Many Reverse Mortgages are actually taxpayer backed loans

derryb

Reverse Mortgages Spike 20% in 2013 as Baby Boomers Scramble for Cash

"In a nutshell, it’s a specific type of home equity loan available only to people aged 62 and over, which has the added benefit of not carrying any interest payments and is only due upon death or once the homeowner is no longer using it as a primary residence. Oh, and since the FHA is originating many of these loans, you the taxpayer will be on the hook!"

"Reverse mortgages also discourage elderly homeowners from undertaking repairs and maintenance that someone else might do more proactively, said Mark Calabria, a former staff member of the Senate Banking Committee. That can hurt the value of the property, which in turn cuts into the proceeds that lenders will receive when it comes time to sell the home, leaving the FHA potentially on the hook because of its guarantee."

Future toxic mortgages for the FED to backstop?

bronco2078

Are you implying the banks found a market even more subprime than subprime? In defense of the bankers though, they usually find a way to cheat the heirs out of the houses that still have equity when the borrower dies.

I think the preferred method is to force the inheritors to act without full information by forcing their hand with illegal deadlines.

OPA

I have serious doubts that the banks will take a major hit on these type of loans, since they calculate their payouts on approx 60% of assessed value less any existing liens. That leaves them a nice fudge factor in the event of foreclosure.

bronco2078

An issue with these is if the owner gets to the point where they need long term care in a nursing home. In that case medicare would take the house after the person passes away but if there is a reverse mortgage who gets it?

If medicare does the bank loses out , if the bank gets it then the taxpayers do.

AUandAG

Reverse mortgages have been around for decades. There has not been a rash of problem loans with
them. Sure the elderly and infirmed may not do the necessary maintenance that is needed but then
again, home prices generally rise thus protecting the lender.
The notes do call for the proper maintenance and if it is not done,then foreclosure can be commenced
just as in any other loan in default.
One cannot get a 100% reverse mortgage loan. There is a cushion built in for the lender. Like a required
down payment on a regular purchase mortgage.
It's equity that can be accessed for the care of the homeowners if needed thus relieving the children or
public for that expense.
They have their place in my opinion.

bob
PS: I live in a retirement community of 7,000 homes and I know many of my neighbors have a Rev Mtg.
Sometimes we outlive our retirement funds, too.
PPS: The baby boomers are now retiring thus causing the spike in R. mortgages. A spike of 23% really
means little because the base was so small.

OPA

<< <i>An issue with these is if the owner gets to the point where they need long term care in a nursing home. In that case medicare would take the house after the person passes away but if there is a reverse mortgage who gets it?

If medicare does the bank loses out , if the bank gets it then the taxpayers do. >>



Medicare is not involved in taking some ones home. That only is applicable if you are on Medicaid.

derryb

<< <i>

<< <i>An issue with these is if the owner gets to the point where they need long term care in a nursing home. In that case medicare would take the house after the person passes away but if there is a reverse mortgage who gets it?

If medicare does the bank loses out , if the bank gets it then the taxpayers do. >>



Medicare is not involved in taking some ones home. That only is applicable if you are on Medicaid. >>


Medicare/Medicaid has no claim on mortgaged property, it belongs to the holder of the mortgage.

BAJJERFAN

I would guess that if you have any of the RM funds left, that you'll have to exhaust those before you can get Medicaid.

bronco2078

<< <i>I would guess that if you have any of the RM funds left, that you'll have to exhaust those before you can get Medicaid. >>



That would make for a pretty picture wouldn't it? Granny needs healthcare but medicaid won't pay because she has an income stream.


Would these people need reverse mortgages if their savings weren't destroyed by ZIRP? The Fed bailing out its crony pals puts people in a position where they have to take a paid for house and sign it away.


In getting a reverse mortgage you have to sit down and estimate pretty accurately how much longer you are going to last right? How much a month you get vs what your bills are going to be.


Hmmmm I can last 8 more years on 1000 a month from a reverse mortgage . Except by year 6 inflation has morphed my diet to cat food and my thermostat has to be set at 55.


Chained CPI

BAJJERFAN

<< <i>

<< <i>I would guess that if you have any of the RM funds left, that you'll have to exhaust those before you can get Medicaid. >>



That would make for a pretty picture wouldn't it? Granny needs healthcare but medicaid won't pay because she has an income stream.


Would these people need reverse mortgages if their savings weren't destroyed by ZIRP? The Fed bailing out its crony pals puts people in a position where they have to take a paid for house and sign it away.


In getting a reverse mortgage you have to sit down and estimate pretty accurately how much longer you are going to last right? How much a month you get vs what your bills are going to be.


Hmmmm I can last 8 more years on 1000 a month from a reverse mortgage . Except by year 6 inflation has morphed my diet to cat food and my thermostat has to be set at 55.


Chained CPI >>



There is always the option of just selling the place outright. A RM just lets you enjoy the proceeds from a property while still living in it. You have to be about destitute to get on medicaid and IIRC you have to be without significant assets for at least 5 years before you can get it. I believe the only qualification that one needs for Medicare is to be 65 and maybe qualify for SS.

cohodk

<< <i>

<< <i>I would guess that if you have any of the RM funds left, that you'll have to exhaust those before you can get Medicaid. >>



That would make for a pretty picture wouldn't it? Granny needs healthcare but medicaid won't pay because she has an income stream.


Would these people need reverse mortgages if their savings weren't destroyed by ZIRP? The Fed bailing out its crony pals puts people in a position where they have to take a paid for house and sign it away.


In getting a reverse mortgage you have to sit down and estimate pretty accurately how much longer you are going to last right? How much a month you get vs what your bills are going to be.


Hmmmm I can last 8 more years on 1000 a month from a reverse mortgage . Except by year 6 inflation has morphed my diet to cat food and my thermostat has to be set at 55.


Chained CPI >>



Granny doesn't have any kids? She should move in with them. Way back in the old days this is what was done. Who wants to be old and alone anyway?


There is also a requirement to maintain the home.
I don't see much threat to the banking system.

Baley

I don't see much threat to the banking system.

Are you serious? The banking system, nay the whole fabric of modern society, is composed of nothing but bogeymen.

BAJJERFAN

<< <i>

<< <i>

<< <i>I would guess that if you have any of the RM funds left, that you'll have to exhaust those before you can get Medicaid. >>



That would make for a pretty picture wouldn't it? Granny needs healthcare but medicaid won't pay because she has an income stream.


Would these people need reverse mortgages if their savings weren't destroyed by ZIRP? The Fed bailing out its crony pals puts people in a position where they have to take a paid for house and sign it away.


In getting a reverse mortgage you have to sit down and estimate pretty accurately how much longer you are going to last right? How much a month you get vs what your bills are going to be.


Hmmmm I can last 8 more years on 1000 a month from a reverse mortgage . Except by year 6 inflation has morphed my diet to cat food and my thermostat has to be set at 55.


Chained CPI >>



Granny doesn't have any kids? She should move in with them. Way back in the old days this is what was done. Who wants to be old and alone anyway? >>



Yeah, right! You wouldn't be saying that if you had to put up with one of those PITAs.

ricko

Their are no financial deals that do not benefit the financier...... Cheers, RickO

MGLICKER

<< <i>Their are no financial deals that do not benefit the financier...... Cheers, RickO >>



Especially when Uncle Sam backs em up with a bottomless wallet.

BBN

People that defend this banking practice by saying that regular real estate appreciation will offset needed repairs once the bank takes ownership. I disagree. Once someone forfeits ownership of their home I highly doubt that they replace a 30-35 year old roof or 25 year old carpet when they're 85 years old. Not to mention, if you go into a home of the typical elderly their last huge updates done were done in their 40s or 50s. By the time someone dies at 80-90 years old the bank will be stuck with a major overhaul of repairs and other updates so it won't appear so dated. I have no problem with a bank and homeowner agreeing with this arrangement. I have a problem with the fact that we'll eventually have to bail out the bank...again.

Another kick the can down the road plan. What generation will get stuck with this mess when the whole thing blows up. I'm afraid my kids (millennials/post mellenials) will.

pennyannie

<< <i>

<< <i>

<< <i>

<< <i>I would guess that if you have any of the RM funds left, that you'll have to exhaust those before you can get Medicaid. >>



That would make for a pretty picture wouldn't it? Granny needs healthcare but medicaid won't pay because she has an income stream.


Would these people need reverse mortgages if their savings weren't destroyed by ZIRP? The Fed bailing out its crony pals puts people in a position where they have to take a paid for house and sign it away.


In getting a reverse mortgage you have to sit down and estimate pretty accurately how much longer you are going to last right? How much a month you get vs what your bills are going to be.


Hmmmm I can last 8 more years on 1000 a month from a reverse mortgage . Except by year 6 inflation has morphed my diet to cat food and my thermostat has to be set at 55.


Chained CPI >>



Granny doesn't have any kids? She should move in with them. Way back in the old days this is what was done. Who wants to be old and alone anyway? >>



Yeah, right! You wouldn't be saying that if you had to put up with one of those PITAs. >>



Granny had to get the RM because the 40 years old kids are jobless, divorced and waiting on a bed at the rehab center.

derryb

<< <i>Granny had to get the RM because the 40 years old kids are jobless, divorced and waiting on a bed at the rehab center. >>



Why I refuse to own a home with a basement or a finished room over the garage.

TwoSides2aCoin

In the end, someone's going to get a house cheaper than the home owner got it.

bronco2078

The original owner worked hard to pay for that house. The bank gets it for free . There is no work involved they just created a little money from thin air once a month by pressing the Bernake button.