*** April 2010 ***
* E-zine *

This Month's Highlights:
· Getting Cash from Your House
· Thoughts, Feelings, and Health
· Disability Resources Site

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getting money from your homeA bonus for homeowners, reverse mortgages allow you to draw money from your home. This FHA guaranteed program enables older homeowners (62+) to "borrow back" a portion of the equity in their home and convert it into cash while remaining in your home for as long as you want. You remain on title and do NOT have to make any loan payments for as long as you continue to live in the home and it remains your primary residence. When the last borrower sells, moves out or passes away, the loan becomes due. This program enables many senior homeowners to age in place.

Loan Features

  • Everyone on title must be at least 62 years of age.
  • There are NO income requirements.
  • There are NO credit requirements.
  • There are NO monthly payments.
  • The funds may be used for ANY purpose and are tax-free.
  • You do NOT have to own your home free and clear to be eligible, but loan proceeds must be sufficient to pay off any existing mortgages.
  • The property may be left to heirs, and trusts are permitted.
  • As a non-recourse loan, you or your heirs can never owe more than the property is worth regardless of the loan balance amount.

A reverse mortgage offers advantages over conventional loans because they address the fact that so many older people are retired and/or live on fixed incomes and often can't meet normal lending guidelines. The funds are tax-free and can be used for any purpose. Many seniors have chosen to secure in-home health care plans and/or life insurance policies, help family members now, meet increased living expenses without selling investments, make home repairs, and help with estate tax planning to avoid higher liabilities associated with inheritances.

Proceeds from a reverse mortgage do not affect Medicare or SSI benefits in any way. They can impact Medicaid benefits in certain situations, so it is a good idea to consult with an elder-law attorney. Reverse mortgage borrowers continue to own the home, and are responsible for paying property taxes, insurance, and home maintenance.

How Much Money Can You Get From a Reverse?
Each borrower presents a different case, and the calculation is based on the client's age (remember, everyone on title must be 62+), home value, location, and interest rate. The FHA lending limit is $625,000. Keep in mind that the reverse mortgage is designed to give you only a portion of your equity. The older you are, the higher that percentage is. Again the proceeds must be sufficient to cover any existing mortgage balance. The borrower receives the difference once the existing balance is subtracted from the loan amount.

Loan Product Options
Currently there is only one FHA HECM (Home Equity Conversion Mortgage). It is the traditional FHA insured reverse mortgage. There is also a new HECM for Purchase product that allows you to take out a reverse mortgage on a new home. It works the same way as a regular reverse mortgage, but it is for a new property and can often give the borrower more than half of the purchase price. The borrower must bring the difference to the transaction and the money may come from any assets as long as it doesn't involve credit of any kind. This is ideal for those who are thinking of relocating within the next few years, perhaps to downsize or move closer to family.

Both products feature an adjustable interest rate (ARM) or fixed rate option, and that rate is based on the LIBOR, or London Interbank Offered Rate, plus a margin charged by the lender. Keep in mind that a higher initial interest rate lowers the amount of money you will receive.

The Adjustable Rate (ARM) HECM allows you to access the money in one of three ways: you can take it all; receive it in the form of monthly payments; or you can leave it in a credit line account.

The credit line option gives you the most flexibility. You can withdraw the money in any amounts, whenever you wish. The money that remains in the credit line does not incur ANY interest. You are only charged interest on the money you withdraw from the credit line.

  • The Fixed Rate HECM offers the security of a set rate, BUT: Even though the fixed rate is higher than an initial ARM, it offers more money because the rate is already capped and won't move.
  • The borrower MUST take out all the money at closing. There is no credit line option. It is ideal for borrowers who have an immediate need for a substantial percentage of the proceeds, whether it is to pay off the previous mortgage, or make repairs, and so forth.

Reverse Mortgage Costs
A lot of controversy surrounds the reported costs of a reverse mortgage. Many of the costs borrowers pay are similar to those of a conventional mortgage, such as appraisal fees and third-party closing costs. Generally, these are minor. Closing costs for reverse mortgages, however, include an origination fee and a mortgage insurance premium. These costs are regulated and determined by HUD. The origination fee is paid to the originator of the loan to pay for processing, administrative overhead, underwriting review, and so forth. The mortgage insurance premium (MIP) insures that the borrower is protected from paying more than the home is worth if the loan balance exceeds that amount. Both origination fee and mortgage insurance premium are based on the maximum loan amount for that transaction. Typically, total costs amount to 5-8% of the loan amount and compare reasonably with a home sale that carries a 5% agent commission plus third-party costs. These costs are factored into the loan itself so the borrower does not have to pay for them upfront.

There are a number of financial institutions that provide financing including banks, such as Bank of America, and lending institutions, such as Financial Freedom. While the products do not vary from place to place, the calculations can result in differences in the actual loan amounts due to different margins and rates. The banks offer only their own version of the traditional HECM and most do not have the HECM for Purchase product. This is also true of other lending institutions. The other option is to work with an independent reverse mortgage broker. Much like independent insurance brokers, these loan officers do not work for a specific lender but are wholesale correspondents for many of them, and consequently they have an array of products to choose from. The AARP and other senior service organizations are now encouraging those interested to do some comparison shopping, and independent brokers are an ideal means to do so.

The Process
The first step is to contact an FHA-approved reverse mortgage professional to determine your eligibility, and to give you an understanding of how the loan works. They will also do the calculations that show how the loan will work in your case. There is NEVER a charge for this type of consultation.

keyThe next step is to set up a phone call with an FHA-approved reverse mortgage counselor. The FHA requires that counseling be completed before an applicant can proceed. Counselors are trained and not affiliated with any lender. The phone calls usually take less than an hour and establish the applicant’s understanding of the loan. There is a $125 fee that must be paid by the borrower. Recently, the FHA funded the program, so that fee is waived. You will receive a certificate of counseling in the mail, and it will become part of the application.

The application process is fairly routine. The loan officer meets with the client to explain each document and secure the appropriate signatures. Within 72 hours of signing the application, the client will receive a Good Faith Estimate, which lists all the costs associated with the loan item by item. These figures are not allowed to increase except for a few very specific reasons.

The property must then be scheduled for appraisal, and in some areas for a pest inspection. The entire process can vary in terms of completion time, depending on the lender's turnaround time and unusual conditions that can arise, but it usually averages four to six weeks. The applicant can change his or her mind at any point in the process, including a 72-hour rescission period after the loan is closed.

Closing costs may give cause for concern. While they are comparable to the costs associated with a home sale, they are not inexpensive. Because of that, a reverse mortgage is generally not cost-effective if the borrower plans on moving in the first four years.

A reputable reverse mortgage professional should consult with the borrower to determine his or her goals and priorities. The FHA now prohibits reverse mortgage originators from selling their clients other financial products such as annuities and insurance policies. They have increased oversight and the penalties for violations by loan originators. Borrowers must perform due diligence before using the proceeds for investment purchases and should consult with a certified financial advisor.

Because reverses are a negatively amortized loan (the principal balance grows) there is the concern that the balance due can eventually wipe out remaining equity. Generally, the home's appreciation rate doesn't lag so far behind the interest being paid as to immediately start decreasing that equity which is left. Usually, the retained equity actually increases for the first 10-15 years or so of the loan, and then starts rolling back down. Most often, there is money left to leave to heirs, but be sure to check the amortization table to get a better idea. Heirs have 30 days after the death of the owner to decide if they want to sell the property or refinance it. With extensions, they may have up to a year to complete the transaction.

If the appraisal cites certain problem areas on the property that require repair, the reverse mortgage can still go through before they are corrected. The lender will require a repair estimate and will put that money aside (plus 50%) to hold in escrow until the repairs are completed. A lender may require that some structural repairs be remedied before the loan can be closed, but this is extreme.

A borrower may own a second home in addition to the primary residence and reside there for part of the year, just so long as the borrower doesn't rent the home upon which the reverse was taken. You ARE permitted, however, to rent out rooms (up to 50%) If you are the sole borrower and suffer a medical emergency that requires staying in a care facility of some kind for more than a year, the lender can call the loan due.

Reverse mortgages have undergone extensive change over the last two years, partly as a result of the economic realities facing the financial sector and an aggressive posture taken by the HUD/FHA to protect senior consumers and make these loans more secure and attractive. The Reverse for Purchase is one such innovation. These agencies are also tightening the licensing procedures for those originating mortgages, and they are issuing stricter guidelines for those underwriting such loans. Their goal is to minimize malfeasance and error through increased regulation and oversight. It is advisable to make sure your broker has the most recent information. You can always check sites such as AARP's to monitor changes.

*Provided courtesy of John Brodey, Sequoia Pacific M. C., Santa Rosa, CA.

Looking for other options? Click here:

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Thomas V. Mariano, Ph.D., edited by Betsy Day

Problem: People often acknowledge the need to change lifestyle habits to decrease the risk of heart disease or other physical ailments. Rarely, though, do we actually do anything to promote healthy emotional reactions. We often ignore stress management or coping skills, or do not take them seriously.

Heart disease, stroke, cancer, and accidents account for two-thirds of all deaths in the United States. Heart disease and stroke alone kill more people in this country than all other diseases combined.

A concerted effort has been made to educate the public about the risk factors or likelihood of contracting a given illness. This is particularly true in the case of heart disease. (Unfortunately, much of that education takes place during TV commercials for heart-disease drugs, and very expensive ones, at that. Not an ideal place to get our education.) We are now being asked to reduce their risk factors by controlling other diseases, such as high blood pressure and diabetes; by not smoking; eating foods low in saturated fats and cholesterol; losing weight; and managing our diabetes. Rarely, though are we asked to do anything to protect the heart's condition through proper emotional reactions. Stress management and coping skills are often ignored or not taken seriously.

Here's an interesting "for instance": Dr. James Muller found that more heart attacks in the U.S. occur between 8:00 and 9:00 a.m. on Mondays than at any other times. He said that this is significant not only because Monday morning is the beginning of the work week, but because it triggers a person's attitudes and feelings about his or her job. A 1973 study in Massachusetts shows job dissatisfaction to be the best predictor for having a heart attack.

A Solution: Drs. Cooper and Aggen experimented with a relaxation technique to effectively reduce cholesterol. It consists of sitting quietly for 15 minutes twice a day, allowing the mind to be passive and inactive. After several weeks, while weight and diet remained constant, and while exercising, cholesterol fell by about one-third.

Dr. Dean Ornish, one of our favorite cardiologists, reported that it is possible to reverse "permanent" heart damage, cholesterol scarring, and deposits in the coronary arteries with a mind-body oriented approach, consisting of participating in group therapy and engaging in group interaction, while modifying diet and exercising.

These doctors are not saying we should discard the tremendous advances in medicine. They are simply advocating a complementary approach to medicine, a mind-body approach.

Within the last 15 years there has been an accumulation of research and clinical studies which provide data to support the position that emotions and our way of viewing a stressful situation play a crucial role in preventing an illness, promoting and maintaining health, and helping in the treatment and rehabilitation of illness.

How Do You Know it’s Time to Talk to Someone About Your Problems:
No one is immune to the effects of the things that affect our behavior, peace of mind, self-esteem, and other facets of emotional and mental well-being. Many of us, at some point in our lives, have experiences that require professional counseling. This treatment may, and probably should, include stress-reduction techniques that will keep us physically healthier and therefore make it easier to deal with emotional situations without becoming ill or "falling to pieces."

However, seeking help may be difficult for some of us. We may be hesitant to talk about problems with a professional because we may be embarrassed to admit we cannot cope on our own. But talking with a professional may not only help ease the effects of our particular situation, but also teach us effective coping skills for the future.

So how do we know when to seek help? We all manifest stress in different ways. Warning signals are different for each person. Some persons under stress may withdraw from others; some of us may have crying spells, or headaches.

Treatment is indicated when symptoms such as poor concentration, irritability, loss of or increase in appetite, inability to sleep, increased use of drugs or alcohol, sadness, fatigue, or recurrent thoughts of death interfere with our daily activities.

Early treatment can prevent prolonged emotional suffering (which is just as real as physical suffering) and feelings of despair. Facing problems can help us learn about ourselves and help us make life more meaningful.

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1. Is Hospice for You?
Hospice, a well-established approach to palliative care, has enabled countless people worldwide to die with dignity. Through focusing on the patient rather than the disease, individuals can spend the last weeks of their lives in an environment where hospice caregivers minimize their pain, maximize their comfort, and provide bereavement services for loved ones and family members. A study by researchers at Harvard Medical School assessed 1,517 patients with metastatic lung cancer. They found that only about half the patients diagnosed with metastatic lung cancer discuss hospice with their physician within four to seven months of their diagnosis. Blacks and Hispanics were significantly less likely to discuss hospice with their physician than whites and Asians. Findings were published in the May 25, 2009 Archives of Internal Medicine. In order for patients to receive the treatment and care they desire, it is important to have an in-depth discussion of options for end-of-life care with medical professionals.

Find more Hospice - related books at

2. Retiree Activities Offices for Armed Services Personnel
On-base Retiree Activities Offices are staffed by dedicated volunteers from all services, including surviving spouses and annuitants. Their charter is to coordinate, establish and staff an office on an active-duty, reserve or guard base through command channels that will assist retirees with myriad actions. These actions include: serving as an information center for space-available travel, Tricare, base services, etc; offering referrals for financial-assistance and pay matters; counseling active-duty members nearing retirement; and providing literature on retirement issues. Another major activity involves working with base agencies to set up Retiree Activity Day events, offering flu shots by base medical personnel, briefings by different base agencies on respective services, tax preparation and advice, staff judge advocate assistance, and base tours. Volunteers are always needed, and most base newsletters contain application forms.

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We present here some words from those with a birthday this month.

Jackie Chan - "Do not let circumstances control you. You change your circumstances."

Russell Crowe - "Perhaps it is good to have a beautiful mind, but an even greater gift is to discover a beautiful heart."

Sonja Henie - "Jewelry takes people's minds off your wrinkles."

Claire Danes - "Money is only irrelevant if you have it,"

Kofi Annan -"If one is going to err, one should err on the side of liberty and freedom."

More "Thoughts" at:

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1. Life Expectancy (thanks to BK, Del Mar, CA)
How about a site for a little diversion with an interesting subject. Give the "Life Expectancy Calculator" a go. It may be found at The site helps you calculate your "Virtual Age." Your Virtual Age is a reflection of your health and vitality. The lower your Virtual Age, the better shape you are in, and the longer your life expectancy. Make sure your responses are truthful. (By the website authors: "We hope you live a long and fruitful life but we make no promises about the accuracy of the calculation.")

2. Disability Resources is an award-winning federal web site that contains disability-related resources on programs, services, laws and regulations to help people with disabilities lead full, independent lives. With just a few clicks, visitors can find critical information on a variety of topics, including benefits, civil rights, community life, education, emergency preparedness, employment, housing, health, technology, and transportation.

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1. Focused Education for Seniors

Marketing 101
How to Ask Questions During Commercials and Be Quiet During the Program.

Phys Ed 102
Can a Bath be Taken Without 14 Different Kinds of Soaps and Shampoos?

Social Science 101
I Was Wrong and He Was Right!--Real Life Testimonials.

2. Getting in Shape

Betty felt like her body had gotten totally out of shape, so she got her doctor's permission to join a fitness club and start exercising. She decided to take an aerobics class for seniors. After her first session, her friend Alice asked how it went. Betty said, "I bent, twisted, gyrated, jumped up and down, and perspired for an hour. But by the time I got my leotard on, the class was over."

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This issue has been edited by Betsy Day ([email protected]).

Copyright 2010, ALL RIGHTS RESERVED. Information in this document is subject to change without notice. Other products, service and companies named herein are trademarks or registered trademarks of their respective companies or mark holders and are solely responsible for the content of their articles. Articles are included for informational purposes and are not an endorsement.

This Copyright E-zine may be forwarded to others only if sent in its entirety. Other uses are subject to written permission of the publisher.

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