Best Places To Retire

Kiplinger’s has published a retiree map that might be helpful for you if you’re nearing retirement. It gives you a visual representation of states with favorable tax (or unfavorable) tax situations for retirees. It will show you:

7 states with no income tax
4 states with no sales tax
5 states with the lowest overall sales tax (including averages for county/city sales taxes)
5 states with the lowest median real-estate taxes
Most pension-friendly states
The states that don’t tax social security benefits
Not a bad map to check out if you’re nearing retirement and looking to make a move.

Source: My Retirment Blog

Top Ten Things to Know if You’re Interested in a Reverse Mortgage

Reverse mortgages are becoming popular in America. HUD’s Federal Housing Administration (FHA) created one of the first. The Home Equity Conversion Mortgage (HECM) is FHA’s reverse mortgage program which enables you to withdraw some of the equity in your home. The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements and more. You can receive free information about reverse mortgages in general by calling AARP toll free at (800) 209-8085. Since your home is probably your largest single investment, it’s smart to know more about reverse mortgages, and decide if one is right for you!

1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. FHA’s HECM provides these benefits. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

2. Can I qualify for FHA’s HECM reverse mortgage?

To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, and you must live in the home. You are further required to receive consumer information from an approved HECM counselor prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on (800) 569-4287 for the name and telephone number of a HUD-approved counseling agency and a list of FHA-approved lenders within your area.

3. Can I apply if I didn’t buy my present house with FHA mortgage insurance?

Yes. It doesn’t matter if you didn’t buy it with an FHA-insured mortgage. Your new FHA HECM will be FHA-insured.

4. What types of homes are eligible?

To be eligible for the FHA HECM, your home must be a single family home or a 1-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

5. What’s the difference between a reverse mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities. With an FHA HECM you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”

6. Can the lender take my home away if I outlive the loan?

No. You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than the value of your home at the time you or your heirs sell the home.

7. Will I still have an estate that I can leave to my heirs?

When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.

8. How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You can use an online calculator like the one on the AARP website to get an idea of what you may be able to borrow.

9. Should I use an estate planning service to find a reverse mortgage?

FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. FHA provides this information free, and HUD-approved housing counseling agencies are available for free or at very low cost, to provide information, counseling, and a free referral to a list of FHA-approved lenders. Search online or call (800) 569-4287 toll-free, for the name and location of a HUD-approved housing counseling agency near you.

10. How do I receive my payments?

You have five options:

Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.

Term – equal monthly payments for a fixed period of months selected.

Line of Credit – unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted.

Modified Tenure – combination of line of credit with monthly payments for as long as you remain in the home.

Modified Term – combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

Source: HUD

Senate Passes Bill….Here Come The Negotiations

Late last week the Senate passed its version of the Department of Transportation Appropriations Act of 2010 (H.R. 3288) by a vote of 73-25. Since the bills each have their differences, both versions to go a conference committee where House and Senate members iron out the differences and return a compromised version to both the House and Senate for final approval.

Each of the bills handled HUD’s $798 million subsidy request for the Home Equity Conversion Mortgage (HECM) differently. We went into more detail on the differences last week, but clearly the most important part of the bill is the principal limits.

Both bills adjust the principal limits for the HECM, but the House bill would do more damage compared to the Senate version which includes $288 million to cover part of HUD’s subsidy request.

Many question why the government would lower the principal limits during a time when seniors are facing so many hardships.

While most in the industry agree that adjusting the limits on HECMs is a step that HUD needs to take, many feel now is not the time. The National Reverse Mortgage Lenders Association has suggested that HUD could reduce the upfront mortgage premium on HECMs and increase the annual premium to deal with shortfall.

keep reading on Reverse Mortgage Daily

On Spending Money: How Do You Buy Stuff?


Is there such a thing as a “frugal spender”? My rambling reflections on frugality, saving and our spending habits.

How Do You “Buy Stuff”?
The story of Sam Walton has always fascinated me. Here was a guy who was worth a huge load of money yet who was reputed to live a simple life. Then there are those folks with these interesting spending and saving profiles:

those who buy things because they’re on sale, hoarding stuff and hoping they’ll have use for them someday, or
those who hardly buy anything but then save up for that big purchase. And when they finally buy something, price isn’t much of a factor.
Then of course, there’s everyone else in between. I do think that spending habits are fascinating to study, as it may reveal something about ourselves at a deeper level, maybe even revealing something about our level of happiness.

Thoughts On Saving and Spending Habits
A long while back, I talked about how I balance my efforts to spend and save money. I’d written a post that covered the science behind money behaviors, discussing how frugality is tied to happiness. The key finding was that spendthrifts (those who can’t stop spending) and tightwads (those who can’t spend at all) weren’t as happy as those who were deemed frugal.

Why so? The experts say it’s because frugal people are considered more “balanced” in the way they view money and while cost conscious, they are free from compulsions that may overwhelm those who have more restrictive or even obsessive relationships with money.

I am familiar with a few people who fall in the extreme ends of what I call “the frugality spectrum” and I’ve seen how negative money behaviors and tendencies have harmed someone’s pocket book and personal relationships with other people. Their inherent attitude towards money has made them miserable — because wanting to fight the urge to constantly spend or save can be frustrating in its own right.

Keep reading here on the Digeratilife

Avoid Overdraft Fees With a “Balance Buffer”

As a followup to my recent post on the dark side of debit cards, I wanted to highlight a simple strategy for avoiding those nasty $30+ overdraft fees…

Instead of letting your account balance run down near zero, create a “virtual zero” by depositing what might be referred to as a “balance buffer” of (say) an extra $100 or $500 in your account. The trick here is to treat that number as your new zero balance point.

If you think it might help, you can go so far as to ignore this amount in your checkbook register, Quicken, etc. That way, it will look you’re really approaching zero as you get close to your “virtual zero.”

Now… If you slip up and accidentally dip below “virtual zero,” respond as if you’ve truly overdrafted, and immediately bring your balance back into positive territory.

Admittedly, this is a bit like setting your clock ahead by a few minutes to avoid being late. Such tricks don’t work for everyone, but if they work for you, then run with it.

Source: Five Cent Nickel

The Party’s Over For Wells Fargo Exec


So I told you all last Friday about the Wells Fargo [WFC 29.25 -0.16 (-0.54%) ] Exec hanging out and partying down in a fancy foreclosure.

Today – I heard back from Wells and it sounds like there is in fact some justice left in today’s housing market:

LOS ANGELES, Sept. 14, 2009 – Wells Fargo & Company said today that its internal investigation into alleged team member misconduct at a bank-owned residential property in Malibu, Calif., has concluded and that the employment of the team member involved in the incident has been terminated for violation of the company’s policies.

Wells Fargo took possession of the property, located on Malibu Colony Drive, last May as part of a private agreement with the prior owner. Under the terms of the agreement with the owner, the property was withheld from the market for an agreed-upon period of time.

In a statement, the company said: “Our investigation concluded a single team member was responsible for violating our company policies. As a result, employment of this individual has been terminated. We deeply regret the activities that have taken place as they do not reflect the conduct we expect of our team members. We continue to place the highest value on honesty, trust and integrity to guide our team members in making business decisions each day.”

Wells Fargo & Company is a diversified financial services company with $1.3 trillion in assets, providing banking, insurance, investments, mortgage and consumer finance through more than 10,000 stores and 12,000 ATMs and the internet (wellsfargo.com) across North America and internationally.

Source: CNBC

The Theory of Reversitivity: What Einstein Would Say About The HECM Reverse Mortgage

The Theory of Relativity is a rather pithy statement that among other things, states that two events that appear simultaneously to one observer will not appear to be simultaneous to another observer who is in a state of motion. The focus is in the observing. There are no absolutes.

Einstein’s E=MC2 formula described the above noted relationship. The key is in the observing. However, in reverse mortgage parlance, this formula takes on a different meaning. It means that Evil results when misconceptions and misreporting (by the media, regulators, politicians and senior organizations) are constant and incessant. Although many view media reporting as biased and often one sided, these same people look to the media for viewpoints on unfamiliar topics.

Marty Bell of NRMLA recently wrote a cogent and extremely well reasoned rebuttal to the current (September)issue of Consumer Reports. He debunks the articles’ many misstatements that are presented as indisputable and immutable fact.

Inaccurate reporting is only one of the many challenges this industry faces. There are other challenges as well. I believe that the balance of 2009 will prove to be pivotal for the reverse mortgage industry. It contains the confluence of forces that could result in the denouement of a brilliant concept. Whether the forces of good (the reverse mortgage industry) will triumph apocalyptic ally over the forces of evil (biased media reporting, political demagoguery, poor GSE policy decisions, Congressional indifference toward seniors, poor state legislative initiatives, inappropriate FHA policy decisions) will soon be determined. If an attitudinal change is not in the offing, then I fear that the program could morph into something vastly different.

The number of reverse mortgage originators as grown exponentially, yet there has not been a similar growth in the program. Considering the potential market, the penetration of same has only shown a slight increase. While many older Americans could never imagine the US economy suffering from depression-like symptoms again, the current recession, has been particularly injurious to their pocket-books and wallets. Likewise, the government’s pocketbook, while resembling a bottomless pit, is facing many major challenges as well.

A parallax view of these challenges posits , on the one hand, an overwhelming need for the program while the latter challenge suggests that political hegemony and political expediency will decide the viability of the HECM program.

Recently (9/4/09), a front page article in the Wall Street Journal title Loan Losses Spark Concern Over FHA, discusses the rising losses at FHA. In 2 years, FHA’s market share has increased from 2.7% to 23%. Rising defaults have eaten away at FHA’s cash cushion. In 2007 FHA has had a cash cushion of just over 6%. Last year the percentage was down to 3 percent. The question must be asked. How will the overall FHA picture affect the HECM reverse mortgage program? Then of course , FHA is projecting a loss of close to 800 million dollars for the next fiscal year. The House of Representatives already told FHA to drop dead. The Senate said we’ll help a little. Maintaining a subsidy neutral position means that senior homeowner HECM borrowers will see substantially less money.

Recently there have also been suggestions out of Washington that the GSE’s will need to be revamped. The Housing and Economic Recovery Act (HERA) mandates that Fannie reduce its portfolio. Accordingly, the HECM program has taken it on the chin. Rising margins have definitely hurt. Eliminating the use of the CMT could turn out to be a bad decision if the worldwide banking community loses confidence- particularly over the geo-political situations in eastern Europe.

The various states need to dispense with the histrionics that reverse mortgage bills are designed to save seniors from unscrupulous individuals and companies serving this market. Often the bills make little sense and serve to drive lenders out of the state. What we need are bills that make sense. There is one main thing that states can do. If they do this 99% of their fears will be assuages. Require separate licensing for reverse mortgage originators and companies.

Over the past 20 years HUD has done quite a remarkable job overseeing a nascent and burgeoning industry. An example of this ongoing effort is evidenced by HUD ’s attempt to standardize counseling and to create a counseling roster(24 CFR Part 206). I would urge HUD to require separate licensing for individual originators as well. States, likewise should create separate licenses for those that participate in this industry. Make it so that only those that care about seniors and about serving their needs are able to serve.

Albert Einstein was able to develop his breakthrough formula because his creativity had no sentimental attachment to the prevailing conventional wisdom. Likewise, the reverse mortgage industry needs to look at this program differently. The goal of maintaining appropriate funding levels for those in need is key. Creativity, with the great minds that make up the industry , is not in short supply. I am confident that Washington working hand in hand with this industry can find a better way. E=mc2 represented a whole new way of regarding reality.

Einstein became a United States citizen because he loved what this country stood for. The United States represented the tradition of “moral strength”. Accordingly he would urge that the incessant pressure our elders face must be assuaged with a reverse mortgage reality that continues to meet the needs of seniors across the country. A politically expedient solution is no solution at all. Ignoring this pressing need places senior homeowners in a very precarious position. He would never believe that such a great country could treat elder Americans this way.

Source: The Reverse Mortgage Blog – by Dennis Haber Esq.

FDIC pushes mortgage help for jobless

NEW YORK (CNNMoney.com) — Some unemployed homeowners at risk for foreclosure could get a temporary break on their mortgage payments under a plan being pushed by the FDIC.

The Federal Deposit Insurance Corp. said on Friday it is encouraging certain banks to reduce mortgage payments for the unemployed or underemployed for at least six months.

Overall, relatively few of the unemployed will benefit from this recommendation because the effort would only apply to a handful of institutions. Specifically, it would affect those that bought failed banks and participate in loss-share agreements with the FDIC. In such deals, the agency covers some of the losses incurred on the assets of the failed banks. Some 53 institutions, mainly regional or community banks, have entered into such arrangements since January 2008.

“With more Americans suffering through unemployment or cuts in their paychecks, we believe it is crucial to offer a helping hand to avoid unnecessary and costly foreclosures,” said Sheila Bair, FDIC chairman, who has led the efforts to have loan modifications be based on income.

The expanding unemployment rolls have long vexed policymakers focused on stabilizing the housing market. Existing foreclosure-prevention programs, including the president’s loan modification plan, generally do not help the jobless because they don’t have enough income to sustain even reduced monthly payments.

keep reading here

Source: CNNMoney.com

Changes To CA Reverse Mortgage Law

The California Assembly passed a bill earlier this week, which is meant to provide an additional level of protection to senior citizens considering reverse mortgages.

Passed by a vote of 49-29, SB 660 requires that a checklist be provided to the consumer prior to the mandatory counseling session and states that any person who recommends a reverse mortgage, with anticipation of financial gain, owes a duty of honesty, good faith, and fair dealing to the consumer.

Senator Lois Wolk, D-Davis, told the Daily Democrat that, “These loans, while appropriate in some instances, can have devastating financial consequences. Because the amount due can fairly quickly exceed the value of the home, borrowers get trapped. They lose their equity and their ability to move into assisted living or other supportive housing, or otherwise provide for long-term care. This measure ensures that seniors have the information they need when making important financial decisions involving their homes.”

Continue reading on Reverse Mortgage Daily