2009 June 30 | Senior Money Memos

Reverse Mortgages have been in the headlines for the past few months. Seniors are using reverse mortgages to repair diminished nest eggs, as they try to stave off the damaging effects of this major recession:

Seniors’ portfolios hammered by the stock market decline are getting a boost from reverse mortgages. Such mortgages allow seniors to get monthly payments based on the equity value in their homes – the amount that the value of the home exceeds any mortgage on the home.

Aging has its compensations, at least in figuring a reverse mortgage payout. The older the homeowner, the better, because the payout increases with the homeowner’s age on the date the mortgage begins. For homeowners younger than 70, the payout rate usually will be unattractive. But as age increases to 70 and beyond, the payout rate rises markedly, especially for larger loan amounts.

However the headline this morning states that Reverse Mortgages Leave Seniors at Risk according to the Government Accountability Office (GAO). Meanwhile the Department of Housing and Urban Development (HUD), which usually backs these reverse mortgages, defends such programs’ safeguards.

While these reverse mortgage loans have become more attractive to seniors as the economy has soured and housing values have dropped, reverse mortgages are complex. That is why the FHA has long required that the seniors take part in HUD-approved counseling sessions before these loans are processed. The GAO report concluded that HUD “lacks effective controls” over the counseling programs.

Seniors should therefore consider carefully the reverse mortgage rates before entering into such a loan arrangement. They should consider all eventualities that might arise and use a reverse mortgage calculator to estimate what they might be faced with in the future. It could also be very worthwhile to consider using the AARP HUD Reverse Mortgage Counseling services too.

Technorati Tags: counseling, GAO, HUD, Reverse mortgage

US pensioners are mentally ’10 years younger’ than those in England.

American pensioners are mentally 10 years younger than their English counterparts due to better education and quality of life. Researchers found that Americans had better memories, were quicker witted and were generally smarter than their English counterparts. And the older the pensioner, the greater the difference.

Researchers from the Peninsula Medical School, the University of Cambridge and the University of Michigan have carried out the first international comparison of cognitive function in nationally representative samples of older adults in the US and England.

The study compared 8,299 Americans with 5,276 British seniors aged 65 and older. The same cognitive tests were administered to the two groups in the same year. The US advantage in ‘brain health’ was greatest for those aged 85 and older. On a population level, the overall difference in cognitive performance between the two countries was quite large and amounted to a decade of ageing – the cognitive performance of 75-year-olds in the US was as good, on average, as that of 65-year-olds in England.

U.S. adults reported significantly lower levels of depressive symptoms than English adults, and this may have accounted for some of the U.S. advantage in ‘brain health’ since depression is linked with worse cognitive function.

The research team also found significant differences in alcohol consumption between the U.S. and English seniors. More than 50 percent of U.S. seniors reported no alcohol use, compared to only 15.5 percent of English seniors. Previous research has shown that moderate alcohol consumption, compared to abstinence, is linked with better cognition among those aged 50 and over.

US citizens tend to retire later than those in England, and this too can have an effect on cognitive performance – there may be a connection between early retirement and the early onset of cognitive decline.”

Dr David Llewellyn, one of the researchers, added: “With the population of the world ageing at a rapid rate, future cross-national studies regarding medical and social factors and ageing can only make significant contributions to the quality and delivery of public health.“

Experts reveal best ways to save an aging brain (cnn.com)

Technorati Tags: Cognition, England, research, United States

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Reverse Mortgages Require Prudent Evaluation

US Seniors Stay Younger Than UK Seniors

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