Without The Reverse Mortgage Money I Would Have Been “Up The Creek Without A Paddle.”

Posted on January 19, 2014 by sidac

My reverse mortgage was a good decision I recently received the following letter from a reverse mortgage client of mine outlining why a reverse mortgage was a good decision.

Dear Beth,

I am writing about why a Reverse Mortgage was a good decision for me. I have had mine since 2010. My husband died in 2009 and although I was able to keep up with my monthly bills, I would run short of cash when Auto Insurance, Fire Insurance, Property Tax and other unexpected bills would arrive.

My family would always be willing to help me with those bills but I did not want to be a burden to them. My daughter-in-law Nancy belongs to a Women’s Group with you, Beth Paterson, and suggested that I may want to look into a Reverse Mortgage. The family was with me throughout the whole procedure and they agreed that it was a good choice for me.

Having a Reverse Mortgage has given me monetary independence and I never realized how important having cash available would be until I fell in October 2013 and broke my right shoulder. I needed care-givers two times a day. Without the Reverse Mortgage money I would have been ‘up a creek without a paddle’. I simply filled out a form, mailed it to the mortgage company and they transferred the needed funds into my bank account. Financial independence saved the day.

Barbara H.

A reverse mortgage is a mortgage like any other mortgage, using the equity in one’s home, but has special terms for homeowners 62 and over. There are no income or credit score qualifications for the interest rate and no monthly payments required. Senior homeowners maintain the title as the reverse mortgage lender does not own the home. Borrowers are responsible for paying their property taxes and insurance as well as maintaining the home. Reverse mortgage borrowers are highly protected – more so than with any other loan.

The HECM Adjustable Rate program allows for borrowers to receive their funds in monthly payments, line of credit, lump sum or a combination of these. The monthly payments can be structured as tenure payments, for life of the loan, or as they need. The line of credit grows so more funds become available in the future. There is also a HECM Fixed Rate option which is favorable if one is pulling all their funds out in a lump sum.

As a non-recourse loan there is no personal liability when repaying the loan, the loan is repaid from the property only. This means if the loan balance when due and payable is $200,000 but the home can only be sold for $150,000 the borrower or the estate do not have to come up with the $50,000 difference. The loan is generally repaid from the sale of the property when the home is no longer the primary residence of the borrower, usually when they move, die or sell. If the home is sold for more than the loan balance the remaining equity goes to the borrower or the estate.

Barbara has the line of credit option which, with the growth rate, has grown over time. The line of credit is there for situations like hers.

Are you or do you know someone who would like to have access to funds providing financial independence and not rely on others? Consider a reverse mortgage!

*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

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-Z2

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.

Veterans Who Have Served Our Country Have Found The Reverse Mortgage Has Served Their Needs

Posted on November 11, 2013 by sidac

Through the years I have had the honor of assisting veterans to be able to stay in their home using a reverse mortgage. Three in particular come to mind.

Earl was a World War II Veteran who had some memory and health issues but wanted to remain in his home. His Power of Attorney set up the reverse mortgage which allowed him to have funds to bring in some home care assistance and stay in his home.

Jack was also a World War II Veteran. He and his wife did the reverse mortgage to be able to supplement their retirement funds and to remain in their home. They decided to leave their reverse mortgage funds in the line of credit so they would have funds for their future needs whether it be emergency funds or to pay for care needs.

Jim was a Veteran of the Koran War. Jim and his wife used their reverse mortgage to pay off their conventional mortgage which improved their cash flow since they no longer had a monthly mortgage payment to make. They had some additional funds in a line of credit. When they sold an RV they took the money from the sale and made a payment on their reverse mortgage. The pre-payment reduced their loan balance but also increased their line of credit funds giving them a larger amount available for their future needs.

When meeting with my clients I always enjoy hearing their life stories. These three were no exception. When meeting with them I have enjoyed and been humbled hearing their stories of their service. One was involved in the bombing of Japan. He shared that years later he met a Japanese Veteran who was fighting on the other side. And as they talked they found a bond, with no anger or bitterness.

These three veterans have all found the FHA HUD insured Home Equity Conversion Mortgage (HECM) has served them in their retirement years.

On this Veteran’s Day I want to say thank you to these and my other clients as well as all who served in the armed forces so that we may have our freedoms. As they have fought for our country’s freedom, it’s been an honor for me to be able to serve them so they have their freedom to remain in their home with funds for their needs and desires.

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.

You’ve Decided To Do A Reverse Mortgage… Should You Do The HECM Standard or The HECM Saver?

Posted on March 11, 2013 by sidac

AS OF OCTOBER 1, 2013 THE HECM STANDARD AND HECM SAVER PRODUCTS ARE NO LONGER AVAILABLE.

Deciding between the different options of the reverse mortgage can be challenging and certainly depends on your situation. The Home Equity Conversion Mortgage, or HECM, is the most common reverse mortgage and only one available in Minnesota. Before looking at the difference between the HECM Standard and HECM Saver, let’s look at the similarities.

A mortgage just like any other mortgage, the reverse mortgage offers special terms for seniors home owners 62 and older. Advantages for seniors are with the reverse mortgage there are no income or credit score requirements to qualify and no monthly payment requirements. Borrowers are responsible for paying property taxes and insurance.

The Principal Limit or maximum loan amount is determined by the home value or FHA Lending Limit, the age of the youngest borrower (the older one is the more they can receive), the Expected Interest Rate, and the program chosen.

The funds available can be received in a lump sum, monthly payments, or a line of credit. The monthly payments can be structured as one needs or for life as long as the home is the primary residence. Funds in the line of credit grow so more funds can be available in the future.

The borrowers keep the title to the home and are responsible for property taxes, insurance, and maintaining the home. Unlike a conventional loan the interest accrues, increasing the balance with no mortgage payments due until the home is no longer the primary residence of the borrower(s). The repayment amount is the lesser of the loan balance or fair market value of the home. As a non-recourse loan there is no personal liability to the borrowers or their estate for repayment,. If there is remaining equity, it goes to the borrowers or their heirs.

One can have a trust, life estate, or receive Medicaid (Medical Assistance in Minnesota), Elderly Waiver or other public benefits.* In the case of a couple even if one of the borrowers goes into the nursing home or passes away, the other one can stay in the home and the loan isn’t due until both borrowers are no longer in the home as their primary residence. Not considered income, Social Security and Medicare are not affected.

*Check with legal advisor for your situation.

With no limitations on how the funds can be used, through the years hundreds of thousands of seniors have benefitted from the reverse mortgage allowing them to stay in their home and have security, independence and control.

Because the closing costs are up-front, they are often perceived as high and often scare people away. However, as with a conventional loan, there are traditional closing costs including an origination fee, appraisal, title fees, title insurance and recording fees. As a FHA insured loan, with the HECM borrowers also pay the FHA Mortgage Insurance Premium (MIP).

The HECM Standard is the original HECM reverse mortgage, first insured by FHA in 1988. In 2010 the Saver was introduced. The Saver has a reduced up-front FHA MIP of 0.01% compared to 2.00% for the Standard. But it also reduces the Principal Limit available to borrowers. While the Saver may be appealing because of the lower up-front MIP, in the long run it may not be the best option.

Initially Karen liked the idea about the reduced closing costs of the HECM Saver. As we compared the HECM Standard and HECM Saver she has a different perspective.

With the HECM Standard Adjustable Rate she would receive over $13,000 more than the HECM Saver Adjustable Rate and $12,000 over the Saver Fixed Rate based on her home value of $170,000. The Fixed Rate requires that all funds be drawn as a lump sum at closing vs having the flexibility of monthly payments, line of credit, lump sum or a combination of these with the Adjustable Rate.

Because she didn’t have any mortgages to pay off or other needs for all funds initially, pulling all the funds out in a lump sum with the HECM Standard Fixed Rate or Saver Fixed Rate (the only fixed rate option available as of April 1, 2013) is not the best option for her situation. So it came down to deciding which of the two Adjustable Rates would best fit her situation.

Being Karen plans on staying in her home for many years to come, when looking at the estimated Amortization Schedules, the HECM Standard Adjustable Rate option is more advantageous for her. With the higher funds available initially with the HECM Standard, she could leave funds in the line of credit to use as she needs. The line of credit grows so more funds become available over time meaning she can access more over time.

Or with the tenure monthly payment option she would be able to receive more in her monthly payments as long as she remains in the home as her primary residence.

If the interest rate is higher on the HECM Saver, the increased costs of the MIP up-ftont MIP for the HECM Standard is diminished over time when compared to the HECM Saver by the lower interest rate it has versus the HECM Saver. But even if the interest rate is the same on the two adjustable rate programs, less funds are available up front which would mean if in the future she needed more funds she would need to refinance, paying closings costs a 2nd time. Being she plans to stay in the home for many years to come, the HECM Standard providing more available funds initially will best suit her situation.

The HECM Saver could be beneficial to those who don’t want to pay as much in the up-front closing costs but also don’t want to use as much equity from their home. It can be ideal if one plans on moving in a shorter period of time or has a higher home value and wants to preserve more of the equity.

Mark and Margaret are considering moving to a one-floor home in two to three years but needs some extra cash flow now. The HECM Saver with the lower up-front MIP is more advantageous for their situation. This would preserve some of their equity for when they sell. And at that time
they could use the HECM for Purchase program to purchase their new home without having monthly mortgage payments.

Before assuming the lower up-front MIP of the HECM Saver is the best option, consider your long-term goals and needs, look at the calculations and Amortization Schedules to determine which is going to the most advantageous for your situation. While we can’t predict the future, reviewing the options can help you make better plans for your future.

*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

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, want to purchase your new home with no monthly mortgage payments? Use A Reverse Mortgage.

Posted on March 3, 2013 by sidac

Are you over 62 and want to downsize? Move to a townhome so you don’t have to do the yard work? Move to a one-level home? Move closer to your children? Move to a larger home to have space for when the family comes to visit? Do you want to move to your new home but don’t want to have monthly mortgage payments? The HECM for Purchase program may be your financing option.

The FHA insured reverse mortgage program that allows those 62 and older to purchase their new home and then not have monthly mortgage payments is called HECM (Home Equity Conversion Mortgage) for Purchase. The features and terms as well as the steps for the HECM for Purchase are the same as with the regular reverse mortgage. However, because it is a unique process, there are a few points you and all parties involved need to be aware of to make it a smooth transaction.

The properties that qualify for the HECM Home Purchase include single family, 1 to 4 family dwelling units if the borrower/owner resides in one unit, FHA approved condos, manufactured homes that meet HUD’s standards.
To run our calculations we use the lessor of the final appraised value, sales price, or FHA mortgage limit for a one-family residence.
- If the purchase price is $190,000 and the appraised value is $200,000, we would use the $190,000. Or if the purchase price is $210,000 and the appraised value is $200,000, we use the $200,000.
The proceeds available to the borrower are calculated the same way as with any reverse mortgage, having all the closing costs (origination and FHA MIP, reports, title and escrow/settlement fees) included in the loan so there are no out of pocket expenses other than the appraisal and potentially any inspections. The Net Principal Limit is the amount available to the borrower.
- Note: When I’m working with those exploring homes, I run several calculations at various possible home values so when the borrower and their real estate agent are looking for a home, they will have an idea of the home value and the cash the borrower will need at close.
The borrower will need to have the difference between the Net Principal Limit (loan amount) and the purchase price available. For example:
- If the purchase price and the appraised value is $200,000 and the Net Principal limit is $124,000, the borrower will need $76,000* to purchase the $200,000 home.
- If a borrower has $100,000 in funds they want to use to purchase the same $200,000 home, they could combine their $100,000 with the $100,000 from the reverse mortgage proceeds to purchase the home and then have $24,000 in their reverse mortgage line of credit when using the adjustable rate, LIBOR, program. (The fixed rate requires you to pull all available funds at close.)
  - Borrowers must use cash on hand, cash from the sale, liquidation of assets or Gift funds (must meet HUD’s approved funding sources and source of funds needs to be documented).
    - The additional funds cannot come from Builder incentives, Seller financing, Seller contributions or concessions, any person or entity that financially benefits from the transaction or third party that is directly or indirectly reimbursed by any of the parties benefitting in the transaction or Credit Card advances, sweat equity, trade equity, rent credit. Cannot use loan discount points, interest rate buy downs, closing cost down payment assistance, gifts or personal property given by the seller or any other party involved in the transaction. Seller can pay their share of taxes and Home Owner Association fees if applicable.
The borrower may choose any of the options/interest rate options:
- HECM LIBOR
- HECM Fixed Saver
  - For calculation purposes our rates change every week. The rate cannot be confirmed until the week of closing. However, we have a Principal Limit Rate Lock (on the index of the LIBOR which means we can use the rate at the time of application or closing, whichever is the most favorable to the borrower, to determine the loan amount available.) For the process of planning how much will be available to the borrower, I initially use the rate and amount of the program chosen at the time of application.
Rather than using all reverse mortgage funds, more personal funds can be used for the purchase so the reverse mortgage can be set up with a Line Of Credit Option (HECM LIBOR option only)
Seller has to be the owner of record for 90 days prior to the date of the sales contract (based on when recorded). (This is to protect against property flipping.)
Prior to completing an application HUD requires the Certification of Occupancy.
The Original Purchase Contract or Certified Copy of the Purchase Contract is needed for underwriting.
Counseling must be completed by a HUD approved HECM counseling agency that has been approved to provide reverse mortgage counseling. Minnesota requires that the counselor be located in Minnesota. We will provide a you a list of HUD approved counselors.
The property must be livable at the time of closing. Any required repairs must be completed prior to closing by the seller – no repairs or repair set asides are allowed.
Funds are provided at closing, as there is no rescission period.
The new property has to be the primary residence and occupancy must happen within 60 days of closing.
One’s existing home may be retained as rental property or if purchasing current home prior to the sale of existing home income verification will be required to document the ability to maintain both properties. (This is prevent the practice of “buy and bail.”)

Using the reverse mortgage to finance the purchase of your new home may be your solution to meeting your goals without having a monthly mortgage payment.

*You may also need funds for property taxes, initial hazard insurance premium, home owner association dues, etc.

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-YY

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 Mortgage Protects Retirement Plan

Posted on February 10, 2013 by sidac

Have you seen the sign, “Too much month at the end of the money?” That applied to Pat and Mary’s situation. In their mid 70’s, Pat and Mary planned for their retirement and have a good plan in place. But as their life changed they found there wasn’t enough money to last through the end of the month. Creating the needed additional funds for each month from their retirement plan would impact their resources for their future. Therefore their financial planner suggested they look into using their home equity and explore a reverse mortgage.

A mortgage just like any other mortgage, the reverse mortgage offers special terms for senior home owners 62 and older. With the FHA insured reverse mortgage, Home Equity Conversion Mortgage (HECM), the most popular and only one available in Minnesota, there are no income or credit score requirements to impact the interest rate and no monthly mortgage payment requirements. *(See note below about Financial Assessment.)

The funds available can be received in a lump sum, monthly payments, a line of credit, or a combination of these. The monthly payments can be structured as tenure payments (as long as you occupy home as primary residence) or as one needs as long as the home is the primary residence of at least one of the borrowers. Funds in the line of credit grow so more funds can be available in the future.

The loan is due and payable when the home is no longer the primary residence of the borrower(s) such as they move, sell or die, or on their 150th birthday. As a non-recourse loan, if the loan balance is higher than what the home can be sold for, the borrower(s) or their estate don’t have to pay with the difference, the FHA Mortgage Insurance Premium (MIP) covers the difference. And if the home is sold for more than the loan balance, the borrower(s) or their estate receive the difference.

After being educated about the reverse mortgage including the positives and negatives, rather than using their retirement funds so they could be protected for their future needs, Pat and Mary decided to do a reverse mortgage.

Doing the Standard Adjustable Rate HECM, they set up the proceeds available to receive a portion in monthly payments, with the balance in a line of credit that they can use if and when they need it.

Receiving the monthly payments allows them to live comfortably, meeting their living expenses without running out of funds before the end of each month.

The line of credit grows at the rate on the reverse mortgage plus 1.25, i.e. if the rate is 2.5% the growth rate will be 3.75%. If the interest rate goes up, the growth rate does also. This means that more funds will be available in their unused portion of their line of credit. They can use these funds for an emergency such as car repairs, a new furnace, medical expenses or for other needs and desires such as making a trip for a family reunion or out of town wedding.

With the reverse mortgage in place providing monthly cash flow and a line of credit for other needs, Pat and Mary’s retirement funds can be protected for their future. They are living their retirement years with a good plan along with funds for their current needs. Now they have more money at the end of the month – what a way to live in retirement!

*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

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 Mortgage Features and Terms Summary

Posted on January 25, 2013 by sidac

There are many loan documents with the reverse mortgage (all mortgages actually) and it’s hard to remember all the details through the life of the loan. To help you have a better understanding initially as well as be a reference in the future, this article summarizes the reverse mortgage features and terms.

A reverse mortgage is a mortgage or lien against your property allowing you to use the equity in your home.
Monthly mortgage payments are not required however you are responsible for property taxes and hazard insurance.
Through FHA, the Home Equity Conversion Mortgage (HECM) is a FHA insured program and regulated by HUD.
As a loan against your property, the funds are not considered income so Social Security and Medicare are not affected; and generally SSI and other public benefits are not affected; Medicaid can also be received under certain situations – consult with legal services for your situation.
Generally the funds received are considered tax free – consult your tax advisor regarding your situation.

Who Owns Your Home

You retain title and remain a vested owner of your property.
You retain all rights and responsibilities of home ownership, including property maintenance, tax and insurance payments, etc.

Borrower Protection

Should the lender default, FHA will assume the responsibilities of the lender and guarantees funds are available to borrowers according to terms of the loan.
As FHA loan, interest rates are lower than they otherwise would be on a reverse mortgage.
Non-recourse: Borrower/Homeowner or the estate will never be obligated for more than the fair market value of the property.

Adjustable Interest Rate – HECMs

- If you have selected an adjustable rate product, your interest rate may change over the life of the loan.
- There is a lifetime cap on the rate; for the monthly adjustable rate it is 5 or10 points (depending on the lender) and for the annual rate it is 5 points over the initial rate at the time of closing.
- The interest rate may adjust annually (maximum of 2 points with each annual change) or monthly. The current and future rates will be provided on your monthly statement.
- The rate is based on the LIBOR index.

Interest is charged against your loan balance only. Unused line of credit and/or unused term/tenure payments will not accrue interest.

Fixed Interest – HECMs

If you have selected a fixed rate product, your interest rate is fixed and will not change over the life of the loan.

Ongoing Costs

Interest accrues only on amounts borrowed.
Monthly charge for FHA Mortgage Insurance Premium (MIP) – .5% (1.25% on loans closed prior to 10/2/2017) per year on loan balance (added to loan balance).
All costs, charges, and accrued interest are added to loan balance.
Essentially you are borrowing these funds each month because you are not paying them monthly; this is why the loan balance increases over time.

Line of Credit (if applicable)

Available credit of unused portion of line of credit grows over time at the current applied interest rate plus .5% (1.25% on loans closed prior to 10/2/2017). This is not interest, but a growth rate.
Interest is not charged on unused portion of line of credit.
Line of credit funds advances must be requested in writing from the lender/servicer. Lender has 5 business days to process your request.

Term/Tenure Payments (if applicable)

If you have selected monthly Term or Tenure Payments, these monthly advances will be paid to you on the first business day of each month beginning the month after loan closing.
Interest is not charged on un-advanced monthly term/tenure funds.

Prepayment

Although monthly or periodic mortgage payments are not required, you may make full or partial payments at any time.
Please contact the lender/servicer for payment address and information.
Partial payments reduce the loan balance due.
Partial payments on adjustable rate HECM’s will create or increase the line of credit and these payments can be borrowed in the future.
Payments on fixed rate HECM’s are permanent payments.
Payment in full will terminate the loan and eliminate any available term/tenure payments and/or line of credit.

Due and Payable

No payment is required until/unless one of the following occurs:
- Borrower(s) no longer occupy the home as a primary residence.
- Borrower(s) no longer owns the home.
- All borrowers have passed away.
- Property taxes are not kept current.
- Homeowner’s/Hazard insurance is not kept current.
- Flood Insurance (if applicable) is not kept current.
- HOA dues (if applicable) are not kept current.
- Required repairs are not completed.
- Property is not properly maintained.
- Title vesting changes are made.

Upon Death of Borrower(s)

If there is a surviving borrower(s) continuing to occupy the home, the reverse mortgage continues without any changes. If a sole borrower dies or there are no surviving borrowers or a non-borrowing spouse, the reverse mortgage becomes due and payable in full. (Non-borrowing spouses see HUD Mortgagee Letter 2015-15 and check with the servicer regarding their rights)
Heirs/estate should contact the lender/servicer within 30 days to provide notice of the death.
A reverse mortgage is not transferrable to the heirs or estate.
The loan may be repaid from sale of property.
If heirs wish to keep the home, they may satisfy the debt by paying the lesser of the mortgage balance or 95% of the FHA appraised value of the home at that time.
Most lenders are allowing up to six months for heirs to settle the estate and repay the reverse mortgage (but timely communication with the servicer is required). Where justified, HUD, who regulates the HECM, may approve extensions beyond this time up to a total of 12 months.

Your Responsibilities

Pay property taxes.
Maintain homeowners insurance on property.
Maintain flood insurance (if applicable) on property.
Pay HOA dues (if applicable).
Complete required repairs timely.
Maintain property.
Not make changes to title vesting.
Return the annual occupancy certificate to lender.
Provide proof your property taxes have been paid annually.
Provide proof your property insurance has been paid.

When To Notify Your Lender

If you change your insurance provider.
If you change your bank for direct deposits.
If you are putting the property into a Trust.
Any other changes to the property.
If there is a claim from your property insurance.
When a Power of Attorney (POA) is being implemented to make decisions on your behalf.

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.

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.

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.

“Own Your Future Minnesota” Campaign Launched – How are you personally preparing for your long-term care needs?

Posted on October 2, 2012 by sidac

The Own Your Future Minnesota campaign is part of a national educational campaign of the U.S. Department of Health and Human Services that promotes personal preparation for long-term care. The campaign is to bring awareness as well as urge Minnesotans of the need to plan for their later years when they are likely to need long-term care.

Own Your Future is important to Minnesota! Between 2010 and 2030 Minnesotans over age 65 will grow by 107%. Those over 65 have a 70% chance of needing long-term care. In 2030 over 325,000 elderly would need to be served if Medicaid (Medical Assistance) had to serve all with insufficient income. This could cost $5 Billion by 2030. Because of the enormous growth in the aging population and the number without resources, Medicaid will be strained to provide support for all these individuals.

Own Your Future Minnesota is encouraging people to have discussions, and be aware of options to pay for their long-term care including considering personal savings, long-term care insurance, life insurance options, annuities, and using ones home equity including reverse mortgages. Additionally they are encouraging people to discuss and plan their advance care which refers to their legal documents.

With the October 2nd launch, Governor Mark Dayton and Lieutenant Governor Yvonne Prettner Solon are urging all Minnesotans age 40 to 65 to own their future by mailing a letter to them.

“Planning for long-term care helps to ensure choice, control and peace of mind for the individual,” said Lt. Gov. Yvonne Prettner Solon. “The sense of security and comfort that comes with having a plan is something all Minnesotans should enjoy.”

The first phase of Minnesota’s Own Your Future initiative includes a new website, public service announcements, internet advertising, community meetings and other employer and grassroots organizations. The website offers options for planning at various ages, tools for your planning covering your personal, financial, housing and advance care planning, as well individual’s stories.

Future phases of Own Your Future will look at development of affordable financial products to help people pay for long-term care and evaluation of possible changes to Medicaid to better align with and encourage private payment for long-term care.

As a member of the Advisory Panel, and on the speakers bureau, through the coming year I will be doing presentations around the Twin Cities to bring clarity on what is long-term care, the impact it has on individuals and their families, why plan ahead along with options and resources to consider.

I’m proud and excited to be part of this important state initiative as the reverse mortgage industry representative.

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.

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.

You Don’t Need To Have A Mortgage To Do A Reverse Mortgage

Posted on September 9, 2012 by sidac

A reverse mortgage is often used to pay off a mortgage which improves the homeowner’s cash flow by eliminating their mortgage payments. But you don’t have to have a mortgage to “reverse the mortgage.”

My borrower, Marjorie didn’t have a mortgage on her home but did a reverse mortgage to be prepared for future needs. She used some of the initial funds to purchase hearing aides and left the rest in a line of credit. She was happy with her decision to do her reverse mortgage because she now has security knowing she has funds available for her needs, independence to live on her own without relying on her family for financial support, she’s maintained her dignity of being able to pay her own bills, and continues having control of her life and the ability to make her own choices. She recently took some funds from her line of credit to make a trip from Minnesota to California to visit her daughter who lives there – she wouldn’t have been able to do this without having her reverse mortgage.

A reverse mortgage is a mortgage with special terms for seniors 62 and older that provides them cash for whatever they need or want. Monthly mortgage payments are not required and income or credit scores are not considered to qualify. The funds can be received in a monthly payment, paid to you, a line of credit with a growth rate, a lump sum or a combination of these. The loan is due when the home is no longer the primary residence of the borrower(s) or on the 150th birthday of the youngest borrower. The borrower is still responsible for paying taxes, insurance and maintaining the property.

A reverse mortgage doesn’t mean you are reversing a current mortgage, it means that rather than having to make payments on a mortgage, funds can be available to you without monthly mortgage payments.

The amount loaned is based on the appraised value (determined by a FHA licensed appraiser) or FHA Lending Limit, whichever is lower, the age of the borrower, the expected interest rate and the program chosen. Any liens or mortgages need to be paid prior to determining the amount available in a line of credit, monthly payments or lump sum.

When there are no current liens or mortgages on a property, more accessible funds are available for borrowers.

As an example, with a $200,000 home value for a 75 year old person and the current interest rate on an adjustable loan (the program that offers the monthly payment, line of credit option, lump sum or combination option; the fixed rate requires all funds be drawn in a lump sum), the amount available after closing costs is $128,805.

The $128,805 can be left in a line of credit or taken in monthly tenure payments of $767, this means you are paid this amount each month as long as you are living in the home as your primary residence.

If there is a current lien or mortgage that needs to be paid, say in the amount of $50,000, the amount available after paying for the current lien or mortgage and the closing costs is $78,804 which can be left in a line of credit or $469 received in monthly tenure payments.

Either situation can provide security, independence, dignity and control for borrowers but with no current mortgage to be paid off, more accessible funds are available. The funds can be used for whatever the borrower needs or wants, such as enhancing one’s retirement, home modifications or repairs, medical expenses, home care, or even just giving that extra elbow room.

Some pertinent facts about reverse mortgages:

You own the home, no one else does.
You won’t lose your home because of a reverse mortgage – you don’t have to make monthly mortgage payments. If you don’t pay property taxes, insurance, maintain the home or abide by other terms of the loan, the loan may be called due and payable.
Tax-free money – consult tax advisor but make sure they know the facts about reverse mortgages
The most common reverse mortgage, HUD’s Home Equity Conversion Mortgage or HECM, and only one available in Minnesota, is government insured and funds are guaranteed to be there for you.
You or your heirs get to keep any remaining equity after the loan balance is paid off.
There is no personal liability to you or your estate when repaying the loan and the loan balance is higher than what the home can be sold for.
There are no out of pocket costs other than the cost of the appraisal.
Closing costs typically become part of the loan balance. Closing costs compare to those on a conventional or “forward” mortgage – the difference is the FHA Mortgage Insurance Premium.
A credit report is pulled to check for any federal liens or debts that would be required to be paid.
You can’t access 100% of your home value at the time of your closing – the amount available is based on your age, your home value or FHA lending limit (currently $625,500), an Expected Interest Rate and the program chosen.
The funds may be received in a line of credit, lump sum, monthly payments or a combination of these.
- Line of credit grows based on the current interest rate plus 1.25%
- Monthly payments may be received as tenure payments (for life as long as the home is your primary residence) or structured to fit your needs.
Historically the interest rate is lower than conventional loans.

Just because you don’t have a current mortgage doesn’t mean a reverse mortgage wouldn’t be beneficial to you. Consider having security knowing you have funds available during your retirement years with the benefit of improved financial health just like Marjorie did.

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.

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