Reverse Mortgage Tax Information

June 3rd, 2010

Most reverse mortgages are home equity conversion mortgages, or HECMs, which are insured by the federal government. You must be at least 62 years old to qualify. For 2010, the absolute maximum amount that can be borrowed under an HECM is $625,500. However, the actual lending limit depends on the value of your home, your age, and the amount of any other mortgage debt against the property. To give you an idea, a 65-year-old can usually borrow about 25% of his or her home equity. The percentage rises to about 40% if you’re 75 and to about 60% if you’re 85.

The first major tax issue is when and if you can deduct the reverse mortgage interest. The first $100,000 of the loan balance will usually qualify as home equity debt under our beloved Internal Revenue Code, and you can generally claim an itemized deduction for the interest up to that amount. However, no write-off is allowed under the alternative minimum tax rules unless you spend the loan proceeds on improving your home. In any case, you can’t deduct any interest until it’s actually paid in cash (as opposed to just being added to the loan balance). You may be in a far better place by the time your reverse mortgage and all the accumulated interest gets paid off, so I would not give much weight to the interest deduction.

The second major tax issue is relevant if selling your home would result in a gain that dwarfs what you could exclude under the tax rules ($250,000 for singles, $500,000 for married joint-filing couples). If taking out a reverse mortgage allows you to hang onto your valuable property until either you or your spouse dies, your heirs might be entitled to a big tax basis step-up that could reduce or eliminate any taxable gain when the property is finally sold. In some cases, the tax savings could be far higher than all the costs associated with the reverse mortgage. Talk to your tax pro if you think this consideration applies to you.

Source: Would a Reverse Mortgage Affect My Taxes? - Personal Finance - Taxes - SmartMoney.com http://www.smartmoney.com/Personal-Finance/Taxes/would-a-reverse-mortgage-affect-my-taxes/

Also visit other helpful reverse mortgage sites:
Reverse Mortgage Requirements
Reverse Mortgage Calculation
Reverse Mortgage Fraud
Reverse Mortgage Magazine

McCaskill Proposes Reverse Mortgage Amendment to Senate Bill

May 20th, 2010

Updated on Reverse Mortgage Amendment…

As lawmakers continue to file debate the Restoring American Financial Stability Act of 2010 (S. 3917) amendments, Senator Claire McCaskill (D-MO) and Senator Herbert Kohl (D-Wis) have introduced S.A. 3941, an amendment that would give the proposed Consumer Finance Protection Agency the authority to establish strict rules governing the sale of reverse mortgages.

More details coming soon…

HUD extends Reverse Mortgage Loan Limits

December 1st, 2009

The US Department of Housing and Urban Development officially extended the loan limits for its FHA insured reverse mortgage program with Mortgagee Letter 2009-50.

The national FHA loan limit for the HECM program in 2010 remains at $625,500 (150 percent of the national conforming limit). In the special exception areas (AK/HI/GU/VI), the maximum claim amount on HECM mortgages is the same $625,500 limit as in all other areas. The loan limit shall be effective for all HECMs that have been assigned a FHA case number on or after the effective date of this Mortgagee Letter.

NGFS Hires Robert Cannon as CEO

November 17th, 2009

Baltimore, MD (PRWEB) November 17, 2009 — Next Generation Financial Services (NGFS) today announced that Robert Cannon has joined NGFS as its Chief Executive Officer. Cannon succeeds acting President Richard Pitbladdo, who will continue with NGFS as its Chief Financial Officer.

As an attorney, Cannon has advised banks, bank regulators and individuals, especially regarding Home Equity Conversion Mortgages, commonly known as “HECMs”. He has overseen nearly 2,000 reverse mortgage closings. Prior to joining NGFS, Cannon was a principal of The Equitas Group, a group of companies he founded that develop private label reverse mortgage programs for community banks and conduct reverse mortgage title closings. Cannon is also a Lecturer at Suffolk University’s Sawyer Business School in Boston.

“Rob is an ideal fit for NGFS,” said Daniel Schmedlen, General Counsel for NGFS parent company LTC Global, Inc. “He has comprehensive knowledge of the increasing regulatory compliance demands the industry faces and has experience in improving the operational efficiency and service quality of reverse mortgage operations, particularly through automation of workflow processes. Cannon has a solid vision of where the industry is heading and how NGFS can play a leading role.”

About NGFS NGFS, headquartered in Baltimore, is a national distributor of reverse mortgage products. NGFS was founded in 2001 and currently operates as a division of 1st Mariner Bank.

Ginnie Mae Reverse Mortgage Update

November 13th, 2009

Ginnie Mae Reverse MortgageThe Government National Mortgage Association (Ginnie Mae) announced that it guaranteed more than $917 million of reverse mortgage MBS (HMBS) in October.

“Ginnie Mae – whose securities carry the full faith and credit of the U.S. government – has been quick to modify and create securitization products that provide additional liquidity to help stabilize the U.S. housing market,” said Thomas R. Weakland, Ginnie Mae’s Acting Executive Vice President. “And for the past 11 months we’ve consistently shown – with industry-wide low Single-Family delinquency rates – that our conservative approach to risk-taking is working for U.S. taxpayers.”