Home Equity Poor Credit

Reverse mortgage defaults threaten seniors

Reverse mortgages, which allow older adults to convert some of the equity in their homes into cash, have been a life line for many house-rich, cash-poor seniors struggling to get by.

But now, with a growing number of reverse mortgages falling into default, these retirees could end up losing their homes.

As the name implies, reverse mortgages work the opposite of traditional mortgages. Instead of the homeowner making monthly payments to the lender, the lender pays the homeowner, in a lump sum or a set amount each month.

Available to people age 62 and older, none of the money -- which might be used for medical bills, home repairs or day-to-day living expenses -- has to be repaid as long as the borrower remains in the home.

Still, the loan can end up in default if the borrower doesn't pay property taxes and homeowners insurance.

The U.S. Department of Housing and Urban Development, which insures virtually all reverse mortgages under its Home Equity Conversion Mortgage program, says it's in the process of compiling official statistics and can't say for sure how many reverse mortgages are in default.

But the industry estimates there are about 30,000 such loans, representing 5 percent of the some 550,000 outstanding reverse mortgages nationwide. Although the number of defaults is still relatively small, a government study suggests they are on the rise.

HUD's inspector general's office in August reviewed four of 16 HECM loan servicers nationwide, finding the number of defaults shot up 173 percent from May 2009 to March 2010.

So far there have not been any foreclosures, HUD and industry experts say, meaning no seniors have been evicted from their homes. The inspector general's report said HUD, which would have to approve the foreclosure process, had been looking the other way because it was loath to foreclose on "senior citizen borrowers."

The report was highly critical of the agency for not having a way to accurately track defaults and, as a result, not knowing the extent of the problem or being able to help borrowers figure a way to become current.

It estimated the government could be on the hook for at least $1.5 billion in the event the roughly 20,000 loans identified in the study ended up in foreclosure.

"Nobody really wants to see situations where older homeowners end up on the street," said Barbara Stucki, vice president at the National Council on Aging, which provides mandatory counseling for homeowners before they can get a reverse mortgage and lately has begun counseling borrowers in default.

Home Equity Poor Credit – How To Get Approval

If you own a home then you should consider applying for a home equity poor credit loan. Home equity loans allow you to borrow money from different lenders using the equity in your home as collateral for the loan. This means that you can get a low interest rate loan that is secured using the equity in your home to back it. These loans are very popular for people who are looking to do home renovations or consolidate existing debt.

Before applying for a bad credit home equity loan, you should ensure that you are in the financial position to actually repay your loan. Some people think that getting an equity loan is free money that can allow them to go on shopping sprees. If your goal for getting the loan is this then you should look elsewhere. Part of being a responsible borrower is being able to use the loan money for things that are positive.

When you are looking to apply for home equity poor credit loans, you should ensure that you find a good lender to provide you with your loan. Go online and do a comprehensive search to find different lenders that specialize in these loans. By doing a thorough search you will find the best interest rates on your equity loan.

As long as you have an income you can apply for these loans. The lenders will use your debt to income ratio to determine whether or not you are in the financial position to repay the debt.

Home Equity Loans are available to borrowers who have equity that is remaining in their home. If you are looking to apply for an equity loan then you should look online for the different Home Equity Lenders that are available to offer you a mortgages.

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