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Organization seeks to boost
minority home ownership
WASHINGTON
“Inability to qualify for a mort
gage at a reasonable rate, diffi
culty saving for a down payment,
risinghouse prices,and race-based
discrimination are some of the
barriers that need to be removed
in order to allow equal access to
homeownership forall Americans,
including minorities, according to
the National Association of Real
tors.
“We are seeing a rise in pur
chasing power among African
Americans, however only half of
them are homeowners,” E’toile
Libbett,a Realtor from Kalamazoo,
Mich., told attendees of the Con
gressional Black Caucus
Foundation’s Tools for Housing
and economic Development fo
rum, part of Summit 2000. “We
need to work to remove the barri
ers minorities face so that
homeownership is equally acces
sible to all Americans.”
- Accordingto Libbett, whoisalso
1999 chair of NAR’s Equal Oppor
tunity and Cultural Diversity Fo
rum, minority households con
tributed over 40 percent of the
recent growth in homeownership
from 1994 to 1997; and African-
American purchasing power has
risen 73 percent in the last 10
years. The national
The ups and downs
of reverse mortgages
f you are 62 years of age or
older and find yourself in a
“house-rich, cash poor” posi
tion, a reverse mortgage could
allow you to supplement your
monthlyincome by a considerable
amount. Because homeowners
need only equity, and not income
to qualify for a reverse mortgage,
these loans can seem too good to
be true. But the Georgia Society
of CPAs cautions you about jump
ingon thereverse mortgage band
wagon. While reverse mortgages
can indeed offer solutions to a
number of problems, it’s impor
tant that you also know about the
negatives before you sign on any
dotted lines. Below you'll find sev
eral things to think about so you
don’t make a costly mistake with
your valuable home equity.
. FIRST, WHAT IS A REVERSE
MORTGAGE?
Areversemortgageisbasically a
loan that works backwards. You
borrow against your home's value
and get the proceeds in the form of
regular monthly payments, as a
lump sum, a line of credit, or in
some combination of these options.
The more equity you have, the
more cash you can borrow. And the
alder youare, thelargertheamount, -
you can borrow. If you have any
debt against your home, yod must
pay it off before getting'a reverse
mortgage. One wayto do this is by
using an immediate cash advance
from the reverse mortgage tobring
the balance owed down to zero.
As a general rule, your reverse
mortgage loan does not have to be
paid off for as long as you live in
yaour home. The loan comes due
only when you eventually sell your
home (or when your home is sold
after you die.) To protect owners
and their heirs the debt can never
exceed the value of the home, even
if the borrower collects more that
amount over the years. '
KNOW WHICH DISTRIBU
TION PLAN WORKS FORYOU
Reverse mortgages offer borrow
ers several different ways in which
to take the loan proceeds: as an
immediate lump sum of cash at
closing; as a credit line account,
which allows the borrower to take
cash advances throughout the life
homeownership rate has recently
reached 66.3 percent, yet the
growthinincomes among African
Americans is not translating to
homeownership, she noted.
Summit 2000 is a five-year col
laborative effort created to en
hance the economic welfare of
African Americans. A goal of Sum
mit 2000, held in conjunction with
the Congressional Black Caucus’
29" Annual Legislative Confer
ence, is to find ways to create one
million new African-American
homeowners by 2005.
NAR is working towards open
ing doors to homeownership for
minorities through its cultural
diversity program, “At Home With
Diversity: One America,” devel
oped in cooperation with the De
partment of Housing and Urban
Development (HUD)” Libbett said.
“The One America’ program
shows real estate professionals
how to promote trust, understand
ing and respect with minorities,
while sensitively marketing to
minority communities,” she noted.
Since NAR launched “At Home
With Diversity: One America” pro
gram in 1997, more than 2,000
Realtorshave completed thetrain
ing and received the “One
America” certification. Assistance
Symposium as a “Best Practice.”
of the loan until it is used up; or as
a monthly cash advance. Monthly
cash advances can either be paid
out within an elected number of
months, or for as long as the bor
rower lives in his or her home; or
the loan can be used to buy an
annuity, with allows the borrower
to receive monthly checks no mat
ter where he or she lives. It is also
possible to choose some combina
tion of all these options.
A word of caution may be appro
priate here: while all this flexibility
looks great at first glance, each
distribution option has a different
trade off. You also should know
that the total cash amount of the
loan can vary substantially as a
result of how you elect to receive
payment. Therefore, you need to
weigh all of your needs very care
fully and calculate exactly how
much each option will cost you.
WHAT WILL A REVERSE
MORTGAGE COSTYOU?
The specific cost items varyfrom
one program to another. Many of
them are of the same type found on
“forward” mortgages: interest
charges, origination fees,and what
ever tb.lrd%?it;v closing costs (title
search and insurance, surveys, in-
Spections, recording fees, mortgage
taxes) are required in your area.
Other types‘of'epsts can be more
unique to reéverse mortgages,
trickier for the novice to under
stand and they can be enormous.
Federal law now requires that
reverse mortéhge lenders disclose
the total annual loan cost (TALC)
to prospective borrowers.
However, not only is it possible
for the TALC rate on one play to
double in a single day, or be three
times greater than the rate on
another plan, but these disclosures
may not be at all clear.
WEIGH YOUR OPTIONS
With so many variables and pos
sible pitfalls for the unsuspecting
to fall prey to, the Department of
Housing and Urban Development
(HUD) now requires prospective
borrowers to meet with HUD ap
proved counselors before taking
out a loan. Besides the questions
you pull together for this counse
lor, there are a few basic questions
you need to ask yourself.
The diversity program was de
signed to train real estate profes
sionals to reach out to all racial
and ethnic groups and market to
minority communities. :
The six module course covers a
variety of topics including: rea
sons for embracing diversity and
adopting business practices to in
corporate all cultural segments of
the population; barriers to
homeownership for minoritiesand
immigrants; recognizing stereo
types and bias; cross-cultural com
munity and relationship building;
and how to put all these tools into
place.
NAR’s diversity course will be
offered in Birmingham, Ala.; Cape
Cod, Mass.; Detroit, Mich.; Las
Vegas, Nev.; Edison, N.J.; Roch
ester, N.Y.; Asheville and New
Bern, N.C.; Toledo, Ohio; Hous
ton and San Antonio, Texas; and
Glen Allen, Va. in upcoming
months. For more information
on the courses, contact NAR’s
Diversity Office at (202) 383-1201.
The National Association of
Realtors, “The Voice for Real Es
tate,” is the nation’s largest pro
fessional association, represent
ing more than 750,000 members
involved in all aspects of the real
estate industry.
First, before you decide to go
with a reverse mortgage, consider
the worth of an alternative: selling
your home and moving. Try and
evaluate how much money you
could get by selling your home,
along with how much it would cost
you to buy (and maintain)orrenta
new one. Don’t forget to factor in
the amount you think you could
safely earn on sale proceeds not
used for a new home. Maybe it
makes more sense for you to go
this route.
CPAsalso urge you toremember
that the more home equity “sav
ings” you use now, the less you'll
have later. Not all reverse mort
gage borrowers end up living in
their homes for the rest of their
lives. Some who expect to remain
living there change their minds.
Others face later health problems
that require a move. If you were to
have to sell and move some day,
how much equity would you have
left?
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