REVERSE CAN BE TRICKY IN A CAR AND A MORTGAGE

Hi,


In our Easy Economics blogs, we have covered a number of government created problems. The reason is that the Government creates a number of problems that we wind up paying for in our taxes and also in our cost of living. The horrendous mortgage problems caused by Fannie Mae and Freddie Mac (covered in a previous blog) have still to be recorded economically and paid.


The current rise in prices is a direct result of the whole economic debacle that we'll be cleaning up for years to come. Media optimism is always a sign of bad times to follow. If you listen to TV with a cynical ear, it can tell you quite a lot about the days ahead.


Unfortunately, one of the casualties of the current economic downturn has been what the government touted as the safest of all investments: REVERSE MORTGAGES!!!!!!!!!


What is a REVERSE MORTGAGE??????? An idea that affects many senior homeowners.


REVERSE MORTGAGES allow seniors (your parents or grandparents) to convert their home equity into cash. Instead of paying the bank each month for a mortgage, the senior gets paid. The payment is made either in a lump sum, a line of credit, or in monthly payments and is based on the appraised value of their home at that time. Homeowners must be 62 to qualify. BUT and this is a BIG BUTT: annual taxes and insurance are the responsibility of the homeowner.


When these annual fees are unpaid and add up over a long period of time and the lenders or loan service can no longer afford to catch up delinquent accounts from the home owner's available mortgage funds (if there are any), the lender has to advance the money to protect the loan and finally turns to the Government. All sound rather IFFY??????? What else is new?


Conceived as an eventual MONEY MAKER for government lenders when the home market was high and sold as an idea to benefit senior citizens, who wanted to stay in their homes but could no longer really afford them, it became another risky government venture lacking ordinary common sense.


Most seniors taking advantage of this scheme were facing financial jeopardy and welcomed the chance to get the equity out of their home as well as stay in it and gain peace of mind. After the mortgage was satisfied, the amount of cash now in the home owner's bank account had to carry them for a long period of time but they were expected by the Government to save out (as the government reckoned they would) the cost for taxes and home insurance. Some did.


Wouldn't it have occurred to at least one government official that like a regular mortgage payment, the cost of taxes and insurance be put in escrow, before payment was made to the homeowner? No, that would require creative thinking--something always lacking in political schemes. AFTER ALL THERE'S ALWAYS MORE MONEY IN TAXPAYER'S POCKETS.


That doesn't excuse the individuals who did not take their responsibilities!!!! A condition often found in Government inspired HELP? But that some of the homeowners taking advantage of this situation in large part were not financially robust and perhaps not even financially able should have been obvious to the lenders and the government.


Now, good old HUD (remember them--the scandal ridden agency so prevalent some years ago and still with us) must now collect the money so that the Reverse Mortgage program is "Not at Risk". Although the National Reverse Mortgage Lenders Association is playing down A FORECLOSURE THREAT for these AT RISK seniors, payment plans have been set up for the delinquencies with a two year limit for those over $5000. What happens if they can't pay??????????


That's a REALLY INTERESTING QUESTION that the government isn't answering. Of course to avoid foreclosure, the debt can be forgiven and the costs can come out of tax money. WHAT ELSE IS NEW?????????


The government can foreclose. The "large majority of the delinquencies have balances under $5000." according to Peter Bell, president of the National organization. FORECLOSING ON A SENIOR'S HOME that has a balance of less than $5000 is not a GOOD OPTION even to blind-sided officials.


Obviously in Mr. Bell's eyes, $5000 is not a BIG DEAL!!!!!!!! However, if the homeowner has no money in the bank, it might as well be $5 million, the ability to pay it off becomes the same. NIL !!!!!!!!!


HUD has allocated $3 Million for housing counseling agencies to help reverse mortgage homeowners (out of tax pockets) but the real amount of the delinquent debt has not been made readily available. But we do know that there are 30,000 delinquent homeowners (or about 5%) nationwide


Let's recap. The government lenders put out a lot of cash for homes to Senior homeowners to eventually profit the government and provide the homeowners with the equity and peace of mind that they desired. A noble cause.


Result. Senior homeowners, who received marginal equity or were irresponsible became delinquent on their taxes and insurance. The recent home debacle may have radically reduced the amount of value in the reverse mortgage homes to the government . Profitability disturbed; peace of mind gone; foreclosure of a segment of our population who can't regain stability not a viable option. Cost to the taxpayer+????????????


NOBLE CAUSE?? OF COURSE. PRACTICAL SOLUTION, NOT!!!!!!!!!!

CHEERS, CONNIE