As Hurricane Fay hits shore, and storm warnings dominate the news, older homeowners in the affected regions may be asking themselves: What happens to my reverse mortgage if my home is damaged in the storm?

With hurricane season upon us -- and in the wake of the recent Southern California earthquake -- it's important for reverse mortgage holders to understand the implications of natural disasters and the damage they can cause.

Because the bank may very well end up owning the home in the event the mortgage holder dies, reverse mortgage lenders typically require that applicants agree to keep their home in good condition (along with a host of other requirements, including staying up to date on property taxes and homeowner's insurance) for the life of the loan.

In the event that the bank determines the house is damaged beyond repair -- even if the damage was caused by natural disaster -- the lender...  Read more

Cash-strapped seniors have seemingly few options when it comes to getting their hands on more money. But now there may be one more possibility.

Similar in concept to reverse mortgages, LegacyLoans, soon to be offered through Legacy Funding Group, will allow older adults to take out a loan against their life insurance policy. They can use the proceeds of the loan for monthly expenses or simply to cover the costs of their life insurance premiums. When they die, the amount of the loan is deducted from the payout to their beneficiaries. There are other insurance companies, including New York Life, which are starting to offer similar products.

Seniors can already sell their life insurance policies, a transaction known as a "life settlement." For many people, this is a good way to use their existing policies to generate cash during their lifetime. The downside to life settlements is obviously the...  Read more

The new mortgage bill includes provisions intended to make reverse mortgages more attractive to wary seniors. But is it a case of too little, too late?

This week President Bush signed legislation intended to address the foreclosure and mortgage mess that's devastated the housing market all year long. Included in the wide-ranging bill are dramatic overhauls to the rules governing reverse mortgages for seniors. What do these changes mean for your parents if they are considering a reverse mortgage?

To start with, under the new rules, your parents:

• Can qualify for much larger loans, depending on where they live. The previous loan limit of $417,000 has been increased to as much as $625,000 in high-cost areas.
• Can now use FHA-insured reverse mortgages to purchase second homes
• Should see reduced lenders' fees
• Are protected by new restrictions on lenders, which make it harder to cross-sell financial...  Read more

As the economy continues to falter, senior citizens are turning to more aggressive -- and in some cases riskier -- ways to generate cash to pay bills and buy groceries and gas, according to a front page story in the Wall Street Journal (online subscription required.)

In record numbers, seniors are raising money by turning to products like:

• Reverse mortgages
• REX loans, which pay out lump settlements in exchange for a chunk of future equity gains
• Life insurance settlements
• 401k loans and hardship withdrawls

Though these loans and products may seem like a convenient way for income-strapped seniors to get quick money, some carry tax consequences and higher fees than traditional loans and home equity financing. The article blames the trend on the usual culprits: falling home prices, dwindling jobs, and a sharp increase in food and energy prices.

Seniors who buy into these types of products won't...  Read more

If you're looking into a reverse mortgage, two new articles may give you pause.

Under a reverse mortgage, the homeowner converts the equity he has built up over time into cash, in the form of either a lump sum, a monthly payment to the owner, or a line of credit. Unlike a traditional home loan, a reverse mortgage has no monthly payments -- no repayment is required until the owner sells the home or is no longer using it as a principal residence. Many homeowners like the flexibility and cash that come with reverse mortgages, but the loans do come with a price: notoriously high closing costs.

Now, The Los Angeles Times is reporting, some homeowners are opting for something known as a deferred payment loan. As the paper explains, with deferred payment loans, "there are no origination fees, and insurance and premiums and closing costs, if any, are very low." Interest rates are also capped at low rates, and part or all of the loan may be forgiven if the homeowner stays in the house for a long period of time...  Read more

Reverse mortgages--a loan for people ages 62 and older that pays homeowners based on the equity they've built up in their house--can be a great way for our parents to pay off medical bills, pay for home improvement projects, or take that trip they've been dreaming of for years.But the loans aren't right for everyone, as the New York Times reminds us in an article about the pitfalls of reverse mortgages. Although the loans are highly regulated (homeowners are required to meet with an independent counselor before even applying) some lenders still deploy sleazy sales tactics including:

• Rushing through the fine print and glossing over closing costs and interest rates
• Offering financial incentives to so-called independent mortgage counselors
• Pushing homeowners into questionable investments with the proceeds of the reverse mortgage

If you're concerned because your parents are thinking about taking...  Read more