Category Archives: Senior Issues

Live in & cash out, too – Thanks, MN Good Age

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Cashing out in your home while living in itAlyson Cummings did a fantastic job on her article in the MN Good Age newspaper, “Live in & cash out, too.”  She had interviewed me a few months ago to learn about reverse mortgages for this article.  She said she couldn’t send me a copy prior to publication so I was nervous on whether she would provide accurate information or stick with the many misstatements that are usually in the media.  Or would she misquote me or print my comments out of context.

With excitement and apprehension I started reading the article the other day when I picked up a copy.  As I read I was pleased to see the acknowledgment and the many quotes.  What was even better was the fact that she did an awesome job providing the facts and quoting me accurately.  I’m proud to have been named and quoted in this article!

Whether you are in Minnesota or elsewhere, this is an article you should read!

Kudos to Alyson Cummings and MN Good Age on an excellent article on reverse mortgages!

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

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

Related Articles:

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

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

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

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Compare Closing Costs for Refinancing Your Home - A Reverse or Conventional MortgageIt 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 1st $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

© 2011-2012 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-t4

Related articles:

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

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

Minnesota 7-Day Cooling Off Period Law is Disservice to Seniors

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MN Reverse Mortgage LegislationIt’s coming up on a year since the Minnesota law went into effect requiring a 7-day cooling off period in addition to the Federal 3-day recission period on all refinances.  No matter how much I explain that the law was put into place by legislators with the intention of protecting them, since then every borrower has complained about waiting an extra 7 days.  Borrowers have stated:

  •  “I’m being treated like a child, not letting me decide that I’m ready to proceed.”
  •  “Why do I have to wait extra time, I’ve already waited long enough.”
  •  “How fast can we close?  I’ve already made up my mind.”
  •  “I took a year to decide, I don’t need more time.”
  •  “This takes away my dignity.”

Or variations of the above but all with the same message.

Borrowers have the right to cancel their loan at any time during the processing which usually takes 30 to 45 days.  They are in control of whether they want to proceed or not during the entire time.  And after closing they have the Federal 3-day recission period during which time they can also choose to cancel their loan.  The additional 7 days is an irritation rather than a protection!

Consequently the Minnesota law makers did nothing to protect seniors when they passed this unnecessary law in the 2010 Minnesota Legislation.  If they really want to protect seniors they should look at other things that would be true protections, not putting in unnecessary regulations.

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

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

Related articles:

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

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

What Gives You A Sense of Independence? A Reverse Mortgage May Provide You These Freedoms!

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Celebrating Our Independence - Finding Independence With A Reverse MortgageWhat gives you a sense of independence?  When I think of independence I think of having freedom of choices and not relying on others.  We all want our independence including seniors.  How can seniors  maintain that independence, have freedom of choices and not rely on others, the government or their children?  A reverse mortgage provides independence for home owners 62 and older.

Having one’s own funds for home repairs, going out to lunch with friends, traveling, visiting family across the country, purchasing a new car, paying medical bills or for medications; paying for help with housework, meal preparation, yard work or transportation, whatever is desired can give that feeling of independence.  Being able to pay off a mortgage to improve cash flow to to save one’s home from foreclosure gives one relief and freedoms.

While some assistance may be needed for seniors to remain in their home, not relying on children or the government for help and being able to choose a home care agency of their choice will give them the sense of independence.  Using the equity in one’s one with a reverse mortgage can provide seniors the funds for their independence.

“Now I have my dignity back and my independence” was what Edna exclaimed after her reverse mortgage was closed.

Another Minnesota reverse mortgage borrower, Bea, said, “With a reverse mortgage you begin to have independence anew and you begin to feel more secure.  Being free from monetary anxiety, you have better control over spending your equity.”  The reverse mortgage allowed Bea to pay off a mortgage, then to travel to family weddings and reunions.  Several years after she initially did her reverse mortgage more recently Bea is using her reverse mortgage funds to pay for home care that is needed to keep her independent and at home.

Ted, age 91 and Anna age 87, Minnesota homeowners, were proud and didn’t want to discuss their financial situation.  However, their son-in-law finally talked to them about doing a reverse mortgage.  When I met them and we started the reverse mortgage process, the children and I were told they were doing the reverse mortgage so they could put new linoleum on their kitchen floor.  Once the loan was closed I was informed by their children that they had indeed put in the new linoleum along with new windows and they bought some new furniture.  The kids were going to Ted and Anna’s and were told, “Don’t pull in the drive way, we just had it blacktopped.”  When Ted and Anna went out to eat with their kids, they could pay for their kid’s meals too making them feel good that they could treat their children to a meal.

Then one day  Anna and her daughter were sitting at the kitchen table and Anna shared that before their reverse mortgage they used to go 3 days at the end of month without food or even milk because they would run out of money from their Social Security.  As they were sitting there and looking at the paper, Anna exclaimed, “Look, Depends are on sale, I can now stock up.”

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

A reverse mortgage insured by FHA, an agency within HUD,  is known as a Home Equity Conversion Mortgage or HECM.  As one of the most protected financial options available for seniors, it allows them to use the equity in their home without looking at income or credit scores to qualify.  With no monthly mortgage payments, cash flow can be improved by receiving money in monthly payments, a line of credit, lump sum or a combination of these.

The title remains in the borrower’s name and the loan is not due until the home is no longer the primary residence, when they die, sell or move or on their 150th birthday. Repaid from the sale of the property, as a non-recourse loan if the loan balance is higher than what the home can be sold the borrower or their heirs are not responsible for the difference.  If the home is sold for more than the amount due then the borrower or their heirs keep the difference. 

As you bring out the red, white and blue, hang your flags and MN Reverse Mortgage Borrower Has Independencegather with family to celebrate the independence of this great country of ours, ask what independence means to your loved ones.  What is needed to help them remain independent and in their home, not relying on the government or on you, their children.   Then explore a reverse mortgage, get the facts about them, and see if it might be an option for their situation to maintain their independence.  Happy Independence Day!

© 2011-2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

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

Related articles:

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

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

Reverse Mortgages Are Expensive… Compared To What?

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Reverse Mortgages Expensive - Compared to what?Everywhere you turn you hear or see in print that reverse mortgages are expensive.  I wonder what they are comparing them to to come up with this statement.

A conventional mortgage where one has to qualify for the loan based on income, credit, assets and ability to make the payment?  Where the interest rate is based on one’s income, credit, and assets?  Where one has to make monthly payments?  Where the loan has to be repaid in full either from the sale of the property or from assets?  Selling and moving?  Where there are fees for a realtor, closing fees, moving costs and rent?  Do they really think these options are less expensive?

Have you compared the reverse mortgage to a conventional mortgage?  Let’s take a look:

Terms Conventional Mortgage Reverse Mortgage
Retain Title/Own Home Yes Yes
Use Home For Collateral Yes Yes
Lien Placed Against Property Yes Yes
Income Requirements Yes* No
Credit Score Requirements Yes* No
Monthly Payment Requirements Yes* No
Repayment Term 15 years, 30 years, etc* When home is no longer primary residence or 150th birthday of borrower
Closing Costs Origination fee, third party fees, possibly FHA Mortgage Insurance Origination fee, third party fees, FHA Mortgage Insurance Premium**
Amount To Be Repaid Loan Balance Loan Balance
Non-recourse, there is no personal liability to the borrower(s) or their estate Not an option – full loan balance is due and would be paid from the estate if not from the sale from the home Yes, the estate would NOT have to come up with the difference if the loan balance is higher than what the home can be sold for (fair market valued)

*Terms and interest rate is determined by income, assets, credit score, ability to make payments and points.

** When costs are compared side-by-side the difference is the FHA Mortgage Insurance Premium.  And the FHA MIP provides many benefits to senior homeowners who do a reverse mortgage.

Compared to Selling and Moving?  Let’s take a look.

Terms Selling & Moving/Rent In Senior Housing Reverse Mortgage
Retain Title/Own Home No Yes
Credit Score Requirements Yes (rental properties look at credit and income to determine if you’ll be able to pay the rent or need to rely on government programs) No
Monthly Payments Requirements Yes, Rent.  Rent in Assisted Living will range from $2,500 to $8,000/month depending on services.  Additional services, i.e. home care, will be additional. No
Realtor/Originator Fee 4% to7% Realtor Fee.  On a $200,000 home = $8,000 to $14,000. Origination Fee is 2% on the 1st $200,000; 1% thereafter max of $6,000.  On a $200,000 home = $4,000.
Third Party Fees/Other Fees Yes Yes; FHA Mortgage Insurance Premium
Non-recourse, there are is no personal liability to the borrower(s) or their estate Not applicable Yes, the estate would NOT have to come up with the difference if the loan balance is higher than what the home can be sold for (at fair market value)


Where else can one access funds with these benefits for the cost of the FHA Mortgage Insurance Premium?  To say the reverse mortgage costs are high compared to a conventional mortgage or to selling and moving is like comparing apples to oranges. 

So I still ask, reverse mortgages are expensive?  Compared to what?

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

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


Related articles:

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

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

We Are Not Chicken Littles – The Sky Is Not Falling In the Reverse Mortgage World!

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We Are Not Chicken Littles - The Sky Is Not Falling on The Reverse Mortgage WorldWith Bank of America and Wells Fargo exiting the reverse mortgage industry along with the picture the media paints, I’m reminded of the story of Chicken Little thinking the sky is falling, looking at the doom and gloom.  Or jumping to the conclusion that because they have left the industry the reverse mortgage option is going away.

However, the sky is not falling in the reverse mortgage world!  Reverse mortgages are still available and a viable option for senior home owners.

There are still lenders lending, some new ones even entering the industry.  FHA is still insuring the Home Equity Conversion Mortgage (HECM), covering the risks for the lenders when the home values drop.  Investors are still investing in reverse mortgages.  Servicers are still servicing reverse mortgages.

HUD still guarantees the funds are available for borrowers.  Monthly payments are still not required.  The loans are still non-recourse which means no personal liability to the borrower or the estate if the loan balance is higher than what the home can be sold for at the time the loan is due and payable; the FHA Mortgage Insurance Premium covers the difference.  Reverse mortgage borrowers still have protections including the required counseling by a third-party HUD trained and approved counselor.  The HECM Standard, HECM Saver and HECM Home Purchase programs are all still available.

Seniors still own their home.  The majority of people want to remain in their home.  Staying in one’s home can be less costly than moving and renting in senior housing. The reverse mortgage remains a viable option to help seniors remain in their home.

Reverse mortgage interest rates are still low.  The funds can still be received in monthly payments, line of credit, a lump sum or a combination of these.  The line of credit still has a growth rate.  The monthly payments to the borrowers can still be received as tenure/for life or structured as one needs.  Reverse mortgage funds are still generally considered tax free.  Social Security and Medicare are still not affected by a reverse mortgage.  Medicaid (Medical Assistance in Minnesota) can still be received with a reverse mortgage.

The funds can still be used for: Paying off current mortgages and helping one out of foreclosure.  Paying for home repairs and home modifications, medical expenses, home care and long term care.  Paying taxes and protecting other assets.  Fulfilling dreams or whatever one needs or wants.Sky is not falling on MN Reverse Mortgages SIDAC

In the world of Reverse Mortgages SIDAC, we are NOT Chicken Littles, the sky is NOT falling.  We ARE STILL offering reverse mortgages through lenders who are committed to helping seniors stay in their home and have security, independence, dignity and control.

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

This material my be re-posted provided it is re-posted in its entirety and without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-s1

Related Articles:

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

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

You Originate reverse mortgages…What Do You Do to Deserve all that money?

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Often stated, the reverse mortgage is expensive and the fee the originator makes is part of the reason. Originating reverse mortgages is not as easy as one, two, three but a very time consuming process.

As we were going through the application and process, Joan, a recent client, said, “I sure hope you are being paid well for all this time and effort you put into my loan.” I hear these comments from most all of my clients.

To help you understand the work and time we, as reverse mortgage expert originators, put into originating and processing a reverse mortgage let me walk you though an outline and approximate time involved.  Note: While you may not read the outline word for word (yes, it’s long), you’ll at least have a good idea of the time involved for originating each reverse mortgage.  Make sure you go to the last five paragraphs for the conclusion.

  1. Take the phone call from one interested in a reverse mortgage.  Generally spend 30 to 60 minutes providing initial information and getting information to run calculations to determine eligibility.
  2. We generally spend time on researching property values. This can be critical to determining the feasibility of completing a reverse mortgage if there is a significant mortgage balance outstanding and important even without debt payoff concerns just to give the homeowner the most accurate estimate of loan proceeds possible – 20 to 60 minutes.
  3. Enter information into computer program, run calculations, prepare informational folder – approximately 45 to 60 minutes.
  4. Drive 60+ minutes round trip to the prospect’s home for an initial educational meeting.
  5. Discuss their situation and educate them on the reverse mortgage and possible other options – 1 to 3 hours.
    1. Leave a list of reverse mortgage counselors for the required FHA HUD insured Home Equity Conversion Mortgage (HECM) counseling.
  6. Generally there are numerous phone calls to answer additional questions.  These calls can be 15 minutes to an hour or more each call.
    1. Sometimes talk with family members or have an additional 1 to 2 hours face-to-face with prospect and their family.
  7. Receive phone call that the prospect is ready to proceed with the loan.  Schedule application time and date – 10 to 30 minutes (longer if they have additional questions).
  8. Call prospect to gather information needed for application as well as which option they are choosing – 15 to 20 minutes.
  9. Enter complete information into computer program – 20 to 30 minutes.
  10. Prepare the full application package for signatures and a separate borrower set – 60 minutes.
  11. Drive 60+ minutes round trip for the application.  Drive time can be 5 to 10 hours round trip if the client is outside the metro area.  (Some lenders will mail the application however I believe that the face-to-face meeting provides better explanations of each of the forms one is signing.)
  12. Spend 1 to 2 hours to review information on application and get signatures.MN Reverse Mortgage Borrowers Signing Application
  13. If counseling wasn’t completed prior to the application, work with borrower to receive counseling and counseling certification with signatures of both the counselor and the borrower(s) which is needed prior to starting the processing of the loan – 15 to 30 minutes.
    1. Originators now need to make contact with the chosen counselor, prior to the counseling session, and provide certain financial information to the counselor (calculations, etc) – 15 minutes.
    2. Make phone calls to have the signed counseling certificate faxed – 60 minutes.  Or will drive to pick up certification – another 60+ minutes round trip plus 10 to 15 minutes with borrower.
  14. Review file and prepare for submitting for processing – 15 to 30 minutes.
  15.  Start processing.  We are a reverse mortgage broker (one who works with more than one lender) and we process the loans in our office, we don’t send them off somewhere to another office or state to be processed.  While the processor is different than the originator, the originator of a broker is often involved in the facilitating the processing by working with the processor and the borrower through to the closing and funding, not just taking an application.
    1. Enter information into processing software program (one we have developed on our own) – Processor: 30 to 45 minutes.
    2. Request FHA Case Number – Processor: 10 minutes.
    3. Order Title Report – Processor: 10 minutes.
    4. Order appraisal from Appraisal Management Company – Processor: 10 minutes.
    5. Order Insurance Binder – Processor: 10 minutes.
    6. Pull Flood Certificate – Processor: 10 minutes.
    7. Pull Credit Report – Processor: 10 minutes.
    8. Pull other required documentation – Processor: 10 minutes each when necessary.
    9. Review Title Report when received – Processor and Originator: 15 to 30 minutes.
    10. Review appraisal when received – Processor and Originator: 30 minutes.
    11. Review Insurance Binder – Processor: 10 minutes.
    12. Review Flood Certificate – Processor: 10 minutes.
    13. Review Credit Report – Processor: 10 minutes.
    14. Request any changes if necessary – Processor: 10 minutes for each change that is necessary.Reverse Mortgage Borrower talking with MN Reverse Mortgage Loan Officer
    15. Phone calls with borrower for clarifications on any information that is on title, credit report, etc.   For example if a mortgage is on title that we didn’t know about, showing taxes weren’t paid, a judgment is on title or the credit report – Originator: 15 to 30 minutes each call.
    16. When appraisal is received, enter new value, if repairs are required, etc. in software program for calculations – Originator: 10 minutes.
    17. Update processing software program with changes – Processor: 10 minutes.
    18. Call borrower to advise borrower of appraised value, required repairs if any, and any calculation changes – Originator: 15 minutes.
      1. Or up to several hours based on the appraised value, repairs, or other factors, the borrower decides a program change would be in their best interest (i.e., a change from fixed rate to adjustable rate), or contractor bids or additional inspections are needed for repairs.
    19. Prepare re-disclosure for borrower – Originator: 10 to 15 minutes.
      1. Or up to several hours or more if, based on the appraised value or other factors, the borrower decides a program change would be in their best interest (i.e., a change from fixed rate to adj rate).
    20. Mail re-disclosure to borrower – Originator: 10 minutes.
    21. Review all documentation to make sure everything needed is in the file for underwriting – Processor: 20 to 30 minutes.
      1. Multiple follow up calls to the borrower may be necessary to remind them and/or advise them on missing, corrected or additional documents that are necessary (i.e., SS card shows maiden name, etc) – Originator: 10 to 20 minutes each call.
    22. Scan and submit file to underwriting – Processor: 15 minutes.
    23. Request final fees from title agent – Processor: 10 minutes.
    24. Address any underwriting conditions by contacting title company, appraisal management company, borrower, or making other necessary changes – Processor: 30 minutes to several hours depending on the condition.  Conditions are required so that HUD will insure the loan and the investors will provide the funding.
    25. Have borrower sign loan commitment – required in MN to be signed and dated by borrower and can’t close for 7 days – Originator: 60+ minutes round trip to get borrower’s signature plus 10 to 15 minutes with borrower.  Can be done via fax or scanned and emailed if borrower has this capability.  If they live outside the metro area and don’t have capability to fax or scan and email the commitment will be done through the mail delaying the time for the closing (not what the borrowers want at this point).
    26. Gather, review and Submit changes/conditions to underwriter – Processor: 10 to 15 minutes.
    27. Discuss with borrower how they want their reverse mortgage funds and their availability for closing – Originator: 15 to 30 minutes.
    28. Schedule closing according to availability of title agent/signer (and possibly a notary), borrower and loan officer and lender’s closing department’s timing requirements, and possibly with family members and/or Power of Attorney (POA) – Processor and Originator: 30 to 40 minutes  each of the phone calls.
    29. Prepare closing document request to send to lender – Processor: 15 minutes.
    30. Receive closing documents, review that the numbers match those in our program – Processor: 10 minutes.
    31. Attend closing.  We believe in attending the closing with our borrowers to assist in explaining the closing documents.  We generally close at borrower’s home for their convenience or would drive to the title company’s office – Originator: 60+ minutes round trip drive time.   Drive time can be 5 to 10 hours round trip if the client is outside the metro area.
    32. Closing with borrower – 1 to 1 ½ hours.MN Reverse Mortgage Borrower Signing Closing Documents
    33. Follow up on funding conditions, i.e. missed signatures or documents,  if there are any (we rarely have any) – Processor: 10 to 30 minutes.
      1. If necessary, we may make another trip to the borrower’s home to get a signature on a document in order to keep on schedule for funding) – Originator: 60+ minutes round trip drive time.  If outside of the metro area we will assist borrower via phone and having sent over-night the necessary documentation – 60+ minutes.
    34. Keep borrower advised of funding status, i.e. when funds were wired to their bank and payments made for paying mortgages, taxes, etc. – Originator: 10 to 15 minutes per phone call, generally 2 calls.
    35. Once funded, send thank you letter – Originator and Processor: 15 minutes to prepare and mail.
  16. Answer questions from borrowers during the life the loan – generally 15 to 30 minutes each call.  We often talk with our borrowers once or twice a year.

What is described above is an ideal no-problem/issues loan. The majority of our loans can have multiple issues that increase our time investment significantly including POA, Conservatorships, Trusts, non-borrowing and non-occupying individuals on the title, private liens and a long list of property issues including manufactured homes, condos, rural properties, repairs, etc. These can result in additional huge time requirements on the originator’s and processor’s part.

We also continually market for new clients meeting with referral sources and reverse mortgage prospects (some of whom decide to wait or not do the reverse mortgage), as well as other marketing efforts.

A good loan originator will take time to meet with the prospects, educate them, their families and advisors.  They will also be familiar with the processing and assist with the processing as well as be available to answer questions even after the loan is closed.  Originators, processors, underwriters, lenders, title companies and their settlement agents, and all involved in the loan process need to be compensated for their time, experience, and expertise.

The originator does NOT receive the full fee collected.  The fee received by the reverse mortgage broker covers the originator’s salary, the processor’s salary, marketing expenses, overhead for the business such as computers, office supplies, copiers, health insurance for employees, etc.  Originating a loan is not charged by the hour.  However if we calculated time versus pay, with some borrowers, because of various problems that come up or they need some extra hand holding, if we were to be paid by the hour there have been times when I would  make less than $10 an hour.

As we go through the application and process, my borrowers, as Joan did, recognize the time we put into helping them with their reverse mortgage and don’t question the fee we are paid. I hope this outline helps you also understand that it is a time consuming process and the reason the fees are what they are. And when broken down “all that money” is not really all that much compared to the time involved.

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

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

Related Articles:

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

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

A Reverse Mortgage Should Be A Last Resort… To What?

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A Reverse Mortgage Should Not Be A Last ResortSo called senior advocates often state a reverse mortgage should be a last resort.  My question is to what?

A Home Equity Loan?  To qualify for a home equity loan or a traditional loan a lender looks at a borrowers’ credit, income, assets, and ability to make payments.  Most seniors don’t qualify for a home equity loan.

Even if a senior does qualify now, if “life happens” and they have to juggle making a mortgage payment or having funds for other expenses, their stress level increases.  And if they don’t make their mortgage payments they could be facing foreclosure.

I receive calls on a regular basis from seniors who did a home equity loan or traditional loan just a few years ago and now they can’t afford the payments.  When I run the calculations more times than not I find there are not enough proceeds from the reverse mortgage to pay off their current mortgage, a requirement of the reverse mortgage, mainly due to lower home values.  But could also be due to the reverse mortgage qualifying factors:

  • the amount one qualifies for with a reverse mortgage is determined by the age of the youngest borrower (the older one is the more one will receive)
  • the home value (determined by a FHA appraisal)
  • the Expected Interest Rate of the program chosen (the higher the interest rate above the 5% FHA floor, the less funds are available)

A combination of these factors could mean there are not enough funds to pay off a current mortgage at a later date.  For example, even though one is older in three or four years, the interest rate could be higher and the home value lower meaning less funds available.

The reverse mortgage as a “last resort” to a home equity loan or traditional mortgage is not generally a wise decision – one could have larger issues in the future.

A last resort to selling and moving?  The time it takes to sell the lower home values, the real estate costs and moving costs can be prohibitive for selling and moving to be a better option to a reverse mortgage.  In addition most seniors want to stay in their home.  See comparisons of costs in my article, “I Want To Stay in My Home – Don’t Tell Me To Sell!” and “Be Educated About Your Options Of Care And Financing The Care.”

A Loan from a family member or friend?  Or help from a family member?  Is there someone who can and is willing to help financially?  What happens if “life happens” to them, i.e they lose their job or have health problems?  This could negatively impact finances for everyone, cause stress for everyone and impact relationships.  Again, generally not a better option to a reverse mortgage.

Skimping on necessities?  “Getting by” without a reverse mortgage?  Doing without to preserve equity for what may be future needs or to leave an inheritance for heirs?  Living from Social Security check to Social Security check just to get by and maybe doing without some of the things in life that give us dignity such as having lunch with friends, getting one’s hair done, or having cable TV… is this really a good option over a reverse mortgage?  Why should one be warned off a reverse mortgage rather than living life comfortably?  Or as Ed, a reverse mortgage borrower stated, “the reverse mortgage gives us some elbow room.”

Not having debt but waiting, saving the equity?  Why attempt to preserve equity from one’s home for the future or as an inheritance for heirs?  For what?  Why shouldn’t one enjoy the extra luxuries in life such as buying a car, taking a dream vacation having funds to attend a family reunion or wedding?  A reverse mortgage could help one remain independent, protect other assets, have security knowing one has funds for what one needs or wants as well as have control and choices of one’s lifestyle.Reverse Mortgage is a finance option

As a senior advocate myself, I help seniors review all their options and educate them on the reverse mortgage so they can make an informed decision and the choice of what best fits their needs.

A true senior advocate will stop stating a reverse mortgage should be a last resort and see that in the big picture the reverse mortgage is generally the best solution sooner than later.  At least it should be reviewed as a valid option for seniors.  And then let the senior make their own personal decision.

My question remains, a reverse mortgage should be a last resort to what?  Mary and Larry, who did a reverse mortgage, stated, “A last resort?  When one is retired it is the last resort.  Our reverse mortgage has been wonderful to meet our needs and maintain our lifestyle.”

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

This material my be re-posted provided it is re-posted in its entirety and without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-r6

Related articles and information:

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.

I’m In The Reverse Mortgage Industry Because…

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Happy Reverse Mortgage ClientWe received a call the other day from the daughter of a reverse mortgage client who we had closed several years ago.  Her mother, Mildred, had been in foreclosure, in fact in this situation the sheriff’s sale had already happened.

Because credit scores and income are not required to qualify for a reverse mortgage and there were enough funds to pay off the mortgage, Mildred qualified for the reverse mortgage and we were able to save her home from foreclosure and redeem it from the sheriff’s sale.  With no monthly mortgage payments the reverse mortgage has allowed Mildred to live in her home with improved cash flow.

As she has done through the years, Mildred’s daughter was calling just to say, “hello.”  During the calls she always let us know how her mother is doing and what’s happening in her life as well.  She reported that her mother is happy that she is still able to be living in her home.  She’s doing well and now goes to adult day services to provide her some socialization.

It’s a pleasure to get these calls and hear how our clients are doing.  I’m in the reverse mortgage industry because I am able to make a difference in one’s life so they can remain in their home as they so choose.  It’s an honor to have our clients and their family members call to just say “hello” and let us know how they are doing.  Even years after the closing it’s rewarding to hear we have made a difference in their life.  I’m blessed to be in the reverse mortgage industry and help our Minnesota seniors and their families.

© 2011-2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

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

Related articles:

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

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

Reverse Mortgage Allowed Creation of Memories for Family

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Reverse Mortgage Created Memories for Bob and His FamilyFriday I received a call from the niece of one of my Minnesota reverse mortgage clients telling me that Bob had passed away.  After extending my sympathies I answered her questions and helped her understand the process now that the loan is due.   As I talked with Bob’s niece she shared how loving Bob was and how the FHA  Home Equity Conversion Mortgage (HECM) reverse mortgage not only benefited him but also allowed for him to create numerous memories for the family.

During our conversation I shared some memories of my meetings and conversations with Bob and his perspective on how the reverse mortgage had made a difference in his life.  Bob had called me after his trip to Yellowstone with a nephew telling me what a wonderful time he had had and how happy he was to be able to take the trip.  During another conversation he had said he had remodeled his home to be adapted to be wheelchair accessible.  He had also shared how much the reverse mortgage had given him his independence and the ability to remain in his home where he wanted to be with his dog.  I originally shared Bob’s stories in my blog “Reverse Mortgage Helps Minnesota Senior To Be Prepared for Future.”

Apparently Bob’s wife who had proceeded him in death limited Bob from fulfilling his dreams.  It appeared it had to do with not having much money but also her attitude.  With the reverse mortgage he had money like he never had before.  He would tell his niece, “I don’t know how it is that I have money now when I never did before.”  She said he became energetic and interested in life.

The family’s perspective of the  trip to Yellowstone was that it had not only been a wonderful experience for Bob, his young traveling partner had an experience of a lifetime with his uncle and has memories of the trip to treasure.  I was told the expressions on their faces upon their return were smug and they were keeping secrets that will likely never be shared like “little boys” do.

Bob bought gifts for family members like a vacuum cleaner for someone who needed it but didn’t have the funds to purchase it on their own.  What a good feeling it must have been for Bob to be able to help his family.

Reverse Mortgage created memories for familyHe bought tickets to take family members to movies and plays.  I was told that one of those experiences was taking his niece’s family to the play “Sleeping Beauty.”  As they were sitting in their seats the niece looked over and saw the pleasure in Bob’s face as he was watching the expressions on the faces of his family.  What a memory to treasure!  This was only one of several of these types of adventures and memories for Bob and his family.  The pleasure for the family was the kids got to know an uncle and share time with him as they had not been able to previously.

Having less funds available when the loan is due and payable or less of an inheritance is a negative of the reverse mortgage.  But using the funds and creating the memories by spending time together or giving the gifts and seeing the difference it makes while one is still alive can be a treasure which can never be replaced.

As his niece shared the stories I got tears in my eyes. The reverse mortgage had not only changed Bob’s life but the lives of an entire family.  Just before we were hanging up, Bob’s niece said, “Thanks for loving my uncle too.”

Providing security, independence, dignity and control for our seniors is why I believe in reverse mortgages and am in this industry.  It’s a blessing for me to be able to help -2015seniors and their families.  And I do love my clients and hearing their stories.

For the details and facts on reverse mortgages visit our website, www.RMSIDAC.com.

© 2011-2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

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

Related Articles:

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

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