GOOD NEWS FOR SENIORS

GOOD FOR SENIORS: INCREASED FHA INSURED LOAN AMOUNT UP TO $417,000INCREASED; FDIC DEPOSIT INSURANCE ON ACCOUNTS TO $250,000.

If you are now a senior you have had a lifetime to accumulate assets, assets which you surely do not want reduced as the result of some lunatic banking decision.

One piece of good news in the midst the current mortgage meltdown is that FHA reverse mortgages remain secure because they are fully backed by HUD — if your lender implodes, explodes, shrinks or goes poof HUD will provide any cash which you are due under a reverse mortgage agreement.

Another piece of good news is this: Deposit insurance coverage has been increased.
The headlines say that FDIC insurance coverage has gone from $100,000 to $250,000. The actual changes are a touch more complex — see the official FDIC announcement below for specifics.

No doubt one of the major purposes of the new insurance limits is to create more confidence in the banking system, and given current events who can argue with such a policy?

While the coverage increase should be seen as a plus, in practice it’s hard to imagine any sentient depositor who, under the old rules, kept $250,000 in one account. Given the previous $100,000 insurance limit, the better option would have been to distribute funds to several institutions and hope that none failed.

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects against the loss of insured deposits if an FDIC-insured bank or savings association fails. FDIC deposit insurance is backed by the full faith and credit of the United States government. Since the FDIC was established, no depositor has ever lost a single penny of FDIC-insured funds.

FDIC insurance covers funds in deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs). FDIC insurance does not, however, cover other financial products and services that insured banks may offer, such as stocks, bonds, mutual fund shares, life insurance policies, annuities or municipal securities.

There is no need for depositors to apply for FDIC insurance or even to request it. Coverage is automatic.

To ensure funds are fully protected, depositors should understand their deposit insurance coverage limits. The FDIC provides separate insurance coverage for deposits held in different ownership categories such as single accounts, joint accounts, Individual Retirement Accounts (IRAs) and trust accounts.

Basic FDIC Deposit Insurance Coverage Limits*
Single Accounts (owned by one person)
$250,000 per owner**

Joint Accounts (two or more persons)
$250,000 per co-owner**

IRAs and certain other retirement accounts
$250,000 per owner

Trust Accounts
$250,000 per owner per beneficiary subject to specific limitations and requirements**

* These deposit insurance coverage limits refer to the total of all deposits that an accountholder (or accountholders) has at each FDIC-insured bank. The listing above shows only the most common ownership categories that apply to individual and family deposits, and assumes that all FDIC requirements are met.

** The legislation authorizing the increase in deposit insurance coverage limits makes the change effective October 3, 2008, through December 31, 2009.