U.S. Government Program since 1987

In the mid 1980’s it was apparent that many senior citizens had not prepared adequately for retirement or had been adversely affected financially by circumstances beyond their control. Many found themselves in positions of being equity rich and cash poor and had a great degree of difficulty in making ends meet. Credit card debt and even equity lines of credit were used just to fund their month to month budgets. Ultimately, many used their life savings and had to sell their homes living on the remaining equity payout which was eventually exhausted. Ultimately, seniors then began to look for Government Assistance programs.

The U.S. Congress in conjunction with the American Association for Retired People (AARP), created a program that would serve seniors who found themselves equity rich and cash poor and in need of help. The product was originally named Reverse Annuity Mortgage (RAM) and pushed through the U.S. Congress in 1987. Later the product became known as a Home Equity Conversion Mortgage (HECM) and is commonly referred to today as a Reverse Mortgage. The Federal Housing Administration (FHA) governmentally insures the program and the Department for Housing and Urban Administration administers the program.

FHA Insured

The FHA requires that all those who enter the program purchase FHA insurance from the FHA. The insurance cannot be purchased from any other agency, but the FHA, and is not sold through an insurance broker nor does anyone receive a commission on the policy. The insurance is in place to protect senior citizens in two ways:

First, the federal government wants the program to continue to pay senior homeowners for the rest of their lives. As a result, the FHA guarantees payment to senior homeowners continuing to pay the last surviving homeowner no matter how long they live. Even if all of the equity was pulled out of the home and there was no more equity left the program continues to pay the last surviving homeowner.

Secondly, the FHA insures the program, but does not supply the actual funds. Several banks are approved to fund Reverse Mortgages and all banks approved must meet rigorous standards. The banks fund the reverse mortgage and sends out monthly payments to those senior homeowners who select a lifetime income option. Although unlikely, should the bank default on payment to the senior homeowners for any reason, then the FHA, through the insurance program, steps into the place of the bank and funds the Reverse Mortgage so the homeowners cannot be left without the lifetime income that they were promised. All of the program participants are completely protected for life!

Tax Free Income

Since the money paid into the home, whether a down payment or monthly payments, was paid with after tax income the funds provided from the Reverse Mortgage are never taxable. No one will ever be required to pay taxes on any money received. All money received goes directly to the senior homeowners and none to the Federal, State or Local government agencies.

Money for Any Reason

The money can be used for any reason no questions asked. Use it for living expenses, paying debts, buying a new car, a new motor home, remodeling, medical care, assisted care living, prescription drugs --- ANYTHING WITH NO QUESTIONS ASKED!

No Income is Required and Poor Credit is OK!

There is no income required so the program is perfect for those who are retired. If there is an income, whether in the form of social security, pension, or employment income, the income received from the Reverse Mortgage will not be impacted. This is true for almost all income except for some government assistance programs. New Horizons’ Reverse Mortgage Advisor will be able to discuss those programs that might be impacted, if any.

Since the Reverse Mortgage income is secured by the home, poor credit is ok. There will be a credit check, but the credit check is not to check the credit score, but to verify that the property taxes and homeowner’s insurance are paid and current. No matter how bad the credit score is it does not impact qualifying for a Reverse Mortgage.

No Monthly Payments

A Reverse Mortgage is not like refinancing. It’s not a home equity loan. Only when the last surviving homeowner dies, sells, or fails to occupy the home as the primary residence does the Reverse Mortgage need to be repaid. The money to repay the Reverse Mortgage can come from the proceeds of the sale, or the home may be refinanced to pay the Reverse Mortgage.

Retain the Title to the Home

The title to the home remains in the homeowner’s name. The home is inheritable to the homeowner’s estate as long as:

• The title to the home is not transferred
• The home remains the primary residence,
• The home is not rented
• The home is not vacated for 12 consecutive months
• The property tax and hazard insurance is paid and current and the home is kept in good repair.

Money in a Matter of Weeks

Qualifying for a Reverse Mortgage is easy and once the criteria are met the process usually is 4 to 8 weeks depending on circumstances.