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Barb stucki aging-inplace_ncrc2011conference


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Barb stucki aging-inplace_ncrc2011conference

  1. 2. Aging in Place & Avoiding Predatory Lending – A Survival Guide for Counseling & Ensuring Financial Security for Older Americans
  2. 3. Using Reverse Mortgages for Aging in Place – Key Issues and Risks Barbara Stucki Vice President, Home Equity Initiatives National Council on Aging
  3. 4. National Council on Aging <ul><ul><li>NCOA is a national voice for older adults—especially those who are vulnerable and disadvantaged—and the community organizations that serve them. </li></ul></ul><ul><ul><li>We are one of five HUD-approved HECM Counseling Intermediaries. </li></ul></ul><ul><ul><ul><li>Offer RM counseling by phone nationwide and in-person. </li></ul></ul></ul><ul><ul><ul><li>RMCS Network of social service agencies in 19 states. </li></ul></ul></ul><ul><ul><li>NCOA is committed to helping older homeowners make wise decisions about using home equity. </li></ul></ul><ul><ul><ul><li>We conduct policy research to enhance consumer protections and improve the marketplace. </li></ul></ul></ul>
  4. 5. Reverse Mortgage Basics <ul><li>Most RMs are FHA-insured HECM loans (98%). </li></ul><ul><li>The size of the loan depends on: </li></ul><ul><ul><li>Age of the youngest borrower. </li></ul></ul><ul><ul><li>Value of the home and the amount of built-up equity. </li></ul></ul><ul><ul><li>Interest rates at the time of origination. </li></ul></ul><ul><li>Types of HECM loans. </li></ul><ul><ul><li>HECM Traditional and HECM Saver. </li></ul></ul><ul><ul><li>Adjustable and fixed-rate loans. </li></ul></ul><ul><ul><li>HECM for home purchase. </li></ul></ul><ul><li>Payment options -lump sum, line of credit, monthly payments (up to life in the home), or a combination </li></ul><ul><li>Loan can impact eligibility for Medicaid and SSI. </li></ul>
  5. 6. Consumer Protections <ul><li>Borrowers can live in the home as long as they want without making any monthly payments. </li></ul><ul><li>Never owe more than the value of the house if sold at the time the loan comes due. </li></ul><ul><ul><li>Heirs (including non-borrower spouses) who want to keep the house pay the full loan amount. </li></ul></ul><ul><li>No foreclosure risk if borrowers continue to pay property taxes, insurance, and maintain the home. </li></ul><ul><li>Limits on the interest rate and origination fee. </li></ul><ul><li>Mandatory counseling before can apply for loan. </li></ul>
  6. 7. Housing Bubble Fueled Financial Optimism
  7. 8. Dynamic Market as Borrower Age Declines Age Group Percent Sources; Rodda et al. (2000); Reverse Market Insights Inc. (2011)
  8. 9. Withdrawing Large Sums Depletes Equity, Increases Foreclosure Risk
  9. 10. Factors Affecting Suitability <ul><li>Duration of stay in home – Long versus short? </li></ul><ul><ul><li>Short stay – Loan type, upfront loan costs. </li></ul></ul><ul><ul><li>Moderate stay – Transition out of home, remaining equity. </li></ul></ul><ul><ul><li>Long stay – Sustainability, interest rates. </li></ul></ul><ul><li>Funds needed – Small versus substantial? </li></ul><ul><ul><li>How long may funds last? Can they meet their goals? </li></ul></ul><ul><ul><li>Impact of upfront lump sums on remaining equity. </li></ul></ul><ul><li>Ability to stay home – Likely versus unlikely? </li></ul><ul><ul><li>Recent health changes, isolation, home environment. </li></ul></ul><ul><ul><li>Availability and cost of additional help. </li></ul></ul><ul><li>Dependence on loan – High or low? </li></ul><ul><ul><li>Payment options – Monthly payments versus credit line? </li></ul></ul><ul><ul><li>Other supports – Family, community, public programs. </li></ul></ul>
  10. 11. Reverse Mortgage Counseling <ul><li>Conducted by 800+ independent counselors from HUD-approved agencies. </li></ul><ul><ul><li>Counselors must pass the HUD exam and register on the HECM Roster. </li></ul></ul><ul><ul><li>Regular training required to maintain status. </li></ul></ul><ul><li>The HECM counseling session will cover: </li></ul><ul><ul><li>Client goals for using a reverse mortgage. </li></ul></ul><ul><ul><li>Life factors that could affect their ability to continue to live at home and benefit from a reverse mortgage. </li></ul></ul><ul><ul><li>An overview of reverse mortgages and their features. </li></ul></ul><ul><ul><li>The amount of money that may be available from a reverse mortgage, and how much this loan could cost. </li></ul></ul><ul><ul><li>Other housing, services, and financial options that could help them meet their goals. </li></ul></ul>
  11. 12. Improvements in HECM Counseling
  12. 13. <ul><li>BenefitsCheckUp is a web-based tool that screens seniors for over 2,000 State, Federal, and private benefits </li></ul><ul><li>Includes over 50,000 offices nationwide where those eligible for benefits can apply </li></ul>Finding Meaningful Options
  13. 14. Reverse Mortgage Default Counseling <ul><li>New HUD guidelines on HECM foreclosure for servicers and borrowers - January 2011 . </li></ul><ul><ul><li>Estimate up to 30,000 borrowers in default (5%). </li></ul></ul><ul><ul><li>Delinquent in paying property taxes and/or insurance. </li></ul></ul><ul><li>Free counseling by 125 HUD-approved counselors. </li></ul><ul><ul><li>Not mandatory. Funded by HUD grants this year. </li></ul></ul><ul><ul><li>Counselors do a budget analysis, work out a repayment plan, help clients access benefits, discuss options. </li></ul></ul><ul><ul><li>Coordination with Aging Network - AoA, N4A, NASUAD. </li></ul></ul><ul><li>NCOA “Soft Landing” Pilot Project </li></ul><ul><ul><li>Partnership with NRMLA and loan servicers. </li></ul></ul><ul><ul><li>Up to 50 high-risk borrowers get intensive help from case managers in four agencies (MI, TX, FL, CA). </li></ul></ul>
  14. 15. Evolving Consumer Risks and Effective Responses <ul><li>Must help homeowners deal with new retirement financing realities that may include home equity. </li></ul><ul><ul><li>Boomers are becoming eligible for reverse mortgages. </li></ul></ul><ul><ul><li>Consumer protections for young and old borrowers. </li></ul></ul><ul><li>Encourage pre-lender counseling. </li></ul><ul><ul><li>Inform homeowners about loan options and other strategies before they talk to a lender. </li></ul></ul><ul><ul><li>Promote collaborative efforts to find real solutions. </li></ul></ul><ul><li>Younger borrowers need an exit strategy. </li></ul><ul><ul><li>Must consider life issues and transitions (spouse). </li></ul></ul><ul><ul><li>Analyze new data on consumer behavior and risks. </li></ul></ul>
  15. 16. <ul><li>Barbara R. Stucki, Ph.D. </li></ul><ul><li>Vice President, Home Equity Initiatives </li></ul><ul><li>National Council on Aging </li></ul><ul><li>[email_address] </li></ul><ul><li>541-322-5610 </li></ul>