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Reverse Mortgage Securities Total $7.1 Billion in 2013 to Date

Issuance of reverse mortgage securities

$7.1 billion was totaled for the first three quarters of 2013, so with 757 pools issued, according to mortgage information by New View Advisors. For the first nine months of 2013, there are now 11 active issuers of reverse mortgage securities, New View notes, with American Advisors Group (AAG) as the newest entrant.

Issuing 14 pools for nearly $288 million,

American Advisors Group represents 4.05% of total reverse mortgage securities issuance. AAG is currently No. 6 for dollar volume in the nine-month rankings compiled by New View.

RMS continues to reign as the No. 1 issuer, with a total of 179 pools for $2.3 billion issued year to date.

The company issued 57 pools for $589.7 million in the third quarter, raising its lead over No. 2 issuer Urban Financial, so Urban sold 44 pools for $495.2 million in the third quarter.

As of the third quarter of 2013, RMS accounts for 32.74% of all issuance and Urban represents 25.53%, respectively.

Live Well Financial, Generation Mortgage and Nationstar held their positions. As they were number three, four and five issuers, representing 13.80%, 9.64% and 6.23%.

While the number of reverse mortgage securities pools issued in the third quarter was nearly identical to the previous quarter, 257 compared to 256, dollar volume declined 13% to $2.2 billion.

This causes lower origination volume. The increase of smaller “tail” issuance occurring as servicing, and borrower draws and MIP. So, Home Equity Conversion Mortgages (HECMs), notes New View. So, “Despite the downward origination trend, ongoing tail issuance, negative amortization and existing new issuance continues to outweigh payoffs,” said Michael McCully, partner with New View. “This has a positive impact on liquidity in the sector.”

Of the third quarter issuance, $950 million, or 43%, was fixed rate. So, year to date, fixed rate reverse mortgage securities represent approximately 60%, or $4.2 billion, of total issuance.

In the first half of 2013, the figure was $3.3 billion, representing 67% of total issuance.

By Jason Oliva

February 13th, 2016.


 

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Retirement Just Got Harder: The FHA Sets New Limits on Reverse Mortgages

Reverse mortgage retirement is something everyone should be able to understand, including the new FHA limits on them.

Bad news for seniors:

Reverse mortgages just got much less attractive. Starting Sept. 30, new regulations will make it more difficult and more expensive to take advantage of the government’s reverse-mortgage program.

What is a reverse mortgage?

The concept is fairly self-explanatory. With a mortgage, you make monthly payments to a lender. So, with a reverse mortgage, you receive payments from a lender. The loan doesn’t have to be repaid until you die, sell the house, or establish another primary residence.

Reverse mortgages are available to people 62 or older. The money can be used as retirement income, to pay for medical bills, for home improvements, or even to pay off your current mortgage. You are converting part of your home equity into cash. As with any loan, you will pay interest on the amount borrowed.

New limitations

After two years with rates at historic lows, the Federal Housing Administration is attempting to mitigate insurance losses by imposing new restrictions on federally insured reverse mortgages.

Here are the changes taking effect this fall for reverse mortgage retirement:

  • First-year limit. A homeowner may now withdraw only up to 60% of the eligible sum during the first year. If, for example, a person receives a reverse mortgage of $300,000, only a withdrawal of $180,000 is possible in year one.
  • Smaller loans. Before the new rules, borrowers could take out as much as 61.9% of their home’s value — the limit depended on your age, your home value, and the interest rate. That same evaluation applies, but on average, borrowers will be able to take out about 15% less than they used to.
  • Fee changes. Previously, the upfront fee to take out a standard reverse mortgage was 2% of the property’s value. The upfront fee to take out a saver reverse mortgage — which limits you to a smaller amount you can borrow against your equity — was 0.01%. Now, the upfront fee will be 0.5% across the board. Folks who take out more than 60% of their home’s value will pay a 2.5% insurance premium.
  • Financial assessment. Lenders will now be required to analyze their borrowers’ ability to keep up with tax and insurance payments before issuing a reverse mortgage. So, lenders will look at income sources and credit history to determine the borrower’s creditworthiness. If a lender decides you may not be able to make your payments, you will be required to set aside money.

The changes are intended to make people more careful about how they fund their retirement.

So, the FHA wants borrowers to take out only what they need and what they can afford. The program strives to be less a safety net for financial emergencies and more a longer-term financial-planning tool. Of course, these changes present additional challenges to the already expensive process of retirement.

By Mike Anderson, NerdWallet, and The Motley Fool

February 10th, 2014. Reverse mortgage retirement

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5 Reverse Mortgage Tips

If you would like to be informed about reverse mortgage tips, this is the article for you.

If you’re in your 60s and own your home, chances are you’ve heard about reverse mortgages—or will soon. Reverse mortgages allow you to tap the equity in your home. But they have risks and can be costly. Here are five reverse mortgage tips to consider:

1. Weigh all your options.

Whether you need money to pay bills or just want some extra cash, a reverse mortgage should be a last resort. Other options include selling your house and downsizing, or renting while carefully investing the sale proceeds. You could also take out a home equity loan or line of credit. If credit cards are the problem, consider consolidating that debt. If paying real estate taxes or home maintenance costs are the problem, look into local government assistance programs that can help. But, you have many options. So ask your state agency on aging about less risky, lower-cost ways to address your needs.

2. Understand the risks, costs and fees.

Even though you won’t be making any interest payments as long as you live in your home, the interest rate matters. If you decide to move, you’ll have to pay back the reverse mortgage plus compounded interest. The same is true if you have to leave your home for more than 12 months. Ask about all costs and fees, including any prepayment penalties.

3. Recognize the full impact of your decision.

While you typically don’t have to pay taxes on the proceeds of a reverse mortgage, the income or lump sum you receive could affect your eligibility—or your spouse’s eligibility—for various state and federal benefits, including Medicaid. Depending on the state, a reverse mortgage may not enjoy the same home-equity protection that would otherwise apply if you have a health emergency and need to enter a nursing home that you can only pay for by liquidating assets. Finally, consider that a reverse mortgage is generally not the right choice for those who want to leave their homes to their heirs.

4. Get independent advice about reverse mortgage tips.

Reverse mortgages are such complicated transactions. The federal government requires borrowers to meet with HUD-approved counselors before getting a federally guaranteed loan. Confirm that any counselor recommended by your lender is truly independent. You can do this by asking whether he or she receives any funding from the lender or the mortgage industry.

While most loans are federally guaranteed, lenders also offer proprietary loans that are not. Even if you’re applying for a proprietary loan, it’s a good idea to get advice from a trusted financial adviser who has no interest in either the reverse mortgage or any investment you plan to make with the proceeds. In any event, before you agree to a reverse mortgage, consult with legal and tax professionals who know the consequences of reverse mortgages for residents of your state and who aren’t connected in any other way to the transaction or the lender.

5. Be skeptical of reverse mortgages as part of an investment strategy.

Be very skeptical if someone urges you to get a reverse mortgage to make an investment or purchase an insurance product or a security—particularly if they are promising high returns. In essence, they’re encouraging you to speculate with your home equity. You may need for more critical purposes down the road. If you can’t afford to get a low return or the loss of your home, you shouldn’t be investing with your home equity funds.

By Gerri Walsh

February 10th, 2014.

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Mortgage Delinquencies Down 10% in 2013, Vary by State

Mortgage delinquencies decline

In 2013 Mortgage delinquencies declined 10% on a year-over-year basis despite a slight uptick in December. (According to Black Knight Financial Services’ Mortgage Monitor data). But, they are varying widely by state.

Mortgage lates were up 0.26% in December 2013 compared to the previous month. There is a total U.S. loan delinquency rate of 6.47% for loans that are 30 or more days past due, but not in foreclosure.

Notwithstanding the small upstick in credit lates and delinquencies to close out the year, the overall trend for 2013 was one of improvement, down 9.85% from 2012. (Black Knight Financial Services) notes, with the lowest level of “seriously delinquent” inventory since 2008.

As of the end of December, there were 3.24 million properties that were 30 or more days past due, not in foreclosure. Nearly 1.3 million properties were “seriously delinquent” at 90 or more days past due. Approximately 4.5 million properties were 30 or more days delinquent or in foreclosure.

Mississippi, New Jersey, Florida, New York, and Louisiana are the states with the highest percent of non-current loans. (According to December 2013 Mortgage Monitor). Conversely, the five states with the lost percentage of non-current loans are Montana, Colorado, Alaska, South Dakota, and North Dakota.

Black Knight Financial Services’ Data and Analytics division generates month-end mortgage performance statistics. This is derived from its loan-level database that represents approximately 70% of the overall mortgage market.

The Financial Assessment expected in coming months for the Home Equity Conversion Mortgage program may include information about past delinquencies, among other relevant financial history. This indicates a borrower’s willingness or capacity to pay loan obligations. HUD recently announced it will release guidance on the Financial Assessment in February.

By Alyssa Gerace

January 29th, 2014.

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How To Do a Reverse Mortgages

Reverse mortgages were originally designed so that seniors who own their homes or have considerable equity in their homes can free up cash for living expenses without selling their homes.

 

To qualify for a reverse mortgage, you must:

-Occupy the home as a principal residence for more than six months of the year.

-Be at least 62 years old.

-Pay off any debt against the home before obtaining the reverse mortgage. Or, use an immediate cash advance from the reverse mortgage to pay it off.

The amount that can be borrowed is based on your age, the equity in the home and the interest rate charged by the lender. You will retain title to your home and be responsible for taxes, repairs and maintenance. If you do not fulfill these responsibilities, the loan could become due and payable in full. The loan becomes due with interest when you sell your home, move, die or reach the end of the loan term.

There are three types of reverse mortgages:

-FHA-Insured

-Lender Insured

-Uninsured

With all three, interest on the loan amount adds to the principal balance each month. There will also be loan origination fees and closing costs with each. The loan is not taxable. When the loan term expires, you will either need to pay back the loan or sell your home and move.

Before you can close on a reverse mortgage you will be required to take counseling at the local office of the US Department of Housing and Urban Development (HUD) or a HUD approved housing counseling agency. This is a free service of HUD and it will give you a good education regarding the various types of reverse mortgages and whether a reverse mortgage is right for you.

A reverse mortgage can be a good choice but they are not right for everyone. You may wish to consult with your attorney and/or financial adviser to see if it makes sense for you.

By Dale Athanas

January 27th, 2014.

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How to Retire Early

For many Americans, the idea of an early retirement is pure fantasy — many surveys suggest that a good portion of us are convinced we’ll never be able to retire at all. But what if retirement saving isn’t quite as insurmountable an obstacle as you think?

The idea that retirement — even early retirement — is within anyone’s grasp is a big part of the appeal of a popular personal-finance blog called “Mr. Money Mustache,” written by a 39-year-old man named Pete, who lives with his wife and 8-year-old son in Longmont, Colo. (The blog recently had 417,000 monthly unique visitors, and has had a total of 4 million unique visitors since it launched in April 2011.)

Pete, who prefers not to divulge his last name to protect his family’s privacy, retired when he was just 30. His wife retired with him, and for the past nine years they’ve been stay-at-home parents. Their investment income supports their lifestyle, but they also work when they want, on their own terms.

Want to retire early? Mr. Money Mustache says it’s time to rethink our spending.

One secret to their success? They live on very little for a family of three: about $25,000 a year. They own a car, but mostly bike. Dining out is an occasional luxury. And shopping for stuff? That’s best avoided. But their philosophy goes beyond mere scrimping, says Mr. Money Mustache. It’s about enjoying life with less.

MarketWatch asked Mr. Money Mustache about his philosophy on spending, how he retired early, and his take on retirement planning. Our Q&A is below. And if you’re wondering about the name?

“Mr. Money Mustache is meant to be a bit of a character — a financial superhero,” Pete said. “He’s me, but a slightly bossier and more opinionated version of me. I find that people gladly obey the commandments of Mr. Money Mustache, even while they would scoff if plain old Pete, the former software engineer, stepped up and started giving them advice.”

How old were you when you decided to try to retire early, and how long did it take you to get to the point where you could retire?

It was a gradual process. I brought some frugal instincts along with me from childhood, so I always tended to save a bit of money rather than spending it all. My wife has been a pretty reasonable spender since the time we met, as well. So I graduated from college in 1997, we eventually moved in together, and, after several years of full-time work, some cash was starting to build up in our investment accounts, and we wondered if there was something useful we could do with it.

Sometime around 2002, we decided we wanted to be parents eventually, and that it would be great if we could retire from our relatively demanding careers in the tech industry before any babies came along. This really increased our motivation to spend less and invest more, and we cranked things up. At the end of 2005, our savings were sufficient to generate passive income that we could theoretically live off forever, so we quit the regular jobs and have been winging it ever since. And we now have an amazing 8-year-old-boy.

How did you decide how much money was enough to retire?

Based on a long-lasting hobby of reading books on stock investing, I realized that you can generally count on your nest egg to deliver a 4% return over most of a lifetime, with a good chance of it never running out. In other words, you need about 25 times your annual spending to retire. So we tracked our spending and our net worth, and when we hit the magic number we declared ourselves “retired.”

Did you have a written retirement plan in place early on, or more of a ballpark figure you were trying to save up?

We did most of the saving before we knew all that much about early retirement. But once the picture became a bit clearer, we had a clearer goal. For the last few years, the mantra was “$600,000 in investments, plus a paid-off house.” This is enough to generate $24,000 of spending money, which goes quite far if you have no rent or mortgage to pay.

How important is it for people to have a written retirement plan, in your opinion?

It doesn’t matter to me if it’s written, verbal or mental. But I do encourage people to open their minds to how real and possible an early retirement can be. It isn’t a vague, fluffy concept like, “someday,” “never” or “when I’m 65.” Retirement (or financial independence) simply means that you have your living expenses covered by nonwork income. In the worst case, this requires 25 to 30 times your annual spending, socked away into investments. If you’re eligible for a pension or Social Security, it’s even easier.

Do you work with a financial planner or manage your finances on your own?

I have always enjoyed managing my own finances. On the blog, I maintain a good-natured battle with the financial-planning industry in general, because they focus too much on retiring at a very old age with many millions in savings — just so you can continue to spend $100,000 a year until you die. It is much more efficient to get a handle on your materialism and spending so you can live more happily on a fraction of that amount, which can shave 20 years or more from the time you need to keep commuting in to that office.

How crucial is it, in your opinion, for people to have a monthly or annual spending plan or budget?

This really depends on your personality type. I’ve never had a spending plan or a budget at any point in my own life. Instead, it was a simple set of values to apply just before I make any purchase or commit to any expense: “Is this the best possible use for this chunk of money, if my goal is creating lifelong happiness for myself?”

Since I valued freedom and financial strength, this automatically ruled out quite a few purchases. For example, as a young man I was a major car enthusiast. But I didn’t run out to borrow money to buy an Acura NSX, because I valued having that money for other things more than I valued a fancy car. Nowadays I can finally afford a car like that without even borrowing, but I am happy to discover that the desire has disappeared.

Some people might think so much cost-cutting is akin to living like Scrooge and not having any fun. How would you respond to that?

If you tell yourself that is how it will be, then you will create your own truth and life will not be fun. But if you understand the fundamentals of what it means to be a happy person, you realize that buying more stuff for yourself has no relationship at all to how happy you are. These fundamentals include things like close relationships with other people, health, rewarding work, a chance to be creative and help others.

Work on those things and you’ll start living a much better life immediately, and soon wonder where the odd compulsion to own a yacht with a submarine came from in your old self.

Surveys suggest there are a lot of people out there who are worried about retiring, who don’t have enough money saved, who feel like they may never retire. Can you offer people in that situation any words of advice in terms of how to turn their situation around?

The quickest way to turn things around is to realize that you are in much more control than you realize. The time to reach retirement depends on only one thing: your savings rate as a percentage of your take-home pay. And this depends entirely on how much you spend. So the moment you can learn to live a less expensive life, suddenly the clouds clear up and the financial picture brightens considerably.

What would you say to someone in his 50s or 60s who maybe doesn’t have any credit-card debt, but is paying a mortgage and has about $100,000 saved for retirement? Is there any scenario where that person would be able to retire in, say, his early 60s?

That’s not a great starting point, but the turnaround can be incredibly fast once you realize where your money has been leaking out and change your life so that you can save much more of your income. Ten to 15 years is plenty of time for most people to go from zero to financial independence, so with a $100,000 head start and the kids all out of the house, this 55-year-old might be in a good place. Adding in Social Security income, the time to retirement would be even faster.

Do you think that the rule of thumb of needing about 85% of pre-retirement income in retirement is accurate, useful, dangerous, innocuous?

This is a good guideline for people who currently spend almost everything they earn, and plan to continue that habit in retirement. But for the rest of us, it is ridiculous!

A much more useful idea is to separate the idea of income from that of spending. Your income is determined by what you do for a living. But your spending should be decided based on your needs — the things and experiences that truly make you happy. As an example, my family’s needs and wants have always ended up adding to about $25,000 a year. So that’s how much we spent, whether we were making $25,000 or $200,000.

So as soon as our retirement income safely exceeded $25,000 a year, we were financially independent and we decided to retire.

I hate to get morbid, but the idea of how long one is going to live is sort of a crucial piece to a retirement plan. How are you handling this impossible-to-answer-yet-essential question? Are annuities and/or long-term-care insurance part of your long-term financial plan?

If you plan your retirement right, your expected longevity might actually have nothing to do with your planning. This is because the amount of money required to fund a 30-year retirement is almost identical to the amount to fund a person forever — an odd behavior of the equation for amortization of a large sum of money.

I’m not into annuities or any type of insurance myself, although those products do have value for some. Both of those ideas are based on statistics and probabilities, and when you do the math you can actually be safer handling things yourself. With a big enough collection of income-producing assets (stocks, rental property, etc.), your savings will easily outlive you, and probably be much larger by the time you die. This big chunk of savings also allows you to pay for unexpected expenses without rocking the boat too much — you have many years to adjust if you do hit a bump that forces you to deplete part of it for something like a medical expense.

You have said in the past that it’s important to “make your dollars work for you.” Does that mean the idea of an emergency savings account at the bank is overrated? Should people be investing more of their savings in the financial markets, via a taxable account, rather than using bank accounts?

Yeah, I’ve always questioned the idea of an emergency fund. It’s a great tool for the financial beginner who lives from paycheck to paycheck, and for whom a broken water heater would make the difference between making ends meet and borrowing via a credit card. But once you get off the ground, your credit card is a monthly buffer and your investment accounts are the emergency fund.

So I have no savings account at all, and keep just a few thousand dollars in the checking account. If a huge unexpected expense ever came up that was greater than my income, I would put it on the credit card along with all other monthly spending. Then just sell some shares of an index fund and transfer that back to the bank before the credit-card automatic payment happened at the end of the month. And I’ve still never had to run a credit-card balance in my life.

The great part is that if your spending is much lower than your income, these emergencies become very rare, because there is always a surplus, which you have to sweep away into investments each month. So if the water heater dies, you buy a new one and just invest a little bit less that month.

To what degree would you say rental income was key to your ability to retire early?

A small degree — I haven’t had the most brilliant landlord career so far, so my results have been only average. But rental properties chosen wisely can return much more than stocks, which could really speed up a savvy person’s retirement program. In my own case, I probably saved only about one year of work by using rental houses along with stocks.

Would you say it’s better to use extra savings to pay down one’s mortgage, or to invest in the financial markets?

For people in a high tax bracket, 401(k) plans in low-fee index funds win this battle pretty easily, especially if there is an employer match. For investment in taxable nonretirement accounts, it all depends on the interest rate (and if you’re pretty well-versed in investing, the stock market’s valuation or P/E 10 ratio).

Right now, with stocks expensive and interest rates very low, it’s probably a somewhat uninspiring tie, in my opinion, and you could do either. But if mortgage interest rates were 6% or more, I’d start getting more excited about paying off a house.

For people with other debts, like student loans, car loans or credit-card debt, at higher rates, I’d prioritize debt payoff even more.

It sounds as though a lot of your success has to do with cutting costs. But I know that some of my readers are really tired of hearing the “cut out the lattes” idea. What would you say to those readers?

For most people, cutting costs is by far the most powerful way to increase wealth. This is because it is easy to burn off almost any amount of money — just ask the 78% of NFL players that have financial problems shortly after turning off the cash fire hose of a pro sports career. It is also possible to cut almost any budget in half, leaving the happy latte cutter saving 50% or more of her income.

But the key to making this work is not cutting out treats — it’s eliminating your desire for those treats in the first place. Driving my 2005 Scion hatchback would be a chore if I had a desire for a 2014 BMW. But since this little Scion is more than enough car for all of my wants (and I usually ride a bike anyway), I am actually winning and living a happier life even while saving $20,000 a year in depreciation and other costs. The handy part of all this is that anyone can eliminate the desire for any of the expensive luxuries currently dominating most of our spending.

Do you have any sorts of items you love to buy and won’t give up?

That’s a tricky question, because our lifestyle does include quite a few luxuries that are fun to have around. I enjoy nice coffee at breakfast and wine many nights at dinner, and the food we eat is very high-end these days. And we live in a pretty fancy house full of nice stuff and take a lot of trips. While I enjoy all of these things, I also make fun of myself for living such a decadent lifestyle, as a reminder that none of these things are essential components of happiness. I would give them up in a heartbeat if we couldn’t afford them — for example if we were in debt or if they compromised our ability to live a free life. But since life is an adventure and there is no need to seek perfection, we dabble in all of the normal treats of American life.

You write a lot about doing things oneself — including being your own handyman. What would you say to people who feel they aren’t good at fixing things and aren’t confident enough to work on their own homes? Is home maintenance going to be a budget killer for them?

You get better at what you do. I think that every homeowner, with possible exceptions for very busy CEOs and rock stars, should be able to take care of a house and can easily learn how to do it. Outsourcing these basic chores is expensive and fussy — it often takes more time to find and supervise a contractor than it takes to do the job yourself.

The key is starting with the assumption that everything is easy, because it is. Then you just grab a book from the library and watch a few YouTube videos on the topic, and dive in. You can also attend the free workshops at Home Depot and ask for help from the handy people within your network of friends. People generally love to help others, and I spend a lot of my own free time giving free home-renovation advice and help to my own friends when they ask for it.

When it comes to spending, what about travel to foreign lands? A no-no because of the steep expense?

Travel can be as expensive or as inexpensive as you choose to make it. We do quite a bit of it these days, spending every summer in Canada and a good part of last winter in Hawaii, with other trips to quite a few other countries in recent years as well. But if you live like a local once you get there, going for the slow and authentic experience rather than flashy hotels and bungee jumping every day, it costs a lot less. One of my favorite trips was a winter driving trip from Colorado down to the Gulf Coast, where we brought along a tent and a kayak and hung out on as many beaches and waterways as we could find in the tropical belt of Texas for a month.

Why did you start your blog?

It was a 50/50 mix of inspiration and exasperation. My wife and I retired from real work at the end of 2005, but all of our friends and peers kept working around us. As their careers blossomed and earnings grew, I kept hearing these complaints about money being tight and retirement being an impossibility. But looking at their lifestyles, I could see exactly where the money was leaking out unproductively — even while they seemed to be missing it. So I decided to start the blog and share the ideas with the world, rather than annoying friends with unrequested financial advice.

By Andrea Coombes

January 17th, 2014.

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Simple Estate Planning Steps Everyone Should Take Care Of

Estate planning is a difficult topic, it requires you to think about a world without you in it. No one likes to reflect on their own demise, which is why many people simply put estate planning off for another day and only get around to it when the chips are down.

It will cross your mind once in a while but because it’s a topic that’s not enjoyable to think about, you’ll put it off for another day with perhaps just a twinge of guilt.

So many things in life, however, taking care of your estate planning now is the right step, even if you don’t have any dependents. It’s a relief off of your shoulders and it leaves plans in place if the unthinkable were to happen to you.

These four items cover the needs of most people. If you have a significant net worth, you should consider talking to a lawyer for specific planning advice for your estate, but for most people, these four steps should take care of most of your estate planning needs.

Everyone should have a master information document.

A master information document is simply a collection of the information a person would need to properly close out your accounts and obtain any and all account balances that you might have. This is an invaluable tool for whoever it is that is responsible for cleaning up your estate after you pass away.

It’s easy to prepare one. All you need is a printed document stored in a safe place that people will check when you pass away. That document should include account information for every account you have open, a complete list of every benefit anyone is entitled to upon your passing, a complete list of all debts and all assets, a detailed description of how to handle any business assets you may have, a copy of your will, your living trust, and any other documents pertaining to your estate.

Everyone with dependents should have a term life insurance policy.

If you’re leaving behind anyone who relies on your income in order to keep food on the table, clothes on their back, and a roof over their head, you need to have a life insurance policy in place.

Insurance salespeople will try to get you to buy lots of types of policies, but all you need is a term policy with a term long enough so that anyone reliant on you will be independent by the end of the term. For most parents, that means a ten year or twenty year term policy. How much? It should provide at least a few years of your salary.

Everyone who wants to make sure who gets personal items when they pass should have a will.

If you have items you want for a person if you pass, you need a will that dictates the handlings. Otherwise, you’re relying on the court and your family and that puts a burden on all of them.

Make a list of any items that you want given to specific people. Then,have the rest of your estate liquidated and split among descendants or given to a charity, as per your desires. This can easily be transformed into a legal will using a service like LegalZoom.com.

Everyone with dependent children should also have a will that includes guardianship information.

Who should care for your children if you were to suddenly pass away? It can be a difficult decision, and it should be one that you discuss with the people you are considering. Most important, such wishes should be set down in a legal will.

Estate planning is an intimidating thing, but many of the steps that people need to take are very simple. They also add to your personal peace once you’ve taken care of them. If you don’t have these in place, consider time to make sure those matters are in hand.

This article originally appeared at U.S. News and World Report Money.   

December 27th, 2013

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2013- The Biggest Reverse Mortgage News Stories

1. FHA to Halt Fixed Rate Standard Reverse Mortgage Starting April 1on Jan. 30, 2013. So, the FHA said it would merge the Saver and Standard loan programs. This would eliminate the popular fixed-rate, standard reverse mortgage

Here are the top 10 most-read stories on RMD this year, according to traffic data compiled by our editorial team.

2. HUD Announces Major Changes to Reverse Mortgage Program on Sept. 3, 2013. The HUD spelled changes to the HECM program including new borrower requirements. This took effect on October 1, the same year.

3. HUD to Combine Existing Reverse Mortgage Products on Aug. 19, 2013. Prior to making reverse mortgage changes, HUD informed the industry it was considering them, following an actuarial review of FHA’s insurance fund that showed reverse mortgage loans led to an FHA shortfall in fiscal year 2012.

4. HUD Slashes Reverse Mortgage Principal Limit Factors on Sept. 4, 2013. Following the announcement of changes to the HECM program, HUD announced new reverse mortgage principal limit factors that went into effect October 1. New borrowers see about 15% less in proceeds as a result.

5. FHA Reverse Mortgage Changes Coming By Month’s End and FHA: New Reverse Mortgage Changes Coming in August—Jan 15 and July 31, 2013, lenders then tuned in to FHA’s announcements of upcoming changes throughout the year.

(From product changes to mergers and new business entrants, the reverse mortgage market has seen a wealth of news in 2013)

6. [Update] Walter Investment Management Buys Security One for Up to $31 Million on Jan. 2, 2013. Walter, which previously acquired RMS, purchased Security One in the first part of 2013, which ramped up its position in the market.

7. Former MetLife Execs Launch New Reverse Mortgage Start-Up on Feb. 24, 2013. Several former MetLife reverse mortgage executives announced a new startup, Reverse Mortgage Funding, that then later opened for business in August.

8. Nationstar Acquires Greenlight Financial for Up to $75 Million on May 7, 2013. Mortgage servicing giant Nationstar agreed to acquire Greenlight Financial as well as its reverse mortgage platform, for up to $75 million.

9. President Obama Signs Reverse Mortgage Reform Bill into Law on Aug. 9, 2013. President Obama signed into law the Reverse Mortgage Stabilization Act, authorizing the Secretary of HUD to establish additional requirements to improve the fiscal safety and soundness of the HECM program.

10. Court Rules Against HUD in Reverse Mortgage Non-Borrowing Spouse Suit—Oct. 1, 2013—In a lawsuit that has yet to be resolved, a court ruled against HUD in a suit filed by non-borrowing spouses of reverse mortgage borrowers. HUD has since appealed the ruling.

By Elizabeth Ecker

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Wife doesn’t need to fear a Reverse Mortgage

Reverse Mortgage

Let’s figure it out.

Question:

Dear Retirement Adviser,
Our home has had a reverse mortgage since 2008 when my husband turned 62 years old. We are retired and I’m now 62. I feel like I need to be added to the deed.

The mortgage lender says that it is not possible because they do not initiate these anymore and that we should refinance with another company. We talked with one company and were told it is not possible because our current interest rate is too low. Also, we would need to come up with an extra $15,000 at closing. We are both disabled and live on our Social Security checks. We have trouble paying the electricity bill.

It appears that if my husband dies I could become homeless. We are worried and don’t know what to do. Can you help?

Thank you,
— Maria Mortgage

Answer:

Dear Maria,
Your situation highlights a common problem with reverse mortgages, particularly for retired couples. At the time your husband got his reverse mortgage, the youngest person on the mortgage had to be at least 62.

It’s also timely because a federal court has recently ruled that a surviving spouse can’t be evicted from the home when there’s a reverse mortgage in place. That’s even if they are not listed on the mortgage.

AARP Foundation attorneys, acting for two surviving spouses, sued the Department of Housing and Urban Development over the issue. HUD regulates reverse mortgage loans. AARP held that HUD was in violation of federal law when it required surviving spouses not named on the reverse mortgage loan to either pay off the loan or face foreclosure when their spouse died.

So, you don’t need to refinance your reverse mortgage to protect your ability to live in the home, should your husband die first.

HUD is expected to release information in the near future that will spell out the implications of this court case. I hate to tell a person struggling to pay the electric bill that he or she should consult with a real estate attorney on the matter. But if you did, it could give you some peace of mind. It also would be a lot cheaper than getting a new reverse mortgage at a higher interest rate and paying $15,000 to close.

These regulations were revised in 2013 under the Reverse Mortgage Stabilization Act. Newer reverse mortgage loans issued since the law was implemented will include the spouse on the loan, thus formally protecting surviving spouses. Unfortunately, the changes are also expected to reduce the amount of money available to seniors from a reverse mortgage.

By Dr. Don Taylor, Ph.D., CFA, CFP, CASL

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Reverse mortgage strategy can open door to second home

A reverse mortgage is a financial agreement in which a homeowner relinquishes equity in their home in exchange for regular payments, typically to supplement retirement income.

A reverse mortgage is against a primary residence, yet the loan also works to help purchase a second home.

While the proceeds of a reverse mortgage typically help seniors to “age in place” by making their home more comfortable for their retirement years, there are no limitations on how reverse funds can be used.

One family sought to lower their monthly mortgage payment on their primary home so that they could afford the monthly payments on a recreational cabin. Instead of cashing other assets, paying the capital gain tax and plunking down the net amount as the cabin’s down payment, the couple took out a reverse mortgage, which accomplished the same goal.

“They wanted to keep their home but were concerned that their monthly obligations would prohibit them from qualifying for another mortgage on a second home,” said John Harding of Axia Home Loans Reverse Mortgage Division. “By refinancing their home with a reverse mortgage, it not only eliminated their mortgage payment but also provided the down payment funds for the cabin. Since there was no longer any monthly payment, it was easier for them to qualify for a mortgage on the cabin.”

Let’s take a look at the numbers:

Primary residence
Value: $600,000

Mortgage: $281,000

Mortgage payment: $2,114 (plus taxes and insurance)

Reverse Mortgage: $433,800

Net proceeds after paying off mortgage plus closing costs: $128,311

Cabin
Purchase price: $215,000

Down payment: $70,000

Funds needed to close: $77,000

Conventional loan: $145,000

Mortgage payment: $811 a month (plus taxes and insurance)

The strategy

The strategy will enable the Casey’s to live in  their home with no mortgage payments for the rest of their lives, or until they sell the house. It also reduces their monthly mortgage obligations from $2,114 to $811.

A reverse mortgage is a loan that enables homeowners 62 or older to borrow against the equity in their home. They can do so without having to sell the home, give up title or take on new monthly mortgage payments. One uses loan proceeds for any purpose, they take out as a lump sum, pay fixed monthly payments, establish a line of credit, or have a combination of those options.

The “expected interest rate” is a critical factor that determines how much equity an elderly homeowner is eligible to receive from a HECM.

Add a margin to the 10-year U.S. Constant Maturity Treasury rate to calculate it, which is published weekly by the Federal Reserve.

The reverse mortgage loan amount depends on the borrower’s age, current interest rates. In most cases, so does the location of the home. A reverse mortgage does not have to be repaid until the borrower moves out of the home permanently, and the repayment amount cannot exceed the value of the home.

Seniors can “outlive” the value of their home without being forced to move. The homeowner cannot be displaced and forced to sell the home to pay off the mortgage. Even if the principal balance grows to exceed the value of the property, this is so. If the value of the house is exceeding what is owed at the time of homeowner’s death, the rest goes to the estate.

A controversial topic has been the “trailing spouse” issue.

If the surviving spouse is not included on the reverse note, the surviving non-borrower spouse may not be able to pay off the loan balance or qualify for a HECM on their own to remain in the property.

The situation usually occurs when an older man marries a younger woman. The woman then chooses not to go on the reverse mortgage title. Since the age of the younger spouse dictates potential proceeds, her participation decreases the net amount.

Recently, HUD’s Office of Housing Counseling sent a notice to all HECM-approved counselors. This encourages them to take special precautionary measures when meeting with non-borrower spouses. So, they fully understand the future repercussions of not being on title to the HECM loan. The notice also recommended that counselors get a signed, individual written statement from a non-borrower spouse. This must acknowledging that he or she may have to leave the property upon the death of the borrower.

This reality is additionally important when a second home is involved. A reverse mortgage can be terrific, but if your name isn’t on the mortgage note, at least have somewhere to stay.

By Tom Kelly

November 30, 2013

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Retiring on the House: Reverse Mortgages for Baby Boomers

As baby boomers age, reverse mortgages expect to gain popularity as a means of covering living expenses. Hence, in the future, more homes passed on to children will come with a bill attached. (The balance due on these equity loans).

Federally insured reverse mortgages, officially issued as part of the Home Equity Conversion Mortgage program, are a way for homeowners 62 and older to borrow money using their home equity as collateral. One must pay the remaining proceeds balance on the mortgage, which frees homeowners from monthly payments. Interest and monthly insurance premiums are charged throughout the life of the loan. The total becomes due when the borrower dies (or permanently moves out of the home).

“A common misconception about reverse mortgages is that the lender takes an equity share in the house”. (Vivian Dye, a reverse-mortgage consultant at Atlantic Residential Mortgage in Westport, Conn). “It’s a relationship between the bank and the borrower,” she said, “and it’s the same kind of relationship as a regular loan.”

As the first lien holder on the property title, however, the lender must be repaid when the property changes hands. How the heirs handle repayment depends on how much equity is left in the home and whether they want to keep it.

Under federal regulations, after the last borrower named on the loan has died, the lender must provide up to 30 days for the heirs to decide on a repayment method.

“Heirs then have up to six months to sell or arrange financing”, said (Colin Cushman, the chief executive of Generation Mortgage). She is a reverse-mortgage originator and servicer based in Atlanta. But, he notes, as many as two 90-day extensions are allows the heirs to show they are actively trying to sell the property.

Should they wish to retain ownership, the heirs might choose to get a separate mortgage to refinance the home and pay off the reverse mortgage. Or, if there is enough equity in the home, they might choose to sell it and use the proceeds to pay off the loan.

The heirs will not be on the hook for any shortfall should the home fail to sell for enough to pay the loan in full. If the loan balance is exceeding the value of the home, the amount owed is limited to 95 percent of the appraised value.

Mr. Cushman offered an example: On a home with an appraised value of $100,000, a reverse mortgage balance of $120,000. In addition, the amount owed the lender would be $95,000. (No short sale approves for less than that amount.) Government-backed insurance on the loan would cover the $25,000 gap.

In such “underwater” situations, the heirs may instead choose a deed in lieu of foreclosure. In this case, they simply deed the property over to the lender.

Heirs should be aware that the ability to draw on the reverse mortgage ceases once the borrower dies. For that reason, Ms. Dye recommends that the family considers whether enough money is set aside for things like funeral expenses while funds are still accessible — that is, if the family discusses finances at all.

“Some people don’t even know their parents had a reverse mortgage,” said Vincent Liberti. (Estate planning and elder law lawyer in Hartford).

He frequently sees financially precarious people who haven’t planned for retirement take on a reverse mortgage as a last resort. This is in addition to those who go through the funds too quickly. It’s one of the last “tools” he recommends using.

But Mr. Cushman says his firm is trying to change such negative perceptions. With an app planning tool, “nu62,” it is shown how to use home equity strategically to meet long-term financial goals.

February 18th, 2014

By Lisa Prevost

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7 Costs That Will Decline In Retirement

Retirees have an opportunity to save money on these expenses.  Many people dream of retiring early, but hesitate to make the jump because they are worried about losing the security of incoming paychecks. But retirement might not be as expensive as you think. Some expenses are much higher for working people than retirees. Here are some costs that are likely to decline in retirement:

You don’t have to buy work clothes anymore.

There’s no need to get dressed up once you no longer report to an office. You probably won’t need to buy ties or expensive suits anymore, and there’s no reason to dress to impress. Instead you can switch to the likely cheaper clothes you feel most comfortable in.

Many work-related costs will disappear.

Your long commute and the associated transportation costs will be gone in retirement. Overpriced sandwiches are out too because you will actually have time to make the sandwiches instead of buying an overpriced combo just to hang out with a colleague in an attempt to fit in.

Stuff will wear out more slowly, and you won’t have to replace it as often.

You’ll put fewer miles on your car once you eliminate your commute, and your expensive clothes will stay nice longer because you’ll likely wear casual clothes most of the time. Even your personal laptop could last longer because you aren’t banging away at each key doing extra work at home on evenings and weekends.

Less income means lower taxes.

Those with high incomes often pay a higher income tax rate. If your income is lower in retirement than your current salary your tax bill will decrease.

Time to improve your health.

With the added free time, you will finally have time to exercise in retirement. But even the couch potatoes will benefit from less job-related stress because retirees typically get to set their own deadlines.

Time to negotiate.

Working people often pay more than they need to for things to save time. Retirees have time to search for the best deal and negotiate in order to get the best possible price. For example, my medical bills often contain errors. The reason almost always boils down to someone punching in the wrong code, which is easy to fix. Workers may be too consumed to investigate, but retirees should have plenty of time to find someone who can correct the problem.

Avoid peak travel premiums.

Many workers do their traveling and leisure activities during the same busy weekends and holidays. But why pay full price in retirement when you can potentially go to events or vacation any day throughout the year? Visiting places during the week or traveling during off-peak times that aren’t school breaks and major holidays can save you money and lead to a better and less crowded experience.

Retirement forces you to look at your expenses, so you are far less likely to throw money away on unnecessary items. While some expenses will go up in retirement, many others will decline or disappear, especially for retirees who take the initiative to cut costs.

March 11th, 2014.

By David Ning

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