Reverse Mortgage Inconvenient Truths
 

It seems, in my opinion, there have been a lot of posts about reverse mortgages. Apparently, there are many inconvenient truths that you may be unaware of. The following I found to be particularly egregious.
Why should taxpayers be on the hook when a reverse mortgage turns toxic?

This from the Heritage Foundation

“Because of the largesse of federally financed subsidies in the Federal Housing Administration’s reverse-mortgage program, the federal government has gradually crowded out private insurers from the market for these financial products since the program began in the late 1980s.
Indeed, amid the multi trillion-dollar maze of federal insurance and guarantee programs lies the Federal Housing Administration Home Equity Conversion Mortgage program—an insurance program providing loss coverage on reverse-mortgage originations backed by federal taxpayers.
The loan program simply has become a severe financial burden for federal taxpayers. The Federal Housing Administration reports that the Home Equity Conversion Mortgage program faces a financial shortfall totaling roughly $14 billion in fiscal year 2017.
To avoid any further compounding of the fiscal fiasco, policy leaders should wind down the federal Home Equity Conversion Mortgage program, and in the interim certainly refrain from any misguided reforms that would increase moral hazard, put more taxpayer money at risk, and ultimately continue to crowd out private mortgage insurers from the market for reverse mortgages.”

Reverse mortgages tend to be promoted by hard sell hucksters hoping to garner huge commissions at the expense of seniors up against the wall financially. Some RM brokers locate and focus upon target rich environments such as TV and capitalize on what is essentially a mother lode. It ain't pretty. Major lenders such as Chase, Wells Fargo and Bank of America got out of this repulsive lending business years ago.

My father had one. He passed away about 3 years ago at 93 and at that time his payoff was ~$140,000 on a small condo worth maybe $60K in Broward County in South FL. After he passed the bank and the condo assoc and Bath fitters lawyers (they gave him at 93 yrs old a $7K loan for a bathroom remodel 3 months before he passed) all tried over and over to collect from ME but on an attorney's advice I just ignored it since I had nothing legally to do with it. Just walked away from it Went into foreclosure and has sat empty since then. The RM was great for him in the years he had it. When he took it out in 2006 the bank valued the $60K property at $170,000 !!!!!! The $600/month + SS helped him "live" by himself especially after my mother passed well before that. They netted well over $100,000 on it. The Feds got it and still own it. He couldn't have got anywhere near that anount on a HELOC.

Another inconvenient truth is that 25% property tax increases force many seniors on fixed incomes to fall into the reverse mortgage trap.

What happened to the remainder of the money? Did you keep it? Not judging but really asking.

I think that makes the OP point. Sorry to hear your dad Passed

Sooo, if a couple has no children, wouldnt a reverse mortgage be a good deal? Asking for a friend......

In most cases, if they need cash, they would be better off by taking out an 80 percent, 30 year conventional mortgage, put the money in the bank, and use it to make the monthly mortgage payments. If they are still in the house when the money in the bank is gone, they can refinance. With a reverse mortgage, they will only get about 50 percent of the house value, pay huge closing costs, and will be forced to sell the house if they need to move into assisted living. Do the math.

What bank will loan to a retiree with no income other than ss? The banks we spoke with didnt care how much cash on hand we had. With no income, no mortgage.
The closing costs for a reverse werent huge either.

I think much of the property tax increase is because our homes have escalated so much in value. And that is true almost everywhere in the U.S. Just to see if I may be right, remember how much you paid for your property and see what the three usual places to check consider the value. (Redfin, Realtor.com and Zillow) They are fairly close to the amount it will sell for in my opinion.

I am not a realtor, never have been and really am not crazy about them.

Another option is to sell the house and rent a comparable house. But, I would avoid a reverse mortgage if I could. It is really not a good deal. For the closing costs, did you consider the required mortgage insurance payments and the fees that are rolled into the loan?

During normal times Citizens First, the bank of TV developer, will have a monthly reverse mortgage seminar at Arnold Palmer CC given by Jennifer Grovesteen. We attended one in early 2017 and liked the benefits it would give us. My wife and I were both over 62, we have no children, both our parents are dead and we have have no brothers and sisters, essentially no heirs to worry about.

Our neighbors received one about six months earlier. After we listened at the seminar we decided it was for us, so we took steps to get one in April 2017. We own our CYV outright, paid cash in 2011. The out of pocket expenses was two items. First an appraisal, which was about $300 and then a phone counseling that made sure you were aware of what you were doing, that was about $100.

Citizens First gathers all the facts and info and then turns it over to Sun West Bank who will actually handle the loan, I believe Citizens is paid $3,000 for their services. Our fees were about $9,000 which are just part of the loan, which I don't ever plan on paying back. Our CYV was appraised at $239K when it was done almost 3 years ago, it's worth about $259K now. You will receive about 45% of the appraised value. We took out $50,000 initially and paid off a car and some other things. Since we haven't touched the balance, our funds available will climb about $200 a month. It's nice knowing we have something to fall back on if something big comes up, peace of mind.

Right now if we were both to die, whoever we left our home to would sell it and then pay back about $68,000 and the rest would be theirs. The $50,000 we've taken out, the $9,000 in up front fees and about $7,200 in accrued interest ($200 a month during the loan).

Reverse Mortgages | Citizens First Bank - The Villages, FL

So we taxpayers are left holding the bag again. I wonder if the condominium association fees, property taxes and utilities are being paid.

Reverse mortgages are a great opportunity - to those that sell them.

IMO there is no good financial loan. You going to pay lot more than you borrow. It’s way system set up.