Senior debt

Here's what to ask if you're considering a reverse mortgage


WASHINGTON (MarketWatch) -- Question: Where can I get more detailed information about reverse mortgages for seniors? We have a house in a "plus 55" community in California for which we paid $315,000 four years ago. We are told now that it, along with all the other houses in the area, would sell for about 20% less than what we paid. Would a reverse mortgage work for us? We are 71 and 64 respectively.


Answer: You have not provided me with nearly enough information with which I need to give you a proper answer. So I took the liberty of running your question by Cyndi Stephenson, who manages the reverse mortgage division at HomeFirst Mortgage Corp., a mortgage brokerage firm in Alexandria, Va.
Stephenson says that if you and she were sitting down together, one-on-one, she would ask you these questions:

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Do you have any liens on the property at this time?
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How much longer would you plan to stay in this home if you do a reverse mortgage?
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Which one of you is 71?
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What is the ZIP code for the property?
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Is it a single family residence, condominium or a townhouse?
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What are your priorities, both long- and short-term?
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Do you plan to leave something to your heirs? To charity?

The reverse mortgage specialist also would ask a question she says keeps her awake at night and that is: Do you have long-term-care insurance?
"I do not worry at all about those who plan to live in the home until they pass away, that is exactly what this product is designed to support," she explains. "What I worry about are those who take out a reverse mortgage, live in their home for maybe three years, then have a stroke or suffer some other disabling illness or injury and need to get moved immediately into an assisted living facility. Especially if they are single."
In those instances -- actually, if you are out of the house for more than 12 consecutive months -- the property will need to be sold to repay the mortgage. And that leads to more questions, says Stephenson: "What funds will you have available to get you into the facility? Who will take care of the sale of the home? Do you have long-term-care insurance or a plan to move into a Medicare/Medicaid facility should something happen to you?"
By the way, Stephenson says she studied reverse mortgages up and down, backwards and forward (no pun intended), "for a very long time" before she entered the field. But she never really "got it" until she ran her own reverse mortgage scenario. And she invites readers to see how a reverse mortgage can work out at HomeFirst's Web site, www.homefirstmortage.com/reverse. Just click on "Scenario for a Reverse Mortgage." Check out the site.
"When properly applied a reverse mortgage can serve to preserve, protect and, quite possibly, enhance a senior's estate," she says. "Although reverse mortgages are not the right answer for all senior homeowners, they are a promising financial tool that all senior homeowners should look into, just as they would any other financial tool available to them."
Q: Do you have any information on who to contact in Southern California for more information about reverse mortgages? Where can I learn more information about this program?
A: I cannot recommend a particular lender. But the National Reverse Mortgage Lenders Association maintains an excellent Web site (www.reversemortgage.org) that not only explains everything you need to know about reverse mortgages but also allows consumers to find lenders who offer these loans in their particular state. Visit the reverse mortgage site.
The AARP also has a information on the product (www.aarp.org/revmort). And so does Uncle Sam. Try both the Federal Housing Administration, which insures lenders who make these loans against loss (www.hud.gov/offices/hsg/shf/hecm/remtopten.cfc) , and the Federal Trade Commission (www.ftc.gov/bcp/edu/pubs/consumer/homes/real3/shtm).

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