Senator McCaskill is urging young couples to consider buying that first home even as she wants to investigate whether senior citizens are being ripped off by reverse mortgages.
McCaskill says if you haven’t bought that first home, now is the time to consider it. The federal economic stimulus bill provides an $8,000 tax credit for first-time home buyers.
"You get this money back on your federal tax return as a tax credit," McCaskill explains, "but that doesn’t help you if you want to buy a house right now. Obviously, if you’re going to buy a house next month or the following month you’re not going to get your income tax credit until next year."
That is where the Missouri Housing Development Corporation comes in. The MHDC is offering an $8,000 loan to those who qualify for the credit and will charge no interest if paid back once they receive the tax credit next year. The federal tax credit is available to those buying their first home this year. Its deadline is December 1 st . Individuals making up to $80,000 qualify for the federal tax credit. The MHDC loan program applies to those making up to $79,800.
Even as McCaskill encourages buying on one end, she worries that some in the reverse mortgage industry are ripping off senior citizens.
"We need to be proactive on reverse mortgages, because we could have the same kind of problems with the reverse mortgage that we’ve had with subprime loans."
McCaskill has offered an amendment to a housing bill that would place the reverse mortgage industry under greater federal scrutiny. Reverse mortgages formally known as Home Equity Conversion Mortgages are available through FHA-approved lenders and are guaranteed by the federal government.
Under a reverse mortgage, a homeowner uses the equity built up in his home over the years to either receive a lump sum payment or, more commonly, to receive monthly payments. If the home is sold, the loan must be repaid. If the homeowner dies, the home either transfers to the business or is sold by to pay off the loan.
Click on this link for a primer on reverse mortgages from the FDIC . The AARP also has a primer on reverse mortgages.
Download/listen Brent Martin reports (:60 MP3)
Sen. McCaskill on mortgages (3:10 MP3)
McCaskill speaks on reverse mortgages on U.S. Senate floor, April 23, 2009
