Reverse Mortgages Gain Popularity

Born between 1946-1964, the generation known as the Baby Boomers will begin to retire in large numbers, substantially shrinking the labor force in the US. As a result, Social Security, Medicare, and other government programs will be significantly affected over the next several years. In fact, the Social Security Advisory Board (SSAB) estimates that, by 2030, about 20% of the American population will be 65 years old or older.

With rising costs of living and a dwindling budget to accommodate the elderly and disabled, we will see increased usage of the reverse mortgage. This loan allows equity to be taken out of the home to meet day-to-day expenses, and was designed in the late 1980s to help those who owned property, but lacked sufficient income to live on. However, there are benefits and disadvantages to be considered before going into this type of loan.

In most loan scenarios a home will go into foreclosure if payment is not made. If payments are made, the debt decreases and equity increases. The opposite holds true for a reverse mortgage; equity is taken out of the home to sustain the family, causing debt to increase while equity decreases. There is an exception – if the actual value of the home increases, less equity will be lost overall.

Most reverse mortgages are set up so there is no monthly payment as long as the owner or co-owner(s) resides in the home. There are no minimum income requirements, and the money can be used for any purpose. Equity disbursed from this type of loan is tax-free. Depending on the type of plan, reverse mortgages will usually allow the owner to retain the title to the property until they have lived in a different residence for 12 months, sold the property, died, or the end of the loan term has been reached.

On the flip side, reverse mortgages can be more costly than a normal equity loan. Interest is added to the principal balance each month, and the amount of interest owed is compounded over time. The interest will not be tax deductible until the loan is paid off, in part or in full. Also, since the reverse mortgage uses equity in the property, this constitutes a loss of assets one could pass on to heirs.

The Federal Trade Commission warns of abuse with this type of loan, as they have received reports of predatory lenders taking advantage of the elderly. It is best for the individual interested in a reverse mortgage to research and obtain counsel from reputable sources.* HUD does not recommend consulting an estate planning service to obtain a referral to a lender. HUD provides this information free to the public. Even if the home was not originally an FHA loan, the reverse mortgage can be federally secured.

The two-day event will be held on July 21 & July 22 at Wade Walker Park, 5585 Rockbridge Rd., in Stone Mountain.

This year’s lineup continues DeKalb’s musical tradition of providing top jazz and blues artists.

Beginning at 4 p.m., on Saturday, July 21, 2007, the Manhattans featuring Gerald Alston will headline the jazz show and feature the Emotions, Deaconbluz & the Holysmoke Band, Brick, Sol Factor, Milkshake, Melanie Massell, Hudson on Bass, Jua and the VIP Band.

Beginning at 4 p.m., on Sunday, July 22, 2007, the crowd favorite Theodis Ealey will headline the blues show and feature acts such as Warren Hill, Latimore, Kal David, Chick Willis, Dee Lucas featuring Xpressions, Delta Moon, Theresa Hightower and the Stephenson High School Jazz Ensemble.

The Strength of Your Credit Score Is Key
By Linda Ferrari, President, Credit Resource Corp.

We all know that home values have softened in many parts of the country. We also know that a record number of foreclosures are expected to take place. While these facts are unsettling to say the least, what’s most disturbing is that people who are extended beyond their reach run the risk of suffering a tremendous loss – a loss that will hurt them now and in the years to come.

Arguably, the biggest difference between those who will wriggle free from financial meltdown and those who will be caught holding the bag is the strength of their credit scores. Although interest rates are starting to climb, the difference between a fixed-rate loan and an interest-only or other adjustable product is not so wide a delta. The real trick is qualifying in an environment that is increasingly unwelcoming for loan applicants.

It’s just simple math. Homeowners who need to solidify a tenable, long-term solution to help them stay on course require the lowest payment possible – and whether they’re able to secure that hinges on the credit report. The best way to ensure the most favorable terms possible in this post-subprime lending environment is to make certain that a borrower’s credit score is as strong as it can possibly be.

Now is the time to take proactive steps to improve your credit score so that you’ll qualify for the best loan possible when you’re in need of financing. Here are some tips to help get you started:

Get educated and stay informed. There is an abundance of information available on credit education. By learning what to do to proactively monitor and protect your credit, you can get a good score and keep it that way. There are no quick credit fixes, but you can make dramatic improvements over time. Speak with your mortgage professional to learn more.

Monitor your credit quarterly. This way, you will be able to see what’s on the report and determine: a) what you can clean up; b) what doesn’t belong there; c) what isn’t there that should be; and d) make any necessary adjustments to realign your credit reports so that you are credit ready at all times.

Verify that the data affecting your payment history is being reported accurately. Check all of your accounts for late pays. Were you late? If yes, then is the late being reported in the correct month? If not, by law it should be removed. Also, check for collections. There are so many nationwide collection scams going on that it is now necessary to check our reports quarterly (at a minimum) to make sure that we’re not victims. Per Sec. 1692g. of the Fair Debt Collections Act, the burden of proof is on the collector, not you, and if you ask them for it, they have to provide you with the following information:

Date they purchased the debt
Amount they paid for said debt
Date of last payment/activity, if any
Original creditor’s full name and address
All records pertaining to actual debt to prove validity
If they cannot provide you with this information, then the account must be deleted from your credit report.

Follow these Top Ten Do’s and Don’ts of credit if you are planning to enter into a loan transaction in the next 6 months:

DON’T APPLY FOR NEW CREDIT OF ANY KIND. This includes those “You have been pre-approved” credit card invitations that you receive in the mail. Every time you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from 2-50 points for one hard inquiry.

DON’T PAY OFF COLLECTIONS OR CHARGE OFFS DURING THE LOAN PROCESS. Paying collections will decrease your credit score immediately due to the “date of last activity” becoming recent. If you want to pay off old accounts, do it through escrow, and make sure that 1) you validate that the debt is yours, and 2) the creditor agrees to give you a letter of deletion.

DON’T CLOSE CREDIT CARD ACCOUNTS. If you close a credit card account, it will appear to FICO that your debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If you have to close a credit card account, do it after closing, and make sure that it is a more recent account.

DON’T MAX OUT OR OVER-CHARGE ON YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring about an immediate drop of 50-100 points in your credit score. Try to keep your credit card balances below 30% of their available limit at all times during the loan process. If you decide to pay down balances, do it across the board. Meaning, make an extra payment on all of your cards at the same time.

DON’T CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS. It seems like it would be the smart thing to do; however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above. If you want to save money on credit card interest rates, wait until after closing.

DON’T DO ANYTHING THAT WILL CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM. This would include adding new accounts, co-signing on a loan, or changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.

DO JOIN A CREDIT WATCH PROGRAM. If you join a credit watch program, you can check your reports weekly, or even daily depending upon the program you select. (When you pull your own reports, you don’t get dinged for a hard inquiry.) This way, if something does show up on your reports that caused your score to go down, you’ll know it immediately, and you may be able to take care of the problem before closing.

DO STAY CURRENT ON EXISTINGING ACCOUNTS. This includes your mortgage and car payments. One 30-day late can cost you anywhere from 30-75 points.

DO CONTINUE TO USE YOUR CREDIT AS NORMAL. Red Flags are easily raised within the scoring system. If it appears that you are changing your pattern, it will raise a red flag, and your score could go down.

DO CALL YOUR MORTGAGE PROFESSIONAL if you receive something in the mail from a creditor or collection agency that you believe may affect your score during the loan process. Your mortgage professional may be able to supply you with the resources you need to stop any derogatory reporting to the bureaus.

Wine South 2007 will take place from September 28-30, 2007.

Wine South is one of metro Atlanta’s largest and most prestigious wine and food events. Wine South 2007 will move intown to Downtown Atlanta and the Georgia World Congress Center.

So what can one expect at this weekend-long event? Of course, there will be wine tastings. There will be more than 250 different wineries to sample from, as well as small bites from some of metro Atlanta’s finest restaurants. A wide variety of cuisines are presented. There will be educational and interactive wine seminars, celebrity chef cooking demonstrations, wine-related art exhibits, and live music all weekend long.