reverse mortgages

Let me see if I get this straight… (very high level summary)

The investment banks in this country made very poor investment decisions, including but not limited to giving mortgages to anyone with a pulse that couldn’t afford the house or the mortgage, and sold these investments to other suckers, including folks managing 401K portfolios.

Investment banks know their mortgage portfolio is shit, so they take out insurance with AIG, paying premiums on insurance policies that will pay off if the mortgages are not paid off (defaulted).

AIG couldn’t pay the insurance due the banks without a massive bailout with taxpayer money.

Investment banks also got bailout money when it was discovered that they carried nothing but bad investments, erroneously rated A2 or higher (investment grade) by Moody’s, Standard and Poor’s and Fitch, who would not get paid by the investment banks unless they got the high rating. (anyone see a conflict of interest in any of this yet?)

Joe and Mary Taxpayer watch their 401K disappear as the stock market crumbles and the entire world economy is almost brought to its knees by this mess.

Lehman Brothers was made the sacrificial lamb of the investment banks by being forced to declare bankruptcy because they couldn’t get another bank to buy them in time. This was done for a number of reasons, but the primary reason was that Barkleys (London) wouldn’t buy this lump of shit company and its toxic assets, and the treasury dept. refused to help them directly. This was also meant to demonstrate to the public that these greedy investment bankers were going to pay the piper, even though reality was far different.

The Stock Market tumbles, and Joe and Mary Taxpayer find that they no longer have the money they thought they’d have to retire on. So now, the banks, who screwed over millions and lost untold (trillions?) for the average investor (who never got their own bailout), are now offering to give you a reverse mortgage on your home.

The RV supplies the home owner with money each month, and instead of the homeowner paying their mortgage, the bank is paying money back to the homeowner.

What is the endgame here? The bank ends up owning the house through their reverse mortgage “generosity”.
So not only did the banks screw an entire segment of the population out of their retirement, they are also screwing them out of their homes by taking them after they either die or move into a nursing home?

Is that about the gist of this? So they blow your retirement AND get your house at the end, too?

While my only source of information regarding RVs is the commercials, it states repeatedly in them that you still remain owner of your home. I’m not sure exactly how that works out but that is what is stated.

Yes, that is my take too. But what I believe they do is give you an option at the end of your reverse mortgage to either pay all the money back, or turn over the house.

So technically, you still own the house (and you definitely own it while you are living there and collecting checks), but my guess is that changes when there is a death, or you decide to move out.

You won’t have anything to leave your children in any estate,

Reverse mortgages are not so difficult to understand. It’s a way of monetising an asset without having to sell it.

Essentially you are selling a little bit of your house every month to the bank in return for income. Naturally it works best if you have 100% equity to sell.

The exacct terms are a matter between you and the bank* Whether it takes the form of an annuity for life, whether it’s a growing line of credit, what interest is paid and when and what happpens in the case of death of incapcitation is all a matter for the individual terms of the mortgage.

I don’t see why it has to be a conspiracy or a way for the bank to screw you. Where I am here, it is an option that makes a lot of sense for a retiree (highly restricted property market, with limited opportunities to downgrade)
*it’s not neccessarily only a bank that can do this by the way…

What does a reverse mortgage have to do with that whole rant? If you have no heirs, who cares if they liquidate your collateral after you die?

I think what bugs me is that not only did they clean out middle america’s 401K and retirement savings, but now they have the balls to take your house from you after you croak.

If you have no heirs, I guess it doesn’t matter. And if you own your place 100%, you can live in it until you die, which could be next month or 40 years from now…

So I guess it can work in your favor

They aren’t ‘taking’ anything. They’re buying your house from you. You can also think of it as a home equity line of credit that is paid out over many months.

I understand this. How many people would actually have done a reverse mortgage if their retirement savings were intact?

Look, I understand that it’s legal. I understand that for some people, it’s a great option. What I don’t like is that many people doing a reverse mortgage were backed into the decision because of what the wizards on Wall Street did to their savings.

Does it not bother anyone that Wall St. took your money (assuming you were in a 401k or other investments directly tied to the stock market), gambled heavily with it, and almost brought this country (and possibly the world) to its knees financially? Once discovered, Washington used your money (taxpayer, that is) to bail out these greedy pricks and keep most people responsible for the mess employed while countless others lost their savings and/or their jobs? Not only that, but they used our money to give themselves huge bonuses again, because they were concerned about losing all of these valuable employees to some competitor. What competitor? If they were given conditions on how they could use the money, no one would be permitted to use that money for bonuses, so no brain drain would have occurred.

You and I received no bailout. I would like my 401K to be worth what it was before this all went down, so couldn’t the government just cut us all a check to make it all the way it was before?

Instead, the government secures reverse mortgages for all of us, allowing us to exit this mortal coil with little to no assets remaining… it’s like they’ve figured out a way to get everything you have or had in your entire life!

Why is there so little outrage over this? Are we all just so pleased as punch that we live in a free enterprise, capitalistic utopia that questioning what is going on is not an option? Or are we as a country just too tired emotionally and beaten down to even think about it all? Or are people unable to get their minds around what’s happened?

Here’s a non-rhetorical question for you all. Were reverse mortgages an option before now? I’d never heard of it, but concede they could have been out there and just not utilized by many people.
I don’t know… maybe I just haven’t reached the point where I’m tired of thinking about all this yet. It seems like most people are, have just accepted it, and have moved on.

Your two points (the rant against Washington, Banks, Insurance companies, and Mortgage brokers) and Reverse Mortgages have nothing whatsoever to do with each other.

Reverse mortgages have been around for a very long time. They were very popular especially with elderly people who were counting on social security, but found that just didn’t cut it anymore. They are perfectly viable instruments to remain in your house, and still have enough income to pay bills. If because of one, you don’t leave the house to the kids, well, too freaking bad for the kids. Let them buy their own place.

What? People have been doing reverse mortgages for years. It’s an extremely popular estate-planning device.

They don’t ‘take your house’ when you die/go into care. When you leave your house, you/your heirs can decide to sell it, pay off the rev. mort. and pocket the difference, or remortgage and live in the place. Where I live, you are only allowed to take up to like 40%, I think. So you’ll never really be upside down on it. So you can afford to live in your home, should the taxes/costs rise.

Like everything, there are some risks, people need to make themselves aware of what it all really means. Much like the people taking out variable rate mortgages should have, or those who bought houses they could never afford.

My parents have a reverse mortgage, and so did my Grandmother before she died. It’s a great program that has given them a bit of extra cash to spend before they die.

In my grandmother’s case, this whole idea of “retirement savings” that the OP is going on about it a moot case; she had no savings, she was a housewife her entire life, raising 6 kids. Her husband was a logger, I believe he retired with a pension. When he died, she was living on social security and maybe a little bit of the pension. She wasn’t starving or anything, but it’s not like she had a ton of extra cash. She did, however, have a house. Tapping into the money from the house let her travel a little bit, buy a few extras, and generally not worry about money in her retirement.

My parents are better off than she is, but still are from an era where “retirement savings” wasn’t something any one did. They both have modest pensions and social security. And a house. Once again, getting a reverse mortgage has given them several hundred dollars extra every month. They are very comfortable and have enough cash to travel, buy a few toys for themselves, and a few luxuries here and there.

As far as I can tell, there’s no chance that they will lose their house, and if they have not gone through all the cash their house is worth before they die and/or move, the remainder of the money goes to them or their heirs when the house is sold.

Is it a sound investment? Hell no. It’s not meant to be an investment; it’s a program to help retirees who have a lot of money tied up in a home. And it’s done nothing but good for my family so far.

Have you missed the entire Occupy movement?

Your comment about living in the house until death and you “guess” it can work out in your favor makes me think you misunderstand the reverse mortgage concept. It always works out in your favor if what you wanted to do is spend the equity in your house without having to sell it until your death. It’s not like the bank could pay you one month of reverse mortgage payment, then you die and they own your whole house.

When you die your heirs sell your house and pay the bank only what you used, your estate keeps the rest. If you used all your equity your heirs can turn the house over to the bank and they’ll sell it. If you used up your equity and live until you’re 120 you can stay in your house. If the house doesn’t sell for enough to pay off the reverse mortgage the bank takes the loss, no other assets can be taken to pay off the balance. No one is taking anything from you, you’re selling your house and living in it at the same time!

Am I correct in my understanding that you forfeit the house if you ever go into a nursing home? If so, what happens in the unlikely event that your condition improves and you can once again take care of yourself at home? Do you have a home to return to?

From what I understand, some reverse mortgages have a clause in them that state if you go into a nursing home for more than a year, the mortgage comes due.

I guess I don’t see that as a big deal. If you’re in a nursing home for an entire year, what’s the real chance that you’re going to recover and go home?

It would appear that’s exactly what has happened.

Some people do it when they have children who live far enough away that selling the house and splitting the proceeds would be a chore for them. It preserves more liquid assets that are easier to divide.

And, yes, it is possible to get a bad deal, or the wrong deal for your circumstances. I’m far enough underwater that I doubt I’ll ever qualify for a reverse mortgage. My retirement savings should be okay if the stock market recovers within the next ten years. None of mine was in anything real estate related. The people who are truly screwed are ones that really should retire now, but are underwater and can’t get a reverse mortgage.

Sure. There are serious problems with our financial system and I’m pissed off about them, too. But reverse mortgages aren’t one of them.

Huh, wow. I’ll be damned.