Reverse Financing Update and The Big Short

I am very excited to be able to provide Reverse mortgage financing to my clients with increased loan limits up to $625,500.

There are fabulous new programs to benefit seniors, including some with NO upfront costs to the clients. Reverse loans are all FHA loans, which carry the typical FHA mortgage insurance premium that increases the up-front costs. Now, clients can choose a program where they don't pay any of the costs.

New products include fixed rates as low as 5%. These fixed rate loans require that all cash is withdrawn at the time of loan closing. In many cases a Line of Credit makes more sense for clients, although the rate is floating vs. fixed. The interest rate is just over 2% on the line of credit, vs. 5% to 5.5%. for fixed rate loans.

Remember, Reverse loans improve cash flow since there are no payments during the loan term and all interest due accrues to the note, and is paid the end of the loan term. Funds can be accessed up front in a lump sum, monthly payments, or a line of credit--just like a HELOC--or a combination of these.


THE BIG SHORT

I’d like to highly recommend The Big Short by Michael Lewis. This author, who also wrote The Blind Side, has written a number of exposés on Wall Street and the financial industry, but none as damning as this…which was just published in March.

Recently cited by Bill Gross, Managing Partner of PIMCO, in his monthly newsletter, this book clearly lays the blame for the world-wide financial crisis at the doorstep of greedy Wall Street Bond traders who operated in secret, setting up transactions most people, even in their own companies, didn’t understand..or were unaware of.

Very interesting reading…I couldn’t put it down. The next time someone tells me the meltdown was all the government’s fault (yes they hold blame for encouraging more lenient lending guidelines) or subprime lenders’ fault for making fraudulent loans (which they certainly did, along with the knowledge of their clients) be advised nothing of this magnitude could or would have happened without the secondary market provided by Wall Street; faulty securities ratings; and the facilitation of "shorting" these instruments (Investment Banks, AIG and others) which exponentially increased the risk of every single layer (tranche) inside the securities backed by subprime loans.