Reverse Mortgage Misconceptions Continue; You need to get the facts!

Confused about Reverse Mortgages FactsI’m amazed at how much misinformation continues about the reverse mortgage in the media as well as those who comment on these pieces.  Let me clarify the more common misconceptions.

Borrower’s do still own the home, not the lender or bank!  The reverse mortgage is a loan allowing homeowners 62 or older to use the equity while they still live in and own the home.  It is a valuable option to consider whether one has no mortgage or a conventional mortgage.  If they use the reverse mortgage to pay off their current mortgage the borrower’s cash flow will increase because they no longer have to make the monthly mortgage payment.

Everyone’s situation is different and one should consider their situation looking at ALL options including a reverse mortgage.  Get the facts, review information on HUD’s website, meet with a local originator to explore the details and how it will possibly work for your circumstances.  As I told someone the other day, one can’t make a good decision unless they have explored all the options.

Closing costs are comparable to any conventional mortgage…I’ve done side-by-side comparisons.

Selling and moving may not be the best option, especially if one wants to remain in their home.  The reverse mortgage can be less expensive than selling and moving.

Options for receiving the reverse mortgage proceeds include:

  • A Line of Credit (which as a growth rate so more funds become available based on the LOC balance).
  • Monthly Payment option – payments made to the borrower as tenure (for the life of the loan), term (an amount determined by the borrower for a specific period of time)
  • Lump Sum – funds drawn at closing
  • A combination of these.

A lump sum is a little risky but HUD has implemented some restrictions including limiting the amount one can access in the first 12 months to 60%, unless there are mandatory charges such as a current mortgage or judgements that are required to be paid from the reverse mortgage.

Better and more common options include: The line of credit with the growth rate can be a useful retirement planning tool and help pay long term care costs in the future.

The monthly payment options whether tenure or term can provide extra cash needed each month.  Maybe one could use an extra $100 or $200 a month so they don’t have to use credit cards to cover living expenses.

Some borrowers do a combination of these, taking some as a lump sum, a line of credit and monthly payments.

MN Reverse Mortgage Borrower Signing Closing DocumentsIt is a loan that does need to be repaid.  The loan does need to be repaid when the home is no longer the primary residence of the borrower(s) with some provisions for non-borrowing spouses.  If one does not pay property taxes, keep insurance on the property or does not abide by the terms of the loan, the lender may call the loan due and payable.  The actual due date on the mortgage is the 150th birthday of the youngest borrower.

The reverse mortgage uses all the equity.  While the interest is being added to the loan balance, this allows the senior homeowner the use of these extra funds during the term of the loan.  And the advantage of the reverse mortgage is it is a non-recourse loan, which means there is no personal liability to the borrower or their heirs, it is repaid from the value of the home only.  If the loan balance is higher than what the home can be sold for when the loan is due, the FHA Mortgage Insurance covers the difference to the lender; the borrower or their heirs or tax dollars don’t cover this difference.

Having Reverse Mortgage Documents ExplainedReverse Mortgages Are Complex.  What financial product or even other products aren’t complex if you don’t understand them?  Do you understand all the details of a conventional mortgage?  Your car loan?  Do you understand and use all the features of your smart phone?  Yes, there are many details with the reverse mortgage, that’s why it’s important to take the time to understand them and work with a reverse mortgage originator will will take the time educate you and not pressure you.

Get the facts!  As with any financial product, or any purchase for that matter, one should get the facts and understand the terms.  With the reverse mortgage there are many protections in place including they are required to obtain 3rd party counseling where the counselor explains the product and the terms. The loan officer they are working with should also be explaining the features and terms of the reverse mortgage.  Don’t jump to conclusions! Understanding them, they might find the reverse mortgage is a viable option for their situation.

© 2011-2016 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety and without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-1ny

Related Articles:

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.

Who is REALLY responsible for reverse mortgage borrowers facing foreclosure

Reverse Mortgage FinancingStories about seniors losing their homes “because” of a reverse mortgage are hitting the media headlines.  They are painting the picture that the reverse mortgage is a bad option.  We recently received a call from a reverse mortgage borrower, not our borrower but from another lender, who is facing foreclosure.  We’ll call her Mary.

Mary called to see if we could help her.  She took her reverse mortgage out around 10 years ago, on a home valued at $200,000.  Through the years she benefitted form the reverse mortgage by using the proceeds for her needs and wants.

She got behind on her taxes by $20,000. This means she is at least 5 to 6 years behind on paying her taxes if her property taxes were around $3,000 to $4,000 a year, likely for her home value in Minnesota.

The terms of the reverse mortgage, as with any traditional mortgage, require borrowers to pay property taxes and insurance on their property.  Even if one doesn’t have a mortgage, it is the responsibility of homeowners to pay property taxes on their home.

In Mary’s case, as has often been the situation with reverse mortgages, the lender paid the back taxes and reached out to her to work with her to repay the amount they had paid on her behalf.

She said she can only pay $100 a month.  At this rate it would take her 200 months or 16 years to repay this.  And she still has to pay her current taxes.

The terms of reverse mortgages don’t allow for repayments for this length of time.  Therefore the lender is telling her she needs to bring her back taxes current or they need to foreclose.

As a homeowner, who pays your property taxes?  Even if your taxes and insurance are escrowed with your conventional mortgage, you are still paying the property taxes, just processed through the lender.  Paying property taxes are a responsibility of being a homeowner.

Think about reverse mortgageThink about getting behind on your property taxes…eventually the county will foreclose.  With the reverse mortgage, the lender paying the back taxes on the borrower’s behalf, and trying to work out a payment plan, could mean foreclosure doesn’t happen.  In any case the lender paying the back taxes on behalf of the borrower extends the time before foreclosure could happen.

If the borrower works out a payment plan, keeps to it and repays back taxes in a reasonable timeframe and keeps their taxes current, then the loan is not called due and payable.  However, if one isn’t able to find a reasonable payment plan and keep their taxes current, foreclosure will happen, whether by the county or by the lender.

And the reason for the foreclosure is the borrower did not pay their property taxes.  Not because they had a reverse mortgage.  They would be facing foreclosure even if there was no reverse mortgage.

Unfortunately as the conversation showed, Mary doesn’t understand this.  She and the others written about in the media don’t want to take responsibility for their home ownership requirements.  They want someone else to take responsibility or to blame someone else.

Mary doesn’t think it’s reasonable for her to have to pay the back taxes because she can’t afford to pay them.  Her statement was, “I only get $1,000 a month, I can’t afford to more than $100 a month towards taxes.”

When asked about her being behind on her taxes and understanding it is her responsibility to pay them she stated, “The taxes are paid current.”  Then when reiterated they were current because  the lender paid on her behalf she acknowledged “Yes, they paid them.”

However she justifies that it was okay for the lender to pay taxes on her behalf and she shouldn’t have to repay them saying, “Well, the government bailed out the big banks but they don’t bail out the little guy.”

So she doesn’t think the lender should be requiring her to pay the back taxes. Really? Who should be paying her taxes?

The loan agreement on the FHA insured reverse mortgage requires borrowers keep taxes current and insurance on the property.  Mary kept insisting, “They are current, the lender paid the back taxes,” ignoring that it is her responsibility, not the lenders to pay property taxes.

Sadly she didn’t have an answer when asked how she was going to pay her current taxes or going forward.

In summary of the conversation, Mary thought the bank should be eating her debt, covering her responsibility of paying taxes, and she shouldn’t be losing her home because she can’t afford to pay the taxes in the past or going forward.

Educated Reverse Mortgage BorrowersBorrowers should take time to be educated and understand the reverse mortgage, or any mortgage or financial product. With the reverse mortgage they are required to obtain 3rd party counseling where the counselor explains the product and the terms. The loan officer they are working with should also be explaining the features and terms of the reverse mortgage. Borrowers then get to decide whether they choose to proceed. It’s their decision and they should not blame a product they chose for their circumstances.

Starting in 2015, a Financial Assessment is required to determine reverse mortgage borrower’s ability and willingness to pay property taxes and insurance into the future. This consumer safeguard for borrowers, along with other new protections for spouses, help make reverse mortgages more sustainable for seniors who want to remain in their homes. This assessment does take into consideration the occasional life circumstance where one may have been late on a payment.

Blaming the reverse mortgage for one’s lack of taking responsibility of general home ownership duties is misplaced by the media and the homeowners.

2016 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety and without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-1mN

Related articles:

Information is current as of date post published, program is subject to change 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 Homeowners’ Foreclosures Should NOT Be Blamed On Reverse Mortgages

HomeownershipWe are seeing articles in the media about seniors with reverse mortgages who are losing their homes to foreclosure.  Is this unfortunate?  Yes!  But let’s look at the reason rather than blaming the product, the reverse mortgage.

All homeowners regardless of age are responsible for paying their property taxes and keeping insurance on their home or risk losing it to foreclosure or not having funds to rebuild after damage to the home from a storm.  This is true whether one has a reverse mortgage, a traditional loan, a Home Equity Line of Credit (HELOC), or no mortgage.  Blaming the reverse mortgage for one’s lack of taking responsibility of general homeownership duties is misplaced by the media and the homeowners.

Several years ago I talked with a woman who was behind on her property taxes and the county was foreclosing on her.  She could have qualified for a reverse mortgage, paid the back taxes, improved her cash flow with funds in a line of credit (or for others paying off a current mortgage and eliminating the monthly mortgage payment) and have funds to pay future property taxes and keep insurance on her home.  Instead she listened to her brother who said reverse mortgages are bad, even though he had no basis for the statement and wouldn’t get the facts before making a decision.  By listening to her brother and not doing the reverse mortgage, the county foreclosed on her property.  She lost $280,000 in equity because she didn’t do the reverse mortgage and pay off the back taxes.

Stories about the county foreclosing on properties because one has not paid back taxes do not make the news…why?

Reverse mortgage maintains lifestyleThe reverse mortgage can, and has, helped those 62 and older have the funds to pay their property taxes and insurance along with other homeowner responsibilities.  More times than not we hear the stories on how the reverse mortgage has made a difference in the lives of seniors.  How it has given them funds to cover their needs, maintain or improve their lifestyle, plan for their future long-term care needs or purchase a new home so they can downsize, move closer to their children or buy their dream home.  See below links to articles on these uses.

The reverse mortgage lenders have reached out and worked with many borrowers who were delinquent in their property taxes and insurance to find a solution to help them get caught up on their late payments.  Some used reverse mortgage proceeds, others worked out a payment plan.  Because they have worked out a plan, these reverse mortgage borrowers are not facing the foreclosures.  Only those who did not respond to lenders’ and/or work out a repayment plan are facing the foreclosures.

As of April 2015 a Financial Assessment is required to determine reverse mortgage borrowers’ ability and willingness to pay property taxes and insurance into the future.  This consumer protection for borrowers helps make reverse mortgages more sustainable for seniors who want to remain in their homes.  This assessment does take into consideration the occasional life circumstance where one may have been late on a payment.

Be educated about reverse mortgagesBorrowers should take time to be educated and understand the reverse mortgage, as they should with any mortgage or financial product.  With the reverse mortgage they are required to obtain 3rd party counseling where the counselor explains the product.  The loan officer they are working with should also be explaining the features and terms of the reverse mortgage.  Borrowers then get to decide whether they choose to proceed.  It’s their decision and they should not blame a product they chose for their circumstances that likely benefited them over time.

© 2016 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

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-1lv

Related articles:

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

Do you wonder if reverse mortgages are so good, why more people aren’t doing them?

This is a question that I was asked recently during an initial meeting from potential reverse mortgage borrowers.  A great question that I think has a couple answers.

  1. People still haven’t heard of them.  When I was talking with one of my reverse mortgage borrowers the other day he said he’s been mentioning that he had done one but is surprised on how many people still haven’t heard about them.  While there are many ads and media coverage, some people are still unfamiliar with them.
  2. Headlines give misinformation about HECM Reverse MortgagesA lot of misinformation has been spread through the media, politicians and the community putting fear into the minds of potential reverse mortgage borrowers.  Unfortunately the media, politicians and people in our communities have not reached out to the experts, those to who specialize in reverse mortgages, to get the facts but continually spread the misinformation. Even some of the articles that tend toward being accurate don’t get all the facts right.  Or the comments on the article contain misinformation.   This misinformation is what scares people from doing a reverse mortgage even when they could benefit from one.

Let’s look at the facts of reverse mortgages and some of the misinformation that people have that keeps them from doing a reverse mortgage.

A reverse mortgage is a mortgage that has special terms for those 62 and over. Unlike a conventional mortgage or Home Equity Line of Credit (HELOC) monthly mortgage payments are not required.  Income and credit scores are not factors in determining one’s interest rate or how much can be loaned.  As without or with a conventional mortgage, a HELOC, homeowners are responsible for paying their property taxes and homeowners insurance.

It is often stated that reverse mortgages are complicated or complex transactions.  In reality reverse mortgages aren’t any more complex than a conventional mortgage or other financial products.  Do you understand all the terms and features of a conventional mortgage or HELOC?  Do you understand your 401K’s, stock investments or other retirement plans?  What about your credit card(s)… do you know how they work?Comparing Your Smart Phone To A Reverse Mortgage

My smart phone has so many bells and whistles I don’t understand all the options or how it works… complex yes, but I still utilize one and I don’t think I could live without it any more.  If people are open to getting the facts, they will likely have a better understanding of reverse mortgage and might just find it useful.

People still think the bank or the lender will own the home once the reverse mortgage is done.  Or the bank or lender will take ownership once the loan becomes due and payable.  However, like a conventional mortgage or HELOC, the title remains in the homeowners name, the bank or lender does NOT own the home.  When the reverse mortgage borrowers are no longer in the home as their primary residence the loan become due and payable.

The amount repaid is the amount borrowed by the homeowners including interest and FHA Mortgage Insurance Premiums.  Any remaining funds go to the borrowers or their heirs.  As a non-recourse loan, if the loan balance is higher than the fair market value of the home, the borrowers or their heirs don’t have to come up with the difference.

Other false statements often seen or heard are that reverse mortgages are a scam, only the lender benefits.  They take advantage of people.  Let me clarify, the most common reverse mortgage, the Home Equity Conversion Mortgage (HECM) is  FHA insured and regulated by HUD – no, not scams but a valid loan using a home as collateral. 

Borrowers receive many benefits in having funds to use without having to make monthly mortgage payments, improved cash flow without restrictions on how the funds can be used, being able to stay in their home or purchase a new home.  Originators and lenders do get paid for reverse mortgage loans, but everyone gets paid for the work they do.  Personally I find it rewarding to help people, and I’m not ripping people off, in fact I and others I know in the industry are certainly not getting rich in this career…there is a lot of work involved to originate reverse mortgages, but we’re passionate in making a difference for people.  In fact, because of all the work, on some loans our compensation works out to very little.

Headlines have stated seniors are losing their homes to foreclosure if they don’t pay property taxes or keep insurance on the homeThink about it, with or without a mortgage if you don’t pay property taxes, the county will foreclose.  If you don’t have insurance on your property and the home is destroyed you will have lost your home and you won’t have the money to rebuild or replace it.  Neither of these are the fault of a reverse mortgage.  But these false headline statements scare people to not do a reverse mortgage.

We often see or hear that the reverse mortgage should be a last resort, to refinance with a conventional mortgage or HELOC or sell.  The problem with this is most seniors don’t qualify for conventional mortgages or HELOCs.  And if they do, the borrowers have to make monthly mortgage payments.  Even if they can make the payments now, if life happens they may not be able to make the payments in the future.  Rather than being a last resort the reverse mortgage can help one pay for retirement, long-term care.

The unused portion of the reverse mortgage line of credit so more funds can become available in the future.  And the funds in the line of credit could be higher than what one could qualify for in the future.  This can be very beneficial to seniors and isn’t available with any other loan. 

Relaxing with Reverse Mortgage in placeSeniors often want to stay in their home rather than moving so don’t tell them to sell.  If they do sell, where are they going to live?  They’d still have housing expenses…can they afford those or wouldn’t having no rent or monthly mortgage payments be more beneficial?

If they do wish to sell maybe to downsize, move closer to their children or to purchase the home of their dreams, the HECM for Purchase program gives them the option to purchase without having to make monthly mortgage payments.

Have you heard or read reverse mortgages are expensive?  Have you looked at the costs of a traditional or forward mortgage?  The costs are the same other than the FHA Mortgage Insurance Premium.  With a conventional mortgage people want to know what the payment will be and what the interest is, they generally don’t pay attention to the costs.  But when you look at the costs of the conventional mortgage you’ll likely be surprised, they aren’t really different from reverse mortgages.

HELOC’s may have lower up-front fees but the interest rate may be higher which in the long run could turn out to be more expensive than a reverse mortgage… besides one has to qualify on income, assets and credit.  Additionally payments have to be made on the HELOCs.  And there is a risk that they HELOC could be called due and at some point during the term the monthly payment must be increased to include the principal, not just the interest.

Seniors and children benefit from reverse mortgagesOther headlines or statements about reverse mortgages state the bank/lender gets the children’s inheritance.  Another false one!  The homeowners receive funds during the term of the loan, whether to pay off conventional loans or receiving funds monthly or draws from their line of credit.  When the loan is being paid, due when the home is no longer the primary residence of the borrower(s), there may or may not be funds left for an inheritance. The lender is receiving payment of principal and interest, this is NOT stealing the children’s inheritance from the remaining equity.  With the reverse mortgage, the homeowner is using the funds for their needs or wants.  Are you as heirs going to give them the funds they need just so you have an inheritance?  What about letting your parents live their quality of life and not worry about getting an inheritance?

The last one I’m going to cover today is the option that lowering your expenses is a better option.  Really?  Most seniors don’t have this option.  Seniors want to maintain their lifestyle and why shouldn’t they?  Do you want to be told to lower your expenses, stop getting your hair done, not having cable TV, being able to get together with friends for lunch, go to a family wedding or reunion?  Just because one turns 62 doesn’t mean they can’t enjoy life especially when they have equity in their home they can utilize.

Seniors discuss misinformation about reverse mortgagesDon’t buy into the scare tactics!  Before believing everything in the media, those commenting on stories, politicians or your friends or neighbors, get the facts about reverse mortgages.  As I often ask, “Do you go to a plumber if you’re having health issues?”  Of course you don’t!  So why are you listening to those who can’t or aren’t providing the facts on reverse mortgages?

Take time to understand and have the facts.  When people do, they see the benefits and more people will do a reverse mortgage!

And hopefully, as my borrower is doing, reverse mortgage borrowers will spread the word on how the reverse mortgage has benefitted them so more people will hear about them.

*As of April 27, 2015 income and credit are used for the Financial Assessment to determine borrower’s ability and willingness to pay property taxes and insurance into the future

 © 2014-2015 Beth Paterson http://rmsidac.com/beths-reverse-mortgage-blog/ 651-762-9648

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-19

Related Articles:

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!

Headlines give misinformation about HECM Reverse MortgagesWith 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.

©2012 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-C6

Related articles:

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 Reverse Mortgage Property Tax Defaults Really Due To The Reverse Mortgage? …They Are Not The Only Reason Seniors Lose Their Home

Reverse mortgages are not the reason for tax defaultsThere is a lot of talk about the issues of reverse mortgage defaults causing borrowers to go into foreclosure and lose their homes because of not paying their taxes and insurance… claiming that the tax defaults are a reason one should not do a reverse mortgage.  The media and so-called senior advocates are pushing this point hard.  Are you aware that anyone who doesn’t pay property taxes on one’s property can face foreclosure?

If one has a conventional mortgage and doesn’t pay their taxes, the lender will pay the taxes on behalf of their borrower and increase the homeowners mortgage payments to cover the taxes.  If they let their homeowners insurance drop, the lender will place “forced” insurance on the property and pass the costs along to the borrower.

Even if one doesn’t have a mortgage, a reverse or conventional, one can lose their home for not paying their taxes – the counties foreclose on them.  Here in Minnesota the county claims the property as a tax forfeiture.

Ann, a 65 year old woman called me 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 the details of the reverse mortgage: A reverse mortgage is a loan 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* 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.

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 and 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 to the lender.

In her situation she would have had a large line of credit that would allow her funds to pay her taxes and insurance going forward… and some other life necessities or a little extra here and there to maintain or improve the quality of her life.

There are many homeowners who lose their home for not paying their property taxes.  When one gets behind on their taxes, they also reduce their option of qualifying for a conventional mortgage, especially with the tighter credit and income qualifications.

And think about it, if one doesn’t have insurance on their home and there is a fire or a storm that destroys the home, the homeowner loses their home and they don’t have money to rebuild.

Another consideration regarding reverse mortgage defaults is they are minimal compared to conventional or “forward” mortgage default foreclosures.  I’m sure some of the forward foreclosures included seniors who had been sold a mortgage without consideration on whether they would be able to make payments in the future.  In fact I know of an 80+ year old woman who did a 30-year mortgage… what was the likelihood she would be able to make mortgage payments for 30 years?  A reverse mortgage would have been a better loan choice for her.

When the senior homeowners with forward mortgages have had “life happen” and they couldn’t make the payments, they also didn’t qualify for a reverse mortgage because they owed more than the reverse mortgage proceeds, they went into foreclosure.  (We often receive calls from seniors in this situation and have to say we can’t do the reverse mortgage for them.)  If these seniors had done the reverse mortgage initially instead of doing the forward mortgage, they would be benefitting from no mortgage payments and having funds to pay their taxes and insurance as well as for their other needs.Reverse Mortgages Make Positive Difference in Seniors' Lives

Reverse mortgages make a huge positive difference in the life of senior homeowners; the majority of reverse mortgage borrowers are satisfied with their reverse mortgage.  Reverse mortgages shouldn’t be discounted because a small percentage are in default.

When reverse mortgage borrowers haven’t paid their taxes the lenders/servicers work with the borrowers to find ways to help them including sending them to counselors who  work with borrowers to find a way to assist them address the issue.

Unfortunately, Ann’s brother had told her reverse mortgages are bad and she shouldn’t do one and she listened to him.   Consequently the county foreclosed on her.  She not only lost her home and a place to live, she lost the $280,000+ in equity.  Whereas a reverse mortgage could have saved her home from foreclosure and she would have been able to pay her taxes and remain in her home with funds for other needs or desires including paying her future taxes and insurance.

So you see, reverse mortgage tax defaults are really defaults on taxes with a reverse mortgage in place and are not the only reason seniors can lose their home – they happen with conventional or no mortgages at all as well.  The media and politicians should stop attacking the reverse mortgage industry as the bad guys and gals – counties across the country are foreclosing on seniors’ homes too.

*To address the issue of tax and insurance defaults, in the near future we anticipate financial assessments with the reverse mortgage to determine if the borrowers are able to pay property taxes and insurance into the future.

©2012 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-YU

Related articles:

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.

Be Cautious on Reverse Mortgages… And From Whom You Are Getting Your Reverse Mortgage Information

Proceed with Caution on A Reverse Mortgage & From who You Receive the InformationCautious is defined as showing or using caution; a warning or having alertness or taking care in a situation.  Therefore I feel you should be cautious of the food you are putting in your mouth, the medications you are taking, the safety of the products you purchase, the credit card you are applying for, how you are spending your money, answering the door when you weren’t expecting anyone, purchasing services from the person going door-to-door, the car you are purchasing, the home you are buying.  Should you be cautious of reverse mortgages?  Of course you should be cautious of reverse mortgages.  But you also need to be cautious of who you are getting your reverse mortgage information.

State Attorney Generals, politicians and other government agencies are issuing cautions on reverse mortgages.  Some of their advice is good, unfortunately, with many of these “warnings” the information is not accurate.  Their advice that one should get information and have an understanding the product and it’s pros and cons is good advice… just as you should for any product or service.  Unfortunately one government agency, the Consumer Financial Protections Bureau (CFBP) didn’t even talk with borrowers to write their report, therefore their report is not based on actual circumstances and discredits the quality of their information.

Senior advocacy groups also offer their cautions on reverse mortgages without having facts or experience with these unique products.  Their opinions include that reverse mortgages should be used as a last resort; should only be for older seniors; are for the cash poor, not for those planning for long-term care.  In my years of specializing in reverse mortgages (since 1999) I have found that these are misguided cautions.  Everyone’s situation is different, so assumptions should not be made and generalized for all situations.

The reverse mortgage should not necessarily be a last resort; can benefit those 62 as well as those 82 or 92; those needing a better cash flow because their home is their only asset or those who want to protect some of their assets for their long-term care planning purposes.  Rather than being an advocate, cautions of these sorts are really a disservice because they scare people rather than encourage them to get the facts and allow seniors to make their own decisions.

On a news talk show recently they were discussing reverse mortgages with a financial advisor who was being portrayed as a reverse mortgage expert.  As I listened to the interview I was astounded by the inaccurate information provided by this so-called “expert.”  Being financial advisors are not allowed to offer reverse mortgages, they are not the reverse mortgage specialists or the experts so they don’t have all the facts.  They have their areas of specialties, as reverse mortgage specialists, we have ours.  At the end of this interview an 800 number was provided with the statement that this was the HUD number to be call to get more information. I didn’t get the number written down so I don’t know whether this was a number to HUD or not.  What really made my jaw drop was the interviewer’s statement that one shouldn’t need to call the number because they just heard all the “facts” from “Mr. Financial Advisor.”  Unfortunately if they listened to those “facts” they would be very misled and not really understand the reverse mortgage or have the truths about them.

The FHA insured, HUD reverse mortgage, the Home Equity Conversion Mortgage or HECM, is the most common reverse mortgage in the country and the only one available in Minnesota.  One can obtain reverse mortgage information from HUD.  Note all those who offer reverse mortgages are not included on the FHA list of lenders.  In January 2011, HUD issued a Final Rule eliminating their approval process of loan correspondents or brokers although brokers can still participate through a sponsorship from a FHA approved sponsor.  For example, we, Reverse Mortgages SIDAC, are a broker, with a FHA licensed sponsor and meeting the federal and state licensing requirements through the National Mortgage Licensing System (NMLS), NMLS #173899.

While not on the FHA list, brokers offer many benefits including working with many different lenders, are local, often meeting with you face-to-face in your home.  Review the difference on my post, “Are You Confused on Whether to Use A Reverse Mortgage Broker, Bank or Lender.”

Proceed with A Reverse Mortgage After Getting Facts from A Reverse Mortgage SpecialistSo yes, take precautions with reverse mortgages, as you should with everything. But also take precautions on who or where your information is coming from.

Do you go to a plumber, politician or the media if you have health issues?  No you go to the doctor, and you go to the doctor who specializes in your specific condition.  The same is true with reverse mortgages, go to the person who specializes in reverse mortgages.

Get the facts from someone who specializes in them, has years of experience and only offers reverse mortgages (not other mortgages), one who works with various lenders, is local in your state not a “call-center” where they only talk with you over the phone.  A financial advisor can be part of the team to help you analyze your overall financial situation.

Keep in mind, the decision is yours on whether or not the reverse mortgage is right for your situation.  It’s not up to the Attorney Generals, politicians, seniors advocates, media, reverse mortgage counselor or originator/loan officer.

© 2012-2014 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-YP

Related articles:

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 Receive Some Good PR Coverage

Couple Getting Reverse Mortgage InfoWhile the media often feeds into the myths and misconceptions about reverse mortgages, the past two weeks there were two pieces that provided accurate and good information about this finance option for seniors.

First was a post in the New York Times on March15th titled, “More Homeowners Seek Reverse Mortgages At Earlier Age”  http://bucks.blogs.nytimes.com/2012/03/15/more-homeowners-seek-reverse-mortgages-at-earlier-age/

And on March 21, NBC Today Money 911 panelists provided a good answer to a daughter who thinks she should get an inheritance rather than her mother having done the reverse mortgage.  http://www.finishrich.com/blog/nbcs-today-show-money-911-march-21-2012/

The reverse mortgage provides funds for the senior’s needs and wants.  It helps them have money for their security, independence, dignity and control… no matter what their age.

It’s good to see the media catching on and providing facts for a change.

© 2012 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-xX

Related articles:

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.

Facts Are Needed About The 101 year-old Woman Who Did A HECM Reverse Mortgage And Was Evicted

Headlines give misinformation about HECM Reverse MortgagesThis last week headlines across the country talked about the eviction of a 101 year-old Detroit woman with a FHA insured HUD Home Equity Conversion Mortgage (HECM) reverse mortgage.  In reading the articles and viewing the TV media pieces I find that facts were missing or misconstrued about this situation and reverse mortgages.  While Ms. Texana Hollis is returning home, her story leaves a lot of misinformation about reverse mortgages and the benefits they provide to the many borrowers.  Let’s take a look at the misconceptions of Ms. Hollis situation.

  • Foreclosure/eviction of Ms. Hollis was not due to reverse mortgage but due to lack of payment of taxes, a requirement of the loan (all mortgages as a matter of fact).
  • Ms. Hollis son and POA facilitated her in getting the reverse mortgage but didn’t follow through on assisting in making sure the terms of the loan were followed, i.e. he or other family members ignored the requirements to pay property taxes, insurance and maintain the home.
  • I’ve seen statements such as “signed the house over to a reverse mortgage.”  A reverse mortgage is a mortgage with special terms for seniors 62 and older. The title remains in the borrower’s name – they are not signing the house over to anyone, they are taking out a mortgage with a lien against the property.  My blog article “Beware Of Reverse Mortgage Misstatements – The Fact Is Reverse Mortgage Lenders Do NOT Own The Home!” addresses this fact.
  • Articles state that the son failed to make payments on the mortgage.  Payments are not required on a reverse mortgage.  One of the special terms of the reverse mortgage is that the borrower can have access to funds without making monthly mortgage payments.  The loan is repaid when the home is no longer the primary residence of the borrower(s).  The amount repaid includes the funds received up-front or through monthly payments or draws on the line of credit along with the closing costs, interest and on-going FHA Mortgage Insurance Premiums (MIP).
  • Ms. Hollis’ reverse mortgage funds were used for home repairs.  It appears from several sources that they were also used by the son for his purchase of a car, donations to a church and other things.  If this is the case, this is financial exploitation, NOT the fault of the reverse mortgage and NOT reverse mortgage fraud as some articles indicated.
  • Statements such as, “Ms. Hollis only learned about the eviction when the police arrived and carried out her belongings” are misleading.  In reality loss mitigation notices were sent by HUD, however it appears that those who were taking responsibility to “assist” Ms. Hollis ignored these notices.  I’ve seen statements that her son who is her POA didn’t tell her about the notices because he “didn’t want to worry her.”  In some reports he has admitted to ignoring and throwing the notices away.  She personally may not have been informed of the eviction because her family intercepted the notices.  Don’t blame HUD or the reverse mortgage for actions of her family.  If her family didn’t respond to notices it is neglect on their part (i.e. the son/POA) – not HUD or the reverse mortgage.

And now let’s look at the facts of the misconceptions of reverse mortgages which have been shared along with this story and other media coverage.

  • The bank does not own the home and the title is not passed to the bank.  The title remains in the name of the borrower(s) as long as the home is the primary residence of the borrower.  If the borrower does not abide by the terms of the loan (pay property taxes, insurance and maintain the home, the home may go into foreclosure just as with a conventional mortgage.)
  • One report stated that a danger of the reverse mortgage is if one spouse passes or goes into senior housing, the other may have to pay back the loan.  In reality as long as one borrower remains in the home, the loan does not become due and payable until they, the second spouse, is no longer in the home as their primary residence.  If a non-borrowing spouse (one that is not on title with the reverse mortgage) is the one remaining in the home, yes, the loan is due and payable because the borrower (the one on title) is no longer in the home as their primary residence – this is the terms of the loan.
  • HUD Home Equity Conversion Mortgages (HECM) are FHA insured.  As with a conventional/forward FHA mortgage, borrowers pay an up-front Mortgage Insurance Premium (MIP) as well as an on-going MIP.  The benefits to FHA insuring 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.  If the loan balance is higher than what the home can be sold for at fair market value, FHA will cover the difference because one has paid the MIP.
    • 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.
  • “The Government will step in” is another statement I’ve heard.  The government doesn’t “step in,” borrowers are paying the FHA Mortgage Insurance to receive the above listed benefits.
  • And of course we have the all too common statement that reverse mortgages are expensive.  Unfortunately, many do not look at the costs of a conventional mortgage, they just make blanket statements without really doing the comparison as I have done.  I’ve written blog articles to address this misstatement:

I think it’s important to note that with a forward FHA mortgage, the up-front Mortgage Insurance Premium is 2.25% vs the 2% on the FHA reverse mortgage. So the forward FHA mortgage is more expensive than a reverse mortgage.

Ms. Hollis story has a happy ending, she is being allowed to return to her home of 50+ years according to HUD spoke’s person Brian Sullivan.  Unfortunately the story still led to a lot of misinformation and misunderstanding about reverse mortgages giving them a bad name.  It would be nice if the media would provide corrections and facts about these valuable and beneficial options for seniors.

Update September 24, 2011:  Facts are still needed!  The revere mortgage took a hit in the media with misinformation about this viable option for seniors yet we still don’t know if this was a reverse mortgage or a conventional/2nd mortgage that was on Ms. Hollis’ home.  However it appears it was NOT a Reverse Mortgage but a 2nd mortgage on the home… or maybe for non-payment of taxes.  Earlier in the week another article reported:

“Action News also found out the background on what really happened and why Texana and her son Warren Hollis were evicted from their home.

“At first, it was thought that Texana’s son had signed a reverse mortgage on the house or that maybe it was a back-taxes issue.

“It turns out that Warren took out a second mortgage on the home in return for $32,000. He claims the money was spent on repairs for the house. He also admits to buying a car with the money and donating some of the money to his church.

“He says the remaining $5,000 was used to pay a number of other expenses. Warren Hollis defaulted on the second mortgage and never told his mother what was going on or that he was receiving eviction notices and warnings. The news broke her heart and she had no time to prepare for being evicted.

“The house no longer belonged to Texana Hollis or her son Warren – who had been living with her. It belonged to HUD. The agency had asked for a court order to have the occupants removed from the home.

“One of the judges from the 36th District Court granted that order several weeks ago and the order was carried out on Monday.

And in another story it was reported that it was brought on by HUD due to many years of non-payment of taxes.

I wonder if we will ever know all the details and what type of mortgage it was or if it was for non-payment of taxes…
 

© 2011 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-u4

Related Articles:

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.

Questions About Reverse Mortgages Continue Receiving Misinformation As Responses

Couple Want A Reverse MortgageRecently I saw a question on an on-line forum wondering if the questionnaire’s relative should be doing a reverse mortgage.  They stated that the relative who is in their mid-60’s and in great health recently remarried a woman who likes expensive things.  This relative evidently has a monthly fixed income of $8,000 and an expensive home and wants to do a reverse mortgage.  With concern over the new wife “bleeding him dry” they “want to protect him.”  They asked for others experience and opinions on reverse mortgages.

Now before you go off and start stating this person shouldn’t be doing the reverse mortgage because reverse mortgages are bad and/or expensive or the person should be able to live off of $8,000 a month as replies to the questions stated, read my reply:

There is a lot of misinformation about reverse mortgages.  Most articles in the media, politicians, so called “financial advisors” who write and/or comment about reverse mortgages and those mortgage professionals who don’t offer them, friends or neighbors with the statements that they are “bad” are based on their own opinions, not on the facts.  They have not talked with those of us in the reverse mortgage industry to get the facts.  So don’t base your opinion or decision on these sources.

You don’t go to a plumber if you are having health problems, right?  You go to a doctor, and not just a generalist but a specialist in the area of need.  Well the same should be true with a reverse mortgage – go to a reverse mortgage specialist to get the facts to make your decision.

See my blog post, “Seventeen Facts about Reverse Mortgages That You May Not Know.

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 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.

Often thought of or stated as expensive, the costs are actually comparable to a conventional mortgage except for the FHA Mortgage Insurance Premium.  See a side-by-side comparison at “Comparing Reverse Mortgage Closing Costs To A Conventional Mortgage – You’ll Be Surprised They Are Not That Different.”  And because the interest rates are historically lower than conventional mortgages, in the big picture the reverse mortgage can be less expensive.

Generally seniors don’t qualify for a conventional mortgage.  And even if they do, one needs to consider that payments are required.  What happens if “life happens” and one can no longer make the payment?  They could be facing foreclosure.  I often get calls from those who took out a conventional mortgage and can no longer make the payments and now want to do a reverse mortgage.  Unfortunately, I often have to say that there are not enough funds from the reverse mortgage to pay off their current mortgage (a requirement of the reverse mortgage).  They would have been better to do a reverse mortgage in the first place.

Now with that said, just like anything, a reverse mortgage is not right for everyone.  While there are no limitations on how the funds can be used one should consider if they will have funds to cover taxes, insurance, maintaining the home as well as other needs in the future.

It sounds like in this situation there is more concern about the new wife’s spending habits.  Are you or others concerned about the new wife eating away at an inheritance?  Because reverse mortgage proceeds use the equity, there may be less inheritance for heirs – this can be considered a negative of the reverse mortgage.

Have a conversation about the reasons for a Reverse MortgageI would suggest a conversation with your relative to understand their reasons for a reverse mortgage.  Is the pension and income paying for the everyday lifestyle but they want extra to enjoy life such as traveling or modifying their home to be prepared for the future?  Do they have a financial and estate plan in place?  Do they have long term care insurance to cover needs of their future?  Have they talked with an elder law attorney to set up a will or trust to determine that the inheritance will go to his heirs and not all go to his new wife?

After helping them get the facts and looking at options, keep in mind it is his decision in the end.  You might check out, “Who Are We To Judge How Reverse Mortgage Funds Should Be Used?

Find a reverse mortgage originator who specializes in reverse mortgages (not conventional mortgages) who has experience and will provide you with the facts and details.  Look for one who has the client’s best interest in mind, not just their own.  Work with one who is local – not doing applications through the mail (for example I originate in Minnesota and meet with borrower’s and their relatives in person.).  And see if your relative will allow you to be part of the meetings with the originator and the counseling.  “What to Consider When Talking With Reverse Mortgage Lenders” will help you know questions to ask reverse mortgage originators and determine who you should have assist you with a reverse mortgage.

To get facts and details on reverse mortgages, explore my website, http://www.RMSIDAC.com and other articles on my blog, http://www.BethsReverseMortgageBlog.wordpress.com.

© 2009 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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-tL

Related Articles:

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.