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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Sunday, November 18, 2007 Age limits on reverse mortgages drop to 60 By Tom Kelly Sixty-two, 61, 60. The age requirements for one reverse-mortgage product just got younger. Melville, N.Y.-based Lender Lead Solutions (www.lender leadsolutions.com, 888-775-3631) recently introduced Simple60, a new reverse-mortgage product available to homeowners aged 60 and older. Reverse mortgages offered to date require that borrowers be at least 62 years old. "For every 100 people I talk with about reverse mortgages, I lose 20 to 30 of them because one spouse is younger than 62 or they don't want to pay the higher closing costs attached to the entire value of the home,'' said David Peskin, Lender Lead Solutions' chief executive officer. "We do not anticipate the Simple60 to be a substitute for (home-equity conversion mortgages). Rather, we look at it as an add-on for borrowers fitting in a specific niche. "Census statistics tell us that the oldest of the baby boomers turned 60 last year, and more than 4.5 million seniors fall between the ages of 60 and 62," Peskin said. "We feel this is the perfect time to introduce the Simple60 product." Home-equity conversion mortgages, are mortgages insured by the U.S. Department of Housing and Urban Development and account for nearly 85 percent of the reverse market. Closing costs are computed on the home's value, not on the amount borrowed. The program has insured more than 240,000 reverse mortgages since 1990, while private jumbo reverse plans also have been available. The Simple60 is geared to consumers who want to pull out $50,000 to $75,000, typically for a specific purpose and a shorter period of time. While loan amounts vary depending on age and home value, a 60-year old borrower with a home valued at $250,000 owned free and clear could qualify for $62,500 under the Simple60 program. Closing costs would be approximately $4,513, about one-third of the equity conversion costs. The interest rate on the Simple60 program is the 30-day LIBOR rate, plus 4 percentage points. Earlier this week that combined rate was 8.7 percent, similar to some home equity loans. Reverse mortgages allow senior homeowners to receive proceeds from a lender, either in a lump sum, regular monthly payments, a line of credit or in a combination of those options. The loan amount plus the accrued interest is due when the house is sold, or the last remaining borrower dies or moves out of the home. The borrower can't owe more than the value of the home and can prepay the loan at any time. Wells Fargo Home Mortgage (www.wellsfargo.com/reverse), the nation's leading retail originator of reverse mortgages, announced it also has trimmed the margin it charges on the equity conversion adjustable by 50 basis points. Seniors who have already applied for a reverse mortgage with Wells Fargo will be offered the lower margin. Reverse mortgages have been provocative and their history has a lot to do with it. Providential Home Income Plan, Inc., a venture capital-funded company whose sole purpose was to originate and service reverse mortgage loans, offered a fixed-rate reverse mortgage in the early 1990s. While the company was one of the first to begin offering a program to enable seniors to tap the equity in their homes, some of the loans contained the controversial "equity share" component, giving the lender a significant portion of the appreciation in the home. Often, that portion was 50 percent of a rapidly appreciating home, leaving some homeowners or inheritors in debt when the senior died or moved out of the home. The equity share component no longer is included in reverse mortgages and is a key reason for the popularity of today's products. In 1996, Transamerica HomeFirst purchased the reverse mortgage servicing assets of Providential. Three years later, Financial Freedom, the Irvine, Calif.-based company specializing in jumbo reverse mortgages, purchased Transamerica HomeFirst. Tom Kelly's new book "Cashing In on a Second Home in Central America: How to Buy, Rent and Profit in the World's Bargain Zone" was written with Mitch Creekmore, senior vice president of Houston-based Stewart International and Jeff Hornberger, the National Association of Realtors' international market development manager. Copies are available on www.crabmanpublishing.com.

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