Reverse Mortgage lenders HUD approved

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money house This week, two plaintiffs represented by the AARP Foundation Litigation won their case against the Department of Housing and Urban Development. A federal trial court in Washington, D.C., ruled that HUD violated federal law when it did not protect surviving spouses of holders of reverse mortgages.

Let’s back up. A reverse mortgage is a loan that allows older homeowners (those over 62) to convert a portion of the equity in their homes into cash. It’s the “reverse” of a traditional mortgage, in which the borrower repays the borrowed sum on a monthly basis. Reverse mortgage borrowers receive money in exchange for their home equity.

Reverse-mortgage borrowers are not required to make monthly or other periodic payments to repay the loan. Instead, the loan balance increases over time, and the loan does not become due and payable until one of several specific events occur. In this case, the loans became due because of the death of the homeowner.

So, here’s what happened. When Robert Bennett and Leila Joseph’s spouses died, their spouses held reverse mortgages. The terms of the mortgages, which were written by HUD, said that the mortgages are due and payable once the borrowers die. But even though Mr. Bennett and Ms. Joseph had owned the homes with their spouses for decades, they were taken off the deeds to the homes at the time the reverse mortgages were done. Because they were not named borrowers on the reverse mortgages, the lenders demanded that they pay off the loans or face foreclosure.

AARP argued that the foreclosures were illegal because HUD’s regulations and mortgage documents conflict with the law Congress passed authorizing the federal reverse mortgage program. The plaintiffs contended that the law protects both reverse-mortgage borrowers and their spouses from foreclosure until they die or sell the property.

The D.C. court agreed. It told HUD that it had to find a way to fix the problem. How exactly the agency will do that is unclear, but one thing we know: Just leaving your spouse’s name off a reverse mortgage is not the quick fix it might seem.

Back-up plan: reverse mortgages can help folks afford retirement, but are they a good offering for insurers with banks?(Life: Reverse Mortgages)(Statistical table): An article from: Best's Review
Book (A.M. Best Company, Inc.)

3 to 5 year minimum

2009-01-31 11:30:30 by RM_Guy

If you are considering a reverse mortgage, plan on staying in the home for at least 3 to 5 years. I do not advise a shorter time period. The longer you have a reverse mortgage the less expensive the closing costs become. This is because you spread the costs over a greater number of years, thus lowering the annual costs.
In this respect they are similar to a "forward" mortgage. You would not get a 30 year forward mortgage if you knew you were leaving the home in 2 years, too expensive.
There are no "points" in a reverse mortgage. HUD does not allow such deception in reverse mortgages

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  • Avatar Scott B IndyMac owns Financial Freedom. Is it still safe to get a reverse mortgage with Financial Freedom?
    Jul 19, 2008 by Scott B | Posted in Personal Finance

    We are in the process of signing papers with Financial Freedom but I worry about them since the government seized their parent company IndyMac Bank. They say they can still make loans, but I worry if they will be able to continue the monthly payments. If I went with them, could I transfer to another lender at a later time?

    • I am told Financial Freedom is OK. If you did want to switch at a later date, you would have fees to pay. I have used Financial Freedom, but prefer Bank of America. We have wholesale account with both of them, as well as with JB Nutter.