IN a speech in Phoenix last Tuesday, President Obama finally entered the debate over the future of United States housing policy. But his talking points offered few details about how to reduce the government’s giant footprint in the mortgage market. 

 Mr. Obama vowed to keep mortgage costs affordable for first-time home buyers and working families, pleasing those who think that the government should have a large role in this arena. His call for investment in rental housing was a welcome change from past mantras that focused solely on increasing homeownership across the country.

Playing to taxpayers who are angered by the government’s takeover of Fannie Mae and Freddie Mac in 2008, Mr. Obama said he wanted to wind these companies down. That’s an important goal.

But as if to prove how hard this will be, both companies later in the week announced enormous profits for the second quarter of this year, most of which go to the government in the form of dividends. Together, the companies reported $15 billion in profits; with Treasury on the receiving end of this lush income stream, it will be tempting to keep the mortgage finance giants in business.

Yet with the government backing or financing nine out of 10 residential mortgages today, it is crucial to lure back private capital, with no government guarantees, to the home loan market. Mr. Obama contended that “private lending should be the backbone” of the market, but he provided no specifics on how to make that happen.

This is a huge, complex problem. In fact, there are many reasons for the reluctance of banks and private investors to fund residential mortgages without government backing.

For starters, banks have grown accustomed to earning fees for making mortgages that they sell to Fannie and Freddie. Generating fee income while placing the long-term credit or interest rate risk on the government’s balance sheet is a win-win for the banks.

A coming shift by the Federal Reserve in its quantitative easing program may also be curbing banks’ appetite for mortgage loans they keep on their own books. These institutions are hesitant to make 30-year, fixed-rate loans before the Fed shifts its stance and rates climb. For a bank, the value of such loans falls when rates rise. This process has already begun — rates on 30-year fixed-rate mortgages were 4.4 percent last week, up from 3.35 percent in early May. This is painful for banks that actually hold older, lower-rate mortgages.

Private investors, like mutual funds and pension managers, aren’t hurrying back to the residential mortgage market, either. Deep flaws remain in the mortgage securitization machine, and it needs to be retooled before investors will begin buying these securities again.

Perhaps the largest problem for investors who might otherwise be willing to return to the mortgage market is the lack of transparency in privately issued securities. Investors interested in mortgage instruments are not allowed to analyze the loans going into these pools before they buy them.

The banks putting together the deals typically provide some data, like borrowers’ incomes and credit scores, as well as whether the loans backed primary residences or second homes. But investors don’t get access to actual loan files that can tell them what they need to know about the quality and types of the mortgages packed inside the deals.

A CIVIL case filed by the Justice Department last week against Bank of America highlights the downside of nondisclosure. In that matter, prosecutors accused the bank of misleading investors when it sold them a mortgage security in early 2008. Although the bank contended in marketing materials that the security contained prime loans that met its underwriting standards, more than 40 percent of those loans did not comply with those standards, prosecutors said.

Lawrence Grayson, a Bank of America spokesman, said the bank was fighting the case.

“These were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that,” he said in a statement last week.

But the Justice Department contends that the bank failed to disclose important facts to investors about the quality of the mortgages in the $850 million pool, which wound up performing badly. As of June 2013, prosecutors said, 15.4 percent of those mortgages had defaulted, indicating that they were of a far lower quality than advertised. The Justice Department estimates that investors will lose more than $100 million on the deal.

Then there’s another issue. Investors are also unlikely to take an interest in mortgage securities because serious conflicts of interest are still embedded in the process.

For example, in the aftermath of the crisis, investors learned that they could not rely on the trustee banks charged with overseeing these loan pools to do their jobs. The trustees are supposed to make sure that firms administering the loans treat investors fairly. These duties include taking in and distributing payments as well as foreclosing on borrowers.

Even though the trustees are supposed to work for investors, these watchdogs are actually hired by the big banks that not only package the mortgage securities but also provide administrative services for them. So it was perhaps not surprising that the trustees failed to make the big banks buy back loans that didn’t meet the quality standards set out when the securities were originally sold. Such buybacks could have prevented billions in losses for investors, and the trustees’ inaction indicated where their allegiances lay.

Yet another reason for investors around the country to steer clear of mortgage securities is the recent action by Richmond, Calif., to seize underwater home loans and reduce the amount of debt outstanding on the properties. Many of the loans that the city officials want to restructure are held by mutual funds and pensions.

Pimco and BlackRock, two huge mortgage investors, are among those represented in a lawsuit filed last week against Richmond, contending that such a plan would violate the contracts that investors agreed to when they purchased the loans. And the Federal Housing Finance Agency, the overseer of Fannie and Freddie, has concluded that Richmond’s action could threaten the safety and soundness of the companies’ operations, harming taxpayers.

Mr. Obama’s views on the path forward for housing finance are welcome. But much work needs to be done before private capital will come back to this market. Eliminating conflicts of interest and increasing transparency in the securitization process will go a long way to achieving that end. 

Source: http://www.nytimes.com/2013/08/11/business/the-housing-market-is-still-missing-a-backbone.html?pagewanted=all&_r=0

Mortgage rates were little changed this week, lender Freddie Mac said Thursday.

The relatively stagnant rates follow some seesawing over the last few weeks, coming off of a two-year high set last month.

This week, the rate on a 30-year fixed-rate mortgage rose just one-hundredth of a percentage point to 4.4 percent, but still remained below that July high of 4.51 percent. A year ago, the rate averaged 3.59 percent.

The rate on a 15-year fixed-rate mortgage was unchanged at 3.43 percent. A year ago, the rate averaged 2.84 percent.

Freddie Mac Chief Economist Frank Nothaft attributed the pause in rates to the mixed July unemployment report.

The national unemployment rate last month fell to its lowest level since December 2008, but the economy added fewer jobs than had been expected last month. And revisions for the previous two months reported at the same time showed that fewer jobs were created than originally believed. 

Source: http://www.chicagotribune.com/business/breaking/chi-mortgage-rates-flat-20130808,0,2084626.story

For years, the Obama administration and regulators have been working to find ways to make it easier for Americans to refinance their mortgages, so that low interest rates might do more to stimulate economic growth. The president announced new proposals just this afternoon that includes streamlining paperwork, waiving closing costs for those with shorter-term loans and allowing families without government-backed mortgages to qualify.

But is it too late?

New government efforts might help streamline the process for refinancing, but there’s one roadblock Obama can’t remove: rising interest rates. Mortgage rates have shot up nearly a percentage point since the start of the year, with the biggest jump occurring over the past two months. The average rate for a traditional 30-year fixed rate loan last week was 4.39 percent, compared to 3.34 percent in January.

That has made refinancing look a lot less attractive for many households – and their prospects are unlikely to get any better. That’s partly because the Federal Reserve is weighing pulling back its support for the housing market, which would push rates even higher. James Marple, senior economist for TD Bank, predicts mortgage rates will rise to 4.8 percent by the end of next year and hit 5.5 percent in 2015.

“The low watermark for mortgages has passed,” he wrote in a note to clients.

The Mortgage Bankers Association’s index of refinance activity is at the lowest point in two years and 55 percent below its recent peak. Marple estimates that refinancing has saved households about $14 billion since 2009.

Many of the refinanced loans were initially originated in 2006-2007, when mortgage rates averaged about 6.4 percent. The White House says some borrowers could save $3,000 a year under its new proposal and that 2.6 million underwater homeowners have taken advantage of its refinancing program. But as the pool of loans leftover from the peak of the boom dries up, and interest rates continue their creep, it will be harder to get the math to add up.

Source: washington post

WASHINGTON -- The U.S. government may continue to play an outsized role in the nation’s roughly $10 trillion home loan market under a proposal President Barack Obama is set to endorse on Tuesday.

The plan, along with a sweeping set of new and old housing recommendations and ideas, will be unveiled in Phoenix, as Obama launches his second-term housing policy agenda in the same city where he made one of the biggest broken promises of his first term.

Under Obama’s plan, mortgages provided by private-sector lenders that are bundled into securities and sold to investors could obtain a taxpayer guarantee in return for a fee, according to the White House.

The private sector would have to shoulder some of the initial losses if defaults were to rise, a condition usually triggered by falling home prices. After that, taxpayers would absorb the remainder of losses stemming from an extreme downturn in the nation’s property market. The insurance fee collected by the government should be “actuarially-fair,” the White House said, meaning it should equal the expected payout.

Though short on specifics, Obama’s endorsement of such a plan marks a turning point in the ongoing Washington debate over how to reform the nation’s housing finance system. Five years after twin housing giants Fannie Mae and Freddie Mac were rescued by taxpayers, policymakers have struggled to advance a proposal that would ensure continued access to a bedrock of the U.S. housing market -- the fixed-rate 30-year mortgage -- but also would reduce the government’s role in funding home loans.

The White House had avoided publicly weighing in on how to reform Fannie Mae and Freddie Mac. In 2011, the administration outlined three policy options. Though it had quickly narrowed those options to a few core ideas, officials have said, the administration refrained from publicly discussing them out of fear White House involvement would poison discussions on Capitol Hill.

Julia Gordon, director of housing finance and policy at the progressive advocacy organization Center for American Progress, praised Obama’s expected remarks for having the discussion about the future of housing policy in the context of “middle-out economics,” rather than focusing on investors and asset classes. Obama is in the middle of delivering a series of policy speeches discussing ways to improve the economy by emphasizing middle-class households.

Fannie Mae and Freddie Mac own or guarantee nearly half of all outstanding home loans. In the aftermath of the 2008 financial crisis, Fannie Mae, Freddie Mac and the rest of the U.S. government have backstopped more than 90 percent of new home loans. Taxpayers now own or guarantee roughly three of every five outstanding mortgages.

The cost of a taxpayer guarantee could be high, especially if the administration’s preference is for the fees to equal expected payouts. A senior administration official said that the cost of the current system, which helped lead to the financial crisis, was “trillions and trillions of dollars in lost equity that we are still rebuilding.”

If the plan ultimately is signed into law, “credit would be modestly more expensive than it was,” the official said.

Policy analysts reckoned there’s little chance Obama’s plan could make it into law before the 2014 election, despite what appears to be a growing bipartisan consensus on the future of U.S. housing finance.

Taxpayers pumped in nearly $190 billion to save Fannie Mae and Freddie Mac so the companies could continue to make good on guarantees that investors were counting on. Now reporting record profits thanks to conservative lending standards, fewer defaults and rising home prices, the companies have returned more than $130 billion to the U.S. Treasury.

Obama’s plan resembles legislation put forward by a bipartisan group of senators led by Bob Corker (R-Tenn.) and Mark Warner (D-Virginia). The lawmakers call for a public entity that would offer a government guarantee to issuers of mortgage bonds that would guarantee investors against losses. Those issuers would have to have sufficient capital to cover up to 10 percent of losses from defaults, after which taxpayers would step in.

Industry and consumer groups ranging from the Mortgage Bankers Association to the Consumer Federation of America have endorsed key planks of the Corker-Warner proposal.

The senior administration official said the Corker-Warner proposal was “consistent” with Obama’s ideas to reform housing finance, though the official said the proposal fell short in ensuring continued access to credit for first-time home buyers or in providing for rental housing.

Still, a powerful group of House Republicans is trying to advance a proposal that would drastically reduce taxpayer involvement in the housing sector. They remain a roadblock to any deal.

House and Senate Republicans are likely to object to other ideas Obama will attempt to advance on Tuesday, such as a government initiative that would allow more borrowers to refinance their home loans into cheaper, taxpayer-backed mortgages.

The site of Obama’s address on Tuesday is a short distance from the spot where the president announced his signature anti-foreclosure effort at the outset of his presidency. At a high school in the Phoenix suburb of Mesa, Obama explained how his mortgage modification program would work and how many people it would help.

In February 2009, Obama said that up to 4 million homeowners would be able to modify the terms of their mortgages under a government plan that would cap payments to income and prevent foreclosures.

The effort, known as the Home Affordable Modification Program, has fallen far short of its goal.

Sheila Bair, the Republican former head of the Federal Deposit Insurance Corp. who has been praised by consumer advocates and liberal Democrats, wrote in her book after leaving government service that she “cringed” when Obama said he'd save 4 million borrowers from foreclosure.

"At the Phoenix announcement, the president was masterful in announcing the program, though I cringed as he threw out what I considered to be wildly inflated numbers on the programs' impact," Bair wrote. "Even with our own, more aggressive proposal, we had estimated the number of successful modifications at 2.1 million tops."

Bair said many borrowers who entered HAMP ultimately were cheated.

Through May, fewer than 880,000 borrowers were making payments on new HAMP mortgages. Originally a $50 billion commitment, the program has shrunk to about $38 billion. Less than $9 billion has been spent so far on housing programs under the bank bailout program known as TARP.

Source: Huffington Post
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Home Equity Loans

A home equity loan is a loan for a fixed amount of money that is secured by your home. You repay the loan with equal monthly payments over a fixed term, just like your original mortgage. If you don’t repay the loan as agreed, your lender can foreclose on your home.

The amount that you can borrow usually is limited to 85 percent of the equity in your home. The actual amount of the loan also depends on your income, credit history, and the market value of your home.

Ask friends and family for recommendations of lenders. Then, shop and compare terms. Talk with banks, savings and loans, credit unions, mortgage companies, and mortgage brokers. But take note: brokers don’t lend money; they help arrange loans.

Ask all the lenders you interview to explain the loan plans available to you. If you don’t understand any loan terms and conditions, ask questions. They could mean higher costs. Knowing just the amount of the monthly payment or the interest rate is not enough. The annual percentage rate (APR) for a home equity loan takes points and financing charges into consideration. Pay close attention to fees, including the application or loan processing fee, origination or underwriting fee, lender or funding fee, appraisal fee, document preparation and recording fees, and broker fees; these may be quoted as points, origination fees, or interest rate add-on. If points and other fees are added to your loan amount, you’ll pay more to finance them.

Ask for your credit score. Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences — like your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and how long you've had your accounts — is collected from your credit application and your credit report. Creditors compare this information to the credit performance of people with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points — your credit score — helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when they’re due. For more information on credit scores, read How Credit Scores Affect the Price of Credit and Insurance.

Negotiate with more than one lender. Don’t be afraid to make lenders and brokers compete for your business by letting them know that you’re shopping for the best deal. Ask each lender to lower the points, fees, or interest rate. And ask each to meet — or beat — the terms of the other lenders.

Before you sign, read the loan closing papers carefully. If the loan isn’t what you expected or wanted, don’t sign. Either negotiate changes or walk away. You also generally have the right to cancel the deal for any reason — and without penalty — within three days after signing the loan papers. For more information, see The Three-Day Cancellation Rule.
Home Equity Lines of Credit

A home equity line of credit — also known as a HELOC — is a revolving line of credit, much like a credit card. You can borrow as much as you need, any time you need it, by writing a check or using a credit card connected to the account. You may not exceed your credit limit. Because a HELOC is a line of credit, you make payments only on the amount you actually borrow, not the full amount available. HELOCs also may give you certain tax advantages unavailable with some kinds of loans. Talk to an accountant or tax adviser for details.

Like home equity loans, HELOCs require you to use your home as collateral for the loan. This may put your home at risk if your payment is late or you can't make your payment at all. Loans with a large balloon payment — a lump sum usually due at the end of a loan — may lead you to borrow more money to pay off this debt, or they may put your home in jeopardy if you can’t qualify for refinancing. And, if you sell your home, most plans require you to pay off your credit line at the same time.
HELOC FAQs

Lenders offer home equity lines of credit in a variety of ways. No one loan plan is right for every homeowner. Contact different lenders, compare options, and select the home equity credit line best tailored to your needs.

How much money can you borrow on a home equity credit line?

Depending on your creditworthiness and the amount of your outstanding debt, you may be able to borrow up to 85 percent of the appraised value of your home less the amount you owe on your first mortgage. Ask the lender if there is a minimum withdrawal requirement when you open your account, and whether there are minimum or maximum withdrawal requirements after your account is opened. Ask how you can spend money from the credit line — with checks, credit cards, or both.

You should find out if your home equity plan sets a fixed time — a draw period — when you can withdraw money from your account. Once the draw period expires, you may be able to renew your credit line. If you can’t, you won’t be able to borrow additional funds. In some plans, you may have to pay the outstanding balance. In others, you may be able to repay the balance over a fixed time.

What is the interest rate?

Unlike a home equity loan, the APR for a home equity line of credit does not take points and financing charges into consideration. The advertised APR for home equity credit lines is based on interest alone.

Ask about the type of interest rates available for the home equity plan. Most HELOCs have variable interest rates. These rates may offer lower monthly payments at first, but during the rest of the repayment period, the payments may change — and may go up. Fixed interest rates, if available, at first may be slightly higher than variable rates, but the monthly payments are the same over the life of the credit line.

If you’re considering a variable rate, check and compare the terms. Check the periodic cap — the limit on interest rate changes at one time. Also, check the lifetime cap — the limit on interest rate changes throughout the loan term. Lenders use an index, like the prime rate, to determine how much to raise or lower interest rates. Ask the lender which index is used and how much and how often it can change. Check the margin — an amount added to the index that determines the interest you are charged. In addition, ask whether you can convert your variable rate loan to a fixed rate some time later.

Sometimes, lenders offer a temporarily discounted interest rate — a rate that is unusually low and lasts only for an introductory period, say six months. During this time, your monthly payments are lower, too. After the introductory period ends, however, your rate (and payments) increase to the true market level (the index plus the margin). Ask if the rate you’re offered is “discounted,” and if so, find out how the rate will be determined at the end of the discount period and how much more your payments could be at that time.

What are the upfront closing costs?

When you take out a home equity line of credit, you pay for many of the same expenses as when you financed your original mortgage. These include: an application fee, title search, appraisal, attorneys’ fees, and points (a percentage of the amount you borrow). These expenses can add substantially to the cost of your loan, especially if you ultimately borrow little from your credit line. Try to negotiate with the lenders to see if they will pay for some of these expenses.

What are the continuing costs?

In addition to upfront closing costs, some lenders require you to pay fees throughout the life of the loan. These may include an annual membership or participation fee, which is due whether you use the account, and/or a transaction fee, which is charged each time you borrow money. These fees add to the overall cost of the loan.

What are the repayment terms during the loan?

As you pay back the loan, your payments may change if your credit line has a variable interest rate, even if you don’t borrow more money from your account. Find out how often and how much your payments can change. Ask whether you are paying back both principal and interest, or interest only. Even if you are paying back some principal, ask whether your monthly payments will cover the full amount borrowed or whether you will owe an additional payment of principal at the end of the loan. In addition, you may want to ask about penalties for late payments and under what conditions the lender can consider you in default and demand immediate full payment.

What are the repayment terms at the end of the loan?

Ask whether you might owe a large (balloon) payment at the end of your loan term. If you might, and you’re not sure you will be able to afford the balloon payment, you may want to renegotiate your repayment terms. When you take out the loan, ask about the conditions for renewal of the plan or for refinancing the unpaid balance. Consider asking the lender to agree ahead of time — in writing — to refinance any end-of-loan balance or extend your repayment time, if necessary.

What safeguards are built into the loan?

One of the best protections you have is the Federal Truth in Lending Act. Under the law, lenders must tell you about the terms and costs of the loan plan when you get an application. Lenders must disclose the APR and payment terms and must tell you the charges to open or use the account, like an appraisal, a credit report, or attorneys’ fees. Lenders also must tell you about any variable-rate feature and give you a brochure describing the general features of home equity plans.

The Truth in Lending Act also protects you from changes in the terms of the account (other than a variable-rate feature) before the plan is opened. If you decide not to enter into the plan because of a change in terms, all the fees you paid must be returned to you.

Once your home equity plan is opened, if you pay as agreed, the lender, generally, may not terminate your plan, accelerate payment of your outstanding balance, or change the terms of your account. The lender may halt credit advances on your account during any period in which interest rates exceed the maximum rate cap in your agreement, if your contract permits this practice.

Before you sign, read the loan closing papers carefully. If the HELOC isn’t what you expected or wanted, don’t sign the loan. Either negotiate changes or walk away. And like a home equity loan, you also generally have the right to cancel the deal for any reason — and without penalty — within three days after signing the loan papers. For more information, see The Three-Day Cancellation Rule.
The Three-Day Cancellation Rule

Federal law gives you three days to reconsider a signed credit agreement and cancel the deal without penalty. You can cancel for any reason but only if you are using your principal residence — whether it’s a house, condominium, mobile home, or house boat — as collateral, not a vacation or second home.

Under the right to cancel, you have until midnight of the third business day to cancel the credit transaction. Day one begins after:

    you sign the credit contract;
    you get a Truth in Lending disclosure form containing key information about the credit contract, including the APR, finance charge, amount financed, and payment schedule; and
    you get two copies of a Truth in Lending notice explaining your right to cancel.

For cancellation purposes, business days include Saturdays, but not Sundays or legal public holidays. For example, if the events listed above take place on a Friday, you have until midnight on the next Tuesday to cancel.

During this waiting period, activity related to the contract cannot take place. The lender may not deliver the money for the loan. If you’re dealing with a home improvement loan, the contractor may not deliver any materials or start work.
If You Decide to Cancel

If you decide to cancel, you must tell the lender in writing. You may not cancel by phone or in a face-to-face conversation with the lender. Your written notice must be mailed, filed electronically, or delivered, before midnight of the third business day.

If you cancel the contract, the security interest in your home also is cancelled, and you are not liable for any amount, including the finance charge. The lender has 20 days to return all money or property you paid as part of the transaction and to release any security interest in your home. If you received money or property from the creditor, you may keep it until the lender shows that your home is no longer being used as collateral and returns any money you have paid. Then, you must offer to return the lender’s money or property. If the lender does not claim the money or property within 20 days, you may keep it.

If you have a bona fide personal financial emergency — like damage to your home from a storm or other natural disaster — you can waive your right to cancel and eliminate the three-day period. To waive your right, you must give the lender a written statement describing the emergency and stating that you are waiving your right to cancel. The statement must be dated and signed by you and anyone else who shares ownership of the home.

The federal three day cancellation rule doesn’t apply in all situations when you are using your home for collateral. Exceptions include when:

    you apply for a loan to buy or build your principal residence
    you refinance your loan with the same lender who holds your loan and you don’t borrow additional funds
    a state agency is the lender for a loan.

In these situations, you may have other cancellation rights under state or local law.
Harmful Home Equity Practices

You could lose your home and your money if you borrow from unscrupulous lenders who offer you a high-cost loan based on the equity you have in your home. Certain lenders target homeowners who are older or who have low incomes or credit problems — and then try to take advantage of them by using deceptive, unfair, or other unlawful practices. Be on the lookout for:

    Loan Flipping: The lender encourages you to repeatedly refinance the loan and often, to borrow more money. Each time you refinance, you pay additional fees and interest points. That increases your debt.

    Insurance Packing: The lender adds credit insurance, or other insurance products that you may not need to your loan.

    Bait and Switch: The lender offers one set of loan terms when you apply, then pressures you to accept higher charges when you sign to complete the transaction.

    Equity Stripping: The lender gives you a loan based on the equity in your home, not on your ability to repay. If you can’t make the payments, you could end up losing your home.

    Non-traditional Products: The lender may offer non-traditional products when you are shopping for a home equity loan:
        For example, lenders may offer loans in which the minimum payment doesn't cover the principal and interest due. This causes your loan balance, and eventually your monthly payments, to increase. Many of these loans have variable interest rates, which can raise your monthly payment more if the interest rate rises.
        Loans also may feature low monthly payments, but have a large lump-sum balloon payment at the the end of the loan term. If you can’t make the balloon payment or refinance, you face foreclosure and the loss of your home.
    Mortgage Servicing Abuses: The lender charges you improper fees, like late fees not allowed under the mortgage contract or the law, or fees for lender-placed insurance, even though you maintained insurance on your property. The lender doesn’t provide you with accurate or complete account statements and payoff figures, which makes it almost impossible for you to determine how much you have paid or how much you owe. You may pay more than you owe.

    The "Home Improvement” Loan: A contractor calls or knocks on your door and offers to install a new roof or remodel your kitchen at a price that sounds reasonable. You tell him you're interested, but can't afford it. He tells you it's no problem — he can arrange financing through a lender he knows. You agree to the project, and the contractor begins work. At some point after the contractor begins, you are asked to sign a lot of papers. The papers may be blank or the lender may rush you to sign before you have time to read what you've been given. The contractor threatens to leave the work on your house unfinished if you don't sign. You sign the papers. Only later, you realize that the papers you signed are a home equity loan. The interest rate, points and fees seem very high. To make matters worse, the work on your home isn't done right or hasn't been completed, and the contractor, who may have been paid by the lender, has little interest in completing the work to your satisfaction.

Some of these practices violate federal credit laws dealing with disclosures about loan terms; discrimination based on age, gender, marital status, race, or national origin; and debt collection. You also may have additional rights under state law that would allow you to bring a lawsuit.

source: FTC

Quick Facts:

• All borrowers must be 62 years and older
  
• Home must be your primary residence
  
• You own your home – no different than a traditional mortgage. Title stays in your name!
  
• No income, health or credit qualification
  
• Consult your tax advisor first, but Social Security benefits and Medicare are generally not affected by a reverse mortgage.
  
• No repayment is made until the home is sold or the owner permanently moves out or passes away
  
• You will never owe more than the value of your home
  
• When the loan is due, your heirs have choices – they can repay the loan and keep the house, or sell the home and repay the loan. Estate nor children are responsible for debt
  

Possible Uses:

• Assistance with your month-to-month living expenses
• Help pay for healthcare and prescription drug costs
• Pay for home repairs or modifications
• Pay off an existing mortgage
• Pay off existing debt
• Reduce burden on children
• Repair or purchase a car
• Pay property taxes
  
• Travel
• Any purpose you choose

Receiving Your Money

• Lump sum – A one time payment at closing. Fixed rate loans require lump sum
  
• “Tenure” Monthly Payment – Receive monthly income. Can be Deposited directly into your checking account every month for life.
• “Term” Monthly Payment – Receive monthly income. Can be Deposited directly into your checking account every month for a set number of months.
• Line of Credit – An open credit line from which you may draw at any time.
• Or a Combination of any of the above.

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