New York Times Reverse Mortgage article:

New York Times Reverse Mortgage article:

Have you had the opportunity to read this article from the New York Times?  Well, here is a copy.  In my previous emails, I have addressed my concern that Congress should not allow the FHA, or any of its staff to run the program.  Why? Because they want to destroy it in the name of making it profitable.

Oh, come on, you can clearly see the changes that Galante wants to make by the use of “her pen”,  via a mortgagee letter, will drastically change the Reverse Mortgage Program as created by Congress and for those who it was set up to help.  Just go with me on this: 

--She wants to limit the amount of cash a Senior can draw from their equity in their homes.  She wants to cap it at 60% of equity.

--She wants to impose a verification of income (although there is no mortgage payments due) to assert they have enough money to pay taxes and insurance. 

--She  wants to introduce a credit score to weigh in if a Senior will qualify.  ( again, no payments due, why does credit come into play).

--She wants to eliminate the Standard Adjustable Program, after just eliminating the Fixed Rate Standard Program on April 1, 2013.  Why? Because Seniors get too much money from that program.  The FHA was smart to bring on the “Saver” program a few years back which limits the draw to Seniors to 15% to 20% less than this Standard program. All under the guise of saving on closing costs, because there is no (minimal) MIP Insurance costs on the Saver.

Okay, let’s look at who needs the reverse mortgages the most.  Seniors who have lost a spouse.  Seniors who would like to live at home rather than in an assisted living facility, or even a nursing home.  Seniors who cannot live with their adult children.  Seniors who do not have the financial means to cover their monthly living expenses.  Seniors with high medical bills, and high medicine costs.  Seniors who do not have retirement funds to live off of.  Seniors who cannot work anymore.  Seniors who just do not want Public Assistance money.  Seniors who are too proud to beg for money.  Seniors who understand the equity in their homes is their money, and since they cannot take their homes with them when they die, they would like to use their money to live with till they pass.

Now, let’s look at what the consequences are by allowing Galante and her FHA to run the Program.  These people will not qualify anymore.  They will be going from being independent to being dependent on the Government for Food Stamps, Medicine, some unto Unemployment, Rent (Section8), and who knows what other wonderful “entitlement” services the Government offers our Seniors.  This will certainly increase our dependency and costs of running the Government.   When we can eliminate most of these costs by allowing these Seniors to use the equity in their homes instead. 

Lastly, let’s look at the reasons for these potential changes and my solutions to them.  Galante has stated the MIP Fund is in the red because there are 10% of reverse mortgage users which have not paid their real estate taxes and homeowners insurance.  These people inevitably end up going for years without paying their taxes until the Bank forecloses on them. And then the BAD PRESS arose on this action by the Banks.  Well, why don’t Seniors pay their taxes?  For many it was because they are forgetful, or because they don’t have any more money, or they just didn’t care.  Well, the solution is not in what Galante wants to invoke as far as the Escrow, or credit qualify, or income qualifying; but rather have TWO “Alternate Contacts” for each applicant so when a Senior goes into arrears with their taxes or insurance, these “alternate contacts” can be reached and made aware these bills need to be addressed by either their Senior parents, or by themselves on behalf of their Senior parents.  Done!  That will take care of about 85% of that 10% default rate FHA has now.  Isn’t this simple enough?

Keep in mind, my personal feeling is that these proposed changes by the FHA and Galante will reduce the number of Seniors who really need this program, and those who see their homes as an asset which they can tap, and keep themselves off the Government rolls.  Realize any Senior can go get a regular mortgage on their home (but must income qualify for that loan, some will and some won’t) and that does not 100% assure the taxes and insurance will get paid, yet no one addresses that issue.  What’s the difference?  Also, please make me see why it is acceptable to have a Senior get a regular mortgage, have to make a payment each month (reducing their available cash to live with) when the end result (as far as  estate liquidation) is the same when they die? 

The proposed changes will be okay for those Seniors who have a great deal of income, or assets; and detrimental to those with lower incomes, and les assets.  The solution rests with having more “alternate contacts” who should be responsible for addressing the issues of delinquencies on reverse mortgages.

George Lagarde

ReverseMortgageLV.com

GLagarde@AllWestern.com