FHA Lending Limit for Reverse Mortgages Extended

Posted on December 7, 2012 by sidac

FHA Lending Limit of Reverse Mortgage $625,500 We got word today that FHA is extending the Lending Limit of $625,500 for reverse mortgages through December 31, 2013. This is good news for those who have a a higher home value!

To determine the loan amount on the FHA HECM (Home Equity Conversion Mortgage), the lending limit or home value, whichever is lower, is used. For example, the value of one’s home may be $900,000 but FHA will use the Lending Limit of $625,500 to calculate the loan amount for a FHA HECM. For reverse mortgages the age of the borrower and the Expected Interest Rate of the program chosen are also used to determine the Principal Limit or Maximum Loan Amount.

For more information see Mortgagee Letter 12-26.

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-Ck

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Have Senior Homeowners With Reverse Mortgages And Tax Defaults Really Gone Into Foreclosure and Lost Their Homes? You Are In For A Surprise!

Posted on October 28, 2012 by sidac

With all the media hype that seniors are losing their homes because they have a reverse mortgage and have tax defaults, the latest data shows the homework wasn’t done before reporting their stories. Trying to paint a negative of reverse mortgages is widespread without the data to back it up.

The fact is rather than foreclose, reverse mortgage servicers made advancements on behalf of borrowers for their insurance and property taxes defaults. And since January 2011 when FHA introduced loss mitigation tools the servicers have been working with the borrowers who were delinquent on their property taxes and insurance. As a result, 20% of those in these situations have been repaid. Another 60% of the defaulted borrowers have begun making repayments.

According to HUD’s Director of Single Family Program Development, Karin Hill, the default rate for the more recent Home Equity Conversion Mortgages (HECMs) is lower than the loans done previously with the worst performing being from 2007 and 2008 which account for just under 40% of all those in default.

The first four years after origination the probability of default increases then slowly declines over time noted Hill. Younger borrowers (62 to 65) are the most likely to default however they are making more repayments than older borrowers.

While we haven’t received data on those who have not made repayments, servicers and HUD remain committed to assist senior homeowners to remain in their home. It shouldn’t be assumed that reverse mortgage borrowers have gone into foreclosure. It’s important to remember that even without a reverse mortgage in place, these homeowners who haven’t paid their property taxes face foreclosure or tax forfeiture through the county. The reverse mortgage is not the reason senior homeowners go into foreclosure.

While the headlines report senior homeowners are losing their homes because of a reverse mortgage and tax defaults, the data shows otherwise; it’s just more myths about reverse mortgages.

Resource: The National Reverse Mortgages Lenders Association (NRMLA); data presented at the 2012 Annual Meeting & Expo by senior HECM managers.

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

What To Consider When Choosing Your Reverse Mortgage Originator

Posted on September 16, 2012 by sidac

When you have decided to explore or to proceed with a reverse mortgage you want to make sure you are working with an originator you are comfortable and has the knowledge and experience to guide you through the process. Originating the reverse mortgage takes patience, kindness, a “social worker” attitude and a teacher aptitude versus a sales approach. There is a difference in originators with their expertise, knowledge and experience with reverse mortgages along with the customer service they provide.

To help ensure that you are working with an originator (also referred to as Loan Officer/Reverse Mortgage Specialist, Reverse Mortgage Advisor or Reverse Mortgage Consultant) who is experienced, knowledgeable and meets the industry’s standards, consider the following when choosing your reverse mortgage originator. Yes, the list is long but knowing the answers to this list of questions will help support and protect you.

How much experience does the Reverse Mortgage Originator have with reverse mortgages – not just conventional mortgages as they are quite different?
- Work with experienced reverse mortgage originators who specialize in reverse mortgages. Ask how many years they have been originating and if/what training they have received.

How many reverse mortgage loans has the Reverse Mortgage Originator done?
- Experienced loan officers have originated hundreds of reverse mortgage loans. Ask how many they have originated, not just their company or lender, but them personally.

Does the mortgage company and Reverse Mortgage Originator have the required federal and state licensing?
- Mortgage Brokers/Originators have completed federal and state education, testing and licensing requirements. FDIC Banks and Credit Unions are registered but have not completed the education, testing and licensing requirements.
- Ask your originator to provide documentation that they personally are licensed and/or look them up at the National Mortgage Licensing System – if the person you are talking with is not listed they are not licensed to originate loans.
  - Make sure they are licensed in the state you are located. In Minnesota all individual mortgage loan officers (performing marketing, educating, originating functions) have to be licensed. This includes completing the application – the originator should be guiding you through the application and explaining the documents you are signing, not just having a notary at the application as they are not approved to provide you information or explanations on the documents you are signing.

Who is the mortgage company’s lender sponsor?
- Originating mortgage broker companies (Third Party Originators) have to be sponsored by a Reverse Mortgage Lender who is FHA licensed.
Do they offer all reverse mortgage programs available for FHA’s HECM and when available, proprietary (private)?
- Experienced originators should offer and be familiar with all the various programs available.
If you are in a manufactured home, log home or unique property, do they work with a lender who will accept these properties?
- Many lenders no longer accept these properties but some do and as a broker, we, Reverse Mortgages SIDAC work with lenders who do accept these properties.

Do they assist you in determining which program is most suitable for your needs?
- Experienced originators should discuss the various programs and help you to assess the program most suitable for your needs. Originators should be showing you at least 3 if not 4 options. Is the adjustable rate program better than the fixed rate program for your situation. Are they discussing how you may be able reduce the upfront Mortgage Insurance Premium (MIP)?

Do they just try to “sell” the program to you or do they help you determine if the program is appropriate for your situation?
- An originator should not pressure you or sell you a particular program, they should discuss the various programs and options and have YOUR best interests at heart, i.e. is an adjustable rate better than a fixed rate for your situation.

Will they meet with you face-to-face for an information session and the application? Or do they just mail you the application package or send a notary to the application?
- Because of the complexities of the program, originators should meet with you face-to-face to complete the application package. These sessions normally take around 2 hours to review all the documentation and insure you understand what you are signing. Don’t sign a package that is mailed to you or one where a notary is observing your signature – find an experienced originator who is local/in your state to work with you.

Do they disclose ALL information and identify ALL costs, explaining the program(s) and details and terms accurately and clearly so you understand them?
- Originators should be willing to disclose and discuss all information regarding reverse mortgages in terms and a way so you understand them. They should welcome your questions and be able to answer them to help ensure you have an understanding.

Do they know what costs are not allowed by FHA?
- HUD regulates the fees and a mark-up of fees are not allowed – you should only be paying the actual cost of the service. Your originator should know which fees are allowed by HUD and which aren’t. They should fight for you if a title company is charging processing or “junk” fees. (Many charge processing fees without the lender or originator addressing it with their title company.) The cost of the settlement statement should reflect this actual amount.

Where are their loans processed?
- Your loan should be processed in an office where they can provide a personal touch vs sending them across the country to a processing center.

How fast do they process their reverse mortgage loans?
- Because the rates can change so quickly, processing (application to closing) should be able to be completed in 30 to 45 days under normal circumstances. If additional documents are needed from you and you don’t provide them, the processing could take longer.

Who does the processing of the reverse mortgage loans? Does the processor have experience processing reverse mortgages, not just conventional mortgages? How much experience does the Reverse Mortgage Originator have with processing and solving the issues that arise during processing?
- Because reverse mortgages are different than forward mortgages, the processor should have experience with reverse mortgages. Originators should also have an understanding of the processing and assist in solving any issues that arise during the processing – they should not just be focused on getting the sale and then moving on.

What type of customer service do they provide? Do they have testimonials and/or references?
- Experienced originators should pride themselves on their customer service and be able to provide testimonials and references from their reverse mortgage clients – ask for them.

Will they (the Reverse Mortgage Originator) answer questions and continue to provide customer service once the loan is closed?
- Originator’s customer service should include being available even after the loan is closed. If they don’t have a lot of experience and/or they move from one lender to another you may not get your future questions answered.

Does the Reverse Mortgage Originator have the knowledge and experience on how the reverse mortgage and other Minnesota programs interact? Programs such as Medical Assistance/Medicaid, Elder Waiver, home improvement loans from cities and counties.
- Originators should be familiar with how the reverse mortgage interacts with other programs. If they don’t find a different originator to originate your loan. You may not need this now, but you may in the future and need assistance with this.

Does the Reverse Mortgage Originator have the knowledge and experience with the requirements of the reverse mortgage if there is a power of attorney, guardian or conservator, a bankruptcy, Trust or Life Estate?
- Originators should have knowledge of what the requirements are or you may start your loan but it may not make it through underwriting or be insured by HUD if your loan doesn’t meet their requirements.

Do they or the companies work with (mortgage company, lender, underwriter, servicer, etc.) offer financial or insurance products in addition to the reverse mortgage? Are they trying to cross-sell (selling more than one product) during the origination of your reverse mortgage? Will you be contacted and offered other services such as financial or insurance products by them or the companies they work with after the loan is closed?
- Cross-selling is not allowed. Originators should only specialize in reverse mortgages and not sell or encourage you to purchase other products. You are not required to purchase annuities, insurance or financial products with your reverse mortgage proceeds.

Are you treated with respect and dignity?
- You, of course should be treated with respect and dignity. If you feel you are not, find a different originator.

Do they protect your privacy and confidentiality and not distribute personal financial information to any third party without permission from you?
- To protect against identity theft you want to be assured that your information is private and kept confidential. Ask what their policies and procedures are.

Do they encourage you to discuss the loan transaction with family and/or trusted advisors?
- Originators should encourage you and welcome talking with your family and/or trusted advisors about your decision to do the reverse mortgage. But respect you if you chose otherwise.

When completing the application do they leave you copies of what you have signed and copies of the sample closing documents?
- At the time of application or within three days, originators are required to leave you copies of what you signed including the calculations and Good Faith Estimate, booklets, and samples of the closing documents. If you do not receive these, request them, if you have problems receiving them, change to a different originator.

Do they provide a list of FHA counselors without steering you to a particular one?
- HUD does not allow an originator to steer or be involved in your choosing or receiving counseling. Minnesota law requires borrowers be counseled by a counselor located in Minnesota, they cannot choose any of the national counselor.
Are they familiar with the Minnesota state laws (or whichever state they are originating in)?
- If an originator is originating in your state they should be familiar with the state’s laws, i.e. Minnesota has some particular laws that pertain to reverse mortgages – all originators are, unfortunately, not familiar with them.

Be cautious that you do not complete an application or give the originator the counseling certificate until you have made your final decision of the originator you are choosing. Once an originator or lender has the counseling certificate they can obtain a FHA number and lock you into using them when they might not be your choice of originator or lender.

Be educated on reverse mortgages and work with an originator and lender who is experienced, knowledgeable, meets the industry’s requirements and fulfills the above list of expectations.

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-YR

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Reverse Mortgages Provide Independence

Posted on July 4, 2012 by sidac

July 4^th we celebrate Independence Day in America honoring the day our country signed the Declaration of Independence. Signing the reverse mortgage documents is a way for seniors 62 and older to sign their own declaration of independence.

Independence is defined as “freedom from the control, influence, support, aid, or the like, of others.” This fits senior’s attitudes, they want to maintain control of their life, make their own decisions and not depend on others for assistance. They may be short funds for maintaining their lifestyle and sometimes they will eat cat or dog food because it is cheap and they do not want to rely on their children. Yet I’ll hear, “I want to leave my house as an inheritance to my children.”

Let me share a story of one of my clients, I’ll call them Ted and Anna. He was 91, she was 87. Being proud, they didn’t want to discuss their financial situation. However, their son-in-law finally talked to them about doing a reverse mortgage. When I met them and we started the reverse mortgage process, the children and I were told they were doing the reverse mortgage so they could put new linoleum on their kitchen floor. Once the loan was closed I was informed by their children that they had indeed put in the new linoleum along with new windows and they bought some new furniture. The kids were going to Ted and Anna’s and were told, “Don’t pull in the drive way, we just had it blacktopped.” When Ted and Anna went out to eat with their kids, they could pay for their kid’s meals too making them feel good that they could treat their children to a meal. Then one day the mother and daughter were sitting at the kitchen table and mom shared that before their reverse mortgage they used to go 3 days at the end of month without food or even milk because they would run out of money from their Social Security. As they were sitting there and looking at the paper, mom exclaimed, “Look, Depends are on sale, I can now stock up.”

While Ted and Anna were too proud to let their children know their financial situation and they didn’t want to depend on them to assist with their living expenses, once they signed the reverse mortgage documents they kept their independence and had funds for their needs and desires. This also improved their dignity.

Unfortunately while not wanting to rely on their children and wanting to leave their home as an inheritance to their children, seniors are doing without. This isn’t what their kids want – they don’t want their parents doing without so they can have an inheritance. Kids actually want their parents to have funds to remain independent.

Then we have the kids who are taking care of their parents by paying for groceries, meals when they go out, paying their bills, taking time from their busy schedules to clean their house, provide home care, and helping meet their other needs. This can have a negative impact on these kids’ finances. Yet their parents don’t want to use the equity in their home and do a reverse mortgage now just so they can leave an inheritance for these kids. In essence the kids are using their funds to take care of their parents now in exchange for an inheritance after their parents are gone.

Neither one of these scenarios make sense. Why be insistent on leaving an inheritance to the kids while you’re doing without now? Why depend on your kids and use their money to take care of you today so you can leave them an inheritance? They want you to have your independence now and they aren’t looking for the inheritance when you need to funds now. Actually the best inheritance you can leave your children would be to take care of yourself so they don’t have to worry about you.

Improve your cash flow during your retirement – sign your own Declaration of Independence with a reverse mortgage – then celebrate your independence.

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Are “Hefty Fees” Really A Drawback of the Reverse Mortgage?

Posted on May 6, 2012 by Beth Paterson, CRMP

An all too common statement is that a drawback of the reverse mortgage is the hefty or high up front fees. But are they really hefty? Are the fees really a drawback?

First, have you looked at the fees to obtain a conventional mortgage? Do you realize the reverse mortgage fees compare to a conventional mortgage with the FHA Mortgage Insurance Premium being the difference? I’ve done side-by-side comparisons.

These comparisons reflect the third-party fees, including the appraisal, credit report, flood certificate, title fees, recording fees, Minnesota Mortgage Registration Tax, etc. are almost identical. Actually because HUD regulates the fees, mark-up and junk fees or processing fees aren’t allowed so the third-party fees may even be a little less than a conventional mortgage.

Another fee associated with both the reverse mortgage and a conventional mortgage is the origination fee, the fee that covers the lender’s time and costs associated with originating the loan including: loan officer’s and staff’s salary, licensing, administrative costs, business overhead (computers, electricity, health insurance, marketing, processing, underwriting,) etc. The underwriting fees are generally additional fees on conventional loans but have to be included in the origination fee on FHA reverse mortgages loans.

On a conventional mortgage one can “buy” a lower interest by paying a higher origination fee or a lower interest rate with a higher origination fee. The reverse mortgage is similar however the rate versus paying an origination fee or not is determined by the product (fixed or adjustable rate) and what the lender sets as allowable. For example, with the fixed rate one may have zero origination fee but the interest is a set amount determined by the lender or there may be a lower interest rate but the FHA allowable origination fee is included. (2% of the first $200,000, 1% on thereafter, with a cap of $6,000). Again the fee is comparable between a reverse mortgage and a conventional mortgage.

The fee that really makes the difference from a conventional mortgage is the FHA Mortgage Insurance Premium (MIP). The most common reverse mortgage, and only one available in Minnesota, is the HUD Home Equity Conversion Mortgage or HECM. With the Standard Reverse Mortgage the up-front MIP is 2% of the home value. (The MIP on a forward FHA loan is currently 1.75%.)

The many benefits of paying the FHA MIP on the reverse mortgage include:

Guaranteeing the funds are available for you.
Guaranteeing the lender against default or shortfalls
Keeping the interest rates lower, the interest rates have historically been lower compared to other mortgages.
Providing a line of credit growth rate (available only with reverse mortgages).
Ensuring as a reverse mortgage it is a non-recourse (no personal liability) loan; FHA makes up the difference if the loan balance is higher than what the home can be sold for.
Requiring counseling by a third-party HUD trained and approved counselor.
The HECMs are highly protected. See my Blog article “You Need To know Reverse Mortgage Borrowers Are Highly Protected.”

One must understand that the reverse mortgage is an open-ended term loan (the due date on the mortgage is the youngest borrower’s 150th birthday*) with no limit to how high the balance can grow and the collateral is only limited to the property (a non-recourse loan with no personal liability to the borrower or the heirs). With FHA’s generous allowance of proceeds, not based on income, assets, or credit scores, some reverse mortgages will end up with loan balances higher than the value of the home either due to the current declining home values or the nature of the loan with no monthly payments being made and accrued interest and on-going FHA MIP (essentially one is borrowing these fees each month). Therefore the MIP and other closing costs are necessary to make the program viable and are not a drawback to the reverse mortgage.

When comparing the costs of a conventional mortgage to the HECM Saver program which reduces the upfront MIP to .01%, the fees are essentially the same. However, in exchange for the reduced upfront MIP, reverse mortgage borrowers receive fewer funds and the interest rate is higher.

It’s important to note that the fees become part of the reverse mortgage loan balance – there are no out-of-pocket fees other than the cost of the appraisal. So borrowers are not required to come up with the money to cover the fees before they do a reverse mortgage.

If one thinks about it selling one’s home could also be considered expensive with similar fees to the reverse mortgage (the generally higher real estate agent’s commission and again the FHA MIP is the difference). Are the real estate commission and closing fees a drawback to selling one’s home?

Besides looking at the costs of a conventional loan or selling one’s home, how expensive are credit cards? While they don’t have up front costs, the interest on credit cards can be outrageous which over time this can make the credit card expensive. We often find seniors have high credit card debt because that is what they are using to finance their living expenses. The cost of credit cards don’t seem to be a drawback, people still get and use credit cards.

If a senior can’t afford to make mortgage payments, if they need funds for repairs, for home care or medical expenses, for daily living expenses, for the extra elbow room, funds to make that trip for a family reunion or wedding, or even to be able to check something off their bucket list, the benefits may outweigh the costs. The security, independence, dignity and control and peace of mind received from the reverse mortgage may outweigh the costs.

Do you not refinance or purchase a home because the of the fees on a conventional loan? And what about the costs of surgery? Would you not have surgery if it would improve or save your life just because of the fees? The cost of food is going up but do you do without food because of the costs? Not if the benefits outweigh the costs, right? Well, if the benefits of the reverse mortgage outweigh the costs, then the fees are not a drawback of the reverse mortgage.

*The reverse mortgage is due and payable when the home is no longer the primary residence of the borrower(s), i.e. when they sell, move, die. The due date on the reverse mortgage is the 150th birthday of the youngest borrower rather than a 15 or 30 year term on a conventional mortgage.

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

A Reverse Mortgage Doesn’t Leave An Inheritance. But How Are You Going To Meet Mom’s Needs Today?

Posted on April 23, 2012 by Beth Paterson, CRMP

“I want to leave an inheritance for my kids.” “I want my son to get my house.” “The reverse mortgage will eat up my inheritance.” “The reverse mortgage isn’t good for the kids.” “The reverse mortgage should only be done with those who don’t have children.” These are statements that are often seen or heard when a reverse mortgage is mentioned. My question is, do you, the children, have the money needed to cover the costs of mom or dad’s needs today if they don’t have the money and don’t do a reverse mortgage?

Let me share a story. As I always do, I have a discussion on the needs and desires of one who is considering a Home Equity Conversion Mortgage (HECM) or a reverse mortgage. In this one particular situation, the woman, Chris, was living off her Social Security income of about $600 a month. She needed new teeth, new glasses, some new clothes, and her home needed some repairs. She loved going to plays but couldn’t even afford the community plays for $5 to $10. Doing a reverse mortgage would help Chris “live with more” so she completed the application.

A few days later she called to say she decided not to proceed. When I inquired why the change, she replied that her son didn’t want her to do it. After some exploratory questions as to why, she said her son wanted her home after she had passed away so he could rent it out and make money.

How outrageous is this? Was she really going to do without all the things she needed as basic necessities not to mention just being able to have some money for a few extra things to enjoy life while she’s still alive just so her son could make money off her house after she passed away?

While I was astounded by this response, I kept my tongue in check and calmly asked her if her son was going to provide the money she needed now or was she going to do without the glasses, teeth, clothes, and home repairs so her son could benefit after she passed away. She said, “Of course not, he doesn’t have the money to help me.”

Is living from Social Security check to Social Security check just to get by and maybe doing without some of the things in life that give dignity such as having lunch with friends, getting one’s hair done, or having cable TV really a good option over a reverse mortgage? Why should one be more concerned about leaving an inheritance than having their independence and control of their life and living comfortably? Why do children think they deserve an inheritance rather than their parents being able to live comfortably, have security, independence, dignity and control of their lives? Aren’t these the same things every one of us wants? Why would you deny your parents?

Even if one’s children are able to help their parents today, do their parents really want to be dependent on their children? What happens if “life happens” to their children, they lose their job, get sick, have to come up with money to pay for their kid’s college, etc. and they no longer have the funds to help their parents? This can impact everyone!

What if one needs home care or has medical expenses? Why should one do without needed care so they can leave an inheritance? Why do children think they should receive an inheritance over their parents having the dignity of paying for their own care and expenses?

If one moves into senior housing, whether independent living, assisted living or skilled care, does one really think there will be funds left to leave for an inheritance? Or will the children have to help pay for the senior housing? Whether private pay or services paid by Medicaid or other government funds, there may not be an inheritance.

And whose money is it anyway? Who should benefit from the use of funds or assets that the senior worked so hard for? Shouldn’t the money and assets be used for whatever one’s parents need or want?

Many seniors say, “My kids are doing better than I am.” This is often the case but even if this isn’t the case, why should one be concerned about leaving money after their gone?

A reverse mortgage is a loan against one’s home to allow seniors 62 and older to remain in their home with security, independence, dignity and control. The most common, and only one available in Minnesota, is the FHA insured HECM. The reverse mortgage offers many benefits including no monthly mortgage payment requirements, and no income or credit requirements to qualify for a low interest rate. The loan is due and payable when the home is no longer the primary residence of the borrower(s) or on the 150th birthday of the youngest borrower. As a non-recourse loan, if the loan balance is higher than what the home can be sold for at fair market value, the borrower or their estate are not responsible for the difference. And the opposite is true too, if the loan balance is lower than what the home is sold for, the borrower or their estate receives the difference.

The borrower remains the owner of the home with the title staying in the name of the borrower(s). In addition, the reverse mortgage has many protections, likely more than any other financial product or service. To learn what these are read, “You Need To Know Reverse Mortgage Borrowers Are Highly Protected.”

I’m happy to say Chris did proceed with her reverse mortgage. And for the last six years I’ve received at least one call, sometimes a couple calls, a year saying she’s so relieved to have the money to meet her needs. Besides the initial needs, she has had funds to fix her car when it needed some repairs, to cover some medical expenses and she had funds to take a trip to attend a family wedding. And yes, she’s even enjoying the community plays every now and then.

Once Chris passes away her son will have the opportunity to keep the home by obtaining a conventional mortgage to pay off the reverse mortgage. If he’s renting the property out, the rent payments he will be receiving will cover the mortgage payment – he could still make money if priced accordingly. In the meantime Chris is remaining in her home with the security, independence, dignity and control she deserves and enjoying her life.

So what do you think is better? Doing without today just so a child can have an inheritance or the senior being able to fulfill one’s needs and wants while they are alive?

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Seniors Find Hope and Opportunity With Reverse Mortgages

Posted on April 8, 2012 by Beth Paterson, CRMP

It’s the season of hope and new growth and opportunity. Flowers are blooming, trees are budding, the grass is growing. As with the season, seniors can find this hope, new growth and have new opportunities that they can remain in their home with security, independence, dignity and control. And like the many types of flowers, buds and new growth, the variety of how the reverse mortgage funds are used and numerous, basically endless. Here are some of the ways seniors have found hope and opportunity with their reverse mortgage.

Stay in one’s home where they may have raised their family, are familiar with the neighborhood and their neighbors and where they usually want to remain.
Pay off a current mortgage to eliminate the monthly mortgage payments.
Save one’s home when faced with foreclosure or tax forfeiture.
Have improved cash flow with no monthly mortgage payments.
Have funds for making home improvements or home modifications.
Retire and not feeling like you have to work just to have money to pay the bills.
Have cash flow to be able to pay taxes.
Have funds to pay for home health care.
Have funds for some assistance with home care or companion services.
Have funds for adult day services.
Have funds for medical expenses and prescriptions.
Afford going to the dentist.
Afford new eye glasses.
Have funds for the needed hearing aid.
Have funds to cover long term care expenses.
Cover everyday living expenses.
Not rely on credit cards.
Not rely on children.
Have funds for the little extras in life, like:
- getting one’s hair done,
- having cable TV,
- buying groceries,
- going to lunch with friends,
- treating their children to dinner,
- going to community plays or the theater or a concert,
- taking the grandchildren to the zoo or a movie,
- Depends (I had a client say with their reverse mortgage they could now afford to buy Depends),
- being able to do hobbies.

Purchase a more dependable car
Afford transportation if one can no longer drive.
Afford the travel for the family wedding or reunion.
Take the vacation they have dreamed of all their life.
Protect some of their other retirement funds or investments where there might be taxes or penalties on withdrawals.
Purchase a new home to downsize and/or move closer to family
Have funds for emergencies.
Reduce financial stress.
Have funds to full fill needs and goals.
To live with security, independence, dignity and control.

It’s fulfilling to me to be able to help seniors find hope, growth, and opportunity with reverse mortgage (visit the links below for some stories). A reverse mortgage has given hope and opportunity to thousands of Minnesota seniors so they can remain in their home with security, independence, dignity and control even during trying times. If you know a senior who is looking for hope and opportunity, a reverse mortgage may be their answer.

To determine if a reverse mortgage is right for one’s situation, talk with an experienced licensed reverse mortgage expert to get the facts. Learn some of the facts at our website: www.RMSIDAC.com. “What to Consider When Talking With Reverse Mortgage Lenders” will help you determine questions to ask when choosing your originator.

Related articles of stories on how seniors have used the reverse mortgage and how it’s made a difference in their lives:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Senior Loses Home After Listening to “Reverse Mortgages Are Bad” Advice

Posted on March 1, 2012 by Beth Paterson, CRMP

I got a call from a 65 year old woman, Ann, inquiring about a reverse mortgage stating she owed over $20,000 in back taxes and was facing tax forfeiture in just a few short months. Ann had no other debt and her home was worth more than $300,000. Based on her situation, she wouldn’t qualify for a conventional or “forward” mortgage. Someone had suggested the reverse mortgage a solution to her situation.

I explained that a reverse mortgage is a mortgage with special terms for those 62 and older. As an FHA insured loan HUD oversees the Home Equity Conversion Mortgage or HECM providing protections like no other financial option. With the HECM there are no income or credit score qualifications *(see updated information below) and no monthly payment requirements. The home would remain hers with the title in her name. And the reverse mortgage funds could pay off her tax debt and she could leave the remaining funds in a Line of Credit with a growth rate for future needs including paying her property taxes going forward. Or if she chose she could receive monthly payments, a lump sum or a combination of these options.

I went on to explain that the loan would be due and payable when the home was no longer her primary residence or on her 150th birthday. If at the time the loan was due and payable the home was sold for more than the loan balance she or her estate would receive the difference in funds. Or if the loan balance was higher than what the home could be sold for, as a non-recourse loan she or her estate would not have to come up with the difference, the FHA Mortgage Insurance covers the difference.

She of course wanted to think about it. During a follow-up conversation she said she had talked with her brother who told her she shouldn’t do the reverse mortgage because they are bad. When I inquired why he thought they were bad, she didn’t have a response. I asked if her brother could come up with the funds to pay her back taxes… “Maybe.”

I reiterated the details and benefits of the reverse mortgage emphasizing that the funds could pay the back taxes and she would have funds in a line of credit for her future taxes and that she wouldn’t have to make monthly mortgage payments. (Borrowers are still responsible for paying property taxes and property insurance.) I also offered to meet with her and her brother to educate them on the details and facts of the reverse mortgage.

A couple weeks later during another follow-up conversation, she was still hesitant because of her brother’s advice. I again inquired if her brother could come up with the funds for her back taxes… “No, he doesn’t have that kind of money!” With an inquiry if she had another way of coming up with the funds for the back taxes… no she didn’t. And her brother didn’t want to meet to learn the details and facts of the reverse mortgage. I explained that if the county foreclosed on her home she would be losing around $280,000 in equity.

Time was getting down to the wire in order for us to have time to process the reverse mortgage so I did one more follow-up call. She said her brother warned her not to do the reverse mortgage because they were “bad” and expensive. I reviewed the costs explaining they compare to a conventional mortgage other than the FHA mortgage insurance. And even beyond that the benefit of the reverse mortgage outweighed the costs… saving her home from foreclosure and the loss of around $280,000 in equity.**

A few months later when I checked the county records, the county was the owner of her property.

Listening to her brother who did not know, and was unwilling to learn the details and facts of the reverse mortgage, Ann had lost her home and a lot of equity. With all the benefits and protections, the reverse mortgage would have made a huge difference in the quality of her life.

It was sad and unfortunate that she listened to the unwise advice of “Don’t do a reverse mortgage, they are bad.”

Next time you hear “Reverse mortgages are bad” or “Don’t do a reverse mortgage” or “One should wait until their 70’s to do a reverse mortgage” remember this story and how the reverse mortgage could have made a difference.

*In April 2015 a Financial Assessment was implemented to determine borrower’s ability and willingness to pay property taxes and insurance into the future. This safeguard help make the reverse mortgage more sustainable so borrowers can remain in their home.

**Property taxes are levied and collected by counties. When property taxes are past due after a certain amount of time (redemption period) they go into tax forfeiture. In most counties across the US, to get their money quickly, the county issues a tax lien certificate or a tax deed and will conduct a sale where the tax lien certificate or tax deed are sold at auction often for only the taxes, penalties and interest due. The winning bidder receives a legal claim to the tax debt or tax lien certificate. The property owner has the opportunity to pay off the debt and reclaim the property. If the owner does not pay back the certificate then the investor often gets the entire property for only the taxes, penalties and interest due.

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Why Are People So Resistant to Reverse Mortgages?

Posted on February 17, 2012 by Beth Paterson, CRMP

I was at a resource provider network meeting the other morning when a Minnesota County government agency talked about their financial and foreclosure counseling services. When I mentioned they should keep in mind that a reverse mortgage should be considered for homeowners over 62 the response was resistance. Here’s how the conversation went.

Me: “Keep in mind that a reverse mortgage may be an option for your clients who are homeowners 62 and over.”

Agency: “Our clients don’t qualify for a reverse mortgage.”

Me: “Why do you say that? Are they homeowners 62 and over?”

Agency with hesitancy: “Some, but not many.”

Me: “Well for those 62 and over a reverse mortgage may help them.”

Agency, again with hesitancy: “They are in foreclosure.”

Me: “But a reverse mortgage may help save their home from foreclosure.”

Agency, defensively: “But one spouse may not be 62.”

Me: “The requirement is that both borrowers be 62 so the younger one would need to be removed from the title, and while that is risky and not normally recommended, if it’s a matter of losing their home or being able to stay in their home, the reverse mortgage may be an option. It’s at least worth considering.*”

*I suggest they talk with an attorney so they are aware of the risks of removing a younger person from the title.

Agency: “But there may not be enough funds to pay off their mortgage.”

Me: “We can work with the banks to negotiate them taking the reverse mortgage proceeds as a payoff. It’s been done where the banks accept the reverse mortgage as a payoff. It can be a challenge but it is at least worth a discussion and a try. We have done some amazing things.

“All I’m saying is that instead of saying there aren’t options, we can’t help, the reverse mortgage should at least considered as an option and explored for those over 62.”

This conversation raises the question, why are people resistant to reverse mortgages when it can make such a difference in the lives of seniors?

Are they so hung up that it’s not their agency solving the problem they don’t think anyone can? Or is it they don’t want someone else to help? Are they afraid that someone else can help and they can’t? Is it because their funding depends on them solving the problem and it’s more beneficial to them to not help and not provide all options? Is it because they are a non-profit government agency and we are a private for-profit company? Is it they don’t think I should get paid for my services (after all as a government non-profit agency and as paid staff they are making a salary with sick days and vacation days while I’m commissioned, no paid sick or vacation days.)? Or is it they just don’t understand reverse mortgages?

I don’t understand why they or others wouldn’t want to offer an option that may benefit the seniors even if it’s not their program that solves the problem. Even if it helps just one person/couple, isn’t it worth it?

A reverse mortgage is a mortgage that has special terms for those 62 and older to use their equity while they still own and live in the home. Income and credit aren’t considered to qualify for an interest rate and monthly payments are not required during the term of the loan. The loan is due when the home is no longer the primary residence of the borrower(s).

The most common reverse mortgage, and only one available in Minnesota, is the HUD Home Equity Conversion Mortgage or HECM which is insured by FHA. The borrowers pay a FHA Mortgage Insurance Premium (MIP).

When the loan is being paid off, the borrower or the estate keep any difference between the loan balance and the sale price. As a non-recourse loan, if the loan balance is higher than the sale price on the home, the lender is repaid the fair market value and the borrower doesn’t have to pay the difference – the FHA MIP covers the difference. The loan documents spell out there is no personal liability to the borrower or their estate, unlike conventional mortgages that can get funds from the estate to cover the loan balance.

One of the other meeting attendees commented to me after the meeting, “It appears they don’t really care to be helping people.” That’s a sad impression to give when you are an agency paid to help the community.

I believe we all need to work together and offer options to help, whether non-profit, government or private for-profit. If the reverse mortgage is considered and explored but is not the right option, I want to be able to know about other options and people who may help so I can do referrals to someone who might be able to assist them. This is why I attend provider network meetings to learn about resources and options.

I wish others wouldn’t be so resistant to reverse mortgages when they can make such a difference for seniors.

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Eleven Statements To Listen For Indicating A Reverse Mortgage May Be Beneficial

Posted on January 19, 2012 by Beth Paterson, CRMP

When you hear any of these eleven statements from a homeowner 62 and older a reverse mortgage may benefit them. They should be encouraged to get the facts to see if a reverse mortgage is right for their situation.

“I want to stay in my home.”
“My only option is to move.”
“I can’t afford home health care.”
“We can’t afford a mortgage payment.”
“We can’t afford to make home repairs or modifications.”
“Not enough money at the end of the Social Security check.”
“I need help with keeping up my home with housekeeping or yard work.”
“I’m downsizing and moving.” or “I’m moving closer to my children.”
They need funds for retirement planning.
They can’t afford the little extras that would help them maintain and enjoy their life.
They want Security, Independence, Dignity, and Control which they are missing in some way now.

A reverse mortgage is a mortgage with special terms for seniors 62 and older. Some of the differences include income and credit scores are not considered to qualify for the interest rate and monthly mortgage payments are not required. Rather than a 15 or 30 year term, the loan is due and payable when the home is no longer the primary residence of the borrowers or on the 150th birthday of the youngest borrower. In addition, the reverse mortgage is non-recourse, which means if the loan balance is higher than what the home can be sold for there is no personal liability to the borrower or their heirs. If the home is sold for more than the loan balance, the borrower or their heirs receive the difference. The most common and only reverse mortgage available in Minnesota is the FHA HUD insured Home Equity Conversion Mortgage or HECM.

Options are available! When you hear any of the above statements remember a reverse mortgage may be the option that is the most beneficial to their situation.

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Minnesota Reverse Mortgages SIDAC

Minnesota Reverse Mortgage Information, Facts and News from the Experts Excelling in Service

Tag Archives: Reverse Mortgage

FHA Lending Limit for Reverse Mortgages Extended

Have Senior Homeowners With Reverse Mortgages And Tax Defaults Really Gone Into Foreclosure and Lost Their Homes? You Are In For A Surprise!

What To Consider When Choosing Your Reverse Mortgage Originator

Seniors Find Hope and Opportunity With Reverse Mortgages

Senior Loses Home After Listening to “Reverse Mortgages Are Bad” Advice

Why Are People So Resistant to Reverse Mortgages?