Reverse Mortgages Grow in Popularity With Senior Citizens

Jul. 7--For retirees Karl Freier and wife Janice, of Kaukauna, a reverse mortgage has proved just the ticket for maintaining a debt-free lifestyle in their home of 40 years.

"It was getting to the point where I was having trouble paying my (property) taxes," Freier said.

The couple, who were self-employed and without pensions, obtained a reverse mortgage through GSF Mortgage Corp., which has an office in Little Chute.

The couple is among the growing number of older Americans taking advantage of a form of financing geared to providing financial independence for those on more limited incomes.

"They're growing dramatically," said Terry Bivins, senior vice president at GSF Mortgage Corp.'s Oak Brook, Ill., branch who handled the Freiers' mortgage. "The borrower is able to maintain or improve their lifestyle. They're able to repay their loans while they're living in the property."

Bivins said reverse mortgages enable homeowners who may be barely getting by on sparse incomes to vastly improve their situations.

Homeowners age 62 and older can convert part of the equity in their home into tax-free income without having to sell it, give up title or take on a new monthly mortgage payment.

The reverse mortgage is so named because the payment stream is "reversed." Instead of making monthly payments to a lender, a lender makes payments to the homeowner.

There is a mandatory but free counseling component. Bivins said applicants meet with an adviser, which takes about a hour, to apprise them of the requirements.

The loans were designed by the U.S. Department of Housing and Urban Development, Fannie Mae and some private placement sources. The Federal Housing Administration insures most of the loans. There are no income, medical or credit requirements, Bivins said.

Broader understanding of the consumer protection features is one of the main reasons for wider acceptance of reverse mortgages, said the Washington, D.C.-based National Reverse Mortgage Lenders Association.

More lenders also are offering the product.

The Home Equity Conversion Mortgage account for 90 percent of all reverse mortgages, said Darryl Hicks, associate director of NRMLA. "Interest rates are low. And also people are needing money to supplement what they're getting through Social Security or other means of income."

HUD administers and insures the loans. Lenders originated a record 37,829 loans during the 2004 federal fiscal year and projections are the number could top 60,000 this year, according to the NRMLA.

Another major issuer with a Fox Valley presence is Wells Fargo Home Mortgage.

"Demand continues to grow at a triple-digit rate," said Lynnette Barry, a Rochester, Minn.-based regional reverse mortgage manager for Wells Fargo. "We believe there are three primary reasons for this: greater awareness and understanding of the product; an aging population and broad-based effort by various organizations and institutions to promote the benefits and flexibility of the product."

Borrowers still need to pay the property taxes, homeowner's insurance and maintain the property, Bivins said.

The Freiers elected to take a line of credit for $30,000 and put half of the funds into a checking account and spent it on home improvements.

There are still more things to do: install a new boiler, new shower module and a new kitchen fan.

The Freiers discussed the arrangement with their three grown children before moving forward on the plan three months ago and are a fully comfortable with their decision.

"There's no way you're going to get stabbed," he said.

WHAT IS A REVERSE MORTGAGE?

A loan that enables homeowners 62 and over to convert part of the equity in their home into tax-free income without having to sell it, give up title or take on a new monthly mortgage payment.

The reverse mortgage is so named because the payment stream is "reversed." Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you.

The proceeds can be used for any purpose. Loans can be taken out as a lump sum, fixed monthly payment, line of credit or a combination.

A senior's home does not have to be owned free and clear to qualify for a reverse mortgage. The loan does not affect regular Social Security or Medicare benefits. The loan is repaid when a borrower ceases to occupy a home as the principal resident, whether he or she (the last remaining spouse, in cases of couples) die, sell the home or permanently move out. Sales proceeds are distributed to the estate.

Source: National Reverse Mortgage Lenders Association, Washington, D.C.

ON THE WEB:

National Reverse Mortgage Lenders Association: www.reversemortgage.org

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To see more of The Post-Crescent, or to subscribe to the newspaper, go to http://www.postcrescent.com.

Copyright (c) 2005, The Post-Crescent, Appleton, Wis.

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail [email protected].

WFC,

Jul. 7--For retirees Karl Freier and wife Janice, of Kaukauna, a reverse mortgage has proved just the ticket for maintaining a debt-free lifestyle in their home of 40 years.

"It was getting to the point where I was having trouble paying my (property) taxes," Freier said.

The couple, who were self-employed and without pensions, obtained a reverse mortgage through GSF Mortgage Corp., which has an office in Little Chute.

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The couple is among the growing number of older Americans taking advantage of a form of financing geared to providing financial independence for those on more limited incomes.

"They're growing dramatically," said Terry Bivins, senior vice president at GSF Mortgage Corp.'s Oak Brook, Ill., branch who handled the Freiers' mortgage. "The borrower is able to maintain or improve their lifestyle. They're able to repay their loans while they're living in the property."

Bivins said reverse mortgages enable homeowners who may be barely getting by on sparse incomes to vastly improve their situations.

Homeowners age 62 and older can convert part of the equity in their home into tax-free income without having to sell it, give up title or take on a new monthly mortgage payment.

The reverse mortgage is so named because the payment stream is "reversed." Instead of making monthly payments to a lender, a lender makes payments to the homeowner.

There is a mandatory but free counseling component. Bivins said applicants meet with an adviser, which takes about a hour, to apprise them of the requirements.

The loans were designed by the U.S. Department of Housing and Urban Development, Fannie Mae and some private placement sources. The Federal Housing Administration insures most of the loans. There are no income, medical or credit requirements, Bivins said.

Broader understanding of the consumer protection features is one of the main reasons for wider acceptance of reverse mortgages, said the Washington, D.C.-based National Reverse Mortgage Lenders Association.

More lenders also are offering the product.

The Home Equity Conversion Mortgage account for 90 percent of all reverse mortgages, said Darryl Hicks, associate director of NRMLA. "Interest rates are low. And also people are needing money to supplement what they're getting through Social Security or other means of income."

HUD administers and insures the loans. Lenders originated a record 37,829 loans during the 2004 federal fiscal year and projections are the number could top 60,000 this year, according to the NRMLA.

Another major issuer with a Fox Valley presence is Wells Fargo Home Mortgage.

"Demand continues to grow at a triple-digit rate," said Lynnette Barry, a Rochester, Minn.-based regional reverse mortgage manager for Wells Fargo. "We believe there are three primary reasons for this: greater awareness and understanding of the product; an aging population and broad-based effort by various organizations and institutions to promote the benefits and flexibility of the product."

Borrowers still need to pay the property taxes, homeowner's insurance and maintain the property, Bivins said.

The Freiers elected to take a line of credit for $30,000 and put half of the funds into a checking account and spent it on home improvements.

There are still more things to do: install a new boiler, new shower module and a new kitchen fan.

The Freiers discussed the arrangement with their three grown children before moving forward on the plan three months ago and are a fully comfortable with their decision.

"There's no way you're going to get stabbed," he said.

WHAT IS A REVERSE MORTGAGE?

A loan that enables homeowners 62 and over to convert part of the equity in their home into tax-free income without having to sell it, give up title or take on a new monthly mortgage payment.

The reverse mortgage is so named because the payment stream is "reversed." Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you.

The proceeds can be used for any purpose. Loans can be taken out as a lump sum, fixed monthly payment, line of credit or a combination.

A senior's home does not have to be owned free and clear to qualify for a reverse mortgage. The loan does not affect regular Social Security or Medicare benefits. The loan is repaid when a borrower ceases to occupy a home as the principal resident, whether he or she (the last remaining spouse, in cases of couples) die, sell the home or permanently move out. Sales proceeds are distributed to the estate.

Source: National Reverse Mortgage Lenders Association, Washington, D.C.

ON THE WEB:

National Reverse Mortgage Lenders Association: www.reversemortgage.org

-----

To see more of The Post-Crescent, or to subscribe to the newspaper, go to http://www.postcrescent.com.

Copyright (c) 2005, The Post-Crescent, Appleton, Wis.

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail [email protected].

WFC,