There are many different types of mortgages and many are better than others based on the age and needs of an individual homeowner. Specifically, a reverse mortgage is a mortgage loan for the elderly through which a financial institution (usually banks or insurance companies) makes a lump sum of money available to the client. They usually offer a cash sum that is a maximum of 20% of the appraisal of the institution’s appraiser.
According to many experts, reverse mortgages seem to have many important advantages. This is why an elderly person may opt for this type of mortgage to supplement their Social Security or other retirement income. It is important to understand the benefits and features that go along with reverse mortgages. This is why 31,274 reverse mortgages were issued in 2019 alone.
A reverse mortgage is a loan that offers in a cash sum that is capped at a maximum dependent on the value of the home. With a reverse mortgage, the client has a limit on the amount to be received and an agreed amount is available each month.
Francis Fernández, an expert on reverse mortgages, explains that, in this way, the property belongs to the owner and if he or she decides to sell it at some point, the capital drawn down and the interest generated by it are liquidated. With a reverse mortgage, if the owner dies, the heirs, upon receiving the property, must also pay off what has been drawn down like any other financing before they can receive the rest of the estate.
Reverse mortgage requirements
To qualify for this type of mortgage, it is normally necessary to be over 65 years of age, although it may vary depending on the entity in which it is negotiated and the particular conditions of the applicant.
The policies of reverse mortgages may differ across jurisdictions. The federal government has its own policies on reverse mortgages, because these loans are insured under the FDIC. However, states also create their own rules for reverse mortgages.
Understanding the benefits and characteristics of reverse mortgages
In order to qualify for a reverse mortgage, you must obviously be a property owner and preferably if should be your habitual residence. Eduardo Molet, real estate consultant, informed us that this type of mortgage is for great homes worth at least $250,000.
The credit ends when the person who takes out the reverse mortgage dies or when the client freely decides to give up the property. At this point, the interest on the loan will accumulate and added to the principal of the loan, which generates a debt that is amortized at death or before if the client freely decides.
Financial experts have remarked that an elderly person has no obligation to return the money if they don’t relinquish ownership before they die. It is the heirs who are in charge of settling the debt with the bank at the death of the elderly person and they have 12 months to pay back the money.
Then they can sell the house, pay off the debt and keep the surplus. They can take out a new mortgage and pay off the debt or pay off the debt with their own money and keep the house.
Here is a practical example of a reverse mortgage in practice. An 80-year-old person with a $500,000 home receives a monthly stipend from the bank of $1,000 per month for as long as they live, provided that they don’t receive any initial amount.
What are the benefits of reverse mortgages?
According to many financial experts, housing is undoubtedly the most valuable asset for most people and it is not very coherent that when we retire we have economic hardship due to a tight pension, having an asset as valuable as housing, and fully paid for. Making the experience owning the current home compatible and obtaining additional monthly liquidity is what this type of mortgage offers.
It is important to emphasize that the property could be leased if the client decides to relocate. In this case, they would have two incomes. If you wanted to move in with your kids without paying rent or move to a place where rent was cheaper than what you were receiving from the lease, then this could be a huge benefit.
Morgan Stanley has agreed to pay $1.25 billion to settle a lawsuit over the sale of mortgage-backed securities.
The money will be paid to the US regulator that oversees Fannie Mae and Freddie Mac mortgage guarantee firms.
US taxpayers had to rescue the two firms in 2008 in a bailout worth $187 billion during the financial crisis.
Morgan Stanley joins other banks, including JP Morgan Chase and Deutsche Bank, in settling with the Federal Housing Finance Agency (FHFA).
The banking giant will add an additional $150m to its legal reserves as a result of the settlement with the US regulator.
The US government filed lawsuits against 17 financial institutions in 2011 over the sale of residential mortgage-backed securities.
The mortgage securities became toxic when the US housing market collapsed.
Morgan Stanley has agreed to pay $1.25 billion to settle a lawsuit over the sale of mortgage-backed securities
In December 2013, Germany’s biggest lender, Deutsche Bank, agreed to pay $1.9 billion to settle a lawsuit with FHFA.
The German bank had been accused of breaking state and federal laws when it sold financial products backed by mortgage loans to Fannie Mae and Freddie Mac between 2005 and 2007.
One month prior, in November 2013, US bank JP Morgan Chase agreed to a $13 billion settlement with the FHFA for misleading investors during the housing crisis.
It was the largest settlement ever between the US government and a corporation.
At the time, JP Morgan Chase acknowledged it had made serious misrepresentations to the public, but said it did not violate US laws.
Morgan Stanley’s quarterly net income for the October-to-December period last year was more than halved by heavy legal fees relating to the mortgage-backed securities.
The lender’s fourth quarter earnings, which were reported earlier this month, were $433m, down from $982 million a year earlier.
Legal expenses were $1.2 billion.
Citigroup and JP Morgan were also affected by legal costs stemming from the sub-prime mortgage crisis.
Morgan Stanley said its legal costs were “specifically litigation and investigations related to residential mortgage-backed securities and the credit crisis”.
In 2014, there is a very strong likelihood that the value of the UK real estate market will increase nearly 8%. There were surprise gains in 2013 that took place in all parts of the country, causing the estate agents and banks to estimate that this boom in the UK property market will continue throughout 2014. This seems to be the consensus view among economists and property professionals. There has been a round up of a survey that was conducted by more than seven banks, estate agents, and surveyors that shows that there will be a further growth in the UK property market and this is through the widespread forecast on the property markets.
Gains will be particularly strong in the South East and in London, partially due to the initiatives of the government in encouraging banks to lend more money for remortgage deals and mortgages, and for consumers to buy more property, in a program known as Help To Buy. This has greatly restored some degree of confidence to the property markets in the UK which has been lacking for the past few years, hence leading to increase in demand. Even though the government of the UK has tried to remove some economic stimulus and has brought about some minor changes in how the mortgage markets are regulated, the property market is nevertheless expected to rise in 2014 as demand for real estate booms.
The expected results of this increase in the property markets in 2014
Due to the public belief that the growth in consumer confidence in the economy in late 2013 is likely to gain momentum in the 2014, people are becoming more willing to buy real estate, driving the price up. Property professionals are expecting a high likelihood that there will be a large increase in the buying and selling of houses, and more than one million homes will be bought and sold. Due to the increase in the transaction levels there is a high expectation that the growth in the real estate market will be around 8 per cent, but may be in the double digits. All this is caused by factors such as:
Better economic conditions
Improved confidence
Increased availability of mortgages
In the UK, the biggest winners in the property market boom will most likely be the sellers of high tech homes, the wrecks, and eco-homes. The UK property market has also split into two regions of particularly strong growth: London and South East. London is the biggest hotspot in the increase in the property market, growing at over 10 per cent last year. This is expected to continue throughout 2014. Due to the continuing boom in the UK property market in 2014, now is the best time for investors to invest more in real estate, and diversify their holdings.
JP Morgan has reached a $5.1 billion settlement with the US Federal Housing Finance Agency (FHFA) over charges it misled mortgage giants Fannie Mae and Freddie Mac during the housing boom.
Meanwhile, a separate settlement with the US Justice Department is expected to be announced soon.
“This is a significant step to address outstanding mortgage-related issues,” the FHFA said in a statement.
It is the biggest settlement ever by a US bank.
In a statement, JP Morgan said the settlement resolves the biggest case against the firm relating to mortgage-backed securities.
JP Morgan added that the agreement relates to “approximately $33.8 billion of securities purchased by Fannie Mae and Freddie Mac from JP Morgan, Bear Stearns and Washington Mutual” from 2005 – 2007.
JP Morgan has reached a $5.1 billion settlement with the FHFA over charges it misled mortgage giants Fannie Mae and Freddie Mac during the housing boom
The bank purchased Bear Stearns and Washington Mutual at the height of the financial crisis of 2008-2009, and has tried to argue that it should not be punished for mistakes made before those deals.
As part of the agreement with the FHFA, JP Morgan will pay $4 billion to Fannie Mae and Freddie Mac to settle claims that it violated US securities law.
It will pay the agencies an additional $1.1 billion for misrepresenting the quality of single-family mortgages.
Fannie Mae and Freddie Mac are the biggest mortgage lenders in the US. They received $187 billion in US taxpayer aid to help them stay afloat during the financial collapse.
They have since repaid $146 billion of the loan.
JP Morgan has been under investigation for several months by US regulators.
The bank said that it hoped the settlement would be part of a “broader resolution” of the firm’s housing bubble woes – a nod to an expected settlement with the US Justice Department that is also likely to run to several billions of dollars.
The firm reported a rare loss last quarter, having set aside an additional $9 billion to help it deal with its mounting legal troubles.
JP Morgan has set aside a total of $23 billion to help the bank work through its many investigations by regulators in the US and abroad.
Last month, JP Morgan agreed to pay more than $1 billion to help it end various investigations into its 2012 “London whale” trading debacle, which cost the bank more than $6 billion and raised questions about its oversight procedures.
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