AT LAST: REVERSE MORTGAGE IMPROVEMENTS ARE HERE!

Benjamin L. Cardin* has been a national leader on health care, retirement security and fiscal issues since coming to Congress in 1987. In addressing the Senate on Saturday, July 26, 2008 regarding the Housing and Economic Recovery Act of 2008, he made the following statement in regard to senior citizens and the Reverse Mortgage...

"...For example, there are changes to reverse mortgages that seniors use. Seniors who have lived in their homes for many, many years have a lot of equity in their homes. They need the cash out of their house to be able to afford to stay. Reverse mortgages help them obtain the resources they need to deal with their health care, to deal with quality-of-life issues. And this bill modernizes the reverse mortgage provisions, providing strong consumer protection provision."

SO, AT LAST...except for the President's signature, (which Bush has promised will come quickly and most likely without a signing ceremony), The Housing and Economic Rcovery Act of 2008 has at long length been approved.

Now, for the thousands of seniors who have been anxiously awaiting the needed changes in the Reverse Morgage since the Spring of 2007...finally a sigh of relief, and a deep breath before they make that long desired phone call to start the Reverse Mortgage loan process.

Why the FHA Modernization Act which was approved by both House and Senate last December, 2007 after bouncing back and forth between the Congressional Houses from April 2007, was ever put into the larger, more controversial HER Act is beyond me.

But, doing that put thousands of senior citizens in jeoparpdy of losing their homes, their health, of being able resolve other monetary problems relating to insurance, long term care, in-home care, paying for medicine, doctor and medical bills, eating healthy diets; let alone repairing homes, getting the heating and air-conditioning so much needed here in the DC metro area and more. It put a lot of unnecessary strain on them and their families. And, those with no familes had that much deeper problems.

I have been waiting to work with an elderly couple, now 76 and 78, (who shall remain nameless), who have been on the verge of losing their home since February. Because their current subprime loan was just $20,000 more than they could get out of a reverse mortgage, and the lender would give them no relief, they and their children have been spending savings, using up credit cards, and working overtime to keep up mortgage payments that jumped from $1700 to over $3400 in just two years. They weren't fools to take the loan, but they didn't know better, not being financially educated.

At the time, they were extremely vulnerable and exercised bad judgment, believing that it was their fault their 30-something son had died of a brain anurysm in his father's car after a hot and hard day of outdoor work. He had been helping his then 76 year old father in his landscaping business to help pay the personal medical bills of his parents. After his death they needed money to pay for their son's funeral, his bills and to pay off their own overdue bills. They believed they had a 30 year fixed rate loan. "The loan officer was so nice, and told us it was for 30 years", they told me.

So what exactly will the new Act do for Reverse mortgages?

The Housing and Economic Recovery Act of 2008 has many actions that are regarded as contoversial. But for the Reverse Mortgage Program for Seniors, it is a boon. The new law and the rules and regulations that eminate from this bill will help thousands of senior citizens stay in their homes, purchase newer, safer homes, repair homes, pay for medical and pharmaceutical costs, buy life insurance or long-term-care insurance, purchase better automobiles for safer transportation, eat more healthily, since often fresh foods cost more than frozen or canned, and improve their life-style in the face of the raising costs of everyday necessities such as gasoline, heating, food and medical/pharmacueticals. Other seniors who live in Co-ops outside the New York limit, will be able, for the first time, to avail themselves of Reverse Mortgage benefits, if they wish.

Briefly the major changes are:

1. The loan limit will be increased to a flat $417,000, all over the country (instead of a patchwork ofmaximum loan limits by county). And in certain high cost areas there will be adjustments to $625,000. When the $625,000 adjustment will take effect has not been determined.
   
2. The Reverse Mortgage may be used to Purchase a home (or help with the purchase of a home).
   
3. Co-op owners may now avail themselves of a reverse mortgage
   
4. Certain rule changes have expanded the type of mobile-home owners who may have reverse mortgages.
   
5. The lender fees have been reduced, to 2% of the first $200,000 and 1% on the balance, but capping out at $6,000, thereby saving the borrower someof the high costs.
   
6. Loan Originators have been restricted and will be stopped from offering or selling other financial products such as insurance or annuities to reverse mortgage borrowers.
   
7. Cross selling financial products by large financial institution will have strong restrictions
   
8. HECM Counelors will be required to receive more education, training and improve the quality of counseling
   

In the coming days and weeks when as thesechanges go into effect, and just how many ways they can be used to improve the use of the Reverse Mortgage will become big discussions on this blog. I hope to hear from you, view your comments and answer your questions. Thanks!

Gloria

*In 2006, he was elected by the people of Maryland to succeed Paul Sarbanes in the U.S. Senate. As a Senator, he serves on the Foreign Relations Committee, Judiciary Committee, Environment and Public Works Committee, Budget Committee and Small Business Committee