It's not like houses are selling like hotcakes now...

Let's hope the new bureau can help these seniors.

A very elderly friend of mine got one at the advice of his son; another friend (who often inserts herself into his affairs) thinks this is a disaster. She tells me that the bank now owns his house.

Is this true?

He currently lives in an assisted living facility and is something like 96 years old.

(NOT that htey always work like that)

You have a home worth, equity wise, oh 300,000. You finance this way and you get a set amount of money every month from the bank, let's say 2,000.

In theory, you can stay at your place and receive that set amount until you die.

In practice, shady as they are, many of these loans do not work this way and anything like missing one maintainaince bill, you are out of the home

And yes, in effect the bank owns her home.

They are conceivably a good idea ONLY if you really need the money and there are no possible descendants.

This guy is a WWII vet and a lifelong Dem. I don't know what his situation is with the house now (the last I heard he was going to rent it out), but I'm guessing his sons (one of whom works for Wells Fargo) know what they're doing.

I'm glad the feds are taking a close look. Thanks again.

If you have no one to leave your home to, and you are not expected to live a very long time, it's not a bad way to recoup your "house-money"...

BUT

If you are 80-something

and your home is paid for and is currently worth $200K

you have a SS income of $1500 and a small pension of say $300 a month

You do not have a house payment

If you could get your equity "refunded" to you @ $1k a month, that $200K could last you the rest of your life and provide you with some comfort for the years left to you.

At some point the "bank" you dealt with could have paid out most of the equity and when you will die. What's left is theirs to keep...along with the home (you have no heirs)

If there ARE heirs, they could be entitled to what's left AFTER those "equity payments" to you have been "repaid". There will be , of course, "fees" and "expenses", and a lot depends on how long the home-owner lives.

The fly in the ointment is when there is a decline in home worth, and they have paid out all or most of what it's worth, and you are still alive...then what?

And it's always sounded dangerous to me.

Borrowers are permitted to borrow a percentage of their homes value that's determined by the borrowers age (younger of the two if married).

Funds are disbursed in various ways-
1) Lump sum
2) Line of credit
3) Periodic wire transfer to your account (no checks are issued as a security measure)

There can also be a mashup of the above, such as a lump sum to retire any existing debts plus a line of credit and a periodic wire.
These loans have no payments, DO accrue interest, homeowner retains ownership and lives in their home until death.
Debt must be retired if the homeowner moves out (IE the loans are only permitted on your primary residence).
Covenants include- gotta keep taxes paid, insurance in force and home in habitable condition.
There is a mandatory counseling session to ensure seniors know when they're getting into.
Heirs inherit the remaining equity in the home.
Credit and income are irrelevant.

In sum, I'd say that it's an option for those who are short on income but heavy on home equity.
Fees are are often way higher than they should be (typically 2% of the maximum loan PLUS a shit ton of fees), which is something FHA should crack down on.
FHA permits a fairly low maximum Loan To Value (LTV) which is max loans divided by appraised value. (see link below)

My credentials- I'm a former owner of a FHA Title II non-supervised institution with operations in 4 states.

Here's a link showing how much you may qualify for based on age and location.
http://rmc.ibisreverse.com/default_nrmla.aspx

Here's a link to the FHA fact page-
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmhome

Other stuff to do to protect yourself-
Deed your home into a trust.
Look into a personal umbrella policy to cover excess liability
Draft a will (you don't want your estate in probate)