Debate on Reverse-Mortgage Risks Heat Up

A report by Consumers Union and other advocacy groups has ignited a debate about whether reverse mortgages are too risky for house-rich seniors in need of extra cash. The groups are urging the new Consumer Financial Protection Bureau to boost oversight of the complex loans and to move to fight scams and deceptive marketing. The call for increased oversight comes as the market for reverse mortgages is poised for expansion as the baby-boom generation retires. Meanwhile, lenders are aggressively marketing reverse mortgages, tapping celebrities such as actor and former U.S. Sen. Fred Thompson as spokesmen and holding seminars at senior centers to sell the loans. Most reverse mortgages are made under the Home Equity Conversion Mortgage program, begun in 1988 and administered by the Department of Housing and Urban Development. A borrower must be at least 62 years old and have paid off all or most of the mortgage. Instead of a monthly mortgage payment, the borrower receives payments as a lump sum, monthly cash advances or line of credit. When the homeowner dies moves or sells the house, the loan must be repaid. The consumer advocates say seniors should use reverse mortgages—which allow older Americans to tap into the equity in their home—only as a last resort because fees can be high and the loans could affect eligibility for government-assistance programs such as Medicaid. Also, if borrowers deplete home equity, they won't have much to pass on to heirs and could have a harder time funding long-term care, the groups warn. Defending reverse mortgages, groups such as RetireSafe and the National Reverse Mortgage Lenders Association say the report fails to acknowledge recent pro-consumer changes. "I think they're rattling the cages here without having much concrete to offer or any evidence to back up their allegations that there are widespread problems," said Peter Bell, president of the NRMLA. Congress directed the new Consumer Financial Protection Bureau to study reverse mortgages. According to a bureau official who works closely on mortgage-related issues, the bureau is beginning to examine reverse mortgages and plans to build on the Federal Reserve's and GAO's efforts to improve disclosures and prevent misleading advertising. The advocacy groups say reverse mortgages are reasonable for some seniors in foreclosure who don't plan to move into assisted living and for low-income seniors who lack other retirement assets, don't qualify for lower-cost alternatives and can't meet their current mortgage obligation. But most seniors should consider alternatives, the groups say. Still, Barbara Stucki, a vice president at the National Council on Aging, expects homes to become more popular sources of income for retirees, given that fewer Americans have defined-benefit pensions and more Americans are living longer after retirement. "Today's retirement realities are daunting, and when you combine that with the economic challenges, people are going to be tapping the equity in their homes," she said. "We want to make sure that options like reverse mortgages are viable and properly regulated." "We understand that the demographics are in our favor. The market will grow, and the need will grow because people need to fund longevity, but it will only grow if consumers feel the products are fair and the people who offer them are trustworthy," said Mr. Bell of the National Reverse Mortgage Lenders Association. "If the regulatory regime helps get us there, that's great."

SBA training on winning federal contracts

The SBA has released its newest online course for women small business owners, titled: Winning Federal Contracts: A Guide for Women Entrepreneurs. This training is free and includes numerous resources. The SBA also has an online training program related to the American Recovery and Reinvestment Act of 2009, titled Recovery Act Opportunities: How to Win Federal Contracts. This program is also free, and includes resources to help you understand and engage in the government’s contracting process. The program is fully automated and indexed so you can review all or only the parts you are interested in.

How to Win Federal Contracts

Today, the Small Business Administration (SBA) launched a new online training course titled "How to Win Federal Contracts." From the press release:

“Government contracts can play a key role in helping small businesses turn the corner in terms of expansion and job creation,” SBA Administrator Karen G. Mills said. “But make no mistake, the benefits the government receives are equally as impressive – working with small businesses allows the federal government to work with some of the most innovative companies in America, often with direct contact with the CEO.” “The SBA online training course can help businesses access the federal purchasing system and position themselves to compete for the commercial opportunities offered by government contracting,” Mills continued.

The course is available at the SBA website.

6 Tips to Speed up SBA Loan Approval

Last week, the Wall Street Journal reminded small business owners that time is running out to get fee-free SBA loans.

Barring another act of Congress, SBA-backed loans will revert to their pre-Recovery Act status by the end of November or December. November is more than two months away, but given that the SBA loan approval process can take as long as 120 days, applicants had better get cracking, says Dave Mulcahy, the director of the Small Business Development Center at Lamar University in Beaumont, Texas.

The article recommends the following 6 tips to speed up the loan approval process:

• Update your financials
• Tax a preferred lender
• Ensure the lender is the right fit
• Hedge your bets with a backup lender
• Offer more backup with your application
• Get help

Recovery Funded Ultra-Low Interest Loans

Here's an excerpt from a press release yesterday from the Office of the Governor: Public Energy Efficient and Renewable Energy Projects Eligible The California Recovery Task Force today announced that one percent interest loans funded through $25 million in American Recovery and Reinvestment Act (Recovery Act) funds are available for eligible public energy efficient and renewable energy projects in California. Available through the California Energy Commission, the loans will help local jurisdictions stimulate their economies and job growth while investing in energy efficiency and reducing greenhouse gas emissions - all in a cost effective manner. Cities, counties, special districts, public schools, colleges and universities, public care institutions, and public hospitals are eligible to apply. For more information and criteria about low interest loan programs or other energy-related Recovery Act funding and programs go to the California Energy Commission’s Recovery page at http://energy.ca.gov/recovery/index.html

The ABCs of SBA Lending

This week, the AICPA published "The ABCs of SBA Lending", which discusses the key benefits of recent law changes, reasons to apply for an SBA loan, and the application interview process. Information is also available at the SBA website. Related posts:

• Interest-free SBA Loans
• Obama proposal for small business lending
• Treasury to focus on small business
• Funds for Small Business