As we begin to wrap up the first quarter 2009, I find myself in unfamiliar territory, again(financial territory that is). I keep one ear to the ground and the other aimed towards the news channel on TV trying to anticipate the future. I think back to 5 or 6 years ago when I worked as a premier banker for a large corporate financial giant (think "stagecoach"), not thinking much of FDIC insurance--yes, it was great (blah, blah, blah), but if this "insurance" was actually needed it would mean that these financial giants were failing...well, lets just say, thoughts of fire and brimstone come to mind! Impossible. I also thought my home's value would not decrease, and that my husbands position as senior manager would not be eliminated. From impossible to highly likely. Sure things are not so sure anymore. Welcome to the real world, Dawn!Last year, the Fed take over of IndyMac Bank was a huge blow to the American people. We all saw how panic in the market can sink a bank in a matter of days. Washington Mutual was next. In the course of about 10 days, something like 18 Billion dollars had been withdrawn from the largest thrift in the U.S.. Buh-bye, WaMu. Panic.
So, all of these things that seemed so sure to me now teeter like a seesaw sitting on the edge of a windy cliff...one wrong move and you find yourself at the bottom of a ravine like the cartoon character falling with a "boom" and a puff of smoke when it hits rock bottom. So many of us are just hanging on for dear life. Financial institutions are now receiving bail-outs from the feds, but is there enough money to go around? It seems that everyone has their hand out to the government, like asking mom and dad to loan you some money because you blew it all over the weekend. (AIG and big bonuses??) Jobs are scarce--unemployment rates seem to be climbing everyday. Large companies are folding or downsizing left and right. Has anyone been to the Downtown Plaza lately? It's turning into a ghost town--just a series of windows covered with desperate pleas from Westfield that seem to cry out "Don't leave! Do business here!"
Back in 2001, right after 9/11 we had a major crash in the market. Many of us lost money in the stock market and as a banker, I heard so many stories about folks who were nearing retirement, but had lost 50% or more of their 401K funds, and would now have to prolong their retirement for at least a few years if not indefinitely. That was a time of fear too...but, we all seem to hold onto our resolve and ban together as Americans. This time it's every man (or woman) for himself.
Seniors take the brunt of our current economical disaster simply because many live on a fixed income and find themselves in jeopardy when an unexpected expense occurs, the cost of living rises, when their pension or 401k looses it's value all the while, health care and prescription costs run rampant. While, it doesn't give me a warm and fuzzy feeling to know that my bills are increasing or that my 401k has lost 30% of it's value, I know that I probably still have the opportunity to recover this deficiency, but for seniors this isn't usually the case. Where is the "bail-out" for them?
In trying times like these, when we find our selves in unfamiliar territory and sure things are not so sure, I believe that reverse mortgage can be that bail out for seniors. I come across seniors everyday who are sitting on unrealized equity that they could be using to live a better, more comfortable life. Some of my clients use the funds to subsidise their social security, so use it to travel...the needs vary just as the individual does, the point being...there is help out there.
A Little About Reverse Mortgages
Reverse mortgage allows the senior (62+) to access the equity in there home without ever making another payment as long as they occupy the home. Most reverse mortgages are underwritten and insured by FHA/HUD. They are non recourse loans--the home stands for the debt and the senior(s) or heirs are not responsible for any monetary repayment if the loan size outgrows the value. There are multiple ways to receive the funds--lump sum (pay off current mortgage), line of credit, tenured payments or any combination the three. The 2009 stimulus package raised lending limits to $625,500 across the board for the remainder of the year which has also opened the door for homeowners with higher valued homes and larger mortgage balances to reap the rewards as well. Reverse mortgage funds are considered to be loan proceeds and do not affect social security or taxes, (you should contact a tax professional for any questions you may have regarding tax advantage or implications)
If you have additional questions about reverse mortgage, please contact me:
Dawn Bachelor
dawn.a.bachelor@bankofamerica.com
(916)969-9855
The information in this blog is the sole opinion of Dawn Bachelor and not necessarily those of Bank of America. Please do not recopy or publish without permission from Dawn Bachelor. This blog is not substitute for professional financial advice.
