Understanding Reverse Mortgages

A reverse mortgage is one of many vehicles that individuals 62 years of age or older can use to turn the equity in their home into cash. It is very important, though, for an individual to fully understand reverse mortgages, their ramifications, and the alternatives. This article will provide an overview of reverse mortgages, as well as discuss alternatives.

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What is a Reverse Mortgage?

With a “normal” home loan you pay a monthly amount (principal and interest). With each month, the amount that you owe goes down and the equity in your home goes up. As one might expect from its name, a reverse mortgage works in an opposite fashion. With a reverse mortgage you can turn the equity in your home into cash. You do not have to make monthly payments. The cash may be paid to you in one or more of the following ways:

• As a single lump sum payment • As a regular monthly amount (a cash advance) • As a credit line account that you draw upon as needed

With a reverse mortgage, the homeowner continues to own their home and receives cash in whatever way is preferable to them. As they receive cash, their loan amount goes up, and the equity in their home declines. A reverse mortgage cannot grow to more than the amount of the equity of the house. In addition, a lender cannot seek payment of the loan from anything other than the value of the house.

A reverse mortgage, plus accrued interest, does eventually have to get paid back. Repayment of a reverse mortgage happens when the last owner of the property named on the loan either dies, sells the home, or permanently moves out of the home. Before then, nothing needs to be paid on the loan.

A reverse mortgage should not be confused with a home equity loan or home equity line, both of which are other means of obtaining money for the equity in your home. With either of these loan vehicles, an individual must pay at least monthly interest on the loan amount received, or amount that they have drawn on their equity line.

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Alternatives to Reverse Mortgages

While usually an option that causes a negative emotional reaction, selling a home is an alternative to a reverse mortgage. The proceeds of the sale can be used to either rent, or purchase a smaller, more “age-friendly” home, while money leftover can be invested to provide additional income. This option should at least be considered and compared to a reverse mortgage so that an individual is making an informed decision.

Reverse Mortgage Counseling

Counseling is required in order to obtain certain types of reverse mortgages. Counseling is required before an individual can obtain a Federally-insured Home Equity Conversion Mortgages (HECMs). Even if counseling is not required for a particular reverse mortgage, individuals considering a reverse mortgage should seek either counseling or the advice of a qualified financial adviser.

Government Contract Proposal Writing Tips

Federal contracts are a very lucrative business. However, learning how to acquire projects takes time, effort and investment. Proposal writing for government contracts is by no means a simple process. However, if you attempt to respond to the agency’s Request for Proposal (RFP), you will have to bring more to the table than just having a good technical writer. The reality is that the “status quo” no longer gets the win. You have to do more than the basic RFP requirements.

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Agencies are now leaning towards trade-offs to justify their best value determinations. Lowest price does not necessarily get the award. As former government contracting officials and members of source selection teams, we have actually reviewed eloquent proposals and perfected efforts by technical writers – we know firsthand that only the proposals that have substance and give the government added value and what source-selection officials want to know actually win the contract. The agency wants to feel like it is getting a good deal – not just reviewing bids with the basic solicitation criteria.

Reasons Why Government Proposals Fail: The first thing to consider when responding to a multi-million dollar offer is whether you have the budget to do what it takes to win. Successful companies spend anywhere from $13K to $20K for proposal writing services for a contract valued anywhere from $1M-5M. Never just cut and paste old proposals for an upcoming project. Agencies spot templated responses from a mile away and automatically put your package proposal to the bottom of the pile.

When responding to a government Request for Proposal, we have found that the following summarizes why proposal fail.

1. The response is not specific and to the point. Government RFP preparation requires the bidder to articulate the key areas to the solicitation. Never try to write a book and expect the agency to understand what you are trying to say. Proposal writers must be very specific and to the point.

2. Too much focus on “we can do the work” instead of “how we are going to do the work.” When grading proposals, the government places a significant emphasis and weight on the bidder’s technical approach. You have to spell out HOW you actually perform each phase of the Statement of Work. Summarizing will not help you.

3. No emphasis on your risk management and quality assurance. One of the fatal mistakes in government contract proposal writing is that bidders miserably fail to address and highlight their risk management and quality assurance. The government is not going to award a contract worth millions and never pay attention to the risk involved. Each proposal writer that understands government contracting must include risk management into the response to the solicitation. If you don’t, then your competition certainly will.

4. Failure to understand best value considerations. In federal contracts, price alone is not the criteria for award and neither is past performance. Sometimes, agencies will consider a price/ past performance trade-off when considering awards. However, effective proposal writing includes more than just these factors. Congress has suggested that taxpayers’ money should get the “best bang”. Since the government generally buys commercial services and products, bidding on government contracts should incorporate factors commonly used in the commercial industry. This includes warranties, discounts for volume, accelerated schedules etc. At Watson & Associates, our success stems from the ability to help you to see the big picture in federal procurement and educate the agency when writing government proposals.

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5. Relying too heavily on teaming partners and subcontractors. Failure to understand that teaming rule can be the kiss of death in government proposal writing. Many companies that offer proposal writing services do not understand how to avoid this commonly-made mistake. Although FAR 9.6 allows for teaming and subcontracting, there are also limitations on subcontracting. When proposing a subcontractor or teaming partner, you have to understand the legal limitations. Failure to correctly propose your team can subject you to a bid protest based upon affiliation. Bidding on government contracts means that the prime contractor (you) must perform the required percentage of labor costs and not pass through the critical aspects of the project. This is yet another reason why our experience as bid protest and government contract attorneys adds value to our proposal writing services.