Reverse Mortgages Are Not Part of the Mortgage Mess

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If you are a senior citizen considering a reverse mortgage at this time, it is natural if you are a bit fearful about moving forward with your decision, given the current conditions in the mortgage and credit markets. The loss of confidence in the financial markets these days is unprecedented.

Your fear is unfounded. Reverse mortgages and the lenders that provide them are not part of the sub-prime credit crises.

This market segment did not originate the risky loans that led to the financial chaos and unprecedented foreclosures on Main Street. Reverse mortgage lenders are not in danger of having to write down huge losses on their reverse mortgage loan portfolios. Therefore, reverse mortgages if you are in need of a reverse mortgage at this time you should not be deterred by scary sound-bites on the nightly news.

However, the problem is that seniors and the general public aren't able to distinguish between these market segments. Recently, I heard senior homeowners state that they wouldn't consider getting a reverse mortgage right now with all the current events. Or, "I cannot get a reverse loan now and I risk my home being foreclosed in today's market."

This is like putting the baby in the bathtub. Reverse mortgages are very different to traditional "forward" mortgages. A reverse mortgage is not the same as a forward mortgage. It is important to not dismiss the possibility of obtaining a reverse mortgage just because it has the word "mortgage in the name.

Reverse mortgages do not require monthly payments or repayments, provided the senior remains in the home.

You can't lose your home due to insufficient payments. Many seniors have saved their homes by getting a reverse loan to replace a forward mortgage they couldn't pay. chip reverse mortgage rates If you have a reverse mortgage loan that is insured by the government, your home will be virtually safe from foreclosure as long as you keep your property in good condition and pay your property taxes.

Second, the FHA (Federal Housing Administration) will insure your HECM (Home Equity Conversion mortgage) if it is a HECM. What that means for you, in light of the recent bank losses and hedge fund failures, is that if your lender were to go out of business for any reason, the FHA insurance fund steps in to make sure that you continue to receive the money and benefits from your reverse mortgage.

A third safety feature of reverse mortgages, is that anyone interested in applying for this type of loan must first complete HUD counseling. HUD counseling is provided by FHA/HUD approved non-profit credit counseling agencies that are not owned by or affiliated with lenders. The counseling covers the pros and cons of reverse mortgages and points out possible alternatives that seniors should consider instead of a reverse mortgage. HUD counseling is free of charge to the senior and can be conducted in person or by telephone. Seniors are encouraged to have adult children, trusted advisors or anyone that may help with their decision, attend the counseling session as well. A certificate will be issued after the senior has completed the counseling. This certificate must be presented to the lender in order to process a reverse mortgage application.