverse mortgage is tax free, and does not interfere with SSI or Medicare benefits. As with any financial transaction, there are other things to consider, and reverse mortgages aren't for everyone.

However, for the senior or couple who are having trouble making ends meet, this can be a life saver.


Some seniors are using the extra cash flow to pay for in-home care, adult day care, pay for prescription drugs, pay off credit card debt, and make much needed home repairs so that they can live safely and more comfortably.



Find a reverse mortgage specialist in your area, and network with them. They might be able to help a senior you know pay privately for care much longer than expected. For more information visit www.aarp.com , www.ncoa.org , or www.reversemortgagenation.com .

Valerie VanBooven RN, BSN

http://www.seniorserviceselling.com

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Reverse Mortgages (Home Equity Conversion Mortgages) have become a popular and well respected way for seniors to access the equity in their homes for many reasons. Some use the equity for long-term care needs, to pay bills, pay off existing mortgages or debt, pay for prescription drug costs, home improvements, home modifications, or to simply be able to enjoy life a little more by traveling and enhancing their retirement cash flow. Many seniors use reverse mortgages to pay high property tax bills, and have even been saved from foreclosure and bankruptcy because they applied for a reverse mortgage.

Other seniors use reverse mortgage proceeds to fund advanced estate planning techniques. This includes increasing the value of their estate through life insurance purchases, planning ahead for future long-term care needs, assisting grandchildren with college funding, making charitable donations, and to convert IRA funds to Roth IRA funds, just to name a few.

Many newspaper, TV, radio and internet articles circulating in the media give inaccurate and misleading information about reverse mortgages. So called "experts" who are interviewed for quotes often have no involvement in the mortgage industry and do not understand the federal law that regulates these loans.

Each consumer should make it his or her own responsibility to talk with an expert, and educate themselves on the facts.

TIP: As you know, the media attract more viewers, readers, and listeners when they make a story exciting, scary, or dramatic. Because reverse mortgages are federally regulated loans, there really isn't anything scary or dramatic about them when you know the facts. Be wary of interviews and articles that make reverse mortgages seem like a scam. The Department of Housing and Urban Development has done an excellent job of regulating reverse mortgages, and they are designed to help seniors, not hurt them.

Some good websites for more information are www.fanniemae.com - be sure to download "Money from Home" for free. The National Reverse Mortgage Lenders Association has great consumer booklets- www.reversemortgage.org .

The National Council on Aging recently did a study that concluded that reverse mortgages are good sources of funds for long-term care planning and long-term care needs. You can download the entire study by visiting www.ncoa.org

Although there are closing costs associated with these loans, most, if not all of them are factored in to the loan, and are not out-of-pocket expenses for the senior. Whether or not a reverse mortgage is right for a senior depends on their specific situation, case design, and cash flow or estate planning needs.

What is a Reverse Mortgage?

A reverse mortgage enables older homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is "reversed." Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you.

Who Qualifies for a Reverse Mortgage?

Eligible property types include single-family homes, 2-4 unit properties, manufactured homes (built after June 1976), condominiums, and townhouses. In general, co-ops are not allowed. Only the Financial Freedom "Cash Account" program is available on co-ops in New York City. As long as you own a home, are at least 62, and have enough equity in your home, you can get a reverse mortgage. There are no special income, credit or medical requirements.

How Are Seniors Protected?

Counseling is one of the most important consumer protections built into the program. It requires an independent third-party to make sure your family member understands the program, and review alternative options, before they apply for a reverse mortgage.

You can seek counseling from a local HUD-approved counseling agency, or a national counseling agency, such as AARP (800-209-8085), National Foundation for Credit Counseling (866-698-6322), and Money Management International (877-908-2227). Counseling is required for all reverse mortgages and may be conducted face-to-face or by telephone.

By law, a counselor must review (i) options, other than a reverse mortgage, that are available to the prospective borrower, including housing, social services, health and financial alternatives; (ii) other home equity conversion options that are or may become available to the prospective borrower, such as property tax deferral programs; (iii) the financial implications of entering into a reverse mortgage; and, (iv) the tax consequences affecting the prospective borrower's eligibility under state or federal programs and the impact on the estate or his or her heirs.

TIP: HUD Counselors are not financial planners, and should not be giving advice on financial product purchases. Talk to a trusted advisor about a plan for the reverse mortgage proceeds.

How Can the Cash Flow From a Reverse Mortgage Keep Mom and Dad at Home Longer?

The cash flow from a reverse mortgage can be used for any purpose. In order to keep seniors safe and at home for longer periods of time, it is recommended that the cash flow be used for home modifications, repairs, personal emergency response systems, and in-home care services.

Whose Name Remains on The Title to the Home?

The seniors' names remain on the title to the home. The bank is not in the business of taking over title, and certainly not in the business of owning homes. Therefore, just as with a traditional mortgage, the seniors' name is on the title to the house.

Can Their Home Be Taken Away from Them?

When a senior implements a reverse mortgage, it is important to remember that they are responsible for keeping the home owner's insurance in force, paying annual property taxes, and for general upkeep of the home. Unless one of these criteria is not met, their home can never be taken away from them.

Will Heirs Be Responsible for Repaying This Loan?

No, a reverse mortgage is a "non-recourse" loan. This means that the lender is only entitled to loan repayment via the sale of the home for fair market value. If there is any remaining equity over and above the final loan amount, the heirs receive that remaining equity. If the home sells for LESS than the final loan amount, the federal government steps in and pays the lender the difference. Heirs' assets are never at risk.

When Does the Loan Come Due?

The loan comes due when the last remaining homeowner leaves the home permanently. This means that the loan will come due when the last homeowner passes away, sells the home, or leaves permanently (12 months or more).

Do Reverse Mortgages Affect Medicare or Social Security?

Reverse Mortgages do not affect Medicare (including Medicare Part D) or social security income. However, the proceeds from a reverse mortgage CAN affect local income based programs in your area, and the big one- Medicaid. (note there is a huge difference between MediCARE and MediCAID.) Medicaid eligibility can be preserved with the right plan even after taking out a reverse mortgage. Talk to a professional about the options.

Can Mom and Dad Still Leave Their Home To Their Children?

Yes, with proper planning, they certainly can. One way to make sure that heirs receive the value of the home is for the seniors to purchase life insurance using the proceeds from the reverse mortgage. Some seniors end up doubling or tripling the value of their estate for their heirs because they use the reverse mortgage proceeds to pay the life insurance premiums. This way they never have to touch a penny of their savings, investments, or current income to increase the value of their own estate. This also helps the heirs, because inheritance passed on through life insurance (beneficiary designation) bypasses probate, and taxes!

How Does The Deficit Reduction Act 2005 Effect Home Equity?

The Deficit Reduction Act of 2005 requires that individuals with home equity over $500,000 ($750,000 in some states) use some of that equity to pay for their own care prior to qualifying for Medicaid services. Reverse mortgages have become a very popular and appropriate option for decreasing the equity in the home and using that equity to pay for care.

For more information or to contact the author visit http://www.theltcexpert.com

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