Harbor Mortgage Solutions Outlines How Reverse Mortgages Are Changing Public Policy.

The good news is we are living longer. The bad news is that many of us could outlive our savings.

Americans 65 and older now total about 34 million. This number is expected to double in the next 20 years to 70 million by the year 2030 as the baby-boom generation enters retirement. George A. Downey, an expert on reverse mortgages who is the founder of Harbor Mortgage Solutions in Braintree, MA, and is also a senior, outlines the shift in public policy that is starting to focus on reverse mortgages as a source of funding to address the long term needs of this burgeoning segment of the US population.

According to Downey, the problem is twofold: “(1) the burden on the federal and state governments to continue funding currently promised Social Security and Medicaid benefits is simply not feasible, and (2) retirement savings levels for aging Americans are too low.” The Center for Retirement Research at Boston College made headlines recently when it announced that 43% of working households were in danger of having too little income to fund their retirement needs.

Federal Medicaid grants to states, which primarily pay for the long-term care needs of senior recipients, have skyrocketed and are now the fifth largest federal budget item—weighing in only after Social Security, defense, federal debt, and Medicare. The nation spent $123 billion on long-term care needs for seniors 65 and older in 2000. Individuals paid for approximately 50% of this sum and private insurance paid for an additional 3%. Government health programs funded the remaining 47% balance ($58 billion)—a figure that is predicted to double in the next twenty years.

Growing numbers of legislators and government officials are exploring the development of incentives to homeowners to use reverse mortgages to pay for long-term care and other retirement needs, including the states of Minnesota and Washington. Congress has demonstrated considerable interest and support for the continued development of reverse mortgages. On July 25, 2006 the House passed (415-7) the Expanding American Homeownership Act (H.R. 5121) that made substantial improvements to the FHA Home Equity Conversion Mortgage (HECM), the nation’s most popular reverse mortgage program. A Senate version, S.3535, is also under consideration.

Home Equity as a Resource
On the plus side, almost 80% (27 million) of today’s seniors own their own homes, and this number will continue to rise in the future. Additionally, seniors have the highest median home equity, averaging $80,000 versus $57,000 for all homeowners across the country. On the other hand, seniors have the lowest median income, averaging $23,311 annually versus $43,481 for all homeowners. This illustrates that conversion of home equity into income could significantly increase the low incomes of senior homeowners.

This is what reverse mortgages are designed to do. Briefly, a reverse mortgage is a unique home equity loan that enables senior homeowners (must be 62 or older) to convert part of their equity into tax-free cash or income without having to sell the home, give up their title ownership, or take on any new monthly payments to a lender. Moreover, the loan has no stated maturity date, and is due only after the last senior owner no longer resides in the home. And, the loan payoff can never exceed the home’s value.

One significant challenge remains – too few people, including seniors, their family members, professionals, government officials and others really understand reverse mortgages. Misconceptions and misunderstandings are still the rule, however, that is beginning to change as awareness and education increases. The total number of reverse mortgage transactions in the year 2000 was slightly over 6,000. As of May 2006, that number had increased to over 7,000 per month.

Clearly, the financial problems of aging Americans are serious. Unquestionably, home equity remains the most significant asset for most senior households and reverse mortgages may provide solutions for both individuals and overburdened government programs.

Harbor Mortgage Speakers Bureau
Area Councils on Aging, Visiting Nurse Associations, home healthcare providers, civic organizations, and church groups are invited to contact Harbor Mortgage to schedule an educational presentation to learn about alternatives available to senior homeowners, including ways to unlock the equity in their homes.

The Reverse of Traditional Thinking
A reverse mortgage, essentially the opposite of a traditional or “forward” mortgage, can enable seniors to tap into accumulated equity without having to face ongoing payments. Unlike traditional mortgages where borrowers make monthly payments, in a reverse mortgage the cash flow is reversed, and the lender makes payments to the borrower, enabling borrowers to use the tax free cash they receive in any way that they wish.

There are no minimum income, asset, or credit qualifications to meet and no effect on Social Security or Medicare benefits. The property must be the primary residence of the borrower and properly insured and maintained, with real estate taxes kept current. As long as the borrower continues to live in the property the loan can never be called. Repayment is required if the home is sold, or when the last borrower permanently leaves the property, or passes away. At that time, the heirs can sell, or refinance, the property to pay off the loan.

Once the province of a few small banks and private lenders, the great majority of reverse mortgages today are provided through government-sponsored programs, namely the HUD/FHA Home Equity Conversion Mortgage (HECM) and the Fannie Mae Home Keeper (HK) programs.

Customized Harbor Mortgage Solutions
Specializing in conventional residential and reverse mortgages, Harbor Mortgage Solutions, Inc. is located at 100 Grandview Road, Suite 105 in Braintree, MA. George A. Downey, who is now joined by his son Christopher Downey, founded family owned and operated Harbor Mortgage Solutions in 1978.

Assisted by a staff of experienced mortgage professionals, Harbor Mortgage Solutions is dedicated to providing customized service, obtaining the best possible solution for each individual client every time. An equal opportunity lender licensed in Massachusetts (license #MC0041) and Rhode Island (license #20041821LB), Harbor Mortgage Solutions is a member of the Massachusetts Mortgage Association, the National Association of Mortgage Brokers, and the National Reverse Mortgage Lenders Association, strictly subscribing to their rigid code of ethics. Harbor Mortgage Solutions is also an Educational Subscriber of the Massachusetts Chapter of the National Association of Elder Law Attorneys.

For additional information on services offered by Harbor Mortgage Solutions please call 781-843-5553 or 800-599-8700, or visit www.HarborMortgage.com.