We decided to present a short update on Reverse Mortgages. As our authority we selected David Gomer, Broker, Founder and Owner of Senior Funding, Calabasas, CA. He has been specializing in all types of Reverse Mortgages since 1989. He earned the prestigious Certified Reverse Mortgage Professional Designation Awarded by the National Reverse Mortgage Lenders, and a Real Estate Degree from California State University Northridge. Senior Funding Associates is the #1 All Time Wholesale Reverse Mortgage Broker in California. I can vouch for David’s honesty and knowledge as I have known him for many years.
There are many different products available today. HECM: Home Equity Conversion Mortgage from Federal Housing and Urban Development. This is the standard Reverse Mortgage loan (95% of the market) that has the over 62 limit and the other well-known Federal Regulation
PROPRIETARY REVERSE MORTGAGE: A mortgage from a private lender with normally higher limits for homes above $1,500,000, higher interest rates, no Mortgage Insurance Premiums, and younger people qualify.
H4P: A Reverse Mortgage for purchase of a residence with no monthly payment. Real Estate Agents like this loan because they possibly could create two transactions.
REFINANCE: One advantage of this Mortgage is that the borrower already has a Reverse Mortgage so communication is much easier. Typically done to reduce the interest rate margin and /or increased cash.
LINE OF CREDIT: A major point is that the Line of Credit grows every year. It grows at the rate of the sum of the current interest rate and the Mortgage Insurance Premium. If the sum today is around seven, using the rule of 72 (72 divided by the rate) the amount available to borrow would double in just over 10 years. A $400,000 limit at age 62 would be almost $800,000 at age 72 and so forth. This is like an insurance policy against financial disaster.
SECOND LOAN REVERSE MORTGAGE: This loan will be subordinate to the existing loan. Homeowners can cash out funds and retain their seasoned, low interest rate primary loan. This is an interesting new RM product and may open up new markets.
CARS INTERESTING INFORMATION. On March 31, 2023, Finance of America announced the purchase of American Advisors Group. Most of you know that AAG was the company that used Senator Fred Thompson and Tom Selleck as their spokespersons. This acquisition now positions Finance of America as one of the top two RM lenders with Mutual of Omaha. Data from HECM WORLD shows the companies each with approximately 24% of the RM market and Longbridge Financial LLC is third with around 11%.
Two important factors to remember from a recent poll by the American Advisor Groups for US homeowners between the ages of 60-75: 92% of Californians want to Age in Place and for 75% of Senior Citizens their home is their major asset.
Be aware of the myths still existing concerning the dangers of Reverse Mortgage. One authority presented the HELOC very favorably when comparing it to a HECM. They forgot to mention that with a HELOC a borrower must qualify showing income, make monthly interest payments, maintain the property in a suitable manner, and pay all insurance costs, property taxes, and Home-Owner Association fees. Then, after a “draw” period of probably 10 years, they will have to pay off all funds borrowed at a completely amortizing rate. Standard bank HELOCS can also be frozen due to market conditions, but a line of credit with a federally insured reverse mortgage is available, as long as, the borrower complies with the loan terms.
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