Reverse Mortgage Offers Options

Editors: These articles have been downloaded from the Web for your reading convenience. At the beginning of each article is a link to the Web document, but many archives require registration and/or payment. Actual clips of many of these articles are available. If you require a paper document, just let Dori know and she will fax or mail your requests.

Reverse Mortgage Offers Options at the Yakima Herald-Republic

May 18, 2003
962 words
Yakima Herald-Republic

Reverse Mortgage Offers Options -- This setup can make it possible for some
seniors to keep their homes and still have some vital cash

By DORI HARRELL
YAKIMA HERALD-REPUBLIC

We've all heard of mortgages, but who's heard of reverse mortgages?

Senior citizens, that's who.

In a growing trend here and nationwide, more and more seniors are taking out
reverse mortgages on their homes, which means the loan isn't repaid until the
house is sold.

In other words, there's no monthly payment with this mortgage.

They're using the money to pay medical expenses, help make ends meet, make
home improvements, buy recreational vehicles or to travel.

Reverse mortgages are only available to those 62 years of age or older who own
their homes outright, or have only a small balance left to pay.

The older they are, the more they can borrow.

Such a loan eats up the equity in their homes and decreases their children's
inheritance. But, some say, it helps them now, when they most need the money.

They can choose from a lump sum, a line of credit or monthly payments for as
long as they live in their house, or a combination of these.

Last year, the number of seniors nationwide borrowing with reverse mortgages
increased 74 percent to more than 14,000. And this year, the rate is up 18
percent over 2002, according to the National Reverse Mortgage Lenders
Association in Washington, D.C.

Reverse mortgage lenders must be approved by the Federal Housing Authority,
and potential borrowers must meet with a financial consultant from a nonprofit
agency such as Consumer Credit Counseling Service of Yakima Valley.

"These are safeguards for seniors, because they're considered a vulnerable
population group," said Glenn Petherick, a spokesman for the lenders
association.

At Consumer Credit Counseling of Yakima Valley, Merry Ames explains how a
reverse mortgage differs from a traditional one.

She works up a budget with her clients to see if that type of loan would
benefit them.

"For example, if they're not going to be able to stay in their home, say due
to a medical situation, then it doesn't make sense," she said.

Ames also says the loan never amounts to more than the value of a home, even
with the monthly payments option.

Those with a reverse mortgage still retain title to their home. Because of
that, they are still responsible for taxes, repairs, and maintenance.

Depending on the plan, the reverse mortgage is due with interest either when
the homeowners move, sell the home, die, or reach the end of the pre-selected
loan term.

The house does not revert to the bank should a borrower die. It goes to the
children or estate, as it normally would. However, the loan must be paid off.
The debt is usually repaid by refinancing the loan into a forward mortgage (if
the heirs are eligible) or by using the proceeds from the sale of the home.

"Most seniors I work with don't have the money to pay back a mortgage," she
said. "This product gives them the ability to use their assets and be able
live in their homes."

She also recommends borrowers consult with their accountants and attorneys.

Two years ago a Terrace Heights couple, who asked that their names not be
used, took out a reverse mortgage to help pay mounting business, medical and
tax bills.

The 73-year-old husband continues to operate his own photography business. The
wife is a retired schoolteacher.

Three years ago, the stock market started to sour, sinking their investments.

Their business sales also flattened as the economy spun downward. And the
medical bills started piling up.

At the same time, property taxes on their Lake Chelan cabin, which they
inherited along with another relative, climbed. Their half of the tax bill
last year amounted to $3,500.

The couple had lived in their home for 40 years and it was paid for. They
considered mortgaging it, but knew they couldn't handle a large monthly
payment.

When they found they qualified for a reverse mortgage, they knew that would
aid them during these tight times.

"I needed a quick fix, and this reverse mortgage, which has no monthly
payment, was just the thing," the gentleman said.

The couple now has a line of credit to draw from as financial needs arise.

"It's been a very big help to my wife and me."

For Yakima Valley residents, Wells Fargo Bank and Seattle Mortgage offer
reverse mortgages.

But neither company has a specialist in the Valley, and much of the
application work is done over the phone.

Seattle Mortgage's Bellevue office does only reverse mortgages. Loan officer
Mike Broderick said he meets his Yakima-area clients at least once during the
application process

The firm, he says, surpassed the nationwide growth in the number of people
taking out the loans and expects to see even more increases this year.

"It's still a niche market and so specialized that most mortgage companies
won't even consider it," Broderick said.

Many customers, he said, need help paying medical expenses. One man, he said,
expected to die in a year. But he wanted to stay in his home and used a
reverse mortgage loan to cover the nursing costs.

The reverse mortgage option has only become popular in the last two years,
Broderick said.

Basically, not many seniors needed the extra dollars and most hadn't heard of
the option.

Previously, the strong stock market meant investments paid off. Property taxes
didn't climb as fast, and retirement plans and social security covered costs.

But with the stock market slide and increasing taxes and medical expenses,
some seniors now find themselves facing a financial crunch, said Glenn
Petherick with the National Reverse Mortgage Lenders Association.

And they're meeting others who've solved similar situations with reverse
mortgages.

The typical borrower, Petherick said, is a single woman in her 70s.

"Last year was a record year," he said. "I believe we'll continue to see
astounding growth."

Top of page