A Community of Savers
Courtesy Capital Area Asset Builders

April marked Financial Literacy Month nationwide and in the District of Columbia. This raises the question: what does it mean to be —“financially literate”? Are Americans spending more than they are earning—a trend that was last observed during the Great Depression—because they do not know any better, or is this dangerous behavior an indication of larger and more serious structural problems in our economy?

It is not an either/or answer, but it is also true that a growing number of Americans struggle to grasp even the most basic financial principles that allow them to manage their money well and make wise investments in their future. We can take a step back, and take an honest look at our own personal finances and make some healthy adjustments. 

To help you do just that, Capital Area Asset Builders (CAAB), the DC Department of Insurance, Securities and Banking, and many nonprofit, government and private sector partners have launched a citywide campaign called DC Saves. Modeled on the Consumer Federation of America’s national America Saves campaign, the goal of DC Saves is to encourage and motivate all Washingtonians to take financial action – by reducing debt, saving money and making investments that build wealth. Individuals who enroll as DC Savers will have access to the following benefits and financial supports, all of which are free:

• Special DC Saves accounts at participating financial institutions (all accounts feature no monthly or minimum balance fees for at least 12 months)
• One-on-one counseling through participating credit and housing counseling agencies
• Seminars on a wide range of financial topics, including credit repair, buying a car or home, saving for education or retirement, investing wisely and insuring your investments
• Subscription to the American Saver quarterly newsletter
• Advice (by e-mail) from Certified Financial Planners and Certified Public Accountants
• Access to a wealth of financial information through the DC Saves website, www.dcsaves.org

Enrolling in DC Saves is easy: all you have to do is identify a specific savings goal, make a deposit to a savings account each month (or make a debt payment), and keep us posted on your progress. In return, we will do our best to provide ongoing support and advice to help you achieve your goals.  But do not just take our word for it, here’s what a few of our local savers had to say:

According to one DC Saver, figuring out her financial priorities while saving for a home has been challenging. “I have to say no to social engagements. I have to watch my spending in regard to food. If I weren’t trying to reach any goals, I could live more comfortably,” but at the same time, she looks forward to achieving her dream. “Saving toward your goal is much more important than temporary pleasure. A home is a whole lot better and more secure than two hours in a movie theater,” she said.

Another new saver says she welcomes the opportunity to learn how to save money and hopes to ensure financial stability for her son for post secondary school. A young couple saving for their first home together looks forward to participating in a free seminar and learning more about the home-buying process, “Buying a house is a big goal and intimidating if you don’t know how to look out for yourself. We’re glad that there’s help available.”  These DC Savers and many more people—just like you—made the choice to start working toward their savings goal.

So what are you waiting for? Taking that first step toward your savings goal is just a click away. Visiting www.dcsaves.org will provide you with information, resources, tools, inspiration, and advice to help you achieve your dreams. Join DC Saves today!

For more information on DC Saves, call 202-419-1442 or visit www.dcsaves.org.

The Capital Area Asset Builders is a nonprofit organization that creates opportunities for people of all incomes to improve their financial management skills, increase their savings and build wealth. For more information, visit its website at www.caab.org.

Understanding Reverse Mortgages for Seniors
By Lewis Smith   
        
A reverse mortgage is a type of loan for consideration by seniors who need more income and reduced monthly payments so they can continue living in their homes. The reverse mortgage eliminates a borrower’s mortgage payments and can provide monthly income payments for life as well as a line of credit to draw upon. Reverse mortgages are one of the fastest growing types of mortgages in America. More and more people are becoming knowledgeable about reverse mortgages, understanding that the loan terms and costs are reasonable and finding the benefits to be extremely helpful. The number of reverse mortgages insured by the Federal Housing Administration (FHA) increased 77 percent from 2005 to 2006 indicating greatly enhanced interest and acceptance. The basic facts of the FHA reverse mortgage follow:

1. To be eligible, borrowers must be 62 years old or over, own and live in their home as their primary residence and have a reasonably modest mortgage balance.
2. A major reverse mortgage benefit is that monthly mortgage payments are eliminated.
3. Borrowers obtain reverse mortgage funds by receiving fixed monthly payments for life, a fixed payment for a fixed term of years, draws from a line of credit or combinations of these different modes of payment.
4. The monthly income payments or line of credit draws are not taxable.
5. The total mortgage balance owed can never exceed the sale value of your home.
6. Homeowners pay off their loan balance, accrued interest and fees only when they move, sell or pass away.
7. As reverse mortgage borrowers continue to own and live in their homes, they benefit from its growing value.
8. All borrowers are required to receive free reverse mortgage counseling from a HUD-approved counselor.
9. Allowable properties include houses and HUD-approved condominiums.
10. In general, the more valuable your home, the older you are and the lower the expected interest rate, the more you can borrow.
11. Reverse mortgage borrowers are secure in living in their homes as long as they continue to reside in their homes and pay their property taxes and homeowner insurance.
12. If the appraisal requires home repairs, these must be completed within 6 to 12 months after settlement.
13. Social Security benefits are not affected.  Supplemental Security Income (SSI) and Medicaid are not affected as long as monthly advances are largely spent within the month.
14. Since credit, debt and income are not considered in qualifying borrowers, a reverse mortgage can be a great tool for seniors in financial difficulty to remain in their homes and even to avoid foreclosure.
15. Borrowers should involve family members and others who are advising them on financial decisions in learning about and deciding upon a reverse mortgage.

Lewis Smith is a financial educator with Manna Mortgage, the District’s first and only nonprofit mortgage company. For more information, visit www.mannamortgage.org.

Disclaimer: The information or views presented in this column are those of the authors and do not reflect the views of DISB or the Commissioner.