My Financial Healthcheck

Some regulators think that reverse mortgages are the next sub-prime mortgage product where their rapid growthcould lead to a vulnerable part of the market being taken advantage of.  A reverse mortgage allows an individual who is 62 years or older to access the equity in their home and not have to pay it back as long as they live in their home.  The largest provider of reverse mortgages Fannie Mae, has a 90% share of the market.  So what will happen in the next year is Washington will put more rules on reverse mortgages thus making them more difficult to get..Washington should be more concerned about the silly, no stupid conceived notion on what a reverse mortgage is based on.  Now individuals who get a reverse mortgage and if it’s insured by the FHA, then they have no worries, its all taxpayers that in the future will have a concern.

The one premise of a reverse is that the equity in a home with continue to grow at a 4% rate…HAS that been happening in the last couple of years…the answer is NO.  A part of the reverse mortgage costs are the FHA fee which is 2% of the maximum value of a house, meaning if the house is worth $800,000 and the maximum value determined by the program is $625,000 then a fee of $12,500 is charged. What the FHA does is take this fee and buy an annuity to on paper cover the program if the reverse mortgage loan’s payoff when a homeowners leaves their home or dies is greater than the market value.  If the average person continues to live longer and home values continue to fall or remain flat then that annuity at some point won’t pay off the loan due..which means it will become a problem for all taxpayers…