Joffrey Long: Reverse Mortgage Benefits to Be Reduced


Favorite Program to End Soon

GRANADA HILLS, Calif., Sept. 17 /PRNewswire/ — A favorite reverse mortgage program — one that gave borrowers the most in cash, monthly income, or credit line benefits, is soon to end.

The “HECM 100,” has been phased out by most FHA insured reverse mortgage lenders, and will be completely phased out by the end of July.

What is the HECM 100 and how will its demise affect borrowers? The interest rates on FHA insured reverse mortgages are determined by adding a certain percentage to the yield on one year treasury obligations. The HECM 100 provided for adding only 1% to the one year treasury. With the one year treasury at less than 5%, this meant that even after adding the one percent, HECM 100’s closed at an interest rate of less than 6%. After the disappearance of the HECM 100, the lowest HECM rate will be from the HECM 150, which is the same in every aspect, except 1.5% is added to the rate on the one year treasury security, rather than 1%. This extra half percent not only causes the borrower to owe more interest over time, more importantly, it means that the borrower is eligible for less money from the reverse mortgage.

The amount a senior citizen gets from a reverse mortgage is determined by their age, but also by the interest rate in effect at the time they obtain or close the reveres mortgage. How much does it affect the borrower? Look at this calculation;

Under the HECM 100, a 72 year old borrower in Los Angeles County, with a $450,000 house, could obtain $236,470 .

Under the HECM 150, the same 72 year old borrower, with a $450,000 house in Los Angeles County would obtain 220,050, — a $16,420 difference.

What can borrowers do? If they feel that a reverse mortgage would help them, apply immediately. And make sure they lock in their loan and provide all conditions to the lender immediately to make sure their loan closes. The HECM 100 will be history shortly, so this is the time to take immediate action, in order to obtain additional loan proceeds and to preserve the lower interest rate.

[ writer bio ] Joffrey Long is a 30 year veteran of the mortgage industry and the President of Southwestern Mortgage, in Granada Hills, (Los Angeles Area ) CA. He is the author of “Making Money with Reverse Mortgages” and the instructor of several training courses for loan officers. He’s the 2007-2008 President of the California Mortgage Association. Southwestern Mortgage provides reverse mortgages throughout California and in Clark County ( Las Vegas ) Nevada. He can be reached at (818)366-5200.

SOURCE Southwestern Mortgage

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