Do The Mortgage Problems On The News Affect Reverse Mortgages?

image The Wall Street Journal continues to be a great resource for Baby Boomers with it’s Encore section of the paper.  Encore is targeted at the 50+ crowd and covers a range of different topics from finance to travel and many others.  The weekend edition of the Ask Encore section features a question from a senior in San Diego who wants to know if the mortgage problems on the news could affect her reverse mortgage?

Ms. Bell would like to use a reverse mortgage to pay off her mortgage balance and after attending several sessions on reverse mortgages she understands and is comfortable with the product.  However, she is nervous about taking a reverse mortgage out with all of the mortgage problems she hears about on the news.

The WSJ explains that if you stick with a government backed reverse mortgage, your payments are guaranteed.  They also recommend that you might want to wait a few weeks to take out a reverse mortgage due to the housing law which will raise the lending limits for HECMs.  According to Peter Bell, president of NRMLA, he expects HUD to announce those limits and start using them on or about October 1st. 

The WSJ also mentions proprietary products which often have higher lending limits but aren’t government backed like the HECM.  According to the WSJ these loans are bundled and sold to investors which was typically handled by a unit of Lehman Brothers Holdings Inc.  Although Lehman’s holding company filed for bankruptcy-court protection Monday, the unit that securitized reverse mortgages "isn’t part of the bankruptcy filing," Mr. Bell says. "So for the moment, there’s no issue."  

If you have any clients who have the same concerns as Ms. Bell, this may be a good article to help answer their questions and assure them a reverse mortgage is safe.

Most Reverse Mortgages Dodge Credit-Crisis Woes (Wall Street Journal)

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