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Reverse Mortgages

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Mountain Man

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Elite Member
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Jan 15, 2002
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Certified General Appraiser
State
Georgia
I kinda sorta understand them, but not real well. After another post lead to some questions, it was suggested to start another thread in hopes of receiving some great wisdom from you'ens.

Lately, I have been getting an unusual amount of FHA reverse mortgage request. As I understand it, the loan amount is based on the appraised value, with the lender making monthly payments to the home owner. The HO basically holds a life estate. The payments are discounted, or adjusted, based on the HO's age and life expectancy. If the HO out lives the agreed upon terms, they still get to live in the home, but don't get anymore cash. This sounds well and good if you really need the monthly income, don't have any heirs, and don't expect to leave anything behind. But with the interest rates at an all time low, why get a reverse mortgage now??? If by chance, the heirs wanted to buy out the reverse mortgage, seems to me that the cost would be quit substantial, and possibly well exceed the value of the property. So does the bank expect to make profits on service fees, appreciation, or what. Or is it the low interest rates that allow the lender to make an anticipated profit? Being always suspicious, I have got to ask: what is their angle? Lower risk or slick marketing?
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
Maximum loan amount is half the appraised value, less the cost of repairs.
 

Mountain Man

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Elite Member
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Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Okay, I can understand it a lot more now. But do they pay the HO market interest rates, or is it some other formula to figure the amortization?
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
I'm not a 100% on this but I think the banks pay a point or so under the fix 30 year rate and make money on the spread. I also think there are dispursement options lump sum and monthly. I just did one where the homeowner's plan was to take the money in a lum and purchase another investment property. However, most of the ones that I've done are used to pay either living expenses or a medical bill.
 

Restrain

Elite Member
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Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
It comes down to the homeowner deciding it's better to use their assets for themselves than to give it to their heirs, whoever they are. After all, it's their money. It's better for the homeowner to support themselves than rely on sometimes unreliable children.

Roger
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
That's what I tell my mother, it's your money have fun.
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Hey Mel,

Here you go. The old timing people have it solved for you.

http://www.rmaarp.com/

They even have a reverse mortgage calculator for you to mess with....to see what kind of dough you get. Throw some figures in and look at the difference between the HUD program and the FNMA program..now you know why they go FHA and why your busy.

Me, I don't understand why the homes have to meet MPS to begin with when HUD's probably going to get a basket-case back in 20 years or so, after they spend all the money and have nothing left for upkeep.


Ben
 

Mountain Man

Thread Starter
Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Me, I don't understand why the homes have to meet MPS to begin with when HUD's probably going to get a basket-case back in 20 years or so, after they spend all the money and have nothing left for upkeep.

I agree, but it is a gob'ment program.

I also agree with the idea that it's your money, so you do what you need.
Lump sum to buy other property? Hmmmm, may be on to something.
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
Most of the ones that I've looked at which had a significant number of MPS requirements were just short of uninhabitable and the occupants probably wouldn't make it another five years. All most of them want was to stay in their home. Of all the "Government programs" this one is probably one of the better ones since in most cases in the end it doesn't cost the taxpayers a dime and it allows former taxpayers to live the last few years in comfort and with dignity.
 

Mountain Man

Thread Starter
Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Ted,
With such a long list of needed repairs, are they still able to do the loans? Do you make the appraisal "subject to", or is it more like a FHA streamline listing the problems, and letting the DU make the call?

The ones I have looked at were people mostly in their 50-60's, and the houses were in average to good condition, or were in good condition having just been remodeled to suite their needs.
 
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