Reverse Mortgages Receive Some Good PR Coverage

Posted on March 24, 2012 by Beth Paterson, CRMP

While 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.

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

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

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

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

Posted on March 1, 2012 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Why Are People So Resistant to Reverse Mortgages?

Posted on February 17, 2012 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted on January 19, 2012 by Beth Paterson, CRMP

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

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

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

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

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

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

You Need To Know That With A Reverse Mortgage You Remain in Control

Posted on October 11, 2011 by Beth Paterson, CRMP

When sitting down with a new prospect the other day I asked what they had heard or thought about reverse mortgages. Bob responded that reverse mortgage borrowers lost control of their home and their money. Have you heard this too? I want to correct this misconception for you.

Reverse mortgage borrowers remain in control of their home. They own the home, just like with any mortgage.

They have the option to paint the home the color of their choice, plant trees or landscape as they choose, and to decorate the inside as they desire (or not make changes).

I had one borrower ask if they could paint their house purple. With a chuckle I responded they could although the neighbors may not like the color purple. The point is, as the homeowner they have the option to choose what color they want to paint their house.

Borrowers are, however, responsible for maintaining the home. This is to the homeowners best interest anyway, and whether they have a reverse mortgage, a conventional mortgage or no mortgage at all. Maintaining means things like no bare wood or chipped paint, roof replaced when needed, foundation and structure is sound, electrical and plumbing in working order.

In their will or trust the reverse mortgage borrowers still choose who will inherit the home or equity of the home.

While the reverse mortgage borrowers will be using the proceeds for their needs or wants during the term of the loan, when the home is no longer their primary residence, the loan is due and payable. The loan is generally paid back from the sale of the home with no personal liability to the borrower or their heirs. If the home is sold for more than the loan balance the borrower or the heirs receive the difference.

If an heir wants to keep the home, they have this option – they would just need to pay off the reverse mortgage balance. This can be done through a conventional mortgage, their own funds or if they were the beneficiary on an insurance policy.

Note that if the loan balance is higher than the fair market value, as a non-recourse loan the borrower or their heirs only need to pay the fair market value of the home, they do not need to come up with the difference. With the FHA HUD insured Home Equity Conversion Mortgage (HECM) the FHA Mortgage Insurance will cover the difference for the lenders.

They have the option to sell when they want and choose the real estate agent. If they have passed away then their estate chooses the real estate agent.

The way one wants to receive their reverse mortgage proceeds is also their choice. They can receive the funds in a line of credit, monthly payments, lump sum or a combination of these.

And how they use these funds is in their control – lenders cannot dictate how one spends the proceeds from their reverse mortgage. Borrowers can and have used their reverse mortgage funds to pay for home repairs, purchasing a new car, traveling, home care or whatever one needs or wants… it’s their choice.

The reverse mortgage provides control for borrowers to have funds so they can make their own choices. For example, where they want to live (in their own home vs government subsidized housing), who they want to care for them (vs the government deciding which home care agency they can use).

Reverse mortgage borrowers do remain responsible for paying their property taxes, having home owners insurance, maintaining the property and paying home owner association dues if applicable, just as they do with or without a conventional mortgage.

Losing control of your home or money with a reverse mortgage is a misconception. In reality reverse mortgage borrowers have control and in some cases even more control than without doing a reverse mortgage. Having funds available gives them more choices and options.

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.

It May Be To Your Advantage To Do A Reverse Mortgage Now

Posted on October 4, 2011 by Beth Paterson, CRMP

It may not be to your advantage to heed the advice of those who state a reverse mortgage should be a last resort or one should wait until they are older before doing one. Let’s explore why doing a reverse mortgage now rather than later may be to your advantage.

First you must know the Principal Limit or Loan Amount of the HUD insured Home Equity Conversion Mortgage (HECM) reverse mortgage is based on the age of the youngest borrower, the lesser of the home value or FHA Lending Limit and the program chosen and the Expected Interest Rate. HUD allows certain types of properties to qualify: single family homes, duplexes or 1 to 4 unit properties as long as the home owner is living in one of the units, townhomes, FHA approved condos, and manufactured homes that meet HUD’s requirements.

Continued Decline in Real Estate Values and Sales Volume

It appears that the real estate values have not yet stabilized so with potential continued decline in home values, one will receive less funds from the reverse mortgage in the future. To determine the value of the home the appraiser must use homes that are similar in size, number of bathrooms, bedrooms, style, etc. and that have sold in the last 6 months. If homes in the area are selling for lower values and/or are foreclosures which means less comparables are available and the homes are valued lower. So before the home values continue to decline, doing the reverse mortgage now will mean more funds will be guaranteed to be available based on the current value. (Note once the loan closes the funds are guaranteed available to borrowers as long as they meet the terms of the loan.)

Properties that qualify

HUD already has restrictions on condos that are not FHA approved making it difficult to do a reverse mortgage on condos. (The spot condo approval was removed in 2010.) We are seeing lenders add manufactured homes, log homes, berm, and rural homes to their list of ineligible homes. While there are still some lenders who continue to lend on these properties, this may change in the future and they are likely to tighten the underwriting requirements for these types of properties. If you are in one of these properties you should look at doing a reverse mortgage now while it’s still an option.

Ron who has a manufactured home was in the process of doing his reverse mortgage however during the processing of his loan the lender the loan was being done through changed their underwriting requirements. Now to proceed with his loan has to be put through another lender. If other lenders change their underwriting requirements he would not be able to do his reverse mortgage.

Reduced Principal Limits

In 2009 and 2010 HUD reduced calculation of the Principal Limit (Loan Amount) by 10% each year. In 2010 HUD increased their on-going annual FHA Mortgage Insurance Premium. While we have not heard this is happening again, given the real estate market and the political climate, HUD may find it necessary to decrease the Principal Limit again and/or increase the FHA Mortgage Insurance Premiums. Waiting may mean less funds are available if HUD reduces the Principal Limit.

No Servicing Fees/Set-Asides

Currently most reverse mortgage programs don’t have a service fee or service set-aside. However servicing fees may return in the future which means the service fee set-aside will reduce the net Principal Limit available to borrowers. Taking advantage of no servicing fee means more funds are available now.

Higher Expected Interest Rates Equals Less Funds Available

With FHA Reverse Mortgages the Expected Interest Rate is calculated weekly and is used to determine initial funds available. The Expected Interest Rate is considered a long term projection of future interest rates. Currently the Expected Interest Rate is below HUD’s floor of 5% which means more funds are available. (Expected Interest Rates at 5% or below have the same Principal Limit.) As the Expected Interest Rate changes to a higher rate, in the future less initial funds could be available to borrowers. It is unknown as to the timing of when the rates may rise but at some point they will for sure go up.

Even if the home value increases in the future the amount available on the reverse mortgage could be the same or less if you wait to do a reverse mortgage.

Let’s compare doing a reverse mortgage now to waiting 5 years before doing your reverse mortgage.

	TODAY	5 Years from now	Initial Interest Rate is currently below 3%
AGE	70	75
HOME VALUE	$200,000	$225,000
*Based on Expected Rate of	4.39	7.515
AVAILABLE (Approximate net after fees)	$122,690	$97,687
DIFFERENCE	$25,003
These are all estimates. Different assumptions would result in different numbers. Interest rates are based on rates of 10/4/2011.

Keep in mind, with an Adjustable Rate Reverse Mortgage funds left in a Line of Credit grow. So if you have $122,690 in your line of credit today, in the future you could have more funds available to you. Here’s an estimated example:

Line of Credit Growth*	No Draws	Draw $5,000 each year
Today	$122,690	$122,690
Year 1 Balance	$127,357	$122,357
Year 2 Balance	$132,201	$122,011
Year 3 Balance	$137,230	$121,652
Year 4 Balance	$142,450	$121,279
Year 5 Balance	$147,868	$120,892
*Growth Rate based on Assumption of Expected Interest Rate of 3.739% in this example. Actual Line of Credit Grows based on current interest rate plus 1.25%.

What would it be like for you to have security knowing you readily have funds available in your Line of Credit without paying additional closing fees in the future? When you use the funds each year you will be taking advantage of having the money you need during your retirement years and the benefit of improved financial health.

Lucy stated, “Having done the reverse mortgage has given me a new sense of security.”

Eliminate Mortgage Payments, Have Lower Interest Expense by Paying Off Your Conventional Mortgage

In addition to a lower interest rate* with a reverse mortgage, eliminating your monthly payment will improve your cash flow because you don’t have to payout that monthly payment each month. While the loan balance will rise because you are not making payments, the reverse mortgage is non-recourse which means there is no personal liability to you or your estate if the loan balance is higher than what the home can be sold at fair market value in the future. And you have the use of the funds to use during the term of the loan for whatever you need or want. By doing the reverse mortgage earlier you have use of funds that otherwise would go toward your monthly payments. Why not improve your cash flow sooner than later?

Note that you do have the option of making payments with your reverse mortgage – it’s just not required. You can choose when, how often and how much you want to pay. When payments are made the payment reduces the loan balance and with the adjustable rate will be applied to the Line of Credit meant it’s available in the future.

*Historically the HECM reverse mortgage interest rate is lower than what one can generally qualify for with a conventional mortgage.

Higher Valued Home Owners Should Do A Reverse Mortgage Before The Lending Limit Is Reduced

Currently the FHA HECM (Home Equity Conversion Mortgage) Lending Limit is $625,500. While we have not received final notice from HUD, word was received that the Lending Limit would remain at the $625,500 through FY 2012 – but this is an unknown. At some point this rate could be reduced to $417,000 or be based on a Lending Limit in the county where one lives. What this means is that if your home is valued more than the Lending Limit amount you can receive is based on the Lending Limit rather than the home value. For example if your home is appraised at $700,000, currently we would use $625,500 to determine the reverse mortgage Principal Limit. January 1, 2012 or after, we would be mandated to use $417,000 (or the county lending limit) for this calculation, making a big difference on the amount one can receive. If you have a higher valued home look at doing your reverse mortgage now instead of waiting until 2012 or after.

Mary, a Minnesota Reverse Mortgage borrower whose home value, as most homes, had decreased over the last few years chose do to the reverse mortgage at the time instead of waiting even though she didn’t have any mortgages to pay off and didn’t have immediate needs for the funds. Her decision was based on the fact that if she waited her home value may continue to decrease whereas if she did the loan now she would have the funds in the line of credit for future use and they would grow so more funds would be available when she needs them. Additionally if she waited the Expected Interest Rate (used to determine how much can be loaned) may be higher making less funds available to her to her in the future.

We’ve talked with seniors whom we originally talked with 2, 3 or 4+ years go and had educated them about the reverse mortgage option. At that time they decided to wait and not do a reverse mortgage. Some even did a conventional mortgage or what we in the industry call a “forward” mortgage. “Life has happened” and they decide they now want to do the reverse mortgage. Unfortunately with many of these seniors we have to tell them the sad news that less funds are available now and in some cases there aren’t enough proceeds to pay off their current mortgage. They can be short $6,000, $10,000 and sometimes $30,000 or more. This is due to decreased home values and changes in the Principal Limit. We are finding this can also be the case for even those we talked with just 6 months ago.

Now a few years after Mary did her reverse mortgage, Mary is still happy with her decision to do have done her reverse mortgage sooner than later. She has security knowing she has funds available for her needs, independence to live on her own without relying on others 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.

Doing a reverse mortgage now may be to your advantage. Are you ready to live with more now? And to have security, independence, dignity and control in your retirement?

Note that I am not posting this as sales pitch, rather to make you aware of anticipated changes so you can make the best decision for your situation.

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

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

“Our Reverse Mortgage Is Great. Gives Us Some Elbow Room.” And More Testimonies by Reverse Mortgage Borrowers

Posted on September 25, 2011 by Beth Paterson, CRMP

While some people will say they have heard bad things about reverse mortgages I haven’t been able to get the real definition of “bad” or the reasons behind these statements. However, actual reverse mortgage borrowers have lots of good things to say about their reverse mortgage. Let me share some of them here.

“The reverse mortgage has allowed me to be able to breathe again and alleviate $tress” S.R.

“My reverse mortgage gives me financial security due to my fixed income.”

“It was a good experience. The extra money each month is wonderful.” D.M.

“Since my cash assets have been spent down over twenty years of retirement, it became pertinent that my $750 mortgage payment needed to be ended. I got this far in life seventy eighty years, without a monthly pension. Now I have funds to supplement my Social Security Income.” D.W

“It’s great not to have to make mortgage payments.” M.L.

“I did the reverse mortgage to have extra money every month for expenses. It gives me a little more financial freedom.” J.F..

“After retiring I found that my income was too little for the active life I was used to, with trips to family and a modest vacation each year. But bills were piling up and I needed a real solution to stay in my home. I have my dignity and security back again.” E.B.

“The reverse mortgage allows me to have more means to meet future needs. Having it has taken some of the fear away that I had for the future” C.G.

“I did the reverse mortgage to pay medical bills, credit cards and other debts. It has made my life less stressful.” C.J.

“The reverse mortgage has allowed me to stay in my home with comfort to do things with my family.” J.T.

“With joy and delight I have felt hope and even vision anew in knowing that this home belongs to me. It comes with a challenge for me to realize that I am accountable in using these funds to achieve goals otherwise not possible.” B.L.M.

“Affords me the ability to retire and make ends meet.” S.G.

“The Reverse Mortgage helps out a great deal and solves many problems.” C.C.

“As a senior citizen, I had been having some concerns with my finances. Being on a limited income made much needed household repairs and property tax payments very difficult to meet. I was going to have to make a choice soon about whether to continue to live in my house, or move on to an apartment. The costs of continuing to live in my home were getting beyond my means, but I wasn’t ready to leave the home that I had raised my children in. I decided t use the equity in my house to make life easier and meet the financial obligations that I had.” S.M.

“We can now continue to travel to Florida every winter.” L.C.

“A reverse mortgage means I’ll have a place to live even in case of serious illness.” D.B.

“It helps me keep up with bills I cannot cover with my limited income. It also allowed me to remodel my home to improve it’s value and be more comfortable. I greatly appreciate it.” R.D.

“It is really great not to have to be concerned about where the money will come from for my long term care insurance policy payment and emergency repairs. It has relieved us of a great deal of stress and makes grocery shopping a lot easier too.” M.S.

“After six years of non-payment of property taxes, nearly four years of confession of judgement, and the home I had lived in for nearly 69 years within weeks of tax forfeiture, the Reverse Mortgage lender Beth Paterson, I worked with came to the rescue with a Reverse Mortgage. The property taxes are now current for the first time in a decade, and I have a line of credit of approximately $100,000.” R.W.J.

“The only way we could comfortably stay in our home of 42 years” S.H.

“Once we realized that we could only relieve the stress on us by contracting 24-hour nursing care for grandma, a reverse mortgage was the only way to do it.” L.T.

“I didn’t have money to keep up with my living expenses so I did a reverse mortgage. I paid some bills and my credit cards and have some additional funds for future needs.” J.D.

“The relief I feel from not having to make a mortgage payment each month is so great! Now that my credit card is paid off, I will only need occasional one-time draws from my Line of Credit. To continue living in my home and travel and pursue some hobbies.” E.B.

Keep these testimonies in mind and share them when you hear reverse mortgages are “bad.” As you can tell, actual borrowers think they are great!

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

Posted on September 18, 2011 by Beth Paterson, CRMP

This 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.

Read more: http://www.wxyz.com/dpp/news/region/detroit/hud-will-give-home-back-to-evicted-101-year-old-detroit-woman-texana-hollis#ixzz1Z1RmVafp

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…

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

Posted on September 11, 2011 by Beth Paterson, CRMP

Recently 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.

I 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.

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.

Comparing Reverse Mortgage Closing Costs To A Conventional Mortgage – You’ll Be Surprised They Are Not That Different

Posted on July 24, 2011 by Beth Paterson, CRMP

It seems like every article, report or someone you talk with states the reverse mortgage closing costs are high. Have you looked at closing costs on a conventional home mortgage?

As with a conventional home mortgage (called a “forward” by HUD), the closing costs for reverse mortgages may vary depending on the home value and the complexity of the loan. Let’s compare the costs side-by-side for a Home Equity Conversion Mortgage or HECM and a conventional/forward mortgage.

The third party and recording fees are standard for any loan. However, with the reverse mortgage HUD regulates the fees and requires that only the actual cost may be charged to the borrower, they do not allow mark ups such as processing or servicing fees. Look at an estimated comparison based on a Minnesota home valued at $200,000:

Third Party Fees	Reverse FHA	Forward	Forward FHA
Appraisal	$450	$400	$450
Credit Report	$20	$20	$20
Flood Certification	$16.50	$16.50	$16.50
Courier Fee*	$25	$55	$25
Escrow, Settlement, or Closing	$250	$250	$250
Abstract or Title Search	$100	$100	$100
Title Exam	$100	$100	$100
Document Preparation	$100	$100	$100
Title Insurance	$475	$475	$475
Endorsements	–	$100	$100
Recording Fees	$92	$46	$92
County/Mortgage Registration Tax	$323	$480	$480
Plat Drawing	$60	$60	$60
Name Search	$30	$30	$30
Special Assessment Search	$30	$30	$30
Counseling Fee	$125	N/A	N/A
TOTAL THIRD PARTY FEES	$2,196.50	$2,262.50**	$2,328.50

* Courier Fee is for sending a payoff on a current mortgage to the mortgage holder.

** These fees do not include all mark ups/processing fees so these may be higher when mark ups/processing fees are included.

Now let’s compare the Lender Fees:

FHA’s Mortgage Insurance Premium (MIP) is paid directly to FHA. With the FHA HECM Standard this is 2% of the home value and 2 1/4% for a forward. The FHA HECM Saver has a reduced MIP. The advantages with FHA insuring the reverse mortgage include:

Guaranteeing the funds are available for you.
Guaranteeing the lender against default or shortfalls which means the interest rates are lower (currently under 3% on the HECM Standard Adjustable Rate) 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.

The origination fee is what the originating lender receives to cover the loan officer’s salary, overhead to run the business, i.e. staff salaries, administration costs, computers, electricity, office supplies, marketing expense, gas mileage, health insurance of employees, etc.. The origination fee also includes the processing and underwriting costs which are generally separate and charged to the borrower on forward loans. HUD regulates the reverse mortgage origination fee to be 2% of the 1^st $200,000; 1% thereafter with a cap of $6,000. With a minimum of $2,500.

The reverse mortgage fees are based on the full home value because over time borrowers can access more than the home value at the time of origination.

An estimate based on a $200,000 home value:

LENDER FEES	REVERSE FHA	FORWARD	FORWARD FHA
Origination/Points	$4,000	$2,000*	$2,000*
MIP	$4,000	$0	$3.500
Underwriting/Processing	$0	$700	$700
SUBTOTAL LENDER FEES	$8,000	$2,700	$6,200

Backend fee**	$0	$2,000	$2,000
TOTAL LENDER FEES	$8,000	$4,700	$8,200

Prepaid Interest***	N/A	++	++

*Typical points on Forward loans are 0-4%; this example is based on $100,000 loan at 2% points.
** Forward loans often have a 1% back-end fee.
*** Number of points are directly related to interest rate charged; the more points paid the lower the interest rate; the lower points paid, the higher interest rate.

TOTAL LOAN FEES	REVERSE FHA	FORWARD	FORWARD FHA
	$10,196.5	$6,952.50	$10,528.50

Note: THE DIFFERENCE IS BASICALLY THE FHA MORTGAGE PREMIUM! Refer to above comments on the benefits of FHA insuring the loan.

Because the majority of conventional loans being done now are FHA insured, the reverse mortgage is actually less expensive.

The fees associated with the reverse mortgage are fully financed as part of the loan with no out of pocket expenses other than the FHA appraisal. (As of 2010 Appraisal Management Companies must be used to order and process the appraisal. This fee is required to be paid for by borrower up front or “out of pocket.”) All of the fees must be disclosed on the Good Faith Estimate (GFE).

Keep in mind that there has to be a cost involved because everyone in the transaction needs to be paid for there services. If the costs on a mortgage aren’t paid up-front then they’ll be paid over time with a higher interest.

When considering whether to do a forward mortgage or a reverse mortgage you must consider if you can even qualify for a forward mortgage; then if you can make the payments over time. For example, what happens if “life happens,” could you continue making those payments or would you be facing foreclosure?

You also need to consider that if you do a forward mortgage now (if you even qualify), you’ll be paying the closings costs on that loan and then when you need more funds in the future and you refinance you’ll be paying the closings costs again. These together can equal or exceed the total of the closing costs on the reverse mortgage.

Whereas with the reverse mortgage you pay the closing costs upfront and then without paying closing costs again you have access to more funds through your life as long as you are living in the home as your primary residence. The additional funds would be either through monthly payments, a line of credit if that is the type of loan you have chosen.

In the big picture the cost of the reverse mortgage is less than a forward mortgage over time because the interest rate is lower on the reverse mortgage. Therefore typically it doesn’t take too long for a forward mortgage to make up and then exceed what difference there is in closing costs of the reverse mortgage.

Now that we’ve compared the costs side-by-side, are you surprised that they are comparable to a conventional loan?

Article updated May 2012

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

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

Minnesota Reverse Mortgages SIDAC

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

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