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Dear Mr. Berko:

Dear H.S.:

Reverse annuity mortgages, or RAMs, those things that so many folks have a hard time understanding, can be a lifesaver for many seniors and soon-to-be retirees in this economic climate. RAMs are lifesavers because they allow a homeowner to put the years of equity accumulated in his or her home to work and provide a tax-free income, guaranteed by the government, every month for life. Taking out a RAM today could also be one of the wisest investments you can make because it locks in the downside value of your home and allows your heirs to participate in any potential increase in market price.

There is no stigma attached to a RAM. If your good neighbor seems to look down her nose at you because she thinks a RAM is “unseemly,” then she’s not really a good neighbor. But she might be impressed if you tell her you are going to use that tax-free monthly income of $1,492.16 to accumulate a portfolio of tax-free municipal bonds that pay 6 percent. I’ll bet she’d approve of that.

And you can tell her that: 1. If she’s 62 or older, then she too can get a tax-free monthly income; 2. She can RAM a condo, a townhome, some manufactured homes and even a small multiple-unit dwelling; 3. Lump-sum cash advances are available instead of a monthly income plan; 4. She can use the money to buy crack cocaine, a three-month cruise on the Ohio River or anything else she wants; 5. She will never have to repay the mortgage as long as she lives in the house; 6. Her heirs are entitled to all remaining equity above the mortgage amount; 7. Even if her home has a regular (small) mortgage, she too can qualify for RAM; 8. There are no income, employment or credit requirements if she wants a guaranteed, monthly, tax-free income, too.

The papers you posted are standard forms and pretty much used by all RAM salesmen. However, the forms are blank and your property description, the percentages, monthly income payments, fees, interest rates, commissions, values, legal, insurance, notary costs, copy and recording costs, and hundreds of other blanks are not filled in. As a result, I cannot “look over the papers” and advise you. As you can see, there are 72 pages of documents, devilishly detailed, and I must tell you that the devil is in the details.

Because RAMs are becoming very popular, grifters — like those phony debt or credit counselors — are sprouting along every highway and byway figuring out how to turn this thing into a “con.” So I cannot stress strongly enough how important it is that the representative and company counseling you are as pure as the driven snow. For most folks, their home is their biggest single asset. The wrong advice can make the rest of your life a living hell.

I probably know more about RAMs than most RAM experts, because I spent more than six months reading hundreds of articles, interviewing a dozen RAM salespeople, talking to some RAM specialists at the U.S. Department of Housing and Urban Development, and researching 21 of the hundreds of mortgage companies that promote these things. I probably did this to excess. But last year I signed pages and pages of papers putting the equity in my house to work for my wife and me. Now, we get a tax-free check every month for $1,757.92.

It was an exhaustive search, but worth every hour by tenfold because there’s enormous room for monkey business in this business, and I was able to avoid all that. Meanwhile, I’ve sent you the name and phone number of the bank I used, which is a huge, publicly traded bank not involved in the subprime mortgage business. They are easy to talk with.

I have recommended this bank and a RAM counselor to readers across the country because they make the process as smooth as silk cream. And, by the way, this bank also handled a RAM for my sister, who is a stickler and a real tough nut. It was flying colors for her, too.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@comcast.net. © 2009 Creators Syndicate Inc.