The Reverse Gear - Reverse Mortgages More Appealing & Affordable

GETTING credit is no simple task these days, even under the best of circumstances — just ask anyone who has applied for a mortgage. But it can be even more problematic for those who are retired, with many facing the triple whammy of declining income, falling home values and dwindling savings from Wall Street’s meltdown.

Looking for a way around the continuing credit crunch, more older people are exploring reverse mortgages, which allow homeowners 62 or older to borrow against their equity.

The Sunday, March 15, 2009, New York Times discusses the new interest in reverse mortgages as an alternative to conventional mortgage refinancing. A sidebar sums up the program:

• They can help older homeowners who are house-rich but cash-poor, allowing them to remain in their homes indefinitely, and even finance their retirement.
• Borrowers convert the equity in their homes into cash while retaining ownership. The reverse mortgage does not require monthly payments. It’s usually repaid when the house is sold or the borrowers move out.
• Borrowers must be at least 62 years old and own their home as their primary residence.
• The sole financing source right now is the Federal Housing Administration, an arm of HUD.
• Several factors determine how much can be taken out, including the age of the youngest borrower, current interest rates and property value.
• There are several options on getting your money. Borrowers can choose to be paid all at once, in a lump sum of cash; through a monthly cash advance; through a line of credit to be taken out at any time; or via a combination of these methods.
• Fees are steep, running from $7,000 to $20,000, which is why many financial advisers consider reverse mortgages a financing source of last resort.

To read the full story, go to The Reverse Gear.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

Sphere: Related Content

Buying a First Home? New tax break in store for you

Kay Bell writes in Bankrate.com about one part of the Housing and Tax Assistance Act of 2008,

Buying your first home is enough of a challenge in good times. In today's economy, it's almost impossible for some people. So in 2008, federal lawmakers enacted tax legislation they hoped would make the process a bit more affordable. Then in February, the home buying tax break was enhanced.

Unfortunately, the back-to-back changes in the first-time homebuyer credit also created a lot of confusion.

As with many government programs, you have to dive beneath the surface to understand a program and this one is no exception because it is a loan, not a true tax credit.

Typically, tax credits

"allow you to reduce your tax bill dollar for dollar. If you owe the IRS $1,000 and qualify for a $500 credit, your tax bill is halved. The best credits are refundable, meaning that you get the tax break's full value even if you owe no tax. If you owe the IRS $250 and the $500 credit you claim is refundable, you get to wipe out your tax bill and then get the $250 excess credit back as a refund check from Uncle Sam."

"But the original credit for first-time homebuyers, while refundable, must be paid back in equal installments over 15 years of subsequent tax filings. That means homeowners who qualify for the full credit would face a $500-a-year payback, starting with their 2010 return."

So in essence, the 2008-version credit is simply an interest-free loan.

There are other criteria that must be addressed before the program will benefit you. For a full copy of the article go to "First home, new tax break."

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

Sphere: Related Content

Where There's a Buck to be Made, Someone Will Find the Way to Make It

The New York Times is reporting tonight, March 3, 2009, "Ex-Leaders at Countrywide Start Firm to Buy Bad Loans."

Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation’s economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering.

So it may come as a surprise that a dozen former top Countrywide executives now stand to make millions from the home mortgage mess.

Stanford L. Kurland, Countrywide’s former president has formed a company called PennyMac to buy loans, some for pennies on the dollar, from the U.S. government and then proceed to collect on them. Bad idea?

It is quite evident that their efforts are, in fact, helping many distressed homeowners.

“Literally, their assistance saved my family’s home,” said Robert Robinson, of Felton, Pa., whose interest rate was cut by more than half, making his mortgage affordable again.

Others are not so happy.

But to some, it is disturbing to see former Countrywide executives in the industry again. “It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” said Margot Saunders, a lawyer with the National Consumer Law Center, which for years has sought to place limits on what it calls abusive lending practices by Countrywide and other companies.

Countrywide is the subject of lawsuits in several jurisdictions and Kurland's role in the busting of the lender is under scrutiny.

It's certainly not a crime to make money off of economic misfortune, but when you've been part of the problem....?

What do you think?

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

Sphere: Related Content

Call Them Irresponsible - Rewarding those who put the 'liar' in liar loans

The Wall Street Journal's editors weigh in on the president's mortgage foreclosure prevention program: Call Them Irresponsible - Rewarding those who put the 'liar' in liar loans.

President Obama continues to insist that only "responsible families" will benefit from his foreclosure prevention program. Addressing Congress last week, Mr. Obama said his plan "won't help speculators or that neighbor down the street who bought a house he could never hope to afford." Sorry, Mr. President. It's becoming increasingly obvious that your plan is going to help tens of thousands of borrowers who put the "liar" into liar loans.

Why won't it work as planned? "In Congressional testimony last week, [Federal Reserve Chair]Mr. Bernanke compared many troubled borrowers to people who accidentally start fires by smoking in bed." FDIC Chairman Sheila Bair "told public radio that it would be "simply impractical" to review old mortgage applications and try to distinguish between honest and dishonest borrowers. All of this moved the Associated Press to report that the President's "assurance Tuesday night that only the deserving will get help rang hollow."

Mortgage fraud is not at an end according to the Mortgage Asset Research Institute and the Treasury's Financial Crimes Enforcement Network.

There is a moral hazard in rewarding bad decisions. But it's worse than that: The White House plan contains penalties for everyone else. The mortgage "cramdown," allowing bankruptcy judges to reduce the amount owed, can only make investors less willing to lend to future homebuyers.

Even Fannie Mae has warned "investors that its focus on foreclosure prevention "is likely to contribute to a further deterioration" in results. Since the Obama plan shovels another $100 billion each to Fan and Fred[die Mac] -- for a total commitment so far of $400 billion -- Fannie is talking to you."

What do you think? We'd like to know.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

Sphere: Related Content

The 2% Solution-- A cure for what ails America?

Arthur Conan Doyle's Sherlock Holmes would create a solution of 7% cocaine and 93% water for his drug habit. When America's economy ails, the drug of choice for American politicians appears to be taxes.
As reported yesterday in The New York Times,

President Obama will propose further tax increases on the affluent to help pay for his promise to make health care more accessible and affordable, calling for stricter limits on the benefits of itemized deductions taken by the wealthiest households.

Today, February 26, 2009, the Wall Street Journal weighs in on the matter discussing The 2% Illusion,

President Obama has laid out the most ambitious and expensive domestic agenda since LBJ, and now all he has to do is figure out how to pay for it. On Tuesday, he left the impression that we need merely end "tax breaks for the wealthiest 2% of Americans," and he promised that households earning less than $250,000 won't see their taxes increased by "one single dime."

This is going to be some trick. Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can't possibly raise enough revenue to fund Mr. Obama's new spending ambitions.

The Journal then proceeds to show the weakness of the assumption that the tax increase will be a cure-all remedy. For instance,

The proposal is to raise the highest rate "only to 39.6%, plus another two percentage points in hidden deduction phase-outs. He'd also raise capital gains and dividend rates, but those both yield far less revenue than the income tax. These combined increases won't come close to raising the hundreds of billions of dollars in revenue that Mr. Obama is going to need."

But let's not stop at a 42% top rate; as a thought experiment, let's go all the way. A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.

The bottom line is that Mr. Obama is selling the country on a 2% illusion. Unwinding the U.S. commitment in Iraq and allowing the Bush tax cuts to expire can't possibly pay for his agenda. Taxes on the not-so-rich will need to rise as well.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

Sphere: Related Content