July 21, 2003
�I am running short
of money and friends tell me that I should take a reverse mortgage, but the
thought of a complicated transaction involving my house just terrifies me. It
would help a lot if you would lay out the steps in 1, 2 3 form?�
With a reverse mortgage, it
is as important to know what not to do as what to do.
So let me start with that first.
respond to any uninvited solicitations.
There are freeloaders about, some calling themselves estate planners, who
would like to be paid for directing you to a lender, or to an insurance company
selling annuities. You don�t need
them, just follow the steps described later.
on a reverse mortgage is easy because, unlike the situation when you took your
first forward mortgage, you already have shelter and the children are grown and
out. Fight the tendency by making an informed decision, which could be that a
reverse mortgage is not for you, or that it is for you but that it would be
better to wait and allow the amount you can draw to rise.
whether your state or locality has a program for property improvement or for the
payment of property taxes that can meet your needs.
These single purpose programs are invariably good deals, but they usually
have eligibility criteria that limit their availability.
A good place to start looking for them is the directory of �homes and
communities organized by state� on www.hud.gov.
yourself on reverse mortgages.
Call AARP at 800 434 3410 for a free copy of Home Made Money, an
excellent pamphlet on reverse mortgages. You
can also order it online at www.aarp.org/revmort.
Other good online sources are www.reverse.org,
you are eligible, determine how much money you can draw and what it will cost. You
do that using an on-line calculator
at one of the following web sites:
www.rmaarp.com, www.revmort.com, www.nrmla.org, or www.ffsenior.com. The first 3 cover the FHA Home Equity Conversion Mortgage (HECM),
and Fanny Mae�s Home Keeper (HK) mortgage.
The last one covers those plus the Financial Freedom Cash Account (CA)
mortgage, which caters to high-priced homes (over $400,000). Based
on these results, decide whether you want a reverse mortgage now, and if so,
which of the 3 types.
a preliminary plan of how you will draw funds.
Will you take a line of credit, a monthly payment, or some combination? Also, formulate questions to be put to a counselor.
by a HUD-approved counseling agency is mandatory, regardless of what kind of
loan you select so use it as part of your education.
You can find a counselor on your own by going to http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm,
clicking on your state, and selecting from among the agencies that list �HECM
You can also find a counselor through AARP.
When you order
its free consumer guide, AARP sends you information on its counseling referral
system. AARP encourages you to read
the booklet before requesting counseling.
If there is a
possibility that you may select a Home Keeper or Cash Account mortgage, find
your counselor through AARP.
Select a lender who belongs to the National Reverse Mortgage Lenders
Association (NRMLA). These lenders
subscribe to a code of conduct that prohibits deceptive or sharp practices.
The code, as well as a list of members by state, is available on
NRMLA�s web site (www.reversemortgage.org
). Next to each NRMLA members is a
notation of the types of loans they do. All
do HECMs. Most do HECMs and HKs.
A smaller number do CAs.
Jack Guttentag 2003