Reverse-Mortgage-Truth.com

The Southern California region is known for its high cost of living. From home maintenance, to uninsured medical bills, to prescription drugs, and even at home care, seniors are finding that it can be difficult to afford all the necessities on social security alone. That’s why many senior homeowners have turned to California Reverse Mortgages to help cover their expenses. And many of these seniors end up with plenty of leftover money to pay for enjoyable things, beyond the necessities as well. Many seniors are now able to take advantage of their home equity to enjoy a higher standard of living using this payment-free home loan.

Over the past 5 years reverse mortgages in California have grown into an accessible and increasingly popular way for seniors to increase their financial means during retirement. Across all areas of California seniors have utilized reverse mortgage programs to accomplish worthwhile purposes such as ridding themselves of their mortgage payment by paying off existing mortgage debt; to make improvements to their home or cover maintenance expenses with a lump sum of cash; to enjoy a more comfortable lifestyle by increasing their monthly stream of income. Seniors have found practically endless uses for the additional funds from a reverse mortgage.

The minimal requirements for reverse mortgages in California have made them relatively easy to obtain. Seniors need only adequate equity in their home to qualify – credit scores, income and other assets do not matter. However, due to declines in the real estate market this past year seniors in some parts of California no longer have the certainty of adequate equity in their homes. As the real estate market in California is now firmly established on a declining path, it is more difficult to qualify for a reverse mortgage because the amount of home equity that seniors have is diminishing. Some parts of the state, however, are faring better than others.

Next we'll focus on San Diego reverse mortgages.

In the last two years we have seen lots of new reverse mortgage programs introduced to the marketplace. Countrywide Bank started offering both the government-backed reverse mortgages and their own version of the jumbo reverse mortgage to compete with Bank of America and Financial Freedom.

Earlier this week, they stopped taking applications for their jumbo reverse mortgage. The decision was probably driven by investor sentiment as reflected in their stock price and of course, mortgage-backed securities overall. Countrywide rocketed up the ranks to become the top lender for reverse mortgage loan volume for the month of March so their loan volume was probably not the issue.

Countrywide will likely continue to offer the FHA Reverse Mortgage, known as the Home Equity Conversion Mortgage (HECM). The HECM is sold to Fannie Mae, though the lender usually retains the servicing, so there is no lack of funds available for the program.

The loss of Countrywide's program to California reverse mortgages will be felt across the state. With fewer programs available, the existing programs will be in greater demand, probably resulting in a migration to less favorable terms. Still, seniors have decent choices in other California reverse mortgage lenders.

As I mentioned earlier, the typical reverse mortgage requires special Federal Housing Authority (FHA) insurance. You may wonder why this insurance is necessary.

The lender is taking a risk by not requiring any repayment for as long as you, the senior with a reverse mortgage, choose to live in the home. Even if you live in your home for the next 50 years, they can't ask you for a payment. And the money that you receive from the reverse mortgage must remain available to you for the life of the loan.

The reverse mortgage is "non-recourse". The lender cannot come after you, your estate, or your heirs if the housing market crashes and the amount owed is more than your home is worth. So the lender - not you - is taking the risks that you live a really long time or that the housing market crashes.

Given those risks, no lender in their right mind would make such a deal without some assurance that they won't lose huge amounts of money. But since the FHA makes up the difference in case of a loss, the lender has little risk and can offer the reverse mortgage at extremely low interest rates. FHA can't provide that guarantee for free, so they charge borrowers for it in the form FHA insurance, which is like a group insurance policy. Everyone pays in to it so when a few go upside down, there is money to cover the loss to the lender.

Well, that all sounds great for the lender, but what do you, the senior home owner, get for it? For starters, this insurance makes the Reverse available to you at really low rates in the first place. More importantly, your money is guaranteed to you by the FHA even if the lender were to go out of business. So you will be able to use the money while you live in your home and won't have to pay back a dime for the rest of your life!