Kevin's Corner

Are RMs Safe?

A question I get from many potential clients is “are reverse mortgages safe?” In a time when everything you read about the mortgage industry is doom and gloom, safety is a valid concern. Even a conservative bank like Ocean First has fallen victim to the melt down in the sub-prime mortgage market and registered a quarterly loss as a result of potential loan losses. It seems every day we read about another institution having problem loans.

But what is ‘safety’? Safety for whom. Well, in a FHA insured reverse mortgage, the US Government provides assurances that the terms of program cannot be changed in the future, even if real estate values decline. The benefits of the program are guaranteed by FHA. They guarantee that if you pay your property taxes, maintain your insurance, and continue to live in your home, that you can do so for as long as you want. They also guarantee the payment of your benefits, so if you have established a line of credit with your benefits, access to that cash is guaranteed. They also guarantee that you can never owe more than the fair-market value of your home, meaning that could never leave a debt to your children over the value of the home, regardless of how many years you have your reverse mortgage.

The interesting part about FHA loan programs is that no matter who lends you the money, FHA makes sure that the terms of the program are followed through, regardless of whether or not the lender goes insolvent!! In the case of insolvency, FHA takes administration of the loan back and fulfills the commitment made.

 So, at least from the view of the loan program and its administration, it is far safer than most any other loan program, either conventional or reverse. But let’s keep going.

 What happens if you stop making payments on a mortgage? Does the lender let you live in the home for as long as you like? Of course not, they will foreclose on the property and force you to leave it. In a reverse mortgage, you do not have to make any principal and interest payments, so guess what…no foreclosure. Another form of safety that a reverse mortgage gives the homeowner, no payments, no foreclosure. And also, a good night’s sleep.

 How about consumer counseling. Does it make sense that before you enter into any important financial decision that you get information about the product and the consequences of purchasing the product? How about getting this information from an independent, professional counseling agency? The FHA reverse mortgage programs require independent counseling before an application can proceed. This protects the homeowner by providing an opportunity to review the terms and implications of a reverse mortgage with a professional that does not have any vested interest in the outcome.

 So when it comes to safety, the FHA reverse mortgage programs score real high. Government guaranteed benefits, no foreclosure and independent consumer counseling, FHA did not want homeowners to get into an unsafe program so they built into the program important safeguards.

The last factor in meeting safety issues is with whom you go to get a revere mortgage. Not all so-called reverse mortgage specialists are really a specialist at all. At Senior Security Capital, we specialize in only reverse mortgages and we offer the best available products from all of the leading reverse mortgage lender/servicers. We are members of the National Association of Reverse Mortgage Lenders and abide by their stringent Code of Ethics. But most importantly, we are a local company, a part of the community with offices in Belmar and Freehold.  We take the time to inform you of all of your options, and let you make the decision. No high pressure, no big sales pitch. Many of our customers initially spoke to me 12 or 18 months before going forward with the program.

If a reverse mortgage is something that you would like to know more about, than I encourage you to call me for a personal consultation or additional information. I’m right around the corner. Don’t trust your most important asset to some spokesman on a TV commercial. Call me today…1-800-496-4035