Here is a great article and video on Reverse mortgages, from MSNBC.

REDFORD, Mich. - For 88-year-old Mort Linick, a red scooter symbolizes financial freedom. He bought the scooter with money he and his wife, Fran, get from the mortgage company, instead of sending the mortgage company money.

“Every fifth of the month, we get a check,” he says “And we don’t have to worry about paying back.”

It’s called a “reverse mortgage.” Instead of building equity, the Linicks are taking it out. They keep the title and the bank gets repaid with interest when they move or die.

Available only to those 62 and older, reverse mortgages are used by more and more retirees to enhance their lifestyles or make ends meet, like 77-year-old Peggy Gysel.

“I could just barely keep up,” she says.

Gysel’s mortgage consumed most of her Social Security check. But using a reverse mortgage, she paid off her Redford, Michigan home and established a line of credit. And that has made quite a difference in here life.

“I’m much more relaxed,” she says. “I can sleep at night.”

Unlike a typical mortgage, a reverse mortgage isn’t based on your income or credit. Instead, lenders look at your age and your home’s value, and make an unusual requirement before you can get the most popular of these loans — you must go through counseling to get the federally insured reverse mortgage.

“Many people think they want a reverse mortgage, but in the process of free counseling, discover that there’s a local program or service that better meets their needs,” says Bronwyn Belling, a reverse mortgage specialist with AARP.

That’s especially true for those who plan to move within three years.

“By the time they pay all of the costs involved — the origination fees, the mortgage insurance premium — it’s an expensive loan to get for a short term,” says Peter Bell with the National Reverse Mortgage Lenders Association.

But for the Linicks, who are staying put in the Los Angeles area, it strikes the perfect chord for financial harmony.

For more information and to see if you qualify for a Reverse mortgage, Click Here .

Low-credit borrowers aren’t the only people who’ll pay a price for the rising number of mortgage defaults. Ordinary homebuyers will take a hit as well, through higher fees at closing.

Fannie Mae and Freddie Mac, the government-sponsored companies that back 40 percent of American mortgages, have decided to impose a new fee of one-quarter of a percentage point on all loans they buy or guarantee, starting next year.

This seemingly small surcharge works out to about $450 on a mortgage for the full value of a home at Nashville’s median price of $179,900.

The fee will be charged to lenders, but it’s the homebuyer who’ll most likely end up paying it at closing. And it doesn’t matter whether borrowers have good credit or bad. Or if they make a small down payment or a big one. The fee will apply to every mortgage Fannie Mae or Freddie Mac backs.

The companies have another fee schedule planned for risky borrowers, those with credit scores below 680 and who fail to come up with at least 30 percent of the purchase price as a down payment.

Impact spreads

A few hundred dollars won’t cause many people to walk away from a home purchase. But it’s just the latest illustration of how the subprime loan crisis has come to affect nearly everyone in the country. Consider these facts:

• Homebuyers in the Nashville area face tighter lending standards and pay higher fees as underwriters compensate for loan losses in states as far away as California and Arizona.

• Renters see lodging costs rise as borrowers who have defaulted on loans move back into apartments or rental homes, boosting demand for rental space.

• Retailers lower earnings expectations as anxiety over the real estate market threatens to curtail year-end consumer spending and dampen Christmas.

Even the wealthy, those who don’t have to worry about renting an apartment or pinching pennies while shopping for gifts, pay a price. The fallout from the subprime crisis has lowered the value of many Americans’ stock portfolios and battered investment firms that buy mortgages.

All of this explains why policymakers in Washington — congressmen, senators and President Bush himself — are so keen to step up to address the mortgage situation. Even the most cynical politician realizes an issue that affects people’s finances is one they must pay attention to because it holds so much potential to do great damage to the economy.

It is tempting to write bad mortgages off as a problem only for those who hold them. But in our interlocked economy, the crisis should be of interest to everyone.

By CHAS SISK
in The Tennessean 12/17/2007