Reverse mortgage: for some, a Lifesaver? But Beware Shady Le

 

Saturday, Mar 28,2009, 5:01:47 PM   Click:

Copyright: The Orlando Sentinel, Fla.
Source: Orlando Sentinel, The (FL)
Wordcount: 851


Mar. 27 - Once dismissed by many as too risky, reverse mortgages have made a comeback as some funds to their homes of seniors tap equity offering to replace battered by the collapse of Wall Street.

Sales of reverse mortgages grew at a double-digit rates recently and are on pace to set a record this year, according to the National Reverse Mortgage Lenders Association.

More than 112,000 were sold in 2008, up nearly 50 percent from 2006, said the trade group. Orlando now the country ranks seventh in reverse mortgage sales, with more than 3500 in 2008 in accordance with federal regulations.

But older people should always weigh the pros and cons before going ahead with a reverse mortgage, experts say. And as values have dropped at home, some will find the house they have little equity left to tap.

At best, a reverse mortgage gives seniors 62 and a fresh source of cash as a monthly payment, line of credit or lump sum. The money is tax free, and the loan not be paid until the borrowing or selling their home. The most loans to overthrow the federal government are also insured, which protects the gain, even if the lender goes bankrupt.


But at their worst, the Reverse Mortgage May be confused with the words, and high pressure sales tactics costly expense. These practices have marred reverse mortgages in the past, some lenders have been accused of trying to manipulate the elderly owners to liquidate their equity.

"It is not for everyone"

Proponents insist that those days are long gone.

Don Mulcahy says its finances are much softer since he put his mortgage on the other hand, a few years ago.

The 68-year-old former phone salesman Orlando used the proceeds to repay his mortgage and save about $ 1000 per month. He loved the idea Conversely, he began to sell mortgage loans itself.

"It's not for everybody," said Mulcahy. "But it turned out to be a good deal for me, I thought others should know."

A federal law adopted last fall capped some major costs for reverse mortgages, pre-requisite loan consumer counseling and prescription of lenders to cross-selling annuities and other financial products.

The industry itself has also worked to improve its reputation by adopting standards of conduct and respond to complaints.

"There are certainly more certainty now," said Joe Nunziata, CEO of Orlando-based FBC Mortgage, lending unit of the Florida Bank of Commerce.

But the industry still has some way to obtain a certificate of good health, says the AARP.

"Despite the new laws, we are always already heard reports of reverse mortgage lenders at high price to sell annuities and other investments to borrowers," said Bronwyn Belling, a reverse mortgage analyst for the AARP Foundation. "The regulators are paying particular attention to this problem and we will continue to monitor very closely."

Many older homeowners considering reverse mortgages for the first time, said Richard Schram, an executive with the Consumer Credit Counseling Service of Central Florida, which provides reverse mortgage counseling. Some seek to supplement their retirement income, while others hope to help prevent financial disaster, he said.

"Unfortunately, there are many seniors who come to us now in need of obtaining a reverse mortgage, because otherwise, they are looking for personal bankruptcy," he said. "If they have not pay their house, they try to leave the sub-monthly mortgage payments to avoid bankruptcy, with the exception of their homes and have money to pay other bills. "

But since values have dropped at home in the collapse of mortgage credit, many seniors do not have enough home equity left to tap with a reverse mortgage, "said Christy bouvier, a lender reverse mortgage with Orlando's First Commercial Bank of Florida.

"This may be a real blow to them," she says. "Some arrive with expectations that are too high."


Even people who have paid their home and are otherwise healthy have had their financial capital dissipate. In some cases, their hopes of living outside their home value has disappeared, and their plans to sell it and buy a condo for retirement were put on hold.

Less benefit today

Mulcahy said that only a few years ago, almost everyone who has requested a reverse mortgage have enough home equity to make it work. Now, perhaps half of the candidates can do.

"Many people have waited too long," said Mulcahy, who leads seminars on the reverse mortgage Marks Street Senior Center in Orlando. "Even those who can take out a reverse mortgage now less money than they would a few years ago. I have been lucky. My house still is not worth nearly what it was then. "

In mulling a reverse mortgage, consumers should compare the offers and verify the credentials of the lender with a better regulatory and business organizations, "said Frank Arnall, a financial planner with the Orlando office of United Planners Financial Services of America.

"I helped customers easily save thousands of dollars through multiple offers from different lenders and the cost to make," says Arnall. "You have to go around."

Richard Burnett can be reached at 407-420-5256 or rburnett@orlandosentinel.com.