Over Half of Seniors Fear Current Net Worth Can’t Sustain Their Retirement
July 22nd, 2009 by admin Published in News, Reverse Mortgage.
Its no secret that the current economic crisis is having a lasting impact on many older Americans, forcing them to make difficult financial decisions due to having such little time and resources available to recover from losses in their retirement portfolio.
A new survey conducted with United Sample, in partnership with Golden Gateway Financial that polled a nationwide sample of more than 500 senior citizens aged 62 or older and found half of the respondents net worth has decreased by 10 to 30 percent. This is forcing many older Americans to put off retirement until after age 70.
"Even though some economists are beginning to grow optimistic, older Americans continue to feel real pain and must make hard tradeoffs and decisions," said Eric Bachman, founder and CEO of Golden Gateway Financial. "This is the worst possible time for the 40 percent of seniors now considering delaying retirement to be searching for jobs. It’s unfortunate that the hopes and dreams of these retirees are being put on hold."
Before the economic crisis, 67 percent of respondents planned to retire before age 70
Now, the number of seniors planning to retire by age 70 dropped to 40 percent
Before the economic crisis, 30 percent of those surveyed planned to retire after age 70
Now, almost 50 percent of seniors plan to retire after age 70. More than 40 percent of seniors polled said the current economy has had some kind of negative affect on their ability to retire. More than 50 percent of respondents said they are concerned that their overall net worth may no longer be enough to sustain their retirement. 86 percent of seniors said they had a reasonable understanding of their net worth, and 50 percent said that net worth had declined by between 10 and 30 percent .
Showing posts with label buy with reverse mortgage. Show all posts
Showing posts with label buy with reverse mortgage. Show all posts
6/22/2009
Decisions About Reverse Mortgages
Hope, worries over reverse mortgages
By Christina Rexrode
Posted: Sunday, Jun. 21, 2009
Doris Simmons, 69, of Indian Trail, says she carefully considered the downsides of a reverse mortgage and decided it was her best option when the recession started to hurt her business.
She's heard all the objections, like the critics who say you can usually get more money by selling your house. “Not in today's economy,” she replies, and she doesn't really want to move anyway. Her house has been in the family for 50 years and brings memories of her children.
She's a little bothered that the reverse mortgage will probably prevent her from leaving the house to her heirs, but “it's better than defaulting and losing it.”
‘A last resort'
Comptroller of the Currency John Dugan gave a speech this month about the risks of reverse mortgages and said he'd like to “get out in front of this issue before real problems develop” – which regulators arguably didn't do with subprime.
Others point out that reverse mortgages are expensive loans, since borrowers can tap only a portion of their equity. Usually, borrowers can get more money by selling their houses outright, or get cheaper terms by taking out a home-equity loans. “Generally it's kind of a last resort,” said Tom Pemberton, of Pemberton Financial Planning in Charlotte.
Still, the Federal Housing Administration praises reverse mortgages as a great option for a subset of borrowers, as do Bank of America Corp., Wells Fargo & Co. and the other banks that provide them. The banks get fees and interest. “We have seniors who own their homes free and clear but are struggling to buy food,” added Steve Boland, who runs Bank of America's reverse mortgage division.
Boland said reverse mortgages aren't appropriate for every senior, such as those who plan to move soon or those who are able to qualify for a home-equity loan and are comfortable with making the monthly payments. He and others point out that the government requires seniors to get independent counseling before taking out a reverse mortgage, which cuts down on the possibility of fraud or poor decision making.
Also, a reverse mortgage is probably a better deal than selling off your stock portfolio at the big loss it would currently incur, said Jeff Taylor. He is vice president for the senior products group at Wells Fargo Home Mortgage, and he encouraged his mother to take out a reverse mortgage about 15 years ago.
Meg Burns, director of the FHA's office of single-family program development, said she's heard only positive feedback. “One of the things you hear all the time is how this program made a really big difference in their lifestyle, just in little things, like now they can take their grandchildren to get ice cream,” Burns said.
Solving some problems
Simmons, the Indian Trail woman who took out the reverse mortgage, gets her income from Old Timers, a bar on the outskirts of Matthews. She bought the place in the 1980s so she'd have something to carry her into retirement. “I don't have any kind of retirement stocks, bonds, IRA, whatever,” Simmons said.
That plan worked fine for years, until the recession hit. With construction jobs drying up, the roofers, landscapers and painters who frequent the place have stopped coming around so often, and don't stay as long when they do.
Last year, Simmons fell behind on her house payments, which were about $550 a month. Though she'd bought the house years ago, she still had a payment because she'd taken out a home-equity loan in the late 1990s for business improvements.
She heard about reverse mortgages from a...representative who was helping with the home-equity loan. She'd also heard about them on TV and was skeptical, but met with a housing counselor anyway and eventually decided it was the best option. It's been a double gain: It eliminated her house payment, and gave her extra income to catch up on bills. The reverse mortgage hasn't solved all her problems. She still worries about when traffic will pick up again at Old Timers. “It saved me for the time being,” Simmons said. “Now I've got to worry about saving my business.”
By Christina Rexrode
Posted: Sunday, Jun. 21, 2009
Doris Simmons, 69, of Indian Trail, says she carefully considered the downsides of a reverse mortgage and decided it was her best option when the recession started to hurt her business.
She's heard all the objections, like the critics who say you can usually get more money by selling your house. “Not in today's economy,” she replies, and she doesn't really want to move anyway. Her house has been in the family for 50 years and brings memories of her children.
She's a little bothered that the reverse mortgage will probably prevent her from leaving the house to her heirs, but “it's better than defaulting and losing it.”
‘A last resort'
Comptroller of the Currency John Dugan gave a speech this month about the risks of reverse mortgages and said he'd like to “get out in front of this issue before real problems develop” – which regulators arguably didn't do with subprime.
Others point out that reverse mortgages are expensive loans, since borrowers can tap only a portion of their equity. Usually, borrowers can get more money by selling their houses outright, or get cheaper terms by taking out a home-equity loans. “Generally it's kind of a last resort,” said Tom Pemberton, of Pemberton Financial Planning in Charlotte.
Still, the Federal Housing Administration praises reverse mortgages as a great option for a subset of borrowers, as do Bank of America Corp., Wells Fargo & Co. and the other banks that provide them. The banks get fees and interest. “We have seniors who own their homes free and clear but are struggling to buy food,” added Steve Boland, who runs Bank of America's reverse mortgage division.
Boland said reverse mortgages aren't appropriate for every senior, such as those who plan to move soon or those who are able to qualify for a home-equity loan and are comfortable with making the monthly payments. He and others point out that the government requires seniors to get independent counseling before taking out a reverse mortgage, which cuts down on the possibility of fraud or poor decision making.
Also, a reverse mortgage is probably a better deal than selling off your stock portfolio at the big loss it would currently incur, said Jeff Taylor. He is vice president for the senior products group at Wells Fargo Home Mortgage, and he encouraged his mother to take out a reverse mortgage about 15 years ago.
Meg Burns, director of the FHA's office of single-family program development, said she's heard only positive feedback. “One of the things you hear all the time is how this program made a really big difference in their lifestyle, just in little things, like now they can take their grandchildren to get ice cream,” Burns said.
Solving some problems
Simmons, the Indian Trail woman who took out the reverse mortgage, gets her income from Old Timers, a bar on the outskirts of Matthews. She bought the place in the 1980s so she'd have something to carry her into retirement. “I don't have any kind of retirement stocks, bonds, IRA, whatever,” Simmons said.
That plan worked fine for years, until the recession hit. With construction jobs drying up, the roofers, landscapers and painters who frequent the place have stopped coming around so often, and don't stay as long when they do.
Last year, Simmons fell behind on her house payments, which were about $550 a month. Though she'd bought the house years ago, she still had a payment because she'd taken out a home-equity loan in the late 1990s for business improvements.
She heard about reverse mortgages from a...representative who was helping with the home-equity loan. She'd also heard about them on TV and was skeptical, but met with a housing counselor anyway and eventually decided it was the best option. It's been a double gain: It eliminated her house payment, and gave her extra income to catch up on bills. The reverse mortgage hasn't solved all her problems. She still worries about when traffic will pick up again at Old Timers. “It saved me for the time being,” Simmons said. “Now I've got to worry about saving my business.”
2/23/2009
FIVE COMMON MYTHS ABOUT AGING
5 Common Myths About Aging
By Deborah Kotz Posted February 20, 2009If you age well, you shouldn’t have to worry about
becoming frail and senile
Think aging is all about losing your memory and becoming hard of hearing? Think again. Many people sail through the aging process without walkers or pacemakers. In fact, researchers now believe it’s those age-related diseases—diabetes, heart disease, cancer, stroke, osteoporosis, Alzheimer’s—that leave us frail or disabled, rather than the normal aging of our bodies.
Consider this: The vast majority of those who live to be 100 are able to live independently on their own well into their 90’s, and about 15 percent of them have no age-related diseases even after they hit the century mark, according to the New England Centenarian Study.
Here are some other common myths about aging.
1. Losing those few extra pounds will extend your life. Once you hit 75, carrying a little extra weight can be protective. The Baltimore Longitudinal Study of Aging, a 50-year ongoing
study involving 3,000 seniors, has shown that older folks who have a body mass index of 27—about 154 pounds for a 5-foot-4 woman—live longer than everyone else, including those with a "healthy" BMI in the range of 19 to 25.It could be that the body needs a little extra fat to provide sufficient energy to the immune system when it’s, say, fighting off a flu infection, explains Luigi Ferrucci, who heads the BLSA study, conducted at the National Institute on Aging. He emphasizes, though, that obese individuals who have a BMI above 30 should still work with their doctors to get their weight down.
2. You ‘ll need a hearing aid. Granted, some hearing loss is quite common with age; as part of the normal aging process, sensory cells within the ear begin to die off. Still, only 35 percent of 80-year-olds actually need a hearing aid, and some folks in their 90s still have perfect hearing.3. You’re bound to get crotchety and withdrawn. The BLSA study found that our
personalities don’t change much
after age 30. So, if you’re cheerful and gregarious in your 40s, you can expect to be the same in your 80s. Marked personality changes some seniors experience are due not to normal aging but to some related disease like dementia or stroke.4. Senility is inevitable. Sure, you may forget a word or someone’s name here or there, but the senile stereotype of an old person—remember Mr. Magoo?—is a thing of the past. While nearly everyone experiences a certain amount of decline in cognitive abilities as they age, most of us don’t have an actual impairment in memory that severely interferes with our ability to live independently well into old age.
The unlucky ones who do, usually have a memory-robbing disease like Alzheimer’s. "I once interviewed a 104-year-old man from Sardinia for a study I was conducting," recalls Ferrucci. "We first spoke on the phone so I could let him know I was coming to see him. When I arrived two hours later, he had composed a poem about me, the man from Tuscany, [incorporating] various details from our previous conversation."
5. You won’t have the energy to exercise well in your 80s. Ninety is the new 70. Evidence now suggests that people 
who take up exercise later in life—say, at age 70—experience improved heart function by lowering their resting heart rate and increasing their heart mass and the amount of blood pumped with each beat. The BLSA study even found a reduction in heart attacks among older men who took up a high-intensity activity like swimming or running. Older exercisers also experience less shortness of breath and fatigue.
2/14/2009
REVERSE MORTGAGE LIMITS RAISED TO $625,500
A BOON FOR SENIORS: STIMULUS
BILL RAISES REVERSE
MORTGAGES TO $625,500.
Within the Stimulus Bill just passed by both the House of Representatives and the Senate, and now on the way to President Obama for signature (hopefully, by Monday, Feb.16th, President's Day) are a number of provisions that will be helpful to Senior Citizens. Below is an article from AARP which outlines these benefits. For senior's interested in larger Reverse Mortgages, there is good news, indeed, as the maximum cap has been raised over $200,000 from $417,000 to $625,500.
Please read on.....
Gloria
----------------------------------------------------------------------------------
AARP: Stimulus is First Step Toward
Restoring Long-Term Financial
Security for Older Americans
WASHINGTON, Feb. 13 /PRNewswire-FirstCall
In a historic and critical vote, Congress today passed the American Recovery and Reinvestment Act of 2009. Designated as a "key vote" by AARP on behalf of its 40 million members, the elected officials' votes will be posted on AARP's Government Watch site (www.aarp.org/governmentwatch) so that individuals across the nation can see how their elected official voted on this legislation.
(Logo: http://www.newscom.com/cgi-bin/prnh/20070209/NYF043LOGO )
Nancy LeaMond, Executive Vice President at AARP, released the following statement today:
"Unprecedented job loss, loss of savings and investments, and rising numbers of uninsured individuals has forced every American to take notice of this dire moment in history. The passage of the American Recovery and Reinvestment Act of 2009 is a critical moment for Americans young and old and a vital jump start to our ailing economy.
"AARP is pleased to see that Congress included a $250 economic recovery payment for older Americans, veterans and people with disabilities who are not eligible for the Make Work Pay credit.
"Additionally, we are encouraged by the long-term investment made by Congress that brings us steps closer to health care reform. Funding for health information technology, comparative effectiveness research and nurse and primary care training are all essential building blocks for reform and AARP is encouraged by their inclusion in the stimulus bill.
"While this landmark legislation is crucial to addressing our nation's most pressing issues today, many critical issues remain, including bolstering and securing the housing market, protecting homeowners from foreclosure and jumpstarting the credit markets. As an organization that regularly works with both sides of the aisle, we are hopeful for bipartisan solutions to these issues as Congress and the new administration move forward."
In a recent letter from AARP CEO Bill Novelli to House and Senate leadership outlines the most important issues for older Americans in this legislation:
The bill contains many provisions that we believe are paramount to promoting economic growth, assisting those most affected by the economic crisis, and providing the foundation for meeting critical needs, such as health care and the development of livable communities. Among the provisions we agree are especially needed are:
A $250 economic recovery payment for older persons, veterans, and individuals with disabilities who are ineligible to receive a Make Work Pay credit.
A significant increase in Medicaid spending that will help to stimulate the economy as the current economic downturn causes caseloads to rise while revenues plummet.
Essential building blocks for health care reform, including support for health information technology that includes critical privacy protections, health care comparative effectiveness research, and nurse and primary care training. These changes are critical because we cannot fix our economy if we do not address our broken health care system.
--An increase in funding for the Social Security Administration at a time of significant caseload increases.
--Affordable health insurance via subsidized COBRA for those who have lost health coverage along with jobs.
--An extension and increase in unemployment benefits. Over the past twelve months the number of unemployed aged 55 and older has risen by 65 percent.
--An increase in Food Stamps and other nutrition support. Fixed and low-income individuals face unacceptable choices as food costs increase along with the price of medicine and health care.
--An increase in the Weatherization Assistance Program to help low-income and older couples reduce their energy costs.
--A substantial increase in funding for transportation infrastructure projects that expand mobility options, including mass transit, rural and para-transit programs, and improved coordination of human services transportation programs.
--An increase in the loan value limit for FHA-insured reverse equity mortgages that would allow greater numbers of older homeowners to safely tap the equity in their homes to refinance unaffordable mortgages, obtain more suitable housing, pay medical bills or just meet daily living costs.
2/13/2009
AGE 70 IN HUMAN YEARS...TAKES HOME 1ST PLACE
STUMP TAKES IT ALL
To all: I gladly admit it; I'm a total dog-lover and the Westminster Dog Show is something I look forward to each year.
And, what fun it was this year to see a Sussex Spaniel named STUMP, take home the top prize - Best In Show. And where else to applaude him, but a site dedicated to making the lives of seniors more enjoyable.
See Video: Stump: Best in Show
Stump's shiny coat, floppy ears and confident-but-laid-back demeanor stole the hearts of the crowd and the judges. His competition included a giant schnauzer that was the nation's top show dog, a standard poodle with 94 best-in-show wins, a Brussels griffon, a Scottish deerhound, a Scottish terrier and a puli.
"He really is retired this time," his handler Scott Sommer told the Associated Press.
Nearly 2,500 dogs in total were entered at Westminster this year.
The odds were against Stump, the ten-year-old Sussex Spaniel, who won the 133rd annual Westminster Kennel Club dog show.
AGAINST the ODDS:
For one thing STUMP is OLD, a senior in dog years - 10. He re-emerged from retirement after taking a 5 year hiatus from the show ring (Stump won the sporting group in Westminster in 2004).
No purpose, no energy, no p'zazz. Poor Stump, a champion at heart, went a wastin'. He spent 19 long, sad days in a pet hospital. Once recovered, Stump hung tight with his handler, Scott Sommer, living the dog's life!
STUMP LONGS FOR THE GREEN CARPET:
Five days before this show, Sommer took Stump for one last walk on the green carpet at the Garden.
And WOWZER! The old Stump returned, strutting and panting with style. Ears a floppin'. Walking like a champion, happy energy soaring. And, as they say, the rest is DOGstory!
Vegas odds expert John Avello, who compiled odds for this year's Westminster show, gave Stump, the Sussex spaniel odds of 275-to-1 to win it all.
Stump proved that attitude reigns supreme. Age is merely a number. And if your ears are floppy and cute enough, you're a winner no matter.
LIFE LESSONS LEARNED FROM A DOG:
If Stump can, YOU CAN! (Not win the Westminster; but WIN!!!)
Take REALITY and toss it out the window. Odds - shmodds!
YOU make your own rules!
EXPERIENCE matters; age can trump youth!
CLAIM WHAT'S YOURS!!!Be the winner you are; follow your heart, your star, your bliss! Be inspired
----------------------------------------------------------------------------------
Hope you enjoyed this post as much as Stump enjoyed the Dog Show this year
To all: I gladly admit it; I'm a total dog-lover and the Westminster Dog Show is something I look forward to each year.And, what fun it was this year to see a Sussex Spaniel named STUMP, take home the top prize - Best In Show. And where else to applaude him, but a site dedicated to making the lives of seniors more enjoyable.
See Video: Stump: Best in Show
Stump was the underdog, both because of his senior status and his history. As the story goes, he left the show ring in 2004 after winning the sporting group at Westminster and later nearly died from a mysterious medical condition. He is the first of his breed to take top honors. The previous oldest winner was an eight-year-old Papillon in 1999.
Stump's shiny coat, floppy ears and confident-but-laid-back demeanor stole the hearts of the crowd and the judges. His competition included a giant schnauzer that was the nation's top show dog, a standard poodle with 94 best-in-show wins, a Brussels griffon, a Scottish deerhound, a Scottish terrier and a puli.
"He really is retired this time," his handler Scott Sommer told the Associated Press.
Nearly 2,500 dogs in total were entered at Westminster this year.
The odds were against Stump, the ten-year-old Sussex Spaniel, who won the 133rd annual Westminster Kennel Club dog show.
AGAINST the ODDS:
For one thing STUMP is OLD, a senior in dog years - 10. He re-emerged from retirement after taking a 5 year hiatus from the show ring (Stump won the sporting group in Westminster in 2004).
No purpose, no energy, no p'zazz. Poor Stump, a champion at heart, went a wastin'. He spent 19 long, sad days in a pet hospital. Once recovered, Stump hung tight with his handler, Scott Sommer, living the dog's life!
STUMP LONGS FOR THE GREEN CARPET:
Five days before this show, Sommer took Stump for one last walk on the green carpet at the Garden.
And WOWZER! The old Stump returned, strutting and panting with style. Ears a floppin'. Walking like a champion, happy energy soaring. And, as they say, the rest is DOGstory!
Vegas odds expert John Avello, who compiled odds for this year's Westminster show, gave Stump, the Sussex spaniel odds of 275-to-1 to win it all.
Stump proved that attitude reigns supreme. Age is merely a number. And if your ears are floppy and cute enough, you're a winner no matter.
LIFE LESSONS LEARNED FROM A DOG:If Stump can, YOU CAN! (Not win the Westminster; but WIN!!!)
Take REALITY and toss it out the window. Odds - shmodds!
YOU make your own rules!
EXPERIENCE matters; age can trump youth!
CLAIM WHAT'S YOURS!!!Be the winner you are; follow your heart, your star, your bliss! Be inspired
----------------------------------------------------------------------------------
Hope you enjoyed this post as much as Stump enjoyed the Dog Show this year
2/12/2009
Buy Your Retirement Home with a Reverse Mortgage
To all: Financial news has been dark, and perhaps for seniors the darkest of all as retirement income is cut and others desiring to retire must continue to work. But there is, at least, one bright spot: reverse mortgages can now be used to purchase a home.
Imagine being able to sell your home, use some of or all of the equity you get as the down payment on the retirement home you have yearned for, and pay for the balance of this home with a mortgage that will not require any mortgage payments, and also has no credit, income or asset qualifications! This , of course, is a bit of a simplification, but is nontheless true.
A reverse mortgage, that has NO monthly mortgage payments can now be used to purchase property. Please refer to other articles in this blog (Buy A House With No Mortgage Payment) that will explain how a reverse mortgage can be used to purchase a home, and/or write or call me for specific details for your situation.
Have a great day!
Gloria
gloria.boone@gmail.com
703-244-8151
Home sweet retirement home...(especially when purchased with a Reverse Mortgage. gb)
By Dan Kadlec, Money Magazine contributing writer
February 11, 2009: 6:08 AM ET
With prices down by a third in many markets, it may be time to start shopping for the house you want to end up in.
Discount Territory for Retirement
Since 2006, home values in many retirement areas have fallen 30% or more vs23% average drop in house prices nationwide.
City Average Home Price Drop since peak
Naples, Fla. $350,843 -38%
Las Vegas $215,542 -36%
Phoenix $203,151 -32%
Source:SOURCES: S&P Case-Shiller; Zillow.com.
My wife and I recently swallowed hard and bought a tiny cabin on a prime lake-front lot near the Berkshire hills in western Massachusetts where we'd like to retire one day. (At a later date, we'll build a bigger house.) Were we early, buying before housing prices hit rock bottom? Almost certainly. Are we losing sleep over it? Absolutely not.
We love knowing we've locked up a fantastic piece of property at 20% below the asking price - the price it might have fetched a few years ago. Now we're enjoying planning for our retirement in specifics - and meanwhile, spending as much time in our Berkshires retreat as we are able to.
If you also dream of retiring to an idyllic waterfront locale, a country plot or an active-adult community, you may similarly find that now is the right time to buy - or at least to start looking in earnest. Prices in once frothy retirement havens like Las Vegas, Naples, Fla. and Phoenix have tumbled more than 30% since peaking in 2006.
Sure, values may go lower still, given forecasts that the housing market will stay soft through 2009. Picking the exact bottom is a dicey game, however. And in any case, the question that matters most to retirement buyers is not what price the house you want will sell for next year but whether it will be worth more than what you paid for it in, say, 10 or 15 years.
Framed that way, the values in retirement homes right now are compelling in many areas. The following steps can help you decide if you're ready to make this leap and, if so, how to land the best deal.
Know what you can afford
Before you spend time and energy scouting properties, make sure you can clear the hurdles that buying now may present. Financing remains tight, so you'll need stellar credit (740 or higher) to qualify for the lowest mortgage rate. Then too, spending money on a second home isn't wise if your job could be in jeopardy because of the recession. And if your nest egg has been seriously dented by falling stocks, you'd be better off putting extra cash into rebuilding it, not carrying the costs of two properties. If these aren't obstacles for you, let the shopping begin.
Pick your sweet spot
The current downturn has hit virtually every corner of the market. So you can find deals almost anywhere; the trick is to home in on locales where the houses also have a good shot at maintaining their value going forward and eventually appreciating.
Your best bet: areas with large employers in growth industries such as health care and technology or that offer other extras that will help fuel expansion. Examples include the new airport planned for Panama City Beach, Fla. and the Goldilocks weather (not too hot, not too cold) in the Carolinas, which have seen a recent influx of new residents from the Deep South, typically former northerners who are coming partway back up the coast to recapture a taste of the four seasons.
If you prefer an active-adult community, you'll find the best values in complexes completed more than five years ago. "You won't get the very latest and greatest amenities," warns Rebecca Stahr, a consultant to adult-community builders at LifeSpring Environs in Atlanta. But that's why prices of these homes have fallen more than those of newer ones - other buyers are likely to favor newer developments that offer lots of on-site facilities like restaurants and spas.
Warning: Stay away from projects that aren't finished, no matter how many free upgrades the developer offers. Builders' struggles mean that construction sites may stay in the construction phase for quite a while.
Drive a hard bargain
Offering 10% less than recent sales is a good starting point; a 20% haircut is okay if you're worried about further drops in the market. If you get a cold response, you can always raise the offer and possibly still walk away with a good deal.
Work with an ally
Normally, real estate agents are legally bound to work on behalf of the seller to land the highest price. But you can choose instead to work with an agent accredited to represent the buyer; in this case, the legal obligation is reversed and the broker is compelled to use her understanding of the seller and the property to extract the lowest price on your behalf. (Find a buyer-agent through referrals or at rebac.net.)
True, the agent still draws her fee from the sales commission so her loyalties, unofficially, may be divided. But given the turbulence of the market, you gain an advantage by working with a knowledgeable partner. Says Carroll: "At times like these it pays to have an advocate."
Dan Kadlec is co-author of The Power Years, a guide for boomers. E-mail him at boom_years@moneymail.com.
Imagine being able to sell your home, use some of or all of the equity you get as the down payment on the retirement home you have yearned for, and pay for the balance of this home with a mortgage that will not require any mortgage payments, and also has no credit, income or asset qualifications! This , of course, is a bit of a simplification, but is nontheless true.
A reverse mortgage, that has NO monthly mortgage payments can now be used to purchase property. Please refer to other articles in this blog (Buy A House With No Mortgage Payment) that will explain how a reverse mortgage can be used to purchase a home, and/or write or call me for specific details for your situation.
Have a great day!
Gloria
gloria.boone@gmail.com
703-244-8151
Home sweet retirement home...(especially when purchased with a Reverse Mortgage. gb)
By Dan Kadlec, Money Magazine contributing writer
February 11, 2009: 6:08 AM ET
With prices down by a third in many markets, it may be time to start shopping for the house you want to end up in.
Discount Territory for Retirement
Since 2006, home values in many retirement areas have fallen 30% or more vs23% average drop in house prices nationwide.
City Average Home Price Drop since peak
Naples, Fla. $350,843 -38%
Las Vegas $215,542 -36%
Phoenix $203,151 -32%
Source:SOURCES: S&P Case-Shiller; Zillow.com.
My wife and I recently swallowed hard and bought a tiny cabin on a prime lake-front lot near the Berkshire hills in western Massachusetts where we'd like to retire one day. (At a later date, we'll build a bigger house.) Were we early, buying before housing prices hit rock bottom? Almost certainly. Are we losing sleep over it? Absolutely not.
We love knowing we've locked up a fantastic piece of property at 20% below the asking price - the price it might have fetched a few years ago. Now we're enjoying planning for our retirement in specifics - and meanwhile, spending as much time in our Berkshires retreat as we are able to.
If you also dream of retiring to an idyllic waterfront locale, a country plot or an active-adult community, you may similarly find that now is the right time to buy - or at least to start looking in earnest. Prices in once frothy retirement havens like Las Vegas, Naples, Fla. and Phoenix have tumbled more than 30% since peaking in 2006.
Sure, values may go lower still, given forecasts that the housing market will stay soft through 2009. Picking the exact bottom is a dicey game, however. And in any case, the question that matters most to retirement buyers is not what price the house you want will sell for next year but whether it will be worth more than what you paid for it in, say, 10 or 15 years.
Framed that way, the values in retirement homes right now are compelling in many areas. The following steps can help you decide if you're ready to make this leap and, if so, how to land the best deal.
Know what you can afford
Before you spend time and energy scouting properties, make sure you can clear the hurdles that buying now may present. Financing remains tight, so you'll need stellar credit (740 or higher) to qualify for the lowest mortgage rate. Then too, spending money on a second home isn't wise if your job could be in jeopardy because of the recession. And if your nest egg has been seriously dented by falling stocks, you'd be better off putting extra cash into rebuilding it, not carrying the costs of two properties. If these aren't obstacles for you, let the shopping begin.
Pick your sweet spot
The current downturn has hit virtually every corner of the market. So you can find deals almost anywhere; the trick is to home in on locales where the houses also have a good shot at maintaining their value going forward and eventually appreciating.
Your best bet: areas with large employers in growth industries such as health care and technology or that offer other extras that will help fuel expansion. Examples include the new airport planned for Panama City Beach, Fla. and the Goldilocks weather (not too hot, not too cold) in the Carolinas, which have seen a recent influx of new residents from the Deep South, typically former northerners who are coming partway back up the coast to recapture a taste of the four seasons.
If you prefer an active-adult community, you'll find the best values in complexes completed more than five years ago. "You won't get the very latest and greatest amenities," warns Rebecca Stahr, a consultant to adult-community builders at LifeSpring Environs in Atlanta. But that's why prices of these homes have fallen more than those of newer ones - other buyers are likely to favor newer developments that offer lots of on-site facilities like restaurants and spas.
Warning: Stay away from projects that aren't finished, no matter how many free upgrades the developer offers. Builders' struggles mean that construction sites may stay in the construction phase for quite a while.
Drive a hard bargain
Offering 10% less than recent sales is a good starting point; a 20% haircut is okay if you're worried about further drops in the market. If you get a cold response, you can always raise the offer and possibly still walk away with a good deal.
Work with an ally
Normally, real estate agents are legally bound to work on behalf of the seller to land the highest price. But you can choose instead to work with an agent accredited to represent the buyer; in this case, the legal obligation is reversed and the broker is compelled to use her understanding of the seller and the property to extract the lowest price on your behalf. (Find a buyer-agent through referrals or at rebac.net.)
True, the agent still draws her fee from the sales commission so her loyalties, unofficially, may be divided. But given the turbulence of the market, you gain an advantage by working with a knowledgeable partner. Says Carroll: "At times like these it pays to have an advocate."
Dan Kadlec is co-author of The Power Years, a guide for boomers. E-mail him at boom_years@moneymail.com.
1/30/2009
GOOD NEWS: Stimulus Bill May Improve Reverse Mortgage
REVERSE MORTGAGE LIMIT MAY BE RAISED TO $625,500
Hey all......good news. I just read that the Obama Stimulus Bill includes a provision for the reverse mortgage to have a top limit of $625,500...raising it from $417,000 for the rest of 2009. To make the increase permanent, it would have to be approved again, to be permanent, by the Congress later in the year.
But, it's a start...and it's in the right direction!
So, let's watch the stimulus bill closely and see what the Senate does with this boon to senior homeowners.
So many homeowners, because of the housing bubble, and in spite of the downturn in the market and lowering of home values, still need this higher limit in order to get enough equity out of their property to pay off current loans.
As an example... if you have a home that is worth $525,000 and you are 65 years of age, here's what you'd get on a Reverse Mortgage capped at $417,000 or at $625,500.
With the $417,000 loan cap, age 65, today's interest rate: A Gross Loan of $270,665. With a $625,500 cap your loan would be approximately $405,900, based on today's RM formulas. That's a huge difference! Huge. And it would provide for thousands and thousands of senior citizens being able to access financial security. Probably such a huge difference, that a letter to your senator (since the Stimulus Bill is now in the Senate Chamber) would definitely be in order.
Virginia Senators:
Warner, Mark R. - (D - VA) (202) 224-2023
B40C DIRKSEN SENATE OFFICE BUILDING WASHINGTON DC 20510
Webb, Jim - (D - VA) (202) 224-4024
144 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
Here's the notice from the Reverse Mortgage Daily:
Yesterday the House of Representatives approved President Obama’s economic recovery plan with vote of 244-188. The text of the bill does include the reverse mortgage provision which was added in response to a request that came jointly from NRMLA and AARP. The provision would set the single national loan limit for HECMs at a higher level than $417,000–for the balance of 2009.
According to the email, it would bring the HECM loan limit to 150% of the Freddie Mac limit, or $625,500.
If the Freddie Mac limit changes, the HECM limit would change commensurately. This change is being offered as a temporary measure, thru 2009 only, because it is part of an emergency economic stimulus package. A permanent change would have to be enacted through a more appropriate housing bill.
Hey all......good news. I just read that the Obama Stimulus Bill includes a provision for the reverse mortgage to have a top limit of $625,500...raising it from $417,000 for the rest of 2009. To make the increase permanent, it would have to be approved again, to be permanent, by the Congress later in the year.
But, it's a start...and it's in the right direction!
So, let's watch the stimulus bill closely and see what the Senate does with this boon to senior homeowners.
So many homeowners, because of the housing bubble, and in spite of the downturn in the market and lowering of home values, still need this higher limit in order to get enough equity out of their property to pay off current loans.
As an example... if you have a home that is worth $525,000 and you are 65 years of age, here's what you'd get on a Reverse Mortgage capped at $417,000 or at $625,500.
With the $417,000 loan cap, age 65, today's interest rate: A Gross Loan of $270,665. With a $625,500 cap your loan would be approximately $405,900, based on today's RM formulas. That's a huge difference! Huge. And it would provide for thousands and thousands of senior citizens being able to access financial security. Probably such a huge difference, that a letter to your senator (since the Stimulus Bill is now in the Senate Chamber) would definitely be in order.
Virginia Senators:
Warner, Mark R. - (D - VA) (202) 224-2023
B40C DIRKSEN SENATE OFFICE BUILDING WASHINGTON DC 20510
Webb, Jim - (D - VA) (202) 224-4024
144 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
Here's the notice from the Reverse Mortgage Daily:
Yesterday the House of Representatives approved President Obama’s economic recovery plan with vote of 244-188. The text of the bill does include the reverse mortgage provision which was added in response to a request that came jointly from NRMLA and AARP. The provision would set the single national loan limit for HECMs at a higher level than $417,000–for the balance of 2009.
SEC. 12004. FHA REVERSE MORTGAGE LOAN LIMITS FOR 2009.
For mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, the second sentence of section 255(g) of the National Housing Act (12 U.S.C. 171520(g)) shall be considered to require that in no case may the benefits of
insurance under such section 255 exceed 150 percent of the maximum dollar amount in effect under the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)).
According to the email, it would bring the HECM loan limit to 150% of the Freddie Mac limit, or $625,500.
If the Freddie Mac limit changes, the HECM limit would change commensurately. This change is being offered as a temporary measure, thru 2009 only, because it is part of an emergency economic stimulus package. A permanent change would have to be enacted through a more appropriate housing bill.
1/26/2009
REVERSE MORTGAGE: USE IT TO PURCHASE OR REFINANCE!
Below, a basic article from the Montana "Missoulian" shows that reverse mortgages are becoming popular all over the USA, and that homeowners in states and counties that used to have smaller FHA Reverse Mortgages (because the loan limits were based on county home prices and economics) are now in excellent positions to obtain more needed cash or credit lines from their homes with the new, higher $417,000 nationwide lending limit.
REVERSE MORTGAGE PURCHASES - WITH NO MONTHLY PAYMENT
As of January 1, 2009, Reverse Mortgages may be used to purchase a new (or a replacement principal residence). The purchase Reverse mortgages works this way, generally.
If you currently own a home that is perhaps too big for you, or is older and needs more repair than you want to put into it, and you would like to buy a newer or smaller home, here are the steps to follow.
1. Estimate how much cash you will have after selling your current home.
2. Estimate the price you'd most likely pay for a new home.
3. Give your Reverse Mortgage Specialist this information, as well as your age(s) and the zip code of the new home.
4. Your Reverse Mortgage Specialist will be able to then tell you, based on the price, your age(s), the interest rate, and zip code, how much of a net (amount after costs) Reverse Mortgage you could get on the new home.
5. Take the value of the new home, deduct the amount of the new net (after costs) Reverse Mortgage, and the balance will be what you'll be required to put down on the new home.
6. At the end of the transaction you will have the new home with no mortgage payments - although you will be responsible for taxes and insurance.
7. In addition, since you won't have to use all of your cash-equity out of your old home to purchase the new home, you'll have extra cash to put into savings to use for future needs.
Here's an example of a senior couple who have been able to do this.
1. They sold their current large home for $550,000 and after paying off their current loan and all closing costs, ended up with $285,000 in cash.
2. They moved to another area in their state where housing prices were lower, and where they could live closer to their grandchildren.
3. They were 69 and 67 years of age and selected a home that cost $350,000. Because of the interest rate, their age and the value of the property, they were able to qualify for a net Reverse Mortgage of $210,831 at a monthly interest rate of 2.43%.
They then put down $139,169 from the $285,000 they got on their old house. This left them with $145,837 in cash to add to their savings and investments which they could use any way they pleased.
In addition, there were no credit, income, employment or savings requirements for them to qualify for the loan. And, they will have no monthly mortgage payments - making their social security and other retirement income go further.
It is true that over time they will eat into the money they put down on the new house (their new equity) as interest on the Reverse Mortgage accumulates. Over a 10 or 15 year period, if their home appreciates at approximately 4% a year, the equity will last many years. (Or provide cash-out to them if they sold the new home)
If you would like to explore this option with me, please call me at 703/244-8151 and I will be happy to provide you with detailed information on how much you would get on a Reverse Mortgage, the costs, as well as an amortization sheet showing you just how much you would owe annually, and how much equity you could have left in your property at any given year. Most people will be pleasantly surprised.
But also bear in mind, that if you ever use up your equity and want to stay in the home anyway - that is absolutely your right, and it is written into the program. If, by the time you (all borrowers) have passed on or moved out, and for any reason at all you owe more on the loan than the home is worth, FHA will pay that difference to the lender. Neither you, nor your heirs, would be responsible for that difference, and neither the lender nor the FHA can come after any of your other assets (or inheritance) to pay that difference. This is also written into the documents.
Gloria
703-244-8151
Turning home equity into cash
By BETSY COHEN of the Missoulian
Reverse mortgage: It's a term - and a tool - that is becoming increasingly familiar among the ranks of retirees and lenders.
What is it? It's a viable option for people over the age of 62 who want to stay in their homes but have little or no savings, assets or other cash options to pay their bills.
This is how it works: Senior citizens who own their homes can convert the equity in those homes into cash without having to move out or repay the loan each month, explained Greg Harper, Missoula branch director for the Consumer Credit Counseling Service of Montana.
The money paid to the homeowner, which is usually between 65 percent to 75 percent of the assessed equity, is paid back to the lender when the homeowner sells the home, moves into another living situation or dies and the home is then sold.
Increasingly, more and more seniors are turning to this option, said Peter Bell, president of the National Reverse Mortgage Lenders Association, a nonprofit trade association based in Washington, D.C..
“I think people are cash-constrained in a number of different ways,” Bell said. “And this has become an important tool for people to manage their personal finances.
“The reverse mortgage is used to pay off an existing mortgage (so homeowners have more available money to pay for other living expenses) or to maintain living in the house.”
Federally insured Home Equity Conversion Mortgages (HCEMs) are the most popular reverse mortgages offered, and account for 90 percent of all such mortgages in the United States. In 2008, the number of HCEMs grew by 6.4 percent, amounting to 115,176 loans.
Homeowners in Florida and California lead this emerging trend, according to the Federal Department of Housing and Urban Development, but statistics show Montana homeowners are also riding the swell.
On the ground, it means the Consumer Credit Counseling Service of Montana is busy - very busy - these days, said Tim Robbins, director of counseling for the statewide agency.
“We have been doing counseling for reverse mortgages for four years and we have had a 400 percent increase over the last four years,” Robbins said. “Four years ago, we were counseling between four and six homeowners a month. Now we are seeing about 20 to 25 people a month.”
By federal mandate, anyone who is interested in HCEMs must have third-party counsel before a reverse mortgage is approved. The law not only helps seniors make informed decisions with the help of an objective third party, but it helps protect seniors from predatory lending practices, Robbins explained.
In Montana, the bulk of such counseling takes place in the eight offices of Consumer Credit Counseling Service.
“What we are experiencing is pretty typical of the national trend,” Robbins said. “Reverse mortgages nationally have doubled every year for the last three to four years.”
Several factors are helping to push this once-obscure fiscal tool into the limelight, said Bell, whose D.C. organization keeps track of the niche lending sector.
“There is a snowball effect for people,” he said. “Once they know someone who has gone out and got it, the person who has it becomes the convincer to help the reluctant one move ahead.”
Of course, there are more tangible reasons.
In November, housing legislation cut fees on reverse mortgages while raising the amount that homeowners can borrow against.
In Montana, borrowing caps were once determined county by county, and generally the amount people could borrow against their equity was around $200,000, even if there was more equity in the home.
Today, that limit is $417,000 nationwide, Robbins said.“To have a national limit has really changed things,” he said. “It's given people more options.”
Robbins expects reverse mortgages will only get more popular as people live longer in general, and as more baby boomers - many of whom may be financially strapped in their sunset years - hit retirement age.
It's telling that the watchdog of American aging, the AARP, is tracking the trend on its Web site, www.aarp.org, where there are numerous and current articles that explain the world of reverse mortgages.
“Reverse mortgages are a good tool for certain people,” said Mary Harris, a certified public accountant with the Missoula firm Boyle Deveny & Meyer.
In recent years, more of her clients have asked Harris about the lending option.
“It really works if you don't have other assets to work with,” Harris said. “It actually can be something that can be very useful, something that will allow people to have a good quality of life.
“For a lot of people, their home is their single largest asset, and with a reverse mortgage you don't have to have your mortgage paid off to do it.”While the option has its allure, there are several caveats. “People are using it as a last resort,” Harris said. “This is not a good option for people who want to keep their home debt-free because a reverse mortgage is a debt.”
In all his years as a counselor at Credit Counseling Service of Montana, Harper said he's learned to immediately tell people that reverse mortgages are most helpful to homeowners who have no other financial options.“It can be a very expensive loan up front,” Harper explained. “This isn't the best option if it's for a short-term deal.”
The other, perhaps most important caveat? “Talk to your family and heirs about this,” Harper said. “They are going to be a party to this even if they don't think they are. The ownership of the property is something you will them - and they have to deal with that and the debt that comes with it.”
Copyright © 2009 Missoulian
REVERSE MORTGAGE PURCHASES - WITH NO MONTHLY PAYMENT
As of January 1, 2009, Reverse Mortgages may be used to purchase a new (or a replacement principal residence). The purchase Reverse mortgages works this way, generally.
If you currently own a home that is perhaps too big for you, or is older and needs more repair than you want to put into it, and you would like to buy a newer or smaller home, here are the steps to follow.
1. Estimate how much cash you will have after selling your current home.
2. Estimate the price you'd most likely pay for a new home.
3. Give your Reverse Mortgage Specialist this information, as well as your age(s) and the zip code of the new home.
4. Your Reverse Mortgage Specialist will be able to then tell you, based on the price, your age(s), the interest rate, and zip code, how much of a net (amount after costs) Reverse Mortgage you could get on the new home.
5. Take the value of the new home, deduct the amount of the new net (after costs) Reverse Mortgage, and the balance will be what you'll be required to put down on the new home.
6. At the end of the transaction you will have the new home with no mortgage payments - although you will be responsible for taxes and insurance.
7. In addition, since you won't have to use all of your cash-equity out of your old home to purchase the new home, you'll have extra cash to put into savings to use for future needs.
Here's an example of a senior couple who have been able to do this.
1. They sold their current large home for $550,000 and after paying off their current loan and all closing costs, ended up with $285,000 in cash.
2. They moved to another area in their state where housing prices were lower, and where they could live closer to their grandchildren.
3. They were 69 and 67 years of age and selected a home that cost $350,000. Because of the interest rate, their age and the value of the property, they were able to qualify for a net Reverse Mortgage of $210,831 at a monthly interest rate of 2.43%.
They then put down $139,169 from the $285,000 they got on their old house. This left them with $145,837 in cash to add to their savings and investments which they could use any way they pleased.
In addition, there were no credit, income, employment or savings requirements for them to qualify for the loan. And, they will have no monthly mortgage payments - making their social security and other retirement income go further.
It is true that over time they will eat into the money they put down on the new house (their new equity) as interest on the Reverse Mortgage accumulates. Over a 10 or 15 year period, if their home appreciates at approximately 4% a year, the equity will last many years. (Or provide cash-out to them if they sold the new home)
If you would like to explore this option with me, please call me at 703/244-8151 and I will be happy to provide you with detailed information on how much you would get on a Reverse Mortgage, the costs, as well as an amortization sheet showing you just how much you would owe annually, and how much equity you could have left in your property at any given year. Most people will be pleasantly surprised.
But also bear in mind, that if you ever use up your equity and want to stay in the home anyway - that is absolutely your right, and it is written into the program. If, by the time you (all borrowers) have passed on or moved out, and for any reason at all you owe more on the loan than the home is worth, FHA will pay that difference to the lender. Neither you, nor your heirs, would be responsible for that difference, and neither the lender nor the FHA can come after any of your other assets (or inheritance) to pay that difference. This is also written into the documents.
Gloria
703-244-8151
Turning home equity into cash
By BETSY COHEN of the Missoulian
Reverse mortgage: It's a term - and a tool - that is becoming increasingly familiar among the ranks of retirees and lenders.
What is it? It's a viable option for people over the age of 62 who want to stay in their homes but have little or no savings, assets or other cash options to pay their bills.
This is how it works: Senior citizens who own their homes can convert the equity in those homes into cash without having to move out or repay the loan each month, explained Greg Harper, Missoula branch director for the Consumer Credit Counseling Service of Montana.
The money paid to the homeowner, which is usually between 65 percent to 75 percent of the assessed equity, is paid back to the lender when the homeowner sells the home, moves into another living situation or dies and the home is then sold.
Increasingly, more and more seniors are turning to this option, said Peter Bell, president of the National Reverse Mortgage Lenders Association, a nonprofit trade association based in Washington, D.C..
“I think people are cash-constrained in a number of different ways,” Bell said. “And this has become an important tool for people to manage their personal finances.
“The reverse mortgage is used to pay off an existing mortgage (so homeowners have more available money to pay for other living expenses) or to maintain living in the house.”
Federally insured Home Equity Conversion Mortgages (HCEMs) are the most popular reverse mortgages offered, and account for 90 percent of all such mortgages in the United States. In 2008, the number of HCEMs grew by 6.4 percent, amounting to 115,176 loans.
Homeowners in Florida and California lead this emerging trend, according to the Federal Department of Housing and Urban Development, but statistics show Montana homeowners are also riding the swell.
On the ground, it means the Consumer Credit Counseling Service of Montana is busy - very busy - these days, said Tim Robbins, director of counseling for the statewide agency.
“We have been doing counseling for reverse mortgages for four years and we have had a 400 percent increase over the last four years,” Robbins said. “Four years ago, we were counseling between four and six homeowners a month. Now we are seeing about 20 to 25 people a month.”
By federal mandate, anyone who is interested in HCEMs must have third-party counsel before a reverse mortgage is approved. The law not only helps seniors make informed decisions with the help of an objective third party, but it helps protect seniors from predatory lending practices, Robbins explained.
In Montana, the bulk of such counseling takes place in the eight offices of Consumer Credit Counseling Service.
“What we are experiencing is pretty typical of the national trend,” Robbins said. “Reverse mortgages nationally have doubled every year for the last three to four years.”
Several factors are helping to push this once-obscure fiscal tool into the limelight, said Bell, whose D.C. organization keeps track of the niche lending sector.
“There is a snowball effect for people,” he said. “Once they know someone who has gone out and got it, the person who has it becomes the convincer to help the reluctant one move ahead.”
Of course, there are more tangible reasons.
In November, housing legislation cut fees on reverse mortgages while raising the amount that homeowners can borrow against.
In Montana, borrowing caps were once determined county by county, and generally the amount people could borrow against their equity was around $200,000, even if there was more equity in the home.
Today, that limit is $417,000 nationwide, Robbins said.“To have a national limit has really changed things,” he said. “It's given people more options.”
Robbins expects reverse mortgages will only get more popular as people live longer in general, and as more baby boomers - many of whom may be financially strapped in their sunset years - hit retirement age.
It's telling that the watchdog of American aging, the AARP, is tracking the trend on its Web site, www.aarp.org, where there are numerous and current articles that explain the world of reverse mortgages.
“Reverse mortgages are a good tool for certain people,” said Mary Harris, a certified public accountant with the Missoula firm Boyle Deveny & Meyer.
In recent years, more of her clients have asked Harris about the lending option.
“It really works if you don't have other assets to work with,” Harris said. “It actually can be something that can be very useful, something that will allow people to have a good quality of life.
“For a lot of people, their home is their single largest asset, and with a reverse mortgage you don't have to have your mortgage paid off to do it.”While the option has its allure, there are several caveats. “People are using it as a last resort,” Harris said. “This is not a good option for people who want to keep their home debt-free because a reverse mortgage is a debt.”
In all his years as a counselor at Credit Counseling Service of Montana, Harper said he's learned to immediately tell people that reverse mortgages are most helpful to homeowners who have no other financial options.“It can be a very expensive loan up front,” Harper explained. “This isn't the best option if it's for a short-term deal.”
The other, perhaps most important caveat? “Talk to your family and heirs about this,” Harper said. “They are going to be a party to this even if they don't think they are. The ownership of the property is something you will them - and they have to deal with that and the debt that comes with it.”
Copyright © 2009 Missoulian
1/14/2009
Reverse Mortgages Get Boost (from Christian Science Monitor)
Reverse mortgages get a boost from Uncle Sam
New rules raise loan limits, lower origination fees. NO credit, income or asset verification required.
New rules raise loan limits, lower origination fees. NO credit, income or asset verification required.
By Margaret Price Correspondent of The Christian Science Monitor
from the October 27, 2008 edition
If you’re in your golden years and the stock market plunge has left a black hole in your bank account, a reverse mortgage might help.
New rules passed by Congress this summer and (which took) effect Nov. 1 have beefed up the federally insured reverse-mortgage program, raising loan limits and lowering origination fees. Called Home Equity Conversion Mortgages (HECM), these loans let seniors age 62 or older tap into the value of their home to get tax-free cash.
To be sure, the timing of the rule changes comes amid a maelstrom in the overall mortgage and housing markets. But industry experts say that lenders are still providing HECMs, which are insured by the Federal Housing Administration (FHA).
In contrast, reverse mortgages built and backed by private lenders are in short supply. (Currently not available 1-14-2009) According to those who work in the reverse mortgage industry, HECMs account for more than 90 percent of the reverse-mortgage market and currently represent about 99 percent of reverse mortgages being made.
Until a recent slowdown in their growth, HECMs’ popularity had been soaring, especially during the mid-decade years. Yet, their market penetration remains only about 1 percent of those eligible to receive them.
Reverse mortgage loans are based on a person’s home as collateral, not on their income or creditworthiness. The loan can be obtained as a lump sum, line of credit, monthly payments, or a combination of these ways. The money is not repaid until after the homeowner dies or otherwise permanently leaves the house.
After that, the borrower or his heirs repay the loan, plus compounded interest on it. But the size of the repayment cannot exceed the home’s value.
The actual size of a reverse-mortgage loan depends on the age of the borrower, the value of the home, closing costs, and current interest rates. Generally, the older the borrower, and/or the more valuable the home, and/or the lower the interest rate, the more money a reverse mortgage can provide.
Experts say the new rules more closely align HECMs with today’s home values while boosting safeguards for elder borrowers. Among the key provisions:
•Loan limits will be raised to $417,000 nationally, versus the prior limit, set on a county-by-county basis, ranging from $200,160 to $362,790.
•Origination fees will be capped at 2 percent on the first $200,000 and 1 percent on any amount above that, with a inflation-adjustable limit of $6,000. The prior cap was 2 percent of any loan amount.
•HECMs can be used to contribute to the purchase of a new residence – an option that may be popular with seniors who want to downsize their living space.
•HECMs can be obtained on co-operative properties. Previously, reverse mortgages were limited to single-family houses, townhouses, and condominiums.
•Beefed up consumer protections. Some seniors have complained about being urged to use their loan money to buy other financial products – annuities, life insurance, long-term care insurance – that were either inappropriate or they didn’t need. To address such abuses, reverse-mortgage lenders will be barred from selling other financial products to its customers.
Most aspects of the latter three changes will take affect in the coming months.
“We think these are very good changes,” sums up David Certner, legislative policy director of AARP.
To Peter Bell, president of the National Reverse Mortgage Lenders Association, the new rules are destined to “trigger more interest” in reverse mortgages. “My sense is that we’ll see greater penetration and accelerating growth for years to come,” he says.
As long-term growth factors, Mr. Bell and others cite the swelling ranks of seniors living longer, needing more financial resources, and becoming more comfortable with borrowing against the value of their home.
“[I] wouldn’t be surprised to see reverse market growth rates of 25 percent per year over the next five years,” says Eric Bachman, CEO of Golden Gateway Financial, a reverse-mortgage broker in Oakland, Calif.
Mr. Bachman believes today’s shaky real estate market has created a timing consideration. “Seniors’ home values have dropped roughly 20 percent in the past year,” he says, and they’re projected to slide further over the next 12-to-24 months. Thus, he feels that seniors looking for a reverse mortgage should act sooner than later to avoid any further slide in their home values, which could reduce the amount they could get from a reverse mortgage.
But decisions about taking out a reverse mortgage shouldn’t be done in haste, warns Martin Shenkman, a lawyer and financial planner in Paramus, N.J. “Before settling on any one financial tool, including a reverse mortgage, people should undertake a broad financial plan to see how one technique fits into their overall financial needs and goals,” he says.
People who need additional funds should weigh an array of options. Mr. Shenkman says that these can range from “cutting expenses, to selling their home to their kids, to increasing distributions from their retirement account, to selling a life insurance policy that they don’t need.”
Even with the rule changes on HECMs, they still won’t be cheap. In addition to an array of mortgage closing fees, other costs include an upfront insurance premium of 2 percent of the maximum claim amount that can be borrowed plus a 0.5 percent annual premium. Although most fees are typically deducted from the loan’s principal, they do trim the amount that the borrower receives. Such fees will require borrowers to think carefully before tapping what could be their last big financial source.
from the October 27, 2008 edition
If you’re in your golden years and the stock market plunge has left a black hole in your bank account, a reverse mortgage might help.
New rules passed by Congress this summer and (which took) effect Nov. 1 have beefed up the federally insured reverse-mortgage program, raising loan limits and lowering origination fees. Called Home Equity Conversion Mortgages (HECM), these loans let seniors age 62 or older tap into the value of their home to get tax-free cash.
To be sure, the timing of the rule changes comes amid a maelstrom in the overall mortgage and housing markets. But industry experts say that lenders are still providing HECMs, which are insured by the Federal Housing Administration (FHA).
In contrast, reverse mortgages built and backed by private lenders are in short supply. (Currently not available 1-14-2009) According to those who work in the reverse mortgage industry, HECMs account for more than 90 percent of the reverse-mortgage market and currently represent about 99 percent of reverse mortgages being made.
Until a recent slowdown in their growth, HECMs’ popularity had been soaring, especially during the mid-decade years. Yet, their market penetration remains only about 1 percent of those eligible to receive them.
Reverse mortgage loans are based on a person’s home as collateral, not on their income or creditworthiness. The loan can be obtained as a lump sum, line of credit, monthly payments, or a combination of these ways. The money is not repaid until after the homeowner dies or otherwise permanently leaves the house.
After that, the borrower or his heirs repay the loan, plus compounded interest on it. But the size of the repayment cannot exceed the home’s value.
The actual size of a reverse-mortgage loan depends on the age of the borrower, the value of the home, closing costs, and current interest rates. Generally, the older the borrower, and/or the more valuable the home, and/or the lower the interest rate, the more money a reverse mortgage can provide.
Experts say the new rules more closely align HECMs with today’s home values while boosting safeguards for elder borrowers. Among the key provisions:
•Loan limits will be raised to $417,000 nationally, versus the prior limit, set on a county-by-county basis, ranging from $200,160 to $362,790.
•Origination fees will be capped at 2 percent on the first $200,000 and 1 percent on any amount above that, with a inflation-adjustable limit of $6,000. The prior cap was 2 percent of any loan amount.
•HECMs can be used to contribute to the purchase of a new residence – an option that may be popular with seniors who want to downsize their living space.
•HECMs can be obtained on co-operative properties. Previously, reverse mortgages were limited to single-family houses, townhouses, and condominiums.
•Beefed up consumer protections. Some seniors have complained about being urged to use their loan money to buy other financial products – annuities, life insurance, long-term care insurance – that were either inappropriate or they didn’t need. To address such abuses, reverse-mortgage lenders will be barred from selling other financial products to its customers.
Most aspects of the latter three changes will take affect in the coming months.
“We think these are very good changes,” sums up David Certner, legislative policy director of AARP.
To Peter Bell, president of the National Reverse Mortgage Lenders Association, the new rules are destined to “trigger more interest” in reverse mortgages. “My sense is that we’ll see greater penetration and accelerating growth for years to come,” he says.
As long-term growth factors, Mr. Bell and others cite the swelling ranks of seniors living longer, needing more financial resources, and becoming more comfortable with borrowing against the value of their home.
“[I] wouldn’t be surprised to see reverse market growth rates of 25 percent per year over the next five years,” says Eric Bachman, CEO of Golden Gateway Financial, a reverse-mortgage broker in Oakland, Calif.
Mr. Bachman believes today’s shaky real estate market has created a timing consideration. “Seniors’ home values have dropped roughly 20 percent in the past year,” he says, and they’re projected to slide further over the next 12-to-24 months. Thus, he feels that seniors looking for a reverse mortgage should act sooner than later to avoid any further slide in their home values, which could reduce the amount they could get from a reverse mortgage.
But decisions about taking out a reverse mortgage shouldn’t be done in haste, warns Martin Shenkman, a lawyer and financial planner in Paramus, N.J. “Before settling on any one financial tool, including a reverse mortgage, people should undertake a broad financial plan to see how one technique fits into their overall financial needs and goals,” he says.
People who need additional funds should weigh an array of options. Mr. Shenkman says that these can range from “cutting expenses, to selling their home to their kids, to increasing distributions from their retirement account, to selling a life insurance policy that they don’t need.”
Even with the rule changes on HECMs, they still won’t be cheap. In addition to an array of mortgage closing fees, other costs include an upfront insurance premium of 2 percent of the maximum claim amount that can be borrowed plus a 0.5 percent annual premium. Although most fees are typically deducted from the loan’s principal, they do trim the amount that the borrower receives. Such fees will require borrowers to think carefully before tapping what could be their last big financial source.
11/12/2008
HOUSING CRISIS: REACH OUT TO BORROWERS BEFORE THEY BECOME DELINQUENT
U.S. moves to prop up those at risk of foreclosure
Bush administration directs Fannie and Freddie to ease mortgage terms, hopes to set standard for lenders
BARRIE MCKENNA
With a report from Associated Press
November 12, 2008
WASHINGTON -- In a sign that the U.S. housing crisis is getting worse, not better, the Bush administration and the mortgage industry are moving to stop a fresh wave of Americans from losing their homes to foreclosure.
The government yesterday directed Fannie Mae and Freddie Mac to ease terms on hundreds of thousands of delinquent home loans. The announcement follows similar foreclosure prevention plans by major commercial banks, including Bank of America Corp., Citigroup Inc., and JPMorgan & Chase Co. The bank said that Citigroup's efforts, for example, would save as many as 130,000 homeowners from foreclosure.
"We need to stop the downward spiral," said James Lockhart, director of the U.S. Federal Housing Finance Agency.
This week's actions mark a renewed effort by the government and banks to tackle the heart of the mortgage crisis - the millions of American households losing their homes or threatened with foreclosure as the United States slides into recession. The various loan workout plans would touch roughly 1.6 million homeowners.
The move by Fannie Mae and Freddie Mac, which own or guarantee nearly 60 per cent of all U.S. home mortgages, should set a standard for the rest of the industry, Mr. Lockhart said.
Anything that keeps homeowners out of foreclosure is a good thing, agreed Celia Chen of Moody's Economy.com. But she said these programs "only nibble at the problem."
Some U.S. authorities also criticized the plan as inadequate. Federal Deposit Insurance Corp. head Sheila Bair said the plan "falls short of what is needed to achieve wide-scale modifications of distressed mortgages, particularly those held in private securitization trusts."
Those mortgages could prove much trickier to modify.
As many as 12 million homeowners are now "underwater" on their mortgages, meaning they owe more than their homes are worth, she said.
By the end of June, more than four million homeowners were behind on payments or in foreclosure, data from the Mortgage Bankers Association show. That represents 9 per cent of borrowers with a mortgage.
And Moody's Economy.com estimates that 8.5 million U.S. homeowners will default on their mortgages between 2008 and 2010. Roughly 5.2 million of them will lose their homes.
Troy Courtney, for example, left his Mill Valley, Calif., home after many attempts at a loan modification. Mr. Courtney had two loans on the house and could not persuade the loan manager to modify terms.
"I feel like I missed the boat," said the San Francisco police officer, 44.
Economist Nouriel Roubini of New York University said the underlying problem is that Americans have too much debt.
"You cannot grow yourself out of a debt problem," he said. "When debt to disposable income is too high, increasing the denominator with rebates is ineffective and only temporary. You need to reduce the debt."
The Fannie Mae and Freddie Mac plan targets homeowners most at risk - those who've missed at least three loan payments, live in their homes and haven't declared bankruptcy. Under the arrangement, Fannie Mae and Freddie Mac will pay loan service companies $800 for every homeowner for which they arrange more affordable monthly payments (defined as 38 per cent of gross household income), either by cutting interest rates, extending loan terms or deferring payment of principal.
The program is set to begin Dec. 15.
Citigroup said it would target borrowers at risk of foreclosure by cutting interest rates to as low as 3 per cent and stretching payment periods to as long as 40 years.
"With the unemployment rate rising and rising, more and more borrowers are getting into financial distress because of loss of income," said Sanjiv Das, chief executive of CitiMortgage. "It is a problem the country will face for some time to come, so it is very important to reach out to borrowers before they become delinquent."
Even U.S. authorities acknowledge the plan has limitations. The government is not stepping in to forgive all or part of any mortgages.
"There is no silver bullet to address the housing downturn," said Neel Kashkari, the Treasury's interim assistant secretary for financial stability.
"We are experiencing a necessary correction and the sooner we work through it, the sooner housing can again contribute to our economic growth."
The scope of the problem is much larger than the relatively small part of the problem that is in the hands of Freddie Mac or Fannie Mae.
The dismal shape of the housing market is making loan modifications increasingly tricky. As U.S. home prices continue falling, a growing number of homeowners are underwater on their mortgages.
These homeowners have little incentive to honour their debts, and many of them will choose to simply walk away from their homes.
And U.S. officials said most troubled mortgages are held by entities other than Fannie and Freddie.
Mr. Lockhart urged those lenders to follow Fannie Mae and Freddie Mac's lead. Beyond moral suasion, the government can't make that happen.
Economist Ed Yardeni said Fannie and Freddie remain "hobbled" by inadequate capital and so they are unable to vastly grow their mortgage portfolios. He urged the government to nationalize the two agencies, and let them lend as much as $2-trillion at a heavily discounted rate of 4 per cent.
"That would be a much more effective way to bail out the financial system, the housing market, and the economy," Mr. Yardeni said.
The Treasury Department seized the two government-created entities in early September because of their ailing finances.
A break for homeowners
Some of the biggest U.S. banks and mortgage companies plan to cut home-loan payments for borrowers facing foreclosures. Here are some of the current and planned initiatives to help homeowners avoid foreclosure:
Citigroup
Will reach out to about 500,000 homeowners with $20-billion in new mortgages during the next six months. Helped about 370,000 people with $35-billion in mortgages avoid foreclosure since 2007. Restructured more than 120,000 mortgages, including granting extensions, during the first half of 2008.
JPMorgan Chase
Will halt foreclosure on some loans as it works to make payments easier on $110-billion of problem mortgages. Plans to assist 400,000 families with $70-billion in mortgage loans in the next two years. Helped an additional 250,000 families with $40-billion in mortgages under existing loan-modification programs.
Bank of America
Will cover more than $120-billion in unpaid loan balances. Announced two plans this year to help reduce customers' loan payments by as much as $11-billion. Modified 226,000 loans this year.
Fannie Mae, Freddie Mac
Will reduce principal or interest rates on some loans and extend terms of others.
Programs won't include money from the Treasury's $700-billion bank rescue package.
Source: Bloomberg
***********************************************************
HECM (Reverse Mortgage) Numbers Rising
— But Rising Enough?
by Peter G. Miller
November 4th, 2008
The new year has begun early — at least for the federal government which starts its fiscal year each October 1st. For reverse mortgage borrowers the results for the first two weeks of the new year look like this:
___6,232 HECM applications to date. This is down 11.1 percent from the same period last year.
___4,921 reverse mortgage approvals — up 28.2 percent over last year.
___HUD is planning on 210,000 FHA reverse mortgages during the next 12 months, that’s up from the 112,154 HECMs actually insured last year.
It’s too early in the game to see how reverse mortgage demand will actually pan out during the coming year. Logically it seems reasonable to believe that FHA HECM numbers should go up for two reasons:
First, origination fees have been reduced from a 2 percent flat rate to 2 percent of the first $200,000 of the loan amount, 1 percent of the balance and not more than $6,000.
Second, the maximum reverse mortgage amount has been raised to $417,000 from $200,160 in low-cost areas to $362,790 in high-cost areas.
That said, an increase from 112,154 reverse loans to 210,000 HECMs is quite a one-year jump. The current rate of 118,104 HECMs per year (24 reporting periods x 4,921 loans) won’t come close.
Part of the problem is that while origination fees are down and loan limits are up — that’s the good news, property values in most markets have fallen. That means less equity to finance or refinance with a reverse mortgage.
Alternatively, what other financing is available to people age 62 and above? Lenders have tighten standards for forward loans to the point where even people with good credit are having trouble getting a mortgage.
In an environment where private-sector loans are drying up it may well be that reverse mortgages will find a new level of popularity.
U.S. moves to prop up those at risk of foreclosure
Bush administration directs Fannie and Freddie to ease mortgage terms, hopes to set standard for lenders
BARRIE MCKENNA
With a report from Associated Press
November 12, 2008
WASHINGTON -- In a sign that the U.S. housing crisis is getting worse, not better, the Bush administration and the mortgage industry are moving to stop a fresh wave of Americans from losing their homes to foreclosure.
The government yesterday directed Fannie Mae and Freddie Mac to ease terms on hundreds of thousands of delinquent home loans. The announcement follows similar foreclosure prevention plans by major commercial banks, including Bank of America Corp., Citigroup Inc., and JPMorgan & Chase Co. The bank said that Citigroup's efforts, for example, would save as many as 130,000 homeowners from foreclosure.
"We need to stop the downward spiral," said James Lockhart, director of the U.S. Federal Housing Finance Agency.
This week's actions mark a renewed effort by the government and banks to tackle the heart of the mortgage crisis - the millions of American households losing their homes or threatened with foreclosure as the United States slides into recession. The various loan workout plans would touch roughly 1.6 million homeowners.
The move by Fannie Mae and Freddie Mac, which own or guarantee nearly 60 per cent of all U.S. home mortgages, should set a standard for the rest of the industry, Mr. Lockhart said.
Anything that keeps homeowners out of foreclosure is a good thing, agreed Celia Chen of Moody's Economy.com. But she said these programs "only nibble at the problem."
Some U.S. authorities also criticized the plan as inadequate. Federal Deposit Insurance Corp. head Sheila Bair said the plan "falls short of what is needed to achieve wide-scale modifications of distressed mortgages, particularly those held in private securitization trusts."
Those mortgages could prove much trickier to modify.
As many as 12 million homeowners are now "underwater" on their mortgages, meaning they owe more than their homes are worth, she said.
By the end of June, more than four million homeowners were behind on payments or in foreclosure, data from the Mortgage Bankers Association show. That represents 9 per cent of borrowers with a mortgage.
And Moody's Economy.com estimates that 8.5 million U.S. homeowners will default on their mortgages between 2008 and 2010. Roughly 5.2 million of them will lose their homes.
Troy Courtney, for example, left his Mill Valley, Calif., home after many attempts at a loan modification. Mr. Courtney had two loans on the house and could not persuade the loan manager to modify terms.
"I feel like I missed the boat," said the San Francisco police officer, 44.
Economist Nouriel Roubini of New York University said the underlying problem is that Americans have too much debt.
"You cannot grow yourself out of a debt problem," he said. "When debt to disposable income is too high, increasing the denominator with rebates is ineffective and only temporary. You need to reduce the debt."
The Fannie Mae and Freddie Mac plan targets homeowners most at risk - those who've missed at least three loan payments, live in their homes and haven't declared bankruptcy. Under the arrangement, Fannie Mae and Freddie Mac will pay loan service companies $800 for every homeowner for which they arrange more affordable monthly payments (defined as 38 per cent of gross household income), either by cutting interest rates, extending loan terms or deferring payment of principal.
The program is set to begin Dec. 15.
Citigroup said it would target borrowers at risk of foreclosure by cutting interest rates to as low as 3 per cent and stretching payment periods to as long as 40 years.
"With the unemployment rate rising and rising, more and more borrowers are getting into financial distress because of loss of income," said Sanjiv Das, chief executive of CitiMortgage. "It is a problem the country will face for some time to come, so it is very important to reach out to borrowers before they become delinquent."
Even U.S. authorities acknowledge the plan has limitations. The government is not stepping in to forgive all or part of any mortgages.
"There is no silver bullet to address the housing downturn," said Neel Kashkari, the Treasury's interim assistant secretary for financial stability.
"We are experiencing a necessary correction and the sooner we work through it, the sooner housing can again contribute to our economic growth."
The scope of the problem is much larger than the relatively small part of the problem that is in the hands of Freddie Mac or Fannie Mae.
The dismal shape of the housing market is making loan modifications increasingly tricky. As U.S. home prices continue falling, a growing number of homeowners are underwater on their mortgages.
These homeowners have little incentive to honour their debts, and many of them will choose to simply walk away from their homes.
And U.S. officials said most troubled mortgages are held by entities other than Fannie and Freddie.
Mr. Lockhart urged those lenders to follow Fannie Mae and Freddie Mac's lead. Beyond moral suasion, the government can't make that happen.
Economist Ed Yardeni said Fannie and Freddie remain "hobbled" by inadequate capital and so they are unable to vastly grow their mortgage portfolios. He urged the government to nationalize the two agencies, and let them lend as much as $2-trillion at a heavily discounted rate of 4 per cent.
"That would be a much more effective way to bail out the financial system, the housing market, and the economy," Mr. Yardeni said.
The Treasury Department seized the two government-created entities in early September because of their ailing finances.
A break for homeowners
Some of the biggest U.S. banks and mortgage companies plan to cut home-loan payments for borrowers facing foreclosures. Here are some of the current and planned initiatives to help homeowners avoid foreclosure:
Citigroup
Will reach out to about 500,000 homeowners with $20-billion in new mortgages during the next six months. Helped about 370,000 people with $35-billion in mortgages avoid foreclosure since 2007. Restructured more than 120,000 mortgages, including granting extensions, during the first half of 2008.
JPMorgan Chase
Will halt foreclosure on some loans as it works to make payments easier on $110-billion of problem mortgages. Plans to assist 400,000 families with $70-billion in mortgage loans in the next two years. Helped an additional 250,000 families with $40-billion in mortgages under existing loan-modification programs.
Bank of America
Will cover more than $120-billion in unpaid loan balances. Announced two plans this year to help reduce customers' loan payments by as much as $11-billion. Modified 226,000 loans this year.
Fannie Mae, Freddie Mac
Will reduce principal or interest rates on some loans and extend terms of others.
Programs won't include money from the Treasury's $700-billion bank rescue package.
Source: Bloomberg
***********************************************************
HECM (Reverse Mortgage) Numbers Rising
— But Rising Enough?
by Peter G. Miller
November 4th, 2008
The new year has begun early — at least for the federal government which starts its fiscal year each October 1st. For reverse mortgage borrowers the results for the first two weeks of the new year look like this:
___6,232 HECM applications to date. This is down 11.1 percent from the same period last year.
___4,921 reverse mortgage approvals — up 28.2 percent over last year.
___HUD is planning on 210,000 FHA reverse mortgages during the next 12 months, that’s up from the 112,154 HECMs actually insured last year.
It’s too early in the game to see how reverse mortgage demand will actually pan out during the coming year. Logically it seems reasonable to believe that FHA HECM numbers should go up for two reasons:
First, origination fees have been reduced from a 2 percent flat rate to 2 percent of the first $200,000 of the loan amount, 1 percent of the balance and not more than $6,000.
Second, the maximum reverse mortgage amount has been raised to $417,000 from $200,160 in low-cost areas to $362,790 in high-cost areas.
That said, an increase from 112,154 reverse loans to 210,000 HECMs is quite a one-year jump. The current rate of 118,104 HECMs per year (24 reporting periods x 4,921 loans) won’t come close.
Part of the problem is that while origination fees are down and loan limits are up — that’s the good news, property values in most markets have fallen. That means less equity to finance or refinance with a reverse mortgage.
Alternatively, what other financing is available to people age 62 and above? Lenders have tighten standards for forward loans to the point where even people with good credit are having trouble getting a mortgage.
In an environment where private-sector loans are drying up it may well be that reverse mortgages will find a new level of popularity.
11/11/2008
A Reverse Mortgage Can Be Used To Buy A House
Tuesday, November 11, 2008
posted by N. Sioris
The long awaited revisions to the FHA insured HECM reverse mortgage program include the ability for senior borrowers to use a HECM reverse mortgage in order to purchase a home.
Until the passage of the new addendum, the only way to purchase a home and still make use of a reverse mortgage was to complete two separate transactions. First you would have to purchase the new home with either all cash or qualify for a regular purchase money mortgage.
After you closed on the purchase of the new home, you would then do a second transaction with a reverse mortgage lender in order to either eliminate the payments and pay off the other brand new mortgage that you just closed on, or to reimburse yourself for the cash that you had to lay out for the purchase.
With the passage of the new revisions, you can now do just one transaction. This not only simplifies and expedites the process, but it saves you from paying double closing costs on two mortgage transactions. The effective target date for purchase money HECM reverse mortgages to be available is January, 2009.
Here Is The Way It Works:
Senior homeowners qualify for a specific amount of money based upon the youngest borrower's age and the APPRAISED value of the to be purchased property. This by the way, is a liberal departure from the standard procedure used for most loans. Typically, the maximum loan amount is determined by the LOWER of either the appraised value or the purchase price. By allowing the appraised value of the property to be used to determine the maximum loan amount, FHA/HUD is allowing borrowers that are purchasing a home at below market prices to be able to benefit from the higher appraised value and not have to contribute as much of their own cash to the transaction.
Here is an example of how the math would work for a senior couple that are both 72 years old, based on current interest rates.
Assume that the purchase price and the appraised value for the new home are both $300,000. On a monthly HECM reverse mortgage loan this couple would be eligible for a $186,790.00. Their required contribution to the transaction would be $113,210.00.
For this same example let's assume that this couple is downsizing to a smaller single level home in a retirement community. They have sold their large two-story family home where they raised their kids and lived for the last 25 years. The sale price of the family home was $425,000.00 and they had a mortgage balance of $75,000.00 on that home. After real estate sale costs and paying off the existing mortgage balance they netted $320,250.00.
After making the down payment on the new purchase of $113,210.00 this couple pockets $207,040.00 from the sale of their previous home and have ZERO house payment on the new home in the retirement community. They have freed up the accumulated equity in the large family home in a lump sum and moved into a new smaller home, mortgage free. Wow! What a way to enjoy retirement. No house payment and a big chunk of extra cash to boot.
The Eligibility Requirements Are:
Homeowners must occupy their new home within 60 days of closing the transaction, and the new home must be their primary residence.
Newly constructed homes must be fully completed and have a final certificate of occupancy from the appropriate local authority.
Flipping of properties is prohibited. Which means that only current owners of record may sell properties that will be financed using FHA HECM reverse mortgages. Any resale of a property may not occur 90 or fewer days from the last sale.
The down payment requirement or cash to close must be verified and cannot be borrowed funds. The borrower's funds must be from cash on hand or cash from a sale or liquidation of the borrower's assets. Borrower's may not obtain a bridge loan or "gap" financing to meet the down payment requirements.
HUD reverse mortgage counseling specific to home purchase reverse mortgages, must be completed prior to an application for loan approval.
There is no three day right of rescission period for reverse mortgage borrowers for purchase transactions.
Properties that do not qualify for a HECM purchase reverse mortgage loan are:
Cooperative Units
New construction residences where a Certificate of Occupancy or its equivalent has not been issued by the appropriate local authority.
Boarding houses
Bed and Breakfast Establishments
Existing manufactured homes built before June 15,1976 and
Existing manufactured homes built after June 15,1976 that fail to conform to the Manufactured Home Construction Safety Standards, as evidenced by affixed certification labels and or lack of HUD approved permanent foundation requirements
Tuesday, November 11, 2008
posted by N. Sioris
The long awaited revisions to the FHA insured HECM reverse mortgage program include the ability for senior borrowers to use a HECM reverse mortgage in order to purchase a home.
Until the passage of the new addendum, the only way to purchase a home and still make use of a reverse mortgage was to complete two separate transactions. First you would have to purchase the new home with either all cash or qualify for a regular purchase money mortgage.
After you closed on the purchase of the new home, you would then do a second transaction with a reverse mortgage lender in order to either eliminate the payments and pay off the other brand new mortgage that you just closed on, or to reimburse yourself for the cash that you had to lay out for the purchase.
With the passage of the new revisions, you can now do just one transaction. This not only simplifies and expedites the process, but it saves you from paying double closing costs on two mortgage transactions. The effective target date for purchase money HECM reverse mortgages to be available is January, 2009.
Here Is The Way It Works:
Senior homeowners qualify for a specific amount of money based upon the youngest borrower's age and the APPRAISED value of the to be purchased property. This by the way, is a liberal departure from the standard procedure used for most loans. Typically, the maximum loan amount is determined by the LOWER of either the appraised value or the purchase price. By allowing the appraised value of the property to be used to determine the maximum loan amount, FHA/HUD is allowing borrowers that are purchasing a home at below market prices to be able to benefit from the higher appraised value and not have to contribute as much of their own cash to the transaction.
Here is an example of how the math would work for a senior couple that are both 72 years old, based on current interest rates.
Assume that the purchase price and the appraised value for the new home are both $300,000. On a monthly HECM reverse mortgage loan this couple would be eligible for a $186,790.00. Their required contribution to the transaction would be $113,210.00.
For this same example let's assume that this couple is downsizing to a smaller single level home in a retirement community. They have sold their large two-story family home where they raised their kids and lived for the last 25 years. The sale price of the family home was $425,000.00 and they had a mortgage balance of $75,000.00 on that home. After real estate sale costs and paying off the existing mortgage balance they netted $320,250.00.
After making the down payment on the new purchase of $113,210.00 this couple pockets $207,040.00 from the sale of their previous home and have ZERO house payment on the new home in the retirement community. They have freed up the accumulated equity in the large family home in a lump sum and moved into a new smaller home, mortgage free. Wow! What a way to enjoy retirement. No house payment and a big chunk of extra cash to boot.
The Eligibility Requirements Are:
Homeowners must occupy their new home within 60 days of closing the transaction, and the new home must be their primary residence.
Newly constructed homes must be fully completed and have a final certificate of occupancy from the appropriate local authority.
Flipping of properties is prohibited. Which means that only current owners of record may sell properties that will be financed using FHA HECM reverse mortgages. Any resale of a property may not occur 90 or fewer days from the last sale.
The down payment requirement or cash to close must be verified and cannot be borrowed funds. The borrower's funds must be from cash on hand or cash from a sale or liquidation of the borrower's assets. Borrower's may not obtain a bridge loan or "gap" financing to meet the down payment requirements.
HUD reverse mortgage counseling specific to home purchase reverse mortgages, must be completed prior to an application for loan approval.
There is no three day right of rescission period for reverse mortgage borrowers for purchase transactions.
Properties that do not qualify for a HECM purchase reverse mortgage loan are:
Cooperative Units
New construction residences where a Certificate of Occupancy or its equivalent has not been issued by the appropriate local authority.
Boarding houses
Bed and Breakfast Establishments
Existing manufactured homes built before June 15,1976 and
Existing manufactured homes built after June 15,1976 that fail to conform to the Manufactured Home Construction Safety Standards, as evidenced by affixed certification labels and or lack of HUD approved permanent foundation requirements
11/08/2008
THE COST OF CARE, DEPLETION OF LIFETIME SAVINGS OR CHOOSING DEATH
This is definitely a Reverse Mortgage blog; but reverse mortgages are not done in a vacuum, are not needed in a vacuum, and anyone involved in this "reverse mortgage culture", as more than a money seller, must be concerned about the lives and care of the people in retirement that they serve, and try to help educate them and their families in all manner of issues facing America's oldest generation. I strive to have this blog do that. Below, are stories from another senior blog.
Jane Gross writes a blog for the New York Times that is dedicated to the issues and needs of the very elderly and their families. Below are three informative and heartfelt recent articles in her blog that have been published by the NYT. They cover the costs of caring for the elderly by the family, how our policies for the elderly demand their pauperization (or divorce if one doesn't want to end up a penniless widow or widower), and the more and more open and acceptable discussion of life-ending processes.
Today, we divide up our elderly into the "young seniors" and "the elderly". Usually this is defined by age - 80-85 to be "elderly", or by the strength, health and independence of a senior. So, a man or woman frail and dependent on others for assistance in daily living at the age of 65, could be considered "elderly"; whereas a vibrant, strong, mentally sharp 87 year old would still be considered a "young senior".
I strongly encourage you to read these articles, both for yourself, or for the senior parents, relatives or partners you may be caring for. And, I cannot stress enough that you educate yourselves about the ins and outs of eldercare before you need it.
Please don't hesitate to leave comments for me, or to send them to Jane Gross at the New York Times. You can reach Ms. Gross at newoldage@nytimes.com.
Gloria
________________________________________________
Always Making Up the Difference
By Jane Gross
September 4, 2008
Like Anne, a reader whose comment to a recent New Old Age blog post is excerpted below, my brother and I contributed in ways large and small to my mother’s care at the end of her life, both before she ran out of her own money and went on Medicaid and after.
We neither resented nor calculated what we spent during those years and, indeed, would have spent more but for worries about our own retirements and old age, a worry that Anne shares.
Responding to a post about what Medicare and Medicaid pay for — and what they don’t — and how adult children often make up the difference, Anne wrote:
So what caregiving expenses did my brother and I have? When my mother lived in Florida, along with airplane fares to spend time with her, we stocked her assisted living apartment with hundreds of dollars of staples from the supermarket each time we visited and bought her furniture that she needed but was reluctant to buy because money was tight.
When she relocated to another assisted living community in the New York area, we paid for her move and a new winter wardrobe. There, on our frequent visits, we filled her little refrigerator with diet Snapple, bought her ginger snaps and coffee candy from Trader Joe’s and frozen dinners for the microwave when she could no longer easily go to the dining room for meals.
Once her medical needs made a nursing home necessary, we paid for private duty aides on holiday weekends, during shift changes and at other junctures when the staffing was inadequate. I had ignorantly thought her long-term care insurance, which we also had paid for, would cover this kind of assistance, unaware that the insurance benefit would go to the nursing home while she was still paying her own way and to the government once she was on Medicaid. My mistake for not reading the small print or asking the right questions.
We lied to her about how we paid for those private aides so she wouldn’t feel guilty or worried we were spending too much.
During those nursing home years, we bought her a motorized wheelchair when she no longer had the strength to operate a manual one, and a “talking board’’ with recorded requests so she could make her needs known when she lost her ability to speak.
Both might — repeat might – have been covered by Medicare, but we were warned the process was arduous and our claim would likely be denied. We were fortunate to be able to afford those big ticket items, without first waging a losing battle with Medicare — and also pay for denture paste, a new bedspread and a VCR.
Only later, when I heard similar stories from friends and colleagues, did I begin to wonder about these out-of-pocket expenses, the ka-ching, ka-ching of elder care. How much did other people spend? Did they keep track? What did they do without in their own lives in order to keep their parents safe and comfortable? In a 2006 story in The New York Times, I interviewed dozens of adult children about the incidental costs of caregiving, ranging from rent for a big enough apartment to accommodate an ailing parent, to full price plane tickets for long-distance emergencies, to shower chairs and grab bars.
At that point, there was no research on this subject, but a study soon followed, which showed that out-of-pocket caregiving costs on average $5,500 a year, more than the average American household spends on health care and entertainment combined. My hunch is that those numbers are low, and the study’s authors agreed.
Inspired by Anne’s comments, The New Old Age would like to hear your stories of out-of-pocket spending for your parents. We’d also like to hear from them directly, since I’m sure it pains them deeply, as it did my mother, to depend on the children who once depended on them.
__________________________________________________
A Policy of Pauperization
By Jane Gross November 5, 2008
Middle-class, middle-aged Americans are stretched to their emotional and financial limits caring for sick parents and spouses, a situation guaranteed to get worse, given our demographic trends, without a top-to-bottom overhaul of the health care system and its focus on acute, rather than chronic, long-term care.
This, of course, is the overarching subject of this blog, but also the agenda for several recent expert panel discussions, including one sponsored by the American Academy of Nursing and hosted by The John A. Hartford Foundation.
I was struck by this compelling account of the program, entitled “Taking Care of Your Aging Parent: What Families Need to Know.” Panelist Gail Sheehy, a best-selling author and wife of the late Clay Felker, the iconic magazine editor, vividly described the plight of all but the wealthiest Americans. Despite fame, success and a well-connected lifestyle that would be the envy of most of us, Ms. Sheehy, in her late 60s, and Mr. Felker, 82 at the time of his death last July, all but ran out of money paying for care in the last year of his life.
Throat cancer left him with a tracheotomy, a feeding tube, and the need for constant home care after he was discharged from a hospital and rehab center. Neither Medicare nor private insurance covered the home health aides and other assistance the couple needed, Ms. Sheehy told the audience, until they turned to hospice. It was the only way to get subsidized, comprehensive home care, but hospice is only available to those certified by a physician as having just six months to live.
The alternative was for the couple to exhaust their remaining assets, except for $5,000, in order to qualify for Medicaid, essentially leaving Ms. Sheehy a penniless widow. They were not willing to do that. Nor were they willing to divorce so that Mr. Felker could receive Medicaid while Ms. Sheehy would be shielded from impoverishment.
These apparently extreme solutions are commonplace when facing the astronomical costs of long-term care. But my hunch is that many readers will be surprised that a glamorous couple like Ms. Sheehy and Mr. Felker could have found themselves in the same bind as the rest of us, which Carol Raphael, president of the Visiting Nurse Service of New York, calls “a policy of pauperization.”
The numbers, as reported by HealthDay.com:
* U.S. Census Bureau figures project that the number of Americans 65 or over will double by 2030, and that two-thirds of today’s 65-year-olds will require some period of long-term care later in their lives.
* At the same time, according to one recent study, the number of geriatricians has actually declined in recent years, to about 7,750; that translates to one for every 4,254 older Americans. In addition, the country will face a shortage of more than 800,000 nurses by 2020.
* According to U.S. government surveys, there were 2.5 million Americans living in either nursing homes or assisted living facilities in 2004. The average cost of a private room in a nursing home, according to a recent MetLife study: $75,000 per year.
* The AARP notes that two-thirds of older Americans who needed long-term care now rely completely on unpaid help — in most cases, family.
Since many of you are spousal caregivers like Ms. Sheehy, I wonder how many of you ever considered spending down to Medicaid eligibility as a couple, despite the fact that the surviving spouse would then be all but penniless? Have any of you divorced, or seriously considered it, so one spouse would be eligible for government help and the other spared impoverishment?
____________________________________________________
At the End of Life, a Delicate Calculus
By Jane Gross November 6, 2008
On Tuesday, Washington State joined Oregon as the second in the nation where physicians are allowed to prescribe lethal doses of medication to terminally ill men and women who want to hasten their own deaths. But the remedies available to suffering patients have expanded dramatically in the 11 years since the Oregon measure took effect, one expert recently noted, and the question of whether doctors should help patients die is far more nuanced than it once was.
The Washington State proposition, Initiative 1000 (PDF), passed by a margin of 59 to 41 percent, and like the Oregon measure, which withstood several legal challenges, contains many safeguards intended to prevent hasty and ill-considered decisions. Patients requesting this assistance must be mentally competent, residents of the state, have six months or less to live according to two physicians, wait 15 days after their initial request and then repeat that request both orally and in writing.
They must be capable of administering the lethal medication themselves and agree to counseling if their physicians request it. In addition, these patients also must be informed by their health care providers of other feasible alternatives.
In the view of Dr. Timothy E. Quill, director of the palliative care program at the University of Rochester, these options have expanded and gained acceptance in medical circles over the past decade. In 1997, in two important cases (Dr. Quill was a plaintiff in one), the U.S. Supreme Court ruled there was no constitutional right to physician-assisted suicide and upheld a prohibition against it. But in the same ruling, the justices conceded that terminally ill patients are entitled to aggressive pain management, even if high doses of opiates or barbiturates have the “double effect” of hastening death.
That seemed a footnote at the time to the larger issue, but it arguably cracked open the door to those other feasible options, which Dr. Quill and other end-of-life experts refer to as “last resorts” in jurisdictions where it is a crime for physicians to assist in dying.
Dr. Quill’s views on physician-assisted death — a term preferred by many palliative care doctors and right-to-die organizations — are outlined in two essays published by the Hastings Center, the nation’s oldest bioethics research institute.
One, entitled “Physician-Assisted Death in the United States: Are the Existing ‘Last Resorts’ Enough?” appeared in the center’s bimonthly report this fall. The other, intended to be a resource for policymakers, political candidates and journalists, is one of 36 topics framed and amplified in the center’s more recent “Bioethics Briefing Book.”
In these articles, Dr. Quill enumerated “last resort” options in the order he advises they be considered, both because of what is involved in each practice and because of the degree of acceptance among ethicists, legal experts and the general public. The essays were written, obviously, before the voting in Washington State.
Dr. Quill considered it “a good time to review areas of progress in palliative and end-of-life care and consider whether [laws or ballot measures of this type] are either necessary or desirable.”
He concluded with a cautious “yes” but makes a compelling case that adding physician-assisted death to the repertoire is not, for him, the singular solution it was when he made history by publishing an account in a medical journal about his own role in a patient’s death.
First and foremost, Dr. Quill and others say, all terminally ill patients should have access to state-of-the art palliative care, both to relieve pain and other symptoms and to provide emotional support to patients and families. Often delivered as part of hospice, palliative care has come of age in the last decade: it is now a board-certified sub-specialty, Dr. Quill noted, offered in a growing number of teaching and community hospitals.
Dr. Quill recommended that a palliative care consultation be mandatory before anyone considers the following “last resorts,” which he listed from least controversial to most:
1. In the rare cases where pain and suffering remain intractable, despite top-notch palliative care, the next option should be pain management so aggressive that it may well hasten death, although that is not the primary intention. This is the doctrine of “double effect,” articulated by the U.S. Supreme Court’s decision in 1997 and relatively uncontroversial.
2. Rarely challenged, too, is a patient’s right to forgo life-sustaining therapies or discontinue them once begun. This likely would include feeding tubes, ventilators and other life-support machinery. But it could also include chemotherapy, blood pressure medication, insulin or garden-variety antibiotics. The legal and ethical argument here is that we all have the right to autonomy and bodily integrity, and to control what is done or not done to us.
3. Also considered by some to be a matter of bodily integrity is V.S.E.D., short for “voluntarily stopping eating and drinking.” Dr. Quill believes this is “more morally complex” choice than the second option, because over the last decade the practice has expanded beyond those with end-stage cancer or Alzheimer’s disease — who often lose interest in food or forget how to eat and drink — to people who are not “actively dying” but nevertheless have had enough of disability or dependence.
V.S.E.D. requires “considerable resolve,” Dr. Quill said, because thirst can be persistent and death can take as long as three weeks. Physicians do not “assist” these patients but support them with symptom relief for dry mouth or sedation in the event of delirium or other complicating discomforts.
4. The “last, last resort,” and by far the most controversial of the legal methods, is sedation to the point of unconsciousness, also known as palliative or terminal sedation. Endorsed earlier this year by the American Medical Association’s Council on Ethical and Judicial Affairs, it involves an explicit decision to render a patient unconscious if pain can be controlled no other way. Food and fluid may be discontinued, and in one to three days the patient dies of dehydration.
According to data from Oregon, 341 people have died in 11 years as a result of lethal doses of medication provided by a physician. That amounts to 1 in 1,000 deaths overall per year, according to the state health department, although 1 in 50 dying patients have discussed the possibility with their doctors and one in six with their families. “Most patients will be reassured by the possibility of an escape,” Dr. Quill said, “and will never need to activate that escape.”
By contrast, when physician-assisted death is a covert operation, far more people seem to grab the chance. Data on this secret but apparently widespread practice is hard to collect, because physicians can be charged and prosecuted for a crime. But in the mid-1990s a team of researchers, Dr. Quill among them, tried to investigate the question using techniques that protected anonymity.
The researchers found that between 1 and 2 percent of deaths per year had been aided, illegally, by physicians through assisted suicide or euthanasia — 10 to 20 times the rate observed in Oregon since legalization of this practice.
This is definitely a Reverse Mortgage blog; but reverse mortgages are not done in a vacuum, are not needed in a vacuum, and anyone involved in this "reverse mortgage culture", as more than a money seller, must be concerned about the lives and care of the people in retirement that they serve, and try to help educate them and their families in all manner of issues facing America's oldest generation. I strive to have this blog do that. Below, are stories from another senior blog.
Jane Gross writes a blog for the New York Times that is dedicated to the issues and needs of the very elderly and their families. Below are three informative and heartfelt recent articles in her blog that have been published by the NYT. They cover the costs of caring for the elderly by the family, how our policies for the elderly demand their pauperization (or divorce if one doesn't want to end up a penniless widow or widower), and the more and more open and acceptable discussion of life-ending processes.
Today, we divide up our elderly into the "young seniors" and "the elderly". Usually this is defined by age - 80-85 to be "elderly", or by the strength, health and independence of a senior. So, a man or woman frail and dependent on others for assistance in daily living at the age of 65, could be considered "elderly"; whereas a vibrant, strong, mentally sharp 87 year old would still be considered a "young senior".
I strongly encourage you to read these articles, both for yourself, or for the senior parents, relatives or partners you may be caring for. And, I cannot stress enough that you educate yourselves about the ins and outs of eldercare before you need it.
Please don't hesitate to leave comments for me, or to send them to Jane Gross at the New York Times. You can reach Ms. Gross at newoldage@nytimes.com.
Gloria
________________________________________________
Always Making Up the Difference
By Jane Gross
September 4, 2008
Like Anne, a reader whose comment to a recent New Old Age blog post is excerpted below, my brother and I contributed in ways large and small to my mother’s care at the end of her life, both before she ran out of her own money and went on Medicaid and after.
We neither resented nor calculated what we spent during those years and, indeed, would have spent more but for worries about our own retirements and old age, a worry that Anne shares.
Responding to a post about what Medicare and Medicaid pay for — and what they don’t — and how adult children often make up the difference, Anne wrote:
"For the past three years, my mother lived at home with me. She received at
home services … from Medicaid, which could not exceed $1,680 per month. The benefit provides for a maximum of 28 hours per week of assistance by an aide and/or medical supplies. Since my mother received incontinence and medical supplies plus nutritional supplements, she was only allowed 21 hours per week of assistance from a home health aide….
The home health aide agency receives $15 per hour from Medicaid. The aide receives $6.00 - $8.00 per hour less taxes from that amount…. Several times a year, when I was on the verge of a breakdown, I would beg her case manager to give us an extra hour or two of aide services so that I could take half a day off. I would literally have to beg.
…My mother visited her primary physician twice a year for a general
physical exam paid by Medicare. Medicare Part D covered a discount on her
vitamins and minerals, which saved us several dollars a week. Medicare and
Medicaid do not cover eye care, hearing aides or dental care. I decided not to get her hearing aides which cost around $10,000 since her hearing loss was only 20 percent. I paid $500 for eye care and new glasses. I paid $5,000 for dental care last fall.
Late last winter my mother suffered from pneumonia and a series of small
strokes affecting her motor skills and ability to swallow. She was hospitalized for a week and sent to rehab at a nursing home — all paid for by Medicare. At the end of the 100 day Medicare benefit, my mother was transferred to the long-term wing.
Medicaid has now begun to pay a monthly fee to the nursing home. I do not
know what the amount is. But now I have to pay the nursing home my mother’s entire Social Security check — her only source of income — less $40 per month.
That’s right — she is allowed “to keep” $40 per month for personal care.
That pays to have her hair done once a week. I pay for the tips, hair cuts, hair color and perms. I pay for the plants and flowers that always adorn her room. I pay for the TV and telephone…. I pay $50 per week in gasoline to visit her every other day plus $1,500 this summer in car repair bills due to the extra wear and tear on my old car.
Now she needs new clothes since she has gained weight. New shoes and
clothing will run around $500. Soon there will be expenses for cards and gifts she’ll want to give. I am so thankful that libraries are free so I don’t have to buy books.
I cannot imagine what we would do without the “safety net” of Medicaid. But it isn’t enough. I am 50 years old. I have to begin to plan on buying long-term health insurance for myself soon.
Where will I find an extra $10,000 per year? Will that be enough? How much benefit will I require 40 years from now? Will it be double or triple today’s cost?….
The multi-millionaires who troll the corridors of the White House and Congress will never have to face the financial nightmare of long-term care. They have forgotten the old adage of “to who much is given, much is expected.”
So what caregiving expenses did my brother and I have? When my mother lived in Florida, along with airplane fares to spend time with her, we stocked her assisted living apartment with hundreds of dollars of staples from the supermarket each time we visited and bought her furniture that she needed but was reluctant to buy because money was tight.
When she relocated to another assisted living community in the New York area, we paid for her move and a new winter wardrobe. There, on our frequent visits, we filled her little refrigerator with diet Snapple, bought her ginger snaps and coffee candy from Trader Joe’s and frozen dinners for the microwave when she could no longer easily go to the dining room for meals.
Once her medical needs made a nursing home necessary, we paid for private duty aides on holiday weekends, during shift changes and at other junctures when the staffing was inadequate. I had ignorantly thought her long-term care insurance, which we also had paid for, would cover this kind of assistance, unaware that the insurance benefit would go to the nursing home while she was still paying her own way and to the government once she was on Medicaid. My mistake for not reading the small print or asking the right questions.
We lied to her about how we paid for those private aides so she wouldn’t feel guilty or worried we were spending too much.
During those nursing home years, we bought her a motorized wheelchair when she no longer had the strength to operate a manual one, and a “talking board’’ with recorded requests so she could make her needs known when she lost her ability to speak.
Both might — repeat might – have been covered by Medicare, but we were warned the process was arduous and our claim would likely be denied. We were fortunate to be able to afford those big ticket items, without first waging a losing battle with Medicare — and also pay for denture paste, a new bedspread and a VCR.
Only later, when I heard similar stories from friends and colleagues, did I begin to wonder about these out-of-pocket expenses, the ka-ching, ka-ching of elder care. How much did other people spend? Did they keep track? What did they do without in their own lives in order to keep their parents safe and comfortable? In a 2006 story in The New York Times, I interviewed dozens of adult children about the incidental costs of caregiving, ranging from rent for a big enough apartment to accommodate an ailing parent, to full price plane tickets for long-distance emergencies, to shower chairs and grab bars.
At that point, there was no research on this subject, but a study soon followed, which showed that out-of-pocket caregiving costs on average $5,500 a year, more than the average American household spends on health care and entertainment combined. My hunch is that those numbers are low, and the study’s authors agreed.
Inspired by Anne’s comments, The New Old Age would like to hear your stories of out-of-pocket spending for your parents. We’d also like to hear from them directly, since I’m sure it pains them deeply, as it did my mother, to depend on the children who once depended on them.
__________________________________________________
A Policy of Pauperization
By Jane Gross November 5, 2008
Middle-class, middle-aged Americans are stretched to their emotional and financial limits caring for sick parents and spouses, a situation guaranteed to get worse, given our demographic trends, without a top-to-bottom overhaul of the health care system and its focus on acute, rather than chronic, long-term care.
This, of course, is the overarching subject of this blog, but also the agenda for several recent expert panel discussions, including one sponsored by the American Academy of Nursing and hosted by The John A. Hartford Foundation.
I was struck by this compelling account of the program, entitled “Taking Care of Your Aging Parent: What Families Need to Know.” Panelist Gail Sheehy, a best-selling author and wife of the late Clay Felker, the iconic magazine editor, vividly described the plight of all but the wealthiest Americans. Despite fame, success and a well-connected lifestyle that would be the envy of most of us, Ms. Sheehy, in her late 60s, and Mr. Felker, 82 at the time of his death last July, all but ran out of money paying for care in the last year of his life.
Throat cancer left him with a tracheotomy, a feeding tube, and the need for constant home care after he was discharged from a hospital and rehab center. Neither Medicare nor private insurance covered the home health aides and other assistance the couple needed, Ms. Sheehy told the audience, until they turned to hospice. It was the only way to get subsidized, comprehensive home care, but hospice is only available to those certified by a physician as having just six months to live.
The alternative was for the couple to exhaust their remaining assets, except for $5,000, in order to qualify for Medicaid, essentially leaving Ms. Sheehy a penniless widow. They were not willing to do that. Nor were they willing to divorce so that Mr. Felker could receive Medicaid while Ms. Sheehy would be shielded from impoverishment.
These apparently extreme solutions are commonplace when facing the astronomical costs of long-term care. But my hunch is that many readers will be surprised that a glamorous couple like Ms. Sheehy and Mr. Felker could have found themselves in the same bind as the rest of us, which Carol Raphael, president of the Visiting Nurse Service of New York, calls “a policy of pauperization.”
The numbers, as reported by HealthDay.com:
* U.S. Census Bureau figures project that the number of Americans 65 or over will double by 2030, and that two-thirds of today’s 65-year-olds will require some period of long-term care later in their lives.
* At the same time, according to one recent study, the number of geriatricians has actually declined in recent years, to about 7,750; that translates to one for every 4,254 older Americans. In addition, the country will face a shortage of more than 800,000 nurses by 2020.
* According to U.S. government surveys, there were 2.5 million Americans living in either nursing homes or assisted living facilities in 2004. The average cost of a private room in a nursing home, according to a recent MetLife study: $75,000 per year.
* The AARP notes that two-thirds of older Americans who needed long-term care now rely completely on unpaid help — in most cases, family.
Since many of you are spousal caregivers like Ms. Sheehy, I wonder how many of you ever considered spending down to Medicaid eligibility as a couple, despite the fact that the surviving spouse would then be all but penniless? Have any of you divorced, or seriously considered it, so one spouse would be eligible for government help and the other spared impoverishment?
____________________________________________________
At the End of Life, a Delicate Calculus
By Jane Gross November 6, 2008
On Tuesday, Washington State joined Oregon as the second in the nation where physicians are allowed to prescribe lethal doses of medication to terminally ill men and women who want to hasten their own deaths. But the remedies available to suffering patients have expanded dramatically in the 11 years since the Oregon measure took effect, one expert recently noted, and the question of whether doctors should help patients die is far more nuanced than it once was.
The Washington State proposition, Initiative 1000 (PDF), passed by a margin of 59 to 41 percent, and like the Oregon measure, which withstood several legal challenges, contains many safeguards intended to prevent hasty and ill-considered decisions. Patients requesting this assistance must be mentally competent, residents of the state, have six months or less to live according to two physicians, wait 15 days after their initial request and then repeat that request both orally and in writing.
They must be capable of administering the lethal medication themselves and agree to counseling if their physicians request it. In addition, these patients also must be informed by their health care providers of other feasible alternatives.
In the view of Dr. Timothy E. Quill, director of the palliative care program at the University of Rochester, these options have expanded and gained acceptance in medical circles over the past decade. In 1997, in two important cases (Dr. Quill was a plaintiff in one), the U.S. Supreme Court ruled there was no constitutional right to physician-assisted suicide and upheld a prohibition against it. But in the same ruling, the justices conceded that terminally ill patients are entitled to aggressive pain management, even if high doses of opiates or barbiturates have the “double effect” of hastening death.
That seemed a footnote at the time to the larger issue, but it arguably cracked open the door to those other feasible options, which Dr. Quill and other end-of-life experts refer to as “last resorts” in jurisdictions where it is a crime for physicians to assist in dying.
Dr. Quill’s views on physician-assisted death — a term preferred by many palliative care doctors and right-to-die organizations — are outlined in two essays published by the Hastings Center, the nation’s oldest bioethics research institute.
One, entitled “Physician-Assisted Death in the United States: Are the Existing ‘Last Resorts’ Enough?” appeared in the center’s bimonthly report this fall. The other, intended to be a resource for policymakers, political candidates and journalists, is one of 36 topics framed and amplified in the center’s more recent “Bioethics Briefing Book.”
In these articles, Dr. Quill enumerated “last resort” options in the order he advises they be considered, both because of what is involved in each practice and because of the degree of acceptance among ethicists, legal experts and the general public. The essays were written, obviously, before the voting in Washington State.
Dr. Quill considered it “a good time to review areas of progress in palliative and end-of-life care and consider whether [laws or ballot measures of this type] are either necessary or desirable.”
He concluded with a cautious “yes” but makes a compelling case that adding physician-assisted death to the repertoire is not, for him, the singular solution it was when he made history by publishing an account in a medical journal about his own role in a patient’s death.
First and foremost, Dr. Quill and others say, all terminally ill patients should have access to state-of-the art palliative care, both to relieve pain and other symptoms and to provide emotional support to patients and families. Often delivered as part of hospice, palliative care has come of age in the last decade: it is now a board-certified sub-specialty, Dr. Quill noted, offered in a growing number of teaching and community hospitals.
Dr. Quill recommended that a palliative care consultation be mandatory before anyone considers the following “last resorts,” which he listed from least controversial to most:
1. In the rare cases where pain and suffering remain intractable, despite top-notch palliative care, the next option should be pain management so aggressive that it may well hasten death, although that is not the primary intention. This is the doctrine of “double effect,” articulated by the U.S. Supreme Court’s decision in 1997 and relatively uncontroversial.
2. Rarely challenged, too, is a patient’s right to forgo life-sustaining therapies or discontinue them once begun. This likely would include feeding tubes, ventilators and other life-support machinery. But it could also include chemotherapy, blood pressure medication, insulin or garden-variety antibiotics. The legal and ethical argument here is that we all have the right to autonomy and bodily integrity, and to control what is done or not done to us.
3. Also considered by some to be a matter of bodily integrity is V.S.E.D., short for “voluntarily stopping eating and drinking.” Dr. Quill believes this is “more morally complex” choice than the second option, because over the last decade the practice has expanded beyond those with end-stage cancer or Alzheimer’s disease — who often lose interest in food or forget how to eat and drink — to people who are not “actively dying” but nevertheless have had enough of disability or dependence.
V.S.E.D. requires “considerable resolve,” Dr. Quill said, because thirst can be persistent and death can take as long as three weeks. Physicians do not “assist” these patients but support them with symptom relief for dry mouth or sedation in the event of delirium or other complicating discomforts.
4. The “last, last resort,” and by far the most controversial of the legal methods, is sedation to the point of unconsciousness, also known as palliative or terminal sedation. Endorsed earlier this year by the American Medical Association’s Council on Ethical and Judicial Affairs, it involves an explicit decision to render a patient unconscious if pain can be controlled no other way. Food and fluid may be discontinued, and in one to three days the patient dies of dehydration.
According to data from Oregon, 341 people have died in 11 years as a result of lethal doses of medication provided by a physician. That amounts to 1 in 1,000 deaths overall per year, according to the state health department, although 1 in 50 dying patients have discussed the possibility with their doctors and one in six with their families. “Most patients will be reassured by the possibility of an escape,” Dr. Quill said, “and will never need to activate that escape.”
By contrast, when physician-assisted death is a covert operation, far more people seem to grab the chance. Data on this secret but apparently widespread practice is hard to collect, because physicians can be charged and prosecuted for a crime. But in the mid-1990s a team of researchers, Dr. Quill among them, tried to investigate the question using techniques that protected anonymity.
The researchers found that between 1 and 2 percent of deaths per year had been aided, illegally, by physicians through assisted suicide or euthanasia — 10 to 20 times the rate observed in Oregon since legalization of this practice.
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