Opinion Piece - Reverse Mortgages
Wednesday, 06 January 2010 17:10
My name is John A. Smaldone. In a recent article, I was pleased to see an organization like the Assisted Senior Living take a positive position toward reverse mortgages. I feel such positive publicity will help rectify many past unjustifiable statements and media blasts. While I agree 100 percent that the HECM product is a safe and effective option for seniors in need of supplementing their income, I must argue that in today’s economic environment, the Reverse Mortgage program is also needed to save seniors from foreclosure, reduce their debt, resolve federal and state liens and for so much more.
As a HUD/FHA controlled program, the intent of the Reverse Mortgage was to do just what the Assisted Senior Living article stated; to supplement retirement income and improve the quality of life for seniors. Today, more than ever, we see reverse mortgages being used to alleviate situations of severe hardship despite agencies such as Fannie Mae, HUD and FHA, as well as state and federal legislators, driving the effectiveness of the Reverse Mortgage out of reach of those who need it most, our seniors.
While the risk of a reverse mortgage has increased due to dropping home values, most of the risk stems from past loans made. The markets and aforementioned agencies did not see the problem on the horizon when home values were spiraling. We hope that today’s home values will rebound, but if values continue to go down nothing will preserve the way of life as we once knew it. Now that home values have dropped and affected loans made in the past, the future loans and seniors will be paying the price for many years to come.
The Reverse Mortgage is out of reach for many who need it due to actions taken by FNMA, FHA/HUD and the effects of the market. Ultimately, these actions, especially over the last 11 month’s have wreaked havoc in the industry and sent Reverse Mortgage into the same arena as the forward mortgage world. Through the stimulus packages and TARP bills, the federal government could have used some of the funds to subsidize the Reverse Mortgage program.
According to an Associated Press release, the Obama administration has proposed to halt foreclosures and fund up to $50 billion in subsidy money. Why did they wait so long to make this move or is this just another modification program for those who must qualify for it and those who never should have gotten the tainted loans in the first place?
Seniors with economic hardships are being turned down by lenders for loans under the modification programs making their choices for security few and far between. Settling with the existing lender takes an immense amount of time while living expenses, medical bills and debts continue to mount. On Sept. 23, 2009 in a letter from HUD, the industry was dealt a major blow. The lowering of the principal limit on all reverse mortgages was made mandatory by as much as 10 percent of the value of the home. To add insult to injury, the industry was given only seven days to comply. This measure made a major difference with existing lien holders willing to settle on what is called a short pay off. The ten percent reduction in the principal limit stopped many loans that were at the settlement stage from being completed. Consequently, many seniors went into foreclosure as a result of it.
There are countless examples of seniors living on fixed incomes that do not qualify for the current modification programs and would benefit greatly from a reverse mortgage. With the possibility of help on the way from the federal government, we could see major relief in negotiating settlements with lenders. However, utilizing the Reverse Mortgage program now as a negotiating vehicle could prevent fewer foreclosures if allowed. If a portion of the $50 billion in subsidy money proposed by the Obama administration, released by the Associated Press, is allocated to the Reverse Mortgage industry, there is hope for seniors in need of a reverse mortgage to save their home from foreclosure. However, another federal modification program that only assists those who currently qualify and mirrored the other programs of the past, could once again, leave seniors out in the cold.
CONTACT
JOHN A. SMALDONE
SENIOR VICE PRESIDENT
AAXA MORTGAGE LLC.
REVERSE MORTGAGE DIVISION
OFF: 866-400-2487 – FAX: 865-982-5180
E-MAIL:
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