For
release
The
by Carol Abaya, M.A.
REVERSE MORTGAGE CLARIFICATION: Reverse mortgages (RM) can be a marvelous
tool to allow older people with limited income to remain in their own home.
After
years of lender abuse, HUD/FHA now regulates how about 95% of RMs are given. This
still leaves the door open for possible abuse by non HUD lenders.
In a
previous column, The Sandwich Generation erroneously said the mortgage lender
sells the house after the last homeowner dies.
Changes now place the repayment and sale responsibilities on the heirs.
The loan must be repaid within a certain
period of time, generally six or 12 months.
Repayment can be made by selling the house, from other assets of the
deceased, or by the heirs themselves.
But the loan plus all accrued interest plus up front fees
must be paid within the specified time frame.
In states where the settlement of an estate is cumbersome and/or
lengthy, even a one-year repayment date can be dicey.
Also, now a homeowner can sell at will and repay the RM lender the
amount received plus interest plus up front fees.
However,
an elderly person might still lose the house because of bad financial advice.
RMs are available to homeowners 62 years and older. In 10% to 20% of RM situations, one spouse is
younger and may not be 62. In order to
qualify for a RM all those named on the deed must be at least 62. However, some mortgage brokers are suggesting
that the deed be changed to have only the 62+ spouse on it. This is risky because when the older spouse
dies, the loan must be paid. This leaves
the surviving spouse in a troublesome situation as she may not have the money
to repay. The house might have to be sold, leaving the surviving spouse out in
the cold. If the surviving spouse was
then 62+, he or she would have to renegotiate a RM, with additional high up
front fees. And renegotiation could be done only if there has been a
substantial increase in the value of the home.
MORE
CAVEATS: There are various kinds of RMs: a lump sum payment, a line of credit, or monthly
benefits payments.
If a
person takes the lump sum and squanders it, there will be no money available
for truly needed health care later on.
If a
person takes a line of credit, he or she immediately “owes” the up front fees
-- even if the credit line is not used immediately. Once used up, there is no more money
available -- unless the value of the house has increased dramatically and a new
loan is negotiated (again with high up front fees.)
The most advantageous RM seems to be one that pays a set amount on a monthly basis. Even if the homeowner lives a long life and has reached the limit of the original loan, monthly payments continue. Heirs only have to repay the original loan amount plus accrued interest plus up front fees.
Are you juggling doing errands for your aging parents, your children, yourself and working at the same time? Are you tired, stressed out and upset that your once vibrant parent is now frail and needy?
Do you feel alone? Rest assured you are not alone! The Sandwich Generation is dedicated to the 50 million Americans who may have elder/parent care concerns and/or responsibilities.
* * *
Do
you have a question? Send it in. Although letters cannot be answered
individually, appropriate letters will be answered in this column whenever
possible. Letters may be edited. Send letters to Ms. Carol Abaya,
mail direct to her at
Carol Abaya is an international-award-winning journalist and creator of the unique magazine The Sandwich Generation: You & Your Aging Parents.
NOTES TO EDITORS: text = 560 words; other material = 160 words
We would appreciate it if you would include the "Globe Syndicate" bug at the end of the column.