More senior homeowners are becoming actively interested in reverse mortgages, especially since the maximum loan amount was recently raised to $417,000 for the most popular plan — those backed by the Department of Housing and Urban Development (HUD).

However, there are certain downsides to signing for a reverse mortgage that seniors should consider.

Reverse mortgage loans are available to senior homeowners who are at least 62 years old. Instead of the homeowner making monthly payments, they receive them from the lender in most cases. The payments are loans, secured by the home's equity.

The borrower can take payments each month, receive the loan in a lump sum or take as a line of credit — or a combination of these methods. The monthly amount may continue for the owner's life, or until the owner(s) sells or moves from the property. The cost depends on the home's value, its location and the age of the homeowner(s).

The growing interest in these loans is understandable. Seniors usually live on fixed incomes, and with rising costs of everything from gas to groceries many need a way to supplement their income.

With curiosity in the loans increasing, more lenders are selling reverse mortgages as an added profit center, promoting them with appealing sugarcoated copy. One element they seldom mention in their promotional pieces is the required upfront fees.

Those charges can be as high as 5 or 6 percent of the home's value, not the loan amount but the property's value; it's much more expensive than traditional mortgages.

When the subject of fees comes up, the reverse mortgage sales rep will usually tell the prospective borrower that most or all those charges can be wrapped into the loan, thus eliminating the need to pay all the fees on closing day. However, that means interest will be accruing on the borrowed amount for charges as well as for loaned funds; therefore, the plan will involve even more payments.

After learning the high expense of reverse mortgages, many seniors conclude it's just not worth it. Hopefully, in a few years those prices will come down to a reasonable level.

Counselors provide basic information to seniors interested in a reverse mortgage. This can be a very helpful service, but be sure the counselor is not hired by or affiliated with the lender of the plan being considered — that would obviously be a conflict of interest.

A reverse mortgage may be a good idea for some senior homeowners, despite its high cost. But those who are interested in such a plan should take the time and effort to learn all the facts. Discuss it with a family member or friend who is a trusted and unbiased financial adviser.

Q: What's the most viable program for helping mortgage borrowers?

A: One of the most effective new programs to help troubled homeowners from losing their house through foreclosure is called the Hope for Homeowners (H4H) program. Created by Congress and implemented on Oct. 1, it refinances the owner's mortgage to a more affordable fixed-rate home loan insured by the Federal Housing Administration (FHA).

The program will remain effective until Sept. 30, 2011; it is available only to homeowner-occupants. Nearly 400,000 homeowners will be able to avoid foreclosure by utilizing this program over the next three years, according to FHA.

The refinancing would be facilitated through FHA-approved mortgage lenders or servicers. The existing lender needs to agree to take a loss on his or her current loan, but that would probably cost less than the expense of a foreclosure and resale procedure.

Qualified homeowner-borrowers must live in their home and have mortgage loans, which were issued to them between January 2005 and June 2007. Borrowers need to be spending at least 31 percent of their gross monthly income on mortgage debt to qualify for the special program.

Homeowners may be up-to-date on their existing mortgage or in default, but either way they must prove that can't continue to pay their existing mortgage payments. They also have to attest that they aren't deliberately defaulting just to obtain a lower payment loan.

For more information on this program, contact your mortgage lender or the nearest FHA office.

Q: What's the B of A program to help borrowers all about?

A: Bank of America, the bank that acquired Countrywide Financial Corp. in July, recently implemented another viable program designed to help financially troubled homeowners. The new plan would modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for about 400,000 Countrywide customers nationwide.

The program is designed to achieve affordable mortgage payments for borrowers who financed their home purchase with Countrywide subprime loans before Dec. 31, 2007. Primarily structured as a modification process, it provides relief for eligible borrowers who are seriously delinquent, or likely to become so, as a result of loan features like rate resets.

For more information, contact a Bank of America loan officer.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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