REVERSE MORTGAGE INFORMATION: Tools, News and Resources to Help Seniors Decide

Pay close attention to the 10 year CMT or Treasury yield if you’ve been considering a reverse mortgage recently. The Federal Reserve is getting ready to provide up to $540 Billion in loans to help relieve pressure on money market mutual funds that are up against redemptions.

What does that mean for those interested in a reverse mortgage but are waiting it out to see what happens with the November 4th election or any other policy change? It means that there are folks in the financial services sector interested in the Fed backing these types of loans and they may start moving money from Treasuries back into commercial paper.

“This will take a lot of pressure off the Fed and the Treasury,” David Glocke, head of taxable money market funds for Valley Forge, Pennsylvania-based Vanguard Group Inc. Glocke said he’ll be more willing to shift money he’s invested in U.S. Treasuries back into financial-sector commercial paper covered by the plan.

One of the determining factors of how much money someone has access to from a reverse mortgage is the 10 year Treasury yield. HUD and FHA have set a floor limit of 5.5% which would maximize equity access or yield for the reverse mortgage borrower. Last week it was very close to 5.5% but it went up on Monday evening to 5.77% and that means the borrower will not have access to as much equity access and it could be the difference in whether you qualify or not in situations where there is an existing mortgage to pay off.

Things have not been stagnant in the reverse mortgage business. Yes, lending limits are set to increase to $417,000 around November 1st and the origination fees will be limited to $6000, down from a high of $7255, so someone will be able to get more and spend less. However, home prices continue to decrease in almost all areas of the country and margins have increased from 1.00% back in March to 2.00% recently which impacts how much interest accrues on balances and now if yields have hit bottom and are on their way up, you have a decision to make.

Do you sit tight and hope that every facet affecting a reverse mortgage weighs in your favor or do you act now and lock in what you know you can get access to?

Its not the first time you’ve read this!!

As the reverse mortgage industry expands and constantly introduces new (and confusing) products, some people are beginning to wonder whether reverse mortgages are destined to become the next subprime mess.

The same type of financial engineering and securitization that repackaged regular mortgages (once held by local banks) into exotic investment securities sold around the world is now fueling reverse mortgage growth. The financial alchemy worked extremely well with traditional mortgages. Investors exhibited an almost unquenchable thirst for these “safe” mortgage-backed securities (MBS). Yet it’s now clear that credit agencies, regulators and investors themselves did not always understand the investments or the underlying risks. (more…)

A couple of interesting surveys of senior citizen attitudes have crossed our desk in recent weeks. Both were sponsored (or co-sponsored) by reverse mortgage lenders.

Liberty Reverse Mortgage: Grandparent’s Cost Index

Liberty Reverse Mortgage (soon to be part of Genworth Financial) and Sacramento State University released their second annual Grandparent’s Cost Index earlier this month to coincide with Grandparent’s Day (September 9th). The upshot: Because of financial constraints, almost three-quarters of grandparents in the U.S. aren’t able to spend as much as they’d like to on their grandchildren.

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