In addition to big industry players, two professors were also asked to speak. George Mason University real estate finance professor Anthony Sanders and New York Law School professor Houman Shadab both presented their research before the committee.

The Aspects of HECM Reverse Mortgages Being Debated

According to Jeff Lewis, Chairman of the Coalition for Independent Seniors, the hearing was called to discuss the state of HECM reverse mortgages. Industry experts will carefully consider the product and debate how HECMs may be improved in the future. In Lewis’s words, the primary goal of the hearing is to determine how government and industry leaders can work together to “improve a financial service tool that is helping our seniors cope with the expense of retirement while staying in their homes longer.”

What Participants Are Hoping to Accomplish During the Hearing

While Lewis’s account of the hearing seems positive, Houman Shadab’s take on HECMs is less encouraging. In his written testimony prepared for the hearing, Shadab clearly opposed expanding the HECM program. Shadab believes that reverse mortgages can flourish without FHA insurance. Instead of HECM programs, the professor believes that the industry should place more emphasis on building stronger conventional reverse mortgage products.

If FHA does continue to insure HECMs, Shadab argues that the maximum claim amount should be reduced. The professor believes that this would lessen the risk of the loan product without posing a “long-term problem for borrowers seeking reasonably priced reverse mortgages.” Public opinion on the issue has yet to be heard.

The Value of a Reverse Mortgage for Seniors

A recent study conducted by Fidelity Investments, an investment management company that serves over 20 million clients, found that the average retiree will be forced to spend approximately $240,000 on healthcare. This figure does not include costs associated with dental care, over-the-counter medication or long-term care.

While Fidelity’s figure is worrisome enough on its own, the cost of healthcare is rising. In the last year alone, medical costs have risen 4%. According to Brad Kimler, Fidelity representative, “Medical inflation is outpacing salary increases and cost of living adjustments for many people.” To adequately prepare for retirement, seniors need to consider this inflation. After all, for most seniors, healthcare will be one of their largest expenses.

How a Reverse Mortgage for Seniors Can Reduce Seniors’ Financial Burden

When faced with overwhelming healthcare costs, seniors have one product to turn to: the reverse mortgage for seniors. For many seniors, their Social Security benefits will not be enough to cover the rising cost of medical care. Fidelity experts predict that, in the next 15 years, the average senior’s medical bills will equal around 60% of his or her annual Social Security benefit.

By allowing seniors to access their home equity and defer payment until they leave their home, a reverse mortgage can pick up where Social Security benefits leave off. Depending on their needs, seniors can use a reverse mortgage to convert a portion of their equity into one lump sum cash payment, monthly payments or a line of credit. Having access to this tax-free cash can make it possible for seniors to keep up with their medical expenses while enjoying their golden years.

Will Increased Awareness Benefit the Senior Reverse Mortgage for Purchase Program?

The reverse mortgage for purchase, or HECM for Purchase, program was first released in October of 2008. By 2010, only 1,200 purchases had been made using a reverse mortgage. Today, the program is still not performing as well as industry experts believe possible.

While there are several factors that might play a role in the program’s performance, one of the most significant problems is a general lack of awareness. According to Michael Banner, creator of the American C.E. Institute, most realtors are simply unaware that such a program exists. Many who are aware still lack a thorough understanding of the program. Unless seniors discover the program on their own, they might not know that they even have the option of purchasing a new home with a reverse mortgage. As more relators complete the NAR’s online education course, the reverse mortgage for purchase program should become more popular.

What Seniors Should Know About the Senior Reverse Mortgage for Purchase Program

The reverse mortgage for purchase program is available to seniors over 62 years of age who currently own a home but are interested in moving to a new residence. With this program, seniors are able to purchase a new residence while simultaneously taking a reverse mortgage on the property. Instead of getting a new forward mortgage loan, seniors will purchase the new home with the proceeds of their reverse mortgage.

Seniors who choose to take advantage of this program will essentially be getting two loan transactions for the price of one. As with regular HECMs, seniors will not have a monthly mortgage payment or be expected to repay their loan until they stop living in their home. This makes the reverse mortgage for purchase program the ideal option for seniors who want to downsize or otherwise purchase a new principal residence without the financial burden of a new forward mortgage loan.

Defining the Average

Before answering this question, it is important to understand the current definition of average. According to statistics released by the Employee Benefit Research Institute, approximately 35% of seniors over 65 years of age rely solely on Social Security benefits during retirement. Only 36% of working Americans have $50,000 or more saved for retirement. The rest have between $0 and $50,000 which, needless to say, is not enough to get seniors through their retirement years comfortably.

While some seniors are confident of their financial stability, the average senior is at least somewhat worried about his or her financial standing. Typically, these are the seniors wondering what are reverse mortgages doing to help their peers plan a financially stable retirement.

What Are Reverse Mortgages Doing for Seniors During Retirement?

Reverse mortgages are helping seniors a number of different ways. Primarily, these loans are used to repay an existing mortgage loan and increase seniors’ cash flow. For seniors depending on Social Security, eliminating one’s monthly mortgage payment can be a significant help.

Some seniors are also using reverse mortgages as part of a larger investment strategy. Many seniors are tapping into their home equity before depleting other assets in order to give their investments more time to recover and grow after being hit by the economic downturn. While seniors can use reverse mortgages any number of ways, there is no question that these loans are turning into one of the most important retirement tools available to seniors.

Face-to-Face Counseling Aimed to Protect Seniors Against Reverse Mortgage Pitfalls

The counseling bill was proposed by Bonilla at the suggestion of the California Senior Legislature. Both Bonilla and the California Senior Legislature hoped that the bill would protect seniors from possible reverse mortgage pitfalls and ensure that potential borrowers are properly educated prior to initiating the loan process.

California Policymakers Find Face-to-Face Counseling Unnecessary

On April 23rd, the bill was amended to require in-person counseling “unless the borrower elects to receive the counseling in another manner.” Presumably, the alternative manner could be over-the-phone counseling. Lenders would still be required to provide potential borrowers with a list of at least 10 HUD-approved counseling agencies from which they could choose a counselor.

While it appears that California borrowers will be allowed to complete counseling over the phone, Massachusetts borrowers have not been so lucky. In 2010, Massachusetts policymakers enacted a law that forced seniors to meet with a reverse mortgage counselor in person before being eligible to receive a counseling certificate. This law has been met with constant opposition from both lenders and licensed counselors who feel that the policy puts undue stress on seniors.

Although face-to-face counseling does help borrowers understand potential reverse mortgage pitfalls, benefits and their different loan options, it can be difficult for seniors to meet with a counselor in person. This is especially true in Massachusetts, where some seniors live very far away from approved counseling agencies. Currently, the Massachusetts bill stands. The California bill, however, will be discussed in a committee hearing that is scheduled to take place on April 30th.

Reverse mortgage Information: Borrowers and Getting Younger and Gaining More Equity

According to research conducted by the National Council on Aging and the Mature Market Institute, the average reverse mortgage counselee was 76 in 2000. Today, the average counselee is only 71.5 years of age. What is really interesting, however, is that in 1999 only 6% of borrowers were between the ages of 62 and 64. Today, 20% of borrowers fall into that age range.

Not only are borrowers getting younger, but senior equity is growing at a rapid rate. According to data collected by the National Reverse Mortgage Lenders Association and Risk Span, senior equity grew by almost one percent in the last quarter of 2011. Seniors gained over $30 billion in home equity, making total senior equity equal to approximately $3.22 trillion dollars. Due to the expanding demographic and growing equity, experts believe that the reverse mortgage market will see significant growth in the future.

Reverse Mortgage Information Regarding the Ever-Changing Landscape

Age is not the only thing that is changing when it comes to reverse mortgages; the geographical landscape is also changing. In the past, Florida, California and Texas have been the top three most active states for reverse mortgages. In recent months, New York has booted Florida out of its position in the top three. While California is still the most active state, New York and Texas are currently tied with Florida in fourth. Experts believe that these rankings will remain steady in the future, unless borrowers in other states begin taking advantage of their growing home equity and alter the demographic once again.

Are Reverse Mortgage Fees Higher than Those Charged on Forward Mortgage Loans?

When it comes to cost, it is very difficult to compare forward and reverse mortgages. These loans are very different products, carry different terms and offer different benefits. Because forward mortgages are commonly taken for 30 years, borrowers frequently pay more in interest than they do on reverse mortgages. In some cases, however, reverse mortgages carry higher upfront fees.

Depending on the loan product, reverse mortgages carry an upfront MIP equal to 0.01% or 2% of the maximum claim amount. Seniors also pay annual MIPs equal to 1.25% of their loan balance. While forward borrowers can sometimes avoid paying for mortgage insurance, reverse mortgage MIPs are required of every borrower.

As with forward mortgage loans, reverse mortgage borrowers will also pay origination fees, closing costs and appraisal fees. Many of the fees charged on reverse mortgages are the same as those charged on forward mortgage loans. Additionally, because Home Equity Conversion Mortgages (HECMs) are federally-insured loan products, the Department of Housing and Urban Development (HUD) caps the fees that lenders are allowed to charge.

Reverse Mortgage Fees: What You Need to Know

HECMs were developed to provide seniors with an affordable way to access their home equity during retirement. To make HECMs affordable, seniors are allowed to finance most of their fees into their loan. In most cases, the only costs that seniors do pay out of pocket are the appraisal and counseling fee. However, even the counseling fee can be rolled into the loan if necessary. While borrowers will have to repay these costs eventually, the ability to avoid paying any large out-of-pocket costs keeps the loan process as affordable as possible.

How Do Reverse Mortgages Work to Increase Wealth?

Since 2008, the United States economy has been in a state of crisis. Consumers who had their assets tied up in stocks and bonds suffered greatly. Many seniors lost a large portion of their retirement assets which set them back in terms of retirement readiness. To make up for the volatile market, economist Stephen Sacks and tax attorney Barry Sacks warn seniors not to withdraw from their assets while they are still underperforming. Doing so would make it impossible for an individual’s portfolio to recover over the next few years.

How Do Reverse Mortgages Work as Part of a Savvy Retirement Plan?

To help seniors avoid withdrawing from their investments, Sacks and Sacks believe that many seniors would benefit from using a reverse mortgage to access home equity before touching their portfolio. Home equity is often a consumer’s largest asset. While home values should begin increasing in the very near future, homes appreciate slower than many other investments.

To make the most of one’s assets, seniors can withdraw a portion of their home equity using a reverse mortgage to avoid depleting their growing investments. This gives a senior’s investments time to recover and increase in value. Employing this strategy can turn a reverse mortgage into a “wealth accumulation device” instead of a loan of desperation or last resort. While many financial planners are still getting used to the idea of using reverse mortgages as common retirement tools, it appears that these loans are becoming increasingly mainstream.

Of the boomers surveyed, 14% had either gotten a reverse mortgage, plan to get a reverse mortgage or would consider the loan in the future. Another 4% were still unsure whether they would consider the option. Still, a significant portion of the senior population will get or consider a reverse mortgage during their retirement years. This leaves many others wondering what are reverse mortgages?

What Are Reverse Mortgages to Cash-Poor Retirees?

Reverse mortgages allow seniors 62 and older to withdraw a portion of their home equity. Besides property taxes and insurance, seniors are not required to make any loan payments until they sell their home, move or pass away. To cash-poor seniors, reverse mortgages are a way to increase their liquid assets and stay financially solvent during their hard-earned retirement years.

What Are Reverse Mortgages Doing to Keep Seniors in Their Homes Throughout Retirement?

Recent statistics show that the great majority of seniors wish to stay in their current homes. Still, 36% of respondents were worried about running out of cash or facing overwhelming healthcare costs in upcoming years.

A reverse mortgage must be in the first lien position, meaning that borrowers must use their proceeds to pay off any remaining mortgage balances. By eliminating their mortgage payments, many seniors are able to enjoy a much greater cash flow. Reverse mortgages also often leave seniors with additional proceeds that can be put towards healthcare or other large expenses. For the 83% of the senior community who wants to remain in their home, a reverse mortgage can help grant them their wish.

Getting the Big Picture with a Reverse Mortgage Calculator

A reverse mortgage calculator is an online tool that predicts how much users might be able to receive through a reverse mortgage. To get an idea of how much you could receive during retirement, input your age according to when you plan on applying for the loan, your property value and your remaining loan balance. The longer you wait to apply, the more you will be eligible to receive. However, waiting until your other assets are low is not always the best choice.

Using a Reverse Mortgage to Delay Filing for Social Security

According to an article published by Reuters on March 21st, more seniors are using reverse mortgages to “fill in the gaps.” Specifically, seniors are using reverse mortgages to delay filing for Social Security benefits. The longer you wait to file, the greater your monthly benefits. Seniors who were born in 1943 or later will receive an 8% bonus for every year they wait to file after reaching full retirement age. That 8% yearly bonus can make a huge difference over the course of one’s retirement.

To qualify for the largest benefit possible, many seniors are choosing to take out a reverse mortgage to “fill in the gaps” before filing for benefits. While this tactic may not be right for everyone, it is a retirement strategy that could benefit many pre-retirees.