Real Concerns Emerging With Reverse Mortgages

Once touted as one of the best ways for an Older American to supplement their retirement years, reverse mortgages are coming under pretty intense scrutiny. Reverse mortgages  allow homeowners 62 and older to borrow money against the value of their homes and not pay it back until they move out or die.  As the real estate market weakened and home values fell, the bigger banks and lenders left the reverse mortgage market, leaving many Older Americans prey to unscrupulous lenders who are making promises that can’t be kept.

The NY Times reports that state and federal regulators are finding new instances of abuse as these smaller lenders and mortgage brokers, including former subprime lenders, enter the reverse mortgage market.   As it was before the bubble burst on the last housing market, these lenders are aggressively pitching loans with fees attached that the seniors can’t afford.  Then once the loan is in place, the senior is still responsible for property taxes and home maintenance, costs that often run into hundreds, or even thousands of dollars per year.  Other reverse mortgage lenders are offering loans with promises of money that can used to finance vacations or to pay down debt, without fully explaining the risks.  These lenders are even writing these loans and pressuring couples to keep a spouse’s name off the deed, without explaining that this same spouse could face foreclosure if her spouse should die without adding her name to the deed before his death.

And as to foreclosure on these loans, the Times reports that more reverse mortgages are ending in foreclosure.   While the number of reverse mortgages has declined in recent years, the rate of default is at a record high — roughly 9.4 percent of loans, according to the consumer protection bureau, up from around 2 percent a decade earlier.  And to make matters worse, more and more borrowers are putting their nest eggs at risk by increasingly taking out the loans at younger ages and in lump sums, federal data and a recent bureau report shows.   If a borrower uses the lump sum to pay down debt or to finance a cruise, they may not have the means to repay the loan, leaving them in a precarious situation where they could face losing their home.  These are the risks of the reverse mortgage program.  Anyone thinking about applying for this program must be sure they are fully informed about all of the risks be fully aware of the penalties and fees before making a decision.  There are local HUD Housing Counselors available to help walk you through this process.  You may also contact your local Area Agency on Aging or your local Aging and Disabilities Resource Center for help.

To read the full NY Times article

Generations Together – A Better Community

I recently read where multiple generations living together in the same household is on the rise.  The reasons stated weren’t surprising: kids graduating college, but not finding jobs so returning home, parents living with adult children because they can no longer live alone, and grown children with their own children moving back in with their parents due to job loss or because their parents have the larger house and now need someone to live with them and provide care.

I don’t see this as necessarily a bad thing.  Families living together provides an intergenerational bond that’s good for everyone…that’s of course as long as everyone remembers individuals are unique and each have their own ways and idiosyncracies.   Children having the benefit of grandparents nearby means they may learn the legacies of their heritage and hear the stories of their family.  Instead of day care by strangers, they may be able to come home from school and be cared for by family.

Instead of finding themselves in a long-term care facility, older parents may be able to remain in their home or the home of their children, surrounded by family as they age and provided care with loving hands.

It’s possible to take these multigenerational households a step farther to multigenerational neighborhoods and then to multigenerational communities, where people of all ages live, work, and play together, providing a framework of experiences and diversity that make their community a stronger, friendlier, and  healthier place to live.

For years, seniors moved into “senior only” communities surrounding themselves with others of similar age.  While there’s nothing wrong with that, there comes a time when the laughter of children is missed, when they could use a teenager to teach them the basics of Skype, and it sure would be nice to discuss something other than Mel’s prostate problems and Urma’s knees.

That’s what intergenerational community planning is all about.  Planning for “Communities for All Ages”, where it’s just as easy to put up street signs with big letters easily read by everyone and time the cross walks  long enough for the mother with three kids and hands for only two to cross along with the young man in the wheel chair and his guide dog.   Plans that include a community center with activities for active seniors and even more active toddlers and rooms for them to work together on Christmas crafts and play Wii.  Sidewalks that take them all safely to the market and the movies and bring them back through the park along the nature path.

People living together in community makes us all better individually and collectively.  Planning District 10 in Charlottesville, VA is a wonderful example of an entire community coming together to make theirs a better community for all.  They even produced a Viable Futures Toolkit for other communities to use to start their Intergenerational Planning efforts.

Rumors to the contrary, America has never been a society to warehouse any part of its people.  Let’s not start now.  Let’s embrace the beauty that is the diversity of our heritage and learn from each other as we live together in community, one generation with another.

Fox: Boomers Changing Senior Living to Fit Their Expectations

 

Today’s assisted living facilities have come a long way from the dreary, utilitarian facilities that many of us think of when we picture the places our grandparents or loved ones lived in.

There’s a veritable buffet of choices available today.

Fox Business reports today that:

The senior housing industry is reinventing itself to meet the needs of the elderly with eco-friendly retirement communities, centers that emphasize lifelong learning, villages that enable retirees to age at home and more.

Senior housing options are no longer one-size-fits-all.

“The population is aging, and more consumers can demand more choices,” says Andrew Carle, founding director of the Senior Housing Administration program at George Mason University, which teaches students to manage senior living properties.  Retirees who require help with daily activities can choose from a variety of settings that reflect their lifestyle choices and meet their physical needs. It’s likely the menu of options will continue to grow.

 Retirees who require help with daily activities can choose from a variety of settings that reflect their lifestyle choices and meet their physical needs. It’s likely the menu of options will continue to grow.”Fifty years ago, people didn’t live as long and their families took care of them,” says Carle. “Now, seniors are living longer and looking for different housing options.”

Baby boomers have “exploded the portfolio of products at every stage of their lives,” says Carle, noting there was only one flavor of Coke when they were born.

As boomers reach retirement age, senior housing options are proving no different.

Senior Living communities are changing with the changing reality of boomer demographics.  More variety, more choices, different lifestyles.  Senior Living communities are also grappling with ways to provide services throughout the spectrum of care and still provide older individuals freedom of choice in where and how they receive services.

For the complete Fox Business Report

A Quick Guide to Affordable Housing

According to the US Department of Housing and Urban Development (HUD), there are many in need of affordable housing, including seniors, the working poor, single parents, and families. The generally accepted definition of affordability is for a household to pay no more than 30 percent of its annual income on housing. Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. An estimated 12 million renter and homeowner households now pay more than 50 percent of their annual incomes for housing, and a family with one full-time worker earning the minimum wage cannot afford the local fair-market rent for a two-bedroom apartment anywhere in the United States. The lack of affordable housing is a significant hardship for low-income households preventing them from meeting their other basic needs, such as nutrition and healthcare, or saving for their future and that of their families.  The agency considers families earning 80 percent or less of their area’s median income “low-income.” HUD categorizes a family earning 50 percent or less as “very low-income” and a household earning 30 percent or less as “extremely low-income.” HUD, as well as local governments, may use other percentages of median income to evaluate eligibility for subsidized housing initiatives. HUD uses American Community Survey data to set its income limits. While HUD publishes new figures annually, they do not always reflect present realities. As HUD noted at its income limits website, the agency derived the 2010 income limits from data collected between 2005 and 2008. This “lag” missed, to some extent, the economic downturn that intensified in 2008 and 2009, driving median incomes down for many areas.

HUD runs a specific program for low-income Seniors.  These affordable housing communities are restricted to individuals age 62 and older and are funded and subsidized by HUD so that rents remain affordable.  Qualified seniors pay up to 30 percent of the their income toward rent. If needed, a HUD assistance or subsidy payment covers any remaining portion of the rent.  Seniors can apply directly with the HUD Senior Housing Community in their area of choice.                                                                                                                                                                                                                                                                      Anyone considering renting an affordable or low-income residence should do their research and know the facts about these rentals. HUD provides information and resources to help find the best option for an individual’s situation. There’s a wealth of information under the “Resources” tab at HUD.gov.

Landlords and/or owners of affordable housing developments receive benefits, therefore, the rent is based on your total annual income, with some qualifying exclusions and deductions, including the number of people in the household.  The rent for an affordable housing unit is based on the household total annual income  and is verified every year. Necessary documentation can include W-2s, social security statements, and tax returns.  The total household annual income is totaled and analyzed using a special equation to determine the monthly rent.

The rent may be adjusted – either up or down – based on the income guidelines.  It is possible to make too much money to live in an affordable housing unit.  If the income guidelines are met, a monthly rent is calculated.  Again, this monthly rent is based on the total annual household income, so should be within the tenant’s means to pay.  If the potential tenant can’t make that rent, they can present extenuating circumstances to try and get a modification, but if they fail to pay their rent on time, they are subject to eviction

Since monthly rent is determined based on the annual total household income and the number of persons in a family, if someone else moves into the residence without approval, eviction is possible.  With approval, any additional income provided by the new resident will be added into the total household income.  If any additional income puts a total annual household over the income limits, the tenants may have to move.  Affordable housing assists individuals who are struggling financially, but if the income guidelines are abused, eviction is possible. Current income guidelines and limits can be found HUD 2012 Income Limits.

Again, all income  must be disclosed when applying for affordable housing.  A tenant may be required to produce their latest tax return and their declared income can be compared to the income information provided to the landlord.

It’s possible to forget or overlook a cash gift or earnings when declaring annual income. If this happens, the tenant must inform the landlord as soon as they realize the mistake happened.  This cannot be overstated.  If a tenant don’t claim the additional income,they can be evicted.  Tenants should also make copies of any documents provided to the landlord.

Affordable housing developments can be very nice and a good solution for seniors, families, or others struggling financially, but there are rules and stringent criteria to be met.  Do the research to find the best option.

Care Without Walls

For many Older Americans, aging in place is their preferred option.  This means they want to stay in their homes, in their communities and neighborhoods, growing older in the place they want to be rather than in a long-term care facility or retirement community.

For these individuals there’s a new option in long-term care.  It’s called a Continuing Care Retirement Community (CCRC) Without Walls.

According to the New Old Age Blog at the New York Times only a dozen continuing care retirement community programs like this exist across the country, mostly east of the Mississippi. But several more are under development, and experts believe the concept may be poised to expand more broadly in the years ahead.

In a traditional CCRC, members pay entry fees, sometimes substantial, to enter into the facility.  Then they pay a monthly fee ($2,000-$4,000 and up) which includes housing, food, activities, and a guarantee that they can “progress” in place from independent living to assisted living to skilled care in a nursing home, if needed.

The model for a CCRC Without Walls is different.  Again, members pay an entry fee (somewhere between $20,000 to $70,000).  They must also pass a rigorous screening to get in.  This screening ensures they are capable of living independently and not have any significant health issues.  The members then pay a monthly fee (anywhere from $250 to $800) and are guaranteed a program if lifelong care.  This guarantee, unlike a traditional CCRC however, guarantees the care in their home for as long as possible.  The model is very similar to the home and community based care concept practiced by Area Agencies on Aging (AAA) throughout the country, but instead of the local AAA facilitating the provision of services, the CCRC Without Walls does it all – case management, in-homes services, meals, etc.  A care coordinator works with the older individual and their family members or caregivers to design a slate of services which will enhance the ability of the older individual to remain in their home for as long as safely possible.

According to the Wall Street Journal, these home-based care programs generally offer a variety of service packages, each covering at least a portion of the future cost of things like home health aides, visiting nurses and live-in companions. Most also cover some or all of stays in skilled-nursing and assisted-living facilities, with the most comprehensive—and expensive—packages defraying 100% of these costs.

The plans are often tiered, with varying levels of benefits.  The most expensive cover services 100 percent; others can require a co-payment of up to 30 percent for assisted living or nursing home care.   If long-term care becomes necessary, it is usually provided in the “bricks and mortar” CCRC providing the in-home support.

These programs do require that members have health insurance – either private or Medicare with supplemental coverage.  Some members may also have long-term care insurance.

As with any program or contract that involves money, please have an attorney review all documents before signing.

The CCRC Without Walls model is growing in popularity and availability, although currently most programs are east of the Mississippi.   Some areas require legislative change to allow the programs.

In some states, laws that govern continuing care retirement centers didn’t allow for these kinds of services and had to be changed.  There are efforts are under way, or  that have already succeeded, to change legislation in California, Connecticut, Florida, New Hampshire, North Carolina and Virginia.

These programs can be a great boon for those who want to “Age in Place” and have the resources to pay for the privilege.  This option is certainly less expensive than the traditional CCRC model and allows individuals to remain in their own home, surrounded by their own belongings.  That is priceless.

Tax Credits Can Make Renovation Possible by Helen Cockrell

Photo courtesy of HAPHousing, Springfield MA

Church Street School Senior Housing: Historic Space with Class

Tax credits are a great way for businesses and/or individuals to make investments in property or operate in particular areas. Credits may be offered against income or property taxes, and are generally nonrefundable to the extent they exceed taxes otherwise due. The credits may be offered to individuals as well as entities. The nature of the credits available varies highly by jurisdiction.

There are several different tax credit programs, but the programs what can help renovate or build affordable senior housing are generally the Federal Historic Rehabilitation Tax Credit (RTC), the Low Income Housing Tax Credit (LIHTC), and in some specific geographic and demographic areas, New Markets Tax Credits.

States may also offer tax credit programs which can often be paired with the federal programs.

Each tax credit programs has a set criteria for qualification, some more complicated than others.  Below is a brief description:

Federal Historic Rehabilitation Tax Credit

The legislative incentive program to encourage the preservation of “historical buildings”. Congress instituted a two-tier Tax Credit incentive under the 1986 Tax Reform Act. A 20% credit is available for the rehabilitation of historical buildings and a 10% credit is available for non-historic buildings, which were first placed in service before 1936. Benefits are derived from tax credits in the year the property is placed in service, cash flow over 6 years and repurchase options in year six

Low Income (Affordable) Housing Tax Credit (LIHTC)

Under this program, created in the 1986 Tax Reform Act, the U.S. Treasury Department allocates tax credits to each state based on that state’s population. These credits are then awarded to developers who, together with an equity partner, develop and maintain apartments as affordable units. Benefits are derived primarily from the tax credits over a 10 year period.

The New Markets Tax Credit Program (NMTC)

This program was established by Congress in 2000 to spur new or increased investments into operating businesses and real estate projects located in low-income communities. The NMTC Program attracts investment capital to low-income communities by permitting individual and corporate investors to receive a tax credit against their Federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs).

Non-profit housing organizations can benefit from tax credit programs when trying to finance a renovation or build new housing for seniors and/or individuals with disabilities.  Tax Credits can be sold to businesses or individuals who are looking for a tax break creating revenue for project financing.

Often a “syndicator”  which is an organization which buys and sells tax credits will work with a non-profit to find tax credits that meet all the criteria and then will work with investors to sell these credits and return the revenue generated to the non-profit to use in financing a project.

Using Tax Credits can be a real boon for non-profit housing organizations, but it’s not a simple process.   I recommend you research the options available at both state and federal levels.