From the NYT:
As baby boomers age, reverse mortgages are expected to gain popularity as a means of covering living expenses. Hence, in the future, more homes passed on to children will come with a bill attached — the balance due on these equity loans.
Federally insured reverse mortgages, officially issued as part of the Home Equity Conversion Mortgage program, are a way for homeowners 62 and older to borrow money using their home equity as collateral. The proceeds must first be used to pay off any remaining balance on the mortgage, which frees homeowners from monthly payments. Interest and monthly insurance premiums are charged throughout the life of the loan, and the total becomes due when the borrower dies (or permanently moves out of the home).
A common misconception about reverse mortgages is that the lender takes an equity share in the house, said Vivian Dye, a reverse-mortgage consultant at Atlantic Residential Mortgage in Westport, Conn. “It’s a relationship between the bank and the borrower,” she said, “and it’s the same kind of relationship as a regular loan.”
As the first lien holder on the property title, however, the lender must be repaid when the property changes hands. How the heirs handle repayment depends on how much equity is left in the home and whether they want to keep it.
Under federal regulations, after the last borrower named on the loan has died, the lender must provide up to 30 days for the heirs to decide on a repayment method. Heirs then have up to six months to sell or arrange financing, said Colin Cushman, the chief executive of Generation Mortgage, a reverse-mortgage originator and servicer based in Atlanta. But, he noted, as many as two 90-day extensions are allowed if the heirs can show they are actively trying to sell the property.
Should they wish to retain ownership, the heirs might choose to get a separate mortgage to refinance the home and pay off the reverse mortgage. Or, if there is enough equity in the home, they might choose to sell it and use the proceeds to pay off the loan.
The heirs will not be on the hook for any shortfall should the home fail to sell for enough to pay the loan in full. If the loan balance exceeds the value of the home, the amount owed is limited to 95 percent of the appraised value.
From the Star Ledger:
Chatham Township ranked safest town in New Jersey
The township has been named the “Safest Place in New Jersey” in a listing of 238 towns compiled by an online real estate firm. Berkeley Heights was listed in the top 10.
The listing of the safest places was created by Movoto Real Estate, which is based in San Mateo, Calif.
The top 10 towns are: Chatham Township, Mahwah; Sparta; Bernards; Hasbrouck Heights; Berkeley Heights; Florham Park; Ringwood; Tenafly and Lincoln Park.
Other towns in the Independent Press circulation area that made the list were Warren Township at 17th and Madison, which was ranked 24th.
JJ nails it – from Newsday:
Home prices, sales rise in Nassau, but Suffolk lags
Nassau County’s housing market is on the rise, more than a year after superstorm Sandy devastated the region.
Homes in Nassau fetched a median price of $430,000 in January, up 7.5 percent from a year earlier, according to a report Friday by the Multiple Listing Service of Long Island.
Suffolk’s real estate market, which wasn’t hit as hard by Sandy, did not show the same strength. There, the median price edged up to $313,000 last month, a year-over-year rise of 1 percent.
In January 2013, Long Island was coping with the immediate aftermath of the Oct. 29, 2012 storm. However, the housing market in Nassau County last month posted gains even in comparison with previous Januaries. Traditionally a slow time for home sales, last month was Nassau’s strongest January for home values since 2008, when the median price was $440,000.
In Long Beach, which was especially hard-hit by the storm, the housing market “is coming back, one day at a time,” said Joyce Coletti, an agent with Douglas Elliman Real Estate.
“Sandy hit, people panicked and they literally gave away their properties,” Coletti said. “Now people are coming to their senses and they’re asking higher prices.”
In another indicator of health, the number of homes sold in Nassau rose by nearly 14 percent last month, to 749 — the most January home sales since 2007, when 826 residences sold in the first month of the year.
“The heirs will not be on the hook for any shortfall should the home fail to sell for enough to pay the loan in full. If the loan balance exceeds the value of the home, the amount owed is limited to 95 percent of the appraised value.”
If the Heirs are not on the hook on any shortfall,who pays the 5% loan balance if the amount owed is limited to 95% of AV. Why even put this statement if the bank or note holder is in the hook for any difference?
Basically saying,go for a reverse mortgage,when the owner dies the Heirs have a choice to keep property ,if there is equity.If not give the keys to the bank.Heirs are not on the hook. Right?
Reverse mortgages are more complicated to understand than the worst ultra subprime swill that was peddled during the bubble.
As such, I firmly believe most of these products border on being a scam to burden the property with as near to 100% debt load as possible with minimal cash payout.
Suspect that these products are significantly more expensive structured in this fashion, compared to a simple 30yr fixed mortgage with cash-out at closing. Say it over and over again, there is no free lunch.
What happens when the single surviving spouse needs to move to an extended care facility, long term hospital stay, or hospice. Surprise! F*ck you, pay me.
Want a better option? Sell the property to one of your children at a sweetheart price, exchange $1. Parent writes a mortgage for the child in the amount of the remaining balance – child pays monthly mortgage payment to parent. Parent pays no rent. Modify deed to provide right of survivorship to parents.
I will guarantee you that in all cases, this family will make out significantly better than the above case. Every time.
Why pay the fees to the lender? Why pay the interest to the lender? Keep your damn money in the family.
I would assume it would be pretty easy, in a typical scenario, to see 50% of the property value at time of death be consumed by interest, probably another 10-15% covered by lender fees, closing costs, and mortgage insurance. 65% of the property value completely vaporized for the luxury of borrowing the money? Absurd.
#5
You are right if the home is free and clear.If there is a balance remaining,your choice will be the reverse mortgage.They pay the remaining balance and you will owe them. I don’t know much about reverse mortgage either. In the outside,it looks good. I have relative that reverse mortgage their home in Fl.Her husband died,and she is in a nursing home now. Nobody lives in their house. Last time I spoke to my BIL he wants to sell it. He was left as the guardian by her repose husband.
Assuming the move to the nursing home is permanent, the mortgage is now due. If she stays in the nursing home or rehab for more than 12 months, the mortgage is due. Guardian is irrelevant. His name isn’t on the deed or mortgage.
Perhaps they are trying to hide this fact? Depending on when they took the reverse mortgage out (was it during the bubble?), there might no longer be any equity at all in the property, or worse, the wife may owe substantially. Yes, you can be underwater on a reverse mortgage and liable for the full amount.
Surprise, lenders can foreclose on reverse mortgaged homes. Surprise, borrowers and their estates can be liable for the deficiency. The reverse mortgage model is all well and good, assuming strong appreciation of the property and upkeep over the years. And everybody knows, making those kinds of assumptions have never been a problem before.
F*ck you, pay me.
There is no equity for sure. The RM was taken during the bubble and they live in the worst hit in FL, Palm Coast.Nobody has lived in that house for at least 2 1/2 years. They have no kids. I dont know if the bank knows she has been living in a nursing home. There is no value on the stick anymore.Nobody maintained that home for that long.
@EpicureanDeal: I’ve listened to many rich and successful people talk about politics and inequality. Very few have thought past their own nose on it.
@EpicureanDeal: In part, that’s because they move in an echo chamber of peers. In part it’s because less powerful people who disagree need their patronage +
@EpicureanDeal: + So the rich almost never hear disagreement from among friends or acquaintances. Only strangers, who can be discounted or demonized.
@EpicureanDeal: I have bitten my tongue many times in the presence of stupid and offensive comments by rich clients and friends, because I cannot afford +
@EpicureanDeal: + to give them offense. Do you think they take my silence as disapproval? Of course not. Neither would you.
@EpicureanDeal: The rich aren’t much different from the rest of us, who mostly seek out those who agree with us and won’t upset our cherished beliefs.
You couldn’t just put that in one post?
Throw RE taxes in the equation and RMs make even less sense in our area. What value is there in the proposition “take this money with humongous fees and use 30% to pay the town”?
flow of tweets wouldn’t had worked in one post. also clot has done that in the past, several posts in a row with only one sentence and you didn’t complain. nonsensical gloom and doom zerohedge.
grim says:
February 15, 2014 at 9:40 am
You couldn’t just put that in one post?
anon (the good one),
Zerohedge is nonsensical? What gloomy, one-horse town in upstate NY did you say you live again?
@Libturd: Nothing that can’t be said in one tweet is worth posting. It’s the beauty of Twitter. #baa
you obviously didnt read and/or didnt understand, good day
Fabius Maximus says:
February 14, 2014 at 6:44 pm
#83 Joyce
What rights do I have to have a clean water supply. What rights do I have that stops a company poisoning the water and disappearing without reparation. Why should I need reparation in the first place?
Who needs 140 characters when it only takes one shot to silence an idiot like anon?
Then again, retweeting is a Sysyphean form of existence.
joyce (20)-
This is what happens when you deal with the sub-mental.
Twitter(hello, twit appears in the name) appeals strongest to groups who have limited mental capacity, or those with the attention span of a flea. I think it helps to explain anon’s fascination.
More info here:
http://www.ragan.com/Main/Articles/Pew_Report_The_demographics_of_Twitter_users_44999.aspx#
Am I permitted to publish this on my twitter?
As baby boomers age, reverse mortgages are expected to gain popularity as a means of
covering living expensespaying property taxes and other state and local taxes and fees.LOL. If that happens, NJ old people < WV young people. Smart people know when to get out.
I am watching Greg Fitzsimmons: Life on Stage on Netflix. At the beginning he talks about personal debt.
Me paraphrasing – “It’s just a number on a piece of paper. It means you’ve had more fun than you’ve earned. Why would you care how big something gets that you’re never going to pay off? Paying it down is stupid and it hurts. People who save money have earned this much fun (raises hand up high) and enjoyed this much (puts hand down low). That’s stupid.”
grim – re: reverse mortgages
As such, I firmly believe most of these products border on being a scam to burden the property with as near to 100% debt load as possible with minimal cash payout.
Not knowing otherwise, my gut tells me this is exactly correct. OTOH, did some old folks make out with reverse am products closed prior to the realization that RE prices don’t go up forever?
good job W. weapon of mass destruction
@ianbremmer: Worst #Iraq violence in 5 years
9,000 killed in 2013
1,000 killed in January
[29] anon
You say it like its a bad thing.
[24] nwnj
Hardly surprising that anon falls into that demographic. I’d hazard that anon is young, up to his (her?) eyeballs in debt, and is presently un- or under-employed.
IMHO, these folks are especially bitter about not getting their slice of American Pie, along with a pony and big-ass trophy just for showing up. The other bitter posse is the older ones who find themselves at midlife with nothing to show for it. So they blame the haves because, ergo, if the haves didn’t have, then the have-nots would have. Got it?
anon is completely rational. He stands where he sits. And if he ever makes decent money and remains rational, that view will change as his circumstances change.
Of course, complete rationality and self-interest doesn’t equal a long view. Give a man to fish, he eats for a day. Teach him to fish, he eats for a lifetime. You don’t make the poor rich by making the rich poor. The mentality of “give me MY slice now” doesn’t allow for this. Still, here we are and those who don’t remember history (their own or others) will be condemned to repeat it.
Finally, understand that anon is posting from another anonymous person’s blog. So, in essence, he is saying “look, someone agrees with me.”
I think that you’d be hard-pressed not to be able to find some who agrees on virtually any topic. Color me not impressed.
It is Saturday before sundown…..you are not even supposed to be using lights…..are you one of those guys that uses the Shabbat elevator?
anon (the good one) says:
February 15, 2014 at 10:04 am
flow of tweets wouldn’t had worked in one post. also clot has done that in the past, several posts in a row with only one sentence and you didn’t complain. nonsensical gloom and doom zerohedge.
grim says:
February 15, 2014 at 9:40 am
You couldn’t just put that in one post?
Looks like another CNN columnist needs to be dragged back onto the reservation:
http://www.cnn.com/2014/02/14/opinion/navarrette-clarence-thomas-race/index.html?hpt=hp_t4
and….
http://jalopnik.com/the-uaw-is-really-pissed-it-lost-the-volkswagen-vote-1523554960
Here is some news that Pain or I on one side of the aisle, and cobbler/Fabian/anon on the other side would agree is good news.
http://money.cnn.com/2014/02/14/news/companies/guns-ammo-sales/index.html?source=cnn_bin
Of course, we would likely disagree on why its news and why its good.
I should have said Pain/Grim/Nom on one side . . .
nom[36]
Being an owner it would be quite hypocritical for me to be anti-gun… I’d be happy to vote for “shall issue” concealed carry reg if it ever goes on a referendum in NJ (won’t happen though).
As for the article itself, I don’t see it as news at all – a year ago we’ve seen panic buying which had to subside.
[38] cobbler,
I stand corrected.