First of all, reverse mortgages are not meant for everyone and according to Housing Counselors, should not be used unless it’s a necessity.

Essentially, this loan is borrowed against your home’s equity and is paid out in a lump sum or in monthly installments to the homeowners. The amount of a reverse mortgage that a homeowner can qualify for depends on factors such as the age of the youngest homeowner (the older that person is, the more they will qualify for), and the home’s equity-value. A major problem that can arise while applying for a reverse mortgage is that both homeowners may not be over 62. Housing Counselors warn that there have been cases where the younger homeowner takes their name off the mortgage so that they can qualify for more money. This is not recommended because the younger homeowner may lose the home if the older owner dies.

Factors considered for a reverse mortgage include, you are 62 or older and have equity built up in your home. This type of loan is very costly and should only be used if you are home rich but cash poor or are struggling to meet your monthly expenses. It is not recommended that you take out a reverse mortgage for gifts or vacation. A reverse mortgage may be more necessary to help with the rising costs of food, drugs and other household expenses that according to a study taken by AARP, has contributed to a surge of bankruptcy filings by the elderly. This study found that from 1991 to 2007, there was an increase of filings equaling 125% for people aged 65-74 and 433% for people aged 75-84.

While reverse mortgages can help out certain people in certain situations, Housing Counselors advise to look into other options such as a home-equity loan before taking into account this very expensive type of loan.

The Federal Financial Regulatory Agencies statement released recently urges mortgage lenders to “identify borrowers at risk of default and pursue appropriate loss mitigation strategies designed to preserve home ownership.” Basically– find out who’s struggling and help them!

President Bush also announced his recommendations for the mortgage crisis recently (view video for comments or read Bloomberg article.) The President has proposed assisting consumers caught in high-risk mortgages to refinance into traditional mortgages insured by the Federal Housing Administration.

Bottom Line: There is no free money coming your way if you’re struggling with your mortgage; however lawmakers are beginning to take notice of the national crisis developing. A HUD-approved counseling agency can work with you and your lender to create a workout plan to get you back on track (contact Family Credit Counseling Service if you need help finding a HUD-approved counselor.) Rather than burying your head in sinking sand hoping your mortgage crisis will fix itself, stay informed of national news updates and take advantage of any assistance that becomes available.

Isn’t it amazing what people will do to make a dollar? Organizations are shooting up all over the country promising to help you avoid foreclosure and turn around your financial situation. The problem - most of them are charging high up front fees and running away with your money without doing a thing to improve your situation. Worse than that, they are targeting low-income, minority and senior homeowners who are most vulnerable.

These organizations receive foreclosure information through public records and notices (which are readily available to anyone) and contact you. They will require you not contact your lender during this relief process, keeping you out of the loop with what is actually being done. Many are asking you to sign over the title (some don’t ask but just hide it within the paperwork) with the intention of selling it back once your payment arrears have been resolved. Most will strip any equity in the home through high, buried fees and make it next to impossible to get back on your feet.

Bottom Line: Never trust help that is unsolicited! If you’re having problems, contact your lender first to see if a workout plan can be arranged. If that doesn’t work, contact a HUD approved housing counselor to see what other alternatives might be available (a listing of approved counseling agencies can be obtained by clicking on http://www.hud.gov/offices/hsg/sfh/hcc/hcc_home.cfm.) In most cases your mother’s advice still holds true: “If it’s too good to be true, it usually is!”

Media outlets are flooded with companies willing to write a debt consolidation loan using the equity in your home to pay off those high interest rate credit cards, but is this a good thing?

It’s true a home equity loan can pay off debts that carry high interest rates (provided you’ve got enough equity.) In many cases the interest paid on a home equity loan can even be deducted on your taxes. Sounds like a "no brainer," right? Not so fast!

Consider that you are not only using the equity in your home to pay off unsecured debt, you are also converting that unsecured debt into SECURED debt. Now, if something happens where you can’t afford your monthly payments, you could risk losing your home.

Here’s the typical scenario: Unless people are completely committed to living debt-free and changing spending habits, people pay off credit card balances with their home equity loan but continue with uncontrolled spending. If this happens, the typical homeowner will find within a couple of years that they not only have a new home equity payment, but new credit card balances that snuck right back to the same levels. If you thought it was difficult making those high-interest credit card payments before, try figuring out where the money is going to come from to pay for those and your new home equity loan.

Bottom Line: Determine your commitment level to change your spending habits before you apply for that home equity loan. If you’re not completely committed, find another solution to your credit problems!