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

Posted on October 21, 2012 by sidac

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted on October 2, 2012 by sidac

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

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

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

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

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

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

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

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

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

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-YS

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!

Posted on June 22, 2011 by Beth Paterson, CRMP

With 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.

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.

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

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 Letter to Minnesota Governor Tim Pawlenty Regarding Reverse Mortgages

Posted on May 17, 2010 by Beth Paterson, CRMP

From the time I first heard about the proposed reverse mortgage legislation in 2009, SF489, I have been writing to and in contact with MN Governor Pawlenty’s office. This year even prior to having details of the bill I started contacting Governor Pawlenty’s office, sending emails regarding the suspected legislation. After Friday evening May 14, 2010 when I finally found the details of the bill SF2430 I again sent Governor Pawlenty a message requesting a veto this time outlining with the details of the issues of the bill. Following is the latest letter I sent to him requesting a veto.

Dear Governor Pawlenty,

After having time to review the reverse mortgage amendment to SF2430/HF2699 I want to provide the reasons why this reverse mortgage legislation should be vetoed.

Besides the facts I have pointed out previously:

This bill has not been transparent – the amendment was just added on the afternoon of May 14, 2010 with no prior knowledge of the details to those of us in the reverse mortgage industry.
This reverse mortgage legislation is controversial. Any reverse mortgage legislation should not happen without a full hearing.
While it appears they pulled the language of suitability, this bill still contains some of the same language as the 2009 SF489/HF528 which was vetoed last year which would mean increased costs to reveres mortgage borrowers and/or cause some lenders to refrain from offering reverse mortgages in Minnesota.

The main issues include:

1. Why should a lender receive a civil penalty an dhave to pay $1,000 for something a counselor does or doesn’t do? Who and how is this going to be overseen?

The language of this is subjective setting up an opportunity for litigation and lenders may decide not to lend in the state if there is a risk of civil penalty for something they have no control over.

Implementing state laws that are different than the HUD requirements will make it more difficult for prospective borrowers to receive counseling.
- Some of the counseling opportunities currently available to our Minnesota borrowers will no longer be an option as some of the counseling agencies may decide that with different regulations they will not provide counseling in the state.
Having the state oversee counseling different than the HUD requirements is likely to be costly for the state in seeing that these regulations are followed by counselors in the state as well as across the country.

2. Adding the language for Lender default and forfeiture may mean lenders will choose not to loan with this requirement and HUD may choose not to insure the loans with these requirements.

3. Seven-day cooling off period; right of rescission will mean the loans will be more expensive for seniors and without the opportunity to waive the provision under certain circumstances such as foreclosure may mean that seniors could lose their home because the reverse mortgage could not be done timely.

It appears they changed the 10-day rescission period language to a seven-day cooling off period but it would have the same negative consequences as the 10-day rescission period.
Language is vague and subjective, i.e. “written commitment to make the reverse mortgage loan. “ What does “written commitment” mean? This makes it more likely for litigation.

4. This law would be additional costs to the state. While the bill may not be showing as a having a budget expenditure, there would be additional costs to the state in overseeing that state laws are followed versus the difference from the federal regulations. If the loan becomes more expensive to seniors and/or lenders choose not to loan in the state more seniors are likely to lose their homes without the reverse mortgage option. Consequently the foreclosures would increase and more housing would be needed for seniors and much of this would be born as state expense.

5. All lenders do not have to abide by the state rules. Federal chartered banks do not have to abide by the state rules because they are federal chartered yet brokers and non-federal chartered banks and lenders would have to follow any state laws. This would be a monopolistic-like advantage for the FDIC banks over other lenders. This obviously does not foster fair competition between all lenders and small business.

6. Seniors can apply for and if they qualify can receive a conventional or home equity loan to refinance without all the regulations that are done with a reverse mortgage. Sometimes they may feel it is easier and less invasive to do so. Unfortunately many who have taken a conventional or home equity loan run into problems making the required monthly payments then inquire about a reverse mortgage. With the lower home values many times these seniors do not qualify for the reverse mortgage and then often face foreclosure and lose their homes. Or they may just use credit cards to finance their retirement expenses then run into problems when they can’t make the payments. There aren’t additional requirements for seniors to qualify for credit cards. And there aren’t additional requirements for seniors to take out a car loan. So why have such tight regulations on reverse mortgages when seniors can make other choices that could be more detrimental to them.

7. Implementing this legislation is insulting to our seniors who have worked hard all of their lives – they are not children, they have lots of experience and knowledge – some that we could and should learn from – so why are we treating them like children? They have the right to be educated on their options then decide what is right for their situation, not have legislators, counselors, or lenders make decisions for them.

Keep in mind that: A reverse mortgage is a mortgage just like any other loan but has special terms for seniors 62 and older. And besides the special terms to benefit them to qualify and improve their life the reverse mortgage borrowers are already highly protected (see attached article)! I would like to educate those making legislative decisions on the facts and terms of reverse mortgages then determine what legislation needs to be implemented for proprietary reverse mortgages.

Again, I ask that you veto the reverse mortgage legislation SF2430/HF2699 to protect Minnesota Seniors and the reverse mortgage businesses.

Thank you,

Beth Paterson
Executive Vice President
Prestige Mortgage LLC
Reverse Mortgages SIDAC
Security, Independence, Dignity and Control
The Experts Excelling In Service
Phone: 651-762-9648
Toll Free: 1-877-590-9648
Fax: 651-653-0878
Be sure to visit our website and
Blog for reverse mortgage facts and details:
www.RMSIDAC.com and
http://BethsReverseMortgageBlog.wordpress.com
Follow on http://Twitter.com/RMSIDAC

While Governor Pawlenty recognizes the issues as he stated in his 2009 veto letter, the unfortunate fact is that this legislation was not a stand alone bill but is attached to a foreclosure bill and without the line-item-veto authority may be signed into law. If this is the case it will be very unfortunate for Minnesota seniors as well as the reverse mortgage industry.

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.

Down To The Wire… The MN Reverse Mortgage Amendment Was Sneaked In and Likely To Have Negative Consequences For Seniors And Reverse Mortgage Businesses

Posted on May 14, 2010 by Beth Paterson, CRMP

Not disclosing any of the details before hand, the reverse mortgage amendment was added to bill SF2430/HF2699. Being passed in Congress we now hope to receive a veto from Governor Pawlenty to protect Minnesota Seniors and the reverse mortgage businesses.
I along with others have concerns about the bill:

This bill has not been transparent. While I have been inquiring and searching for information for months, I did not learn the bill number or the details of the bill until the evening of May 14th – just before the May 17th end of the 2010 legislation session.
This reverse mortgage legislation is controversial. Any reverse mortgage legislation should not happen without a full hearing. And without all of us impacted, especially brokers and lenders who are not federal chartered banks having an opportunity to see and address any proposed legislation.
This law would mean increased costs to reverse mortgage borrowers and/or cause some lenders to refrain from offering reverse mortgages in Minnesota. As with the 2009 SF489/HF528 bill which Governor Pawlenty vetoed last year this bill still contains some of the same language and would have the same impact.
Reverse Mortgage Borrowers are highly protected – why confuse the issue with state laws. Currently the only reverse mortgages available in Minnesota are the FHA insured Home Equity Conversion Mortgages or HECMs and these are highly protected and regulated by HUD. Visit my blog, “You Need To Know Reverse Mortgage Borrowers Are Highly Protected!” for details.
There are so many changes on the Federal level it would be a disservice to Minnesota seniors to implement state laws. The state would have to oversee any differences from federal regulations.
This law would be additional costs to the state. While the bill may not be showing as a having a budget expenditure, there would be additional costs to the state in overseeing that state laws are followed versus the difference of the federal regulations. More seniors are likely to lose their homes without the reverse mortgage option. Consequently the foreclosures would increase and more housing would be needed for seniors and much of this would be born as state expense.
All lenders do not have to abide by the state rules. Federal chartered banks do not have to abide by the state rules because they are federal chartered yet brokers and non-federal chartered banks and lenders would have to follow any state laws. As I sated in my blog, “Do You Know The Best Kept Reverse Mortgage Secret in Minnesota?,” this would be amonopolistic-like advantage for the FDIC banks over other lenders. This obviously does not foster fair competition between all lenders and small business.

If Govenor Pawlenty signs the SF2430/HF2699 bill into law there will be negative consequences to our Minnesota seniors as well as reverse mortgage brokers and lenders in Minnesota.

While some are claiming the changes made from the 2009 bill now has widespread support, those of us in the reverse mortgage industry have not had an opportunity to review or address this legislation – we are NOT supporting it. Sneaking this legislation on at the last minute when it has not been transpartnet and is so controversial seems to me does not fit into the democratic consitution of our country or state.

I have asked that Governor Pawlenty veto the bill so we in the industry, who are senior advocates and would be directly impacted by the law chances, have the opportunity to review and address as well as write proposed legislation that will be in favor of protecting seniors as well as the reverse mortgage businesses.

Please join me in requesting Governor Pawlenty veto SF2430/HF2699 by sending him an email at tim.pawlenty@state.mn.us. Use my above outlined issues as reasons for your request for a veto.

Thank you for your assistance in protecting Minnesota seniors as well as revesre mortgage borrowers.

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

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

Do You Know The Best Kept Reverse Mortgage Secret in Minnesota?

Posted on May 7, 2010 by Beth Paterson, CRMP

During the 2009 Minnesota Legislation Session a reverse mortgage bill, SF489/HF528 was introduced and then passed by the Senate and House but eventually vetoed by Governor Tim Pawlenty. During this session I was very involved in addressing my concerns as a reverse mortgage originator, processor and senior advocate, testifying against the bills at every hearing, writing to the Attorney General Lori Swanson, the authors of the bills, Senator Tarryl Clark and Representative Jim Davnie as well as Governor Pawlenty explaining the facts of reverse mortgages and the issues with the bill if signed into law. Actually I was the only person who testified during this legislation that has actually originated and processed reverse mortgages. The others who testified were all lobbyists, attorneys or had little knowledge and no experience with the details or originating reverse mortgages.

Some of the issues of the bill included a 10-day rescission period, originators determining suitability and cross-selling prohibition that those who do a reverse mortgage could not purchase insurance products within the 18 months after the reverse mortgage closing.

Governor Pawlenty’s veto letter stated that it is important that reverse mortgages continue to be offered in Minnesota and the legislation could have unintended consequences causing mortgage bankers to refrain from offering reverse mortgages. He stated the suitability clause was poorly written and would cause litigation. Governor Pawlenty encouraged the authors to rewrite legislation that protects seniors but does not limit the availability of reverse mortgages in Minnesota.

Early during the 2010 legislation session I heard through the grapevine that a FDIC bank was supporting and “pushing” a bill modeled after the California reverse mortgage law into this legislation session. For months now I have been researching to find details about this potential legislation but to little avail. While I was so involved during the 2009 legislation, and as an actual originator trying to educate the bill authors and legislators on reverse mortgages, the process and issues with their bill, I was not contacted by any of them to assist with any new legislation.

Last month the National Reverse Mortgage Lenders Association (NRMLA) stated that a senator was expected to add an amendment on reverse mortgages to a bill that was slated to pass. My research has continued and I have learned that, yes, the author of last year’s Senate bill is working on finding a bill to add the reverse mortgage amendment to but with no confirmation of which bill and/or the verbiage of the anticipated amendment.

I have also learned that a FDIC bank is working on verbiage for the reverse mortgage amendment. Not sure if this would be the same bill or two different bills. For some undetermined reason this legislative act has taken on a shroud of secrecy.

My concern with this process and any amendment that may be added to legislation is that this is a very controversial issue that could impact those of us who are brokers or lenders that are not federal chartered banks. We are not on the same playing field – federal chartered banks do not have to abide by the state rules because they are federal chartered yet brokers and non-federal chartered banks and lenders would have to follow any state laws.

What does this mean? If a 10-day rescission is implemented, the FDIC bank would still be working off the 3-day rescission; yet non-federal chartered banks and lenders would have to operate with the 10-day rescission. The same is true for a suitability clause and for cross-selling. This would be a monopolistic-like advantage over other lenders. This obviously does not foster fair competition between all lenders and small business. Is this the purpose of the FDIC Bank in supporting and pushing through legislation that they don’t even have to follow? Is this for their gain rather than for the seniors?

Additionally this legislation has not been transparent. We have not been able to find out exactly what the legislation entails. From what I have heard there is potential that it could be similar to or even worse than last year’s legislation but this is being kept a secret.

I feel that any reverse mortgage legislation should not happen without a full hearing. And without all of us impacted, especially brokers and lenders who are not federal chartered banks having an opportunity to see and address any proposed legislation. Without disclosing the information and keeping this a secret and not consulting those who it will actually be impacting (i.e. the non-federal chartered bank originators who actually work in the field on a daily basis and with the seniors) it appears legislators are not looking at protecting seniors yet looking out for their own political gain.

When we are trying to help homeowners stay in their home, receive help with their mortgages and/or avoid foreclosure it would be a disservice to seniors to pass Minnesota reverse mortgage legislation at this time. Additionally at this time when there are so many changes on the federal level through HUD affecting reverse mortgages, it will be a disservice to Minnesota seniors to pass state legislation adding to the confusion of the product.

Additional suggested reading:

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 Reverse Mortgage Borrowers Are Highly Protected!

Posted on March 7, 2010 by Beth Paterson, CRMP

Legislators, media, some senior advocate groups, and even the general public miss the point that reverse mortgage borrowers are already highly protected. With more protections than with any other loan or financial decision seniors make they still feel more protections are needed. Currently the only reverse mortgage is the Home Equity Conversion Mortgage (HECM) which is insured by HUD. HUD has guidelines and requirements to protect seniors. Even when there were proprietary (private) reverse mortgage products, they followed HUD’s guidelines. While there are protections, seniors still have the right to make their own decisions, for better or worse. Let’s discuss these protections.

Third-party counseling is required on all reverse mortgages. Counseling is absolutely mandated with no exceptions and is provided by HUD trained and approved counselors. During the counseling sessions the counselors are required to follow a protocol approved by HUD. Evolving over time, HUD’s counseling guidelines and regulations now require distance between the counselors and lenders. Lenders are required to provide borrowers with a list of 5 local and 5 national counselors without steering borrowers to any specific counselor. Additionally, counselors are restricted from steering to lenders.
- The counselor’s role is to educate about reverse mortgages, explain the allowable fees, and terms of the loan so potential borrowers have an understanding of the reverse mortgage. They also provide other potential options. They counselors are not to make a decision for the borrower on whether they should or should not do the reverse mortgage.

Cross-selling is prohibited. Mortgagee Letter 2008-24 (HUD’s guidelines and requirements) states that a “HECM mortgage originator or any other party that participates in the origination of a FHA insured HECM mortgage shall not participate in, or be associated with, or employ any party that participates in or is associated with, any other financial or insurance activity.” Additionally if a lender or bank has financial departments they must demonstrate to the Secretary of HUD that they have and maintain “firewalls and other safeguards designed to ensure that (i) individuals participating in the origination of a HECM mortgage have no involvement with, or incentive to provide the mortgagor with, any other financial or insurance product; and (ii) the mortgagor shall not be required, directly or indirectly, as a condition of obtaining a mortgage under this section, to purchase any other financial or insurance product.”
- Lenders require mortgage brokers sign forms that they do not sell insurance and do not cross-sell.
- All lenders application packages have disclosures stating that annuities and/or other financial products are not required to be purchased with reverse mortgage funds.

HUD regulates the fees. HUD outlines what lenders and third-parties may charge stating they must be customary and reasonable costs necessary to close the mortgage. Mark-ups are not allowed. You may find HUD guidelines at their website (http://www.hud.gov/offices/hsg/sfh/ref/sfhp2-15.cfm) and in Mortgagee Letters 2008-34; 2006-07; 2006-04; 2004-18; 2000-10.

The Good Faith Estimate (GFE) must disclose all fees. RESPA (Real Estate Settlement and Protections Act) requires all fees be disclosed at the time of application, restricts what fees can be changed and for the fees that can be changed borrowers must receive new disclosures.

The Total Annual Loan Costs (TALC) must be disclosed. Providing a comparison of the percent of the costs to the amount received through the loan, this document discloses that the longer one keeps the loan the less expensive it is.

Sample Closing Documents must be provided at the time of application. HUD requires that borrowers must receive the sample closing documents as well as a booklet regarding home equity loans. This gives borrowers time to review the documents they will be signing at closing. They may also have family, trusted friends or their attorney review the documents during the processing.

Disclosures must be provided to borrowers at application. There are a variety of disclosures including:
- Non-borrowing spouse disclosures outlining the risks if a spouse will not be on the loan.
- Taxes and Insurances are the responsibility of the borrower(s).
- Annuities and/or other insurance and financial products are not required with a reverse mortgage.
  - If annuities are being purchased the costs of the annuity are to be included on the TALC.

Three-day Right of Recession. As with any refinance, there is a three-day right of recession giving the borrower(s) time to review and decide whether or not to proceed.

HUD insures and guarantees the funds. As a HUD insured loan the funds are guaranteed to be available to the borrower as long as the borrower(s) abide by the terms of the loan.

Non-recourse loan. Unlike any other loan, the reverse mortgage is a non-recourse loan which means there is no personal liability to the borrower or the estate as long as the borrower or their estate is not retaining ownership when the loan is due and payable.

There are guidelines for marketing practices. HUD, The Federal Trade Commission and industry associations review and have cracked down on misleading advertisements.

State licensing and the SAFE Act. Many states require mortgage brokers take test and receive licensing in order to originate loans including reverse mortgages. (Note: FDIC insured banks are exempt from these requirements.) The Housing and Economic Recovery Act of 2008 (HERA) enhances consumer protections including encouraging states to establish minimum standards for licensing and registration of mortgage loan originators. The SAFE Act will establish and maintain a national mortgage licensing system and registry for the residential mortgage industry.

Protected MN Reverse Mortgage Borrowers

When doing other types of mortgages, loans or financial decisions seniors do not have all of these same protections. For example they do not have to go through counseling, have the same disclosures requirements, have regulated fees, are not guaranteed or have the non-recourse clause and often do not require the testing and licensing. Think about these situations that don’t have these same requirements or disclosures:

A reverse mortgage compares to a regular home equity loan in the fact that regardless of age the mortgages are used to finance lifestyle using the home equity. With a forward/conventional loan the funds are taken as a lump sum and can be used however one wishes.

If a senior is selling they have costs associated with sale and receive funds in a lump sum. No one is controlling how they use the remaining equity from the sale of the home. And they have to determine where they are going to live. If they are renting (i.e. regular apartment, independent living, or assisted living) the money may only last for a short period of time and they may still not have funds for future needs.

If the senior (or anyone) does a forward/conventional loan the funds are received in a lump sum. They can do whatever they want with this equity. And they have to make payments which can become difficult for them if “life happens.”

If they win the lottery they have money in a lump sum which can be spent however they wish.

With credit cards seniors (or anyone) are not restricted on how they are used. They can charge for whatever they want. And they then have created debt that has to be paid back on a monthly basis.

When you hear that seniors need to be “protected from the reverse mortgage” remember all these protections and know that seniors doing a reverse mortgage have more protections than any other loan or financial decision they make. As with any decision, especially financial or legal, one should be educated and understand the service or product. And while these protections are in place, the seniors still have a right to decide for themselves on whether the reverse mortgage is right for 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.

The Impact Of A Reverse Mortgage On A Community Spouse

Posted on February 20, 2010 by Beth Paterson, CRMP

I want to provide the facts on a comment I received regarding a reverse mortgage for a couple where one is considered a community spouse, i.e. one living in the community and the other is not and receiving Medicaid assistance. This person stated that if a reverse mortgage was put in place for a couple to provide the money for the expenses where one needs more in home care than the spouse can give, then after the ill person passes away, the remaining “community spouse” would have no or little money AND no place to live.

In reality, the reverse mortgage is a great tool for keeping seniors in their homes and paying for home care whether a single person or as a couple. An additional benefit for them is the reverse mortgage is not considered income so the borrowers may still receive public benefits such as Medicaid or other county benefits in addition to the reverse mortgage. They can also receive VA benefits if they qualify. Depending on the circumstances, Medicaid could cover the home care costs, the reverse mortgage could be used for things not covered by Medicaid and for the needs of the community spouse, i.e. maintaining the home, paying taxes, insurance, auto expenses, groceries, etc.

With both names on title, when the ill person passes away the community spouse would still have a place to live as they can stay in the home because the loan is not due and payable until the home is no longer their primary residence or on the 150th birthday of the youngest borrower. This means they can still have a roof over their head without having to make monthly mortgage or rent payments.

In fact the reverse mortgage can provide funds for more care than selling and moving into senior housing. When one sells, the net proceeds would be used to pay rent in senior housing as well as for home care whereas when staying in ones’ home the expense is lower, there is no rent payment and they would have a roof over their head. One of my Blog articles, “Be Educated About Your Options of Care And Financing The Care,” compares the differences of costs of selling and moving to staying in the home with a reverse mortgage and receiving home care.

Let me share the story of my clients, Bob and Jean. Jean had some memory loss issues so she was in a memory care Assisted Living facility. At the recommendation of their Elder Law Attorney Bob decided to do the reverse mortgage to pay for Jean’s rent and care. Jean was living in a private pay facility so the reverse mortgage allowed her to remain in the same place and not have her rely on government funding. The reverse mortgage provided them the control and choice of where Jean would live. The reverse mortgage also freed up some cash flow for Bob as the community spouse since Jean’s care was no longer coming from his Social Security or pension.

Reverse Mortgage Benefits MN Community Spouse

When Jean passed away the reverse mortgage funds were no longer needed for her care so there was more funds were available for Bob’s use. When Bob needed some additional care assistance of his own the reverse mortgage funds were used for his home care needs. Bob was able to have funds and live in his home until his death several years after the reverse mortgage was originated. This couple received what everyone of us desires: their desired security (having a place to live), independence (not relying on others), dignity (they could make their own decisions), and control (deciding where they were to live).

Experienced reverse mortgage originators along with a team of an Elder Law Attorney, care manager, and home care agency who is familiar with reverse mortgages can to help determine what is right for a senior’s situation especially when they may need home care or the decision of when one may need a care center.

The reverse mortgage can be a lifesaver for seniors even as a community spouse. Through the years I’ve been fortunate to help many seniors in these circumstances providing them with security, independence, dignity, and control.

Review these additional articles for facts and how reverse mortgages have benefited 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.

One Bad Apple Spoils The Bushel of Reverse Mortgages

Posted on October 26, 2009 by Beth Paterson, CRMP

Reverse Mortgage Apples Every industry has their bad apples and reverse mortgages are no exception. However the few and far between “bad apples” in the reverse mortgage industry are not representative of the industry or the product as politicians, media and some reporters are stating. Headlines such as “Beware of Reverse Mortgages” is a disservice to seniors because it scares away the seniors who could benefit from a reverse mortgage. So even the reporters and politicians are bad apples spoiling the bushel of reverse mortgages.

There is little evidence of subprime lending and fraud with reverse mortgages. The National Consumer Law Center Report recently released which claims reverse mortgages are the next subprime mortgage is not based on statistical evidence. As Peter Bell, President of the National Reverse Mortgage Lender’s Association has pointed out, the cases sited in this report are over 3 years old and some have been dismissed in the legal system.

Some of the instances mentioned in this report are not abuses by lenders but by those who took advantage of seniors who had the reverse mortgage. My Blog article, “It is NOT Reverse Mortgage Fraud When…” outlines some claims of reverse mortgage fraud that aren’t really reverse mortgage fraud.

Let’s look at the bad apples of fraud in the reverse mortgage industry:

One bad apple was where a scheme was set up to flip homes using a reverse mortgage.
Another bad apple was an investor who sells the property using a quit claim deed then the buyer applies for a reverse mortgage using an inflated appraisal and a fake mortgage company. The senior then refinances using a reverse mortgage paying off all debts including the fake mortgage providing the investor funds – some of these seniors were homeless prior to the scheme and didn’t understand the terms of the loan or the need to pay taxes and insurance on the property. Protections have been implemented to stop these types of schemes.
An originator who proceeded with the loan closing knowing the borrower had passed away was another bad apple.
HUD has charged another bad apple for violating HUD’s regulations and is in the process of proceedings to have that company’s FHA license pulled and the people involved will be put on HUD’s sanction list and not be allowed to work in the industry. (This lender does both conventional and reverse mortgages – the violations were based on conventional loans, not reverse mortgages s0 this was not really reverse mortgage fraud but it likely could have been.)

Out of all the reverse mortgage lenders and reverse mortgages these are the only instances I found to be real fraud and this is not an issue with the product itself but with a person or persons. If there are more, I couldn’t find them in my search of reverse mortgage fraud through the many sites and articles found at the FBI, Federal Trade Commission, HUD, National Reverse Mortgage Lender Association, and other industry reports. Obviously with only these instances, reverse mortgage schemes and fraud are not increasing or set to be the next subprime focus.

Yes, there is always a risk of potential increase of scams and fraud as there is a risk of increase of scams with anything including increase of theft from a store, identity theft, medical or insurance practices or products, on and on. And while everyone doing a reverse mortgage, a conventional mortgage or any financial transaction should know the facts and beware of scams, three or four instances does not mean the product should be avoided. Would you stop shopping because it involves using cash or a bank card just because there is a risk of increase of theft or identity theft? No, you just take precautions. Do you stop driving your car because there is a risk of increase of car theft. No, of course not, you just take precautions.

HUD has many protections in place making the reverse mortgage the safest loan available to seniors. These protections include required third-party counseling, now with a new protocol (see my Blog article “New Protocol for Reverse Mortgage Counseling”), regulating fees, prohibiting cross-selling, implementing a wait period for home purchases (a result of a scam) as well as review of marketing practices and disclosure of fees.

Meg Burns, Director, FHA Single Family Program Development U.S. Department of Housing and Urban Development (HUD) has stated, “the program has the potential to benefit seniors with a wide variety of financial needs and, as such, should be thoughtfully considered by all seniors making financial planning decisions.” She has stated that widespread abuse is unsubstantiated and shares the reverse mortgage industry’s concern about decisions based on lack of knowledge, as outlined in her statement, “I have grave concerns about the overzealous attention by legislators to the reverse-mortgage sector. Federal regulators are going to pay attention, but they don’t know the product. We have yet another party entering this world who wants to layer on additional consumer protection, but they don’t understand the product well enough-[and yet] we have auditors nipping at our heels.”

Instead of highlighting how many seniors have benefitted from the hundreds of thousands reverse mortgages that have been done and how originators have bent over backwards to help seniors save their home from foreclosure, eliminate mortgage payments, have cash to repair or modify their home or have funds for medical expenses or home health care, or funds for their retirement during the economic downturn the media and politicians focus on the rare instance of fraud.

Consider a few of the many comments we have received on how the reverse mortgage made a difference for seniors:

“Thank you! I now have my bills paid, money in the bank, and I can take a vacation this summer.”
“It helps me keep up with bills I cannot cover with my limited income. It also allowed me to remodel my home to improve its value and be more comfortable. I greatly appreciate it.”
“The Reverse Mortgage helps out a great deal and solves many problems.”
“It has relieved us of a great deal of stress and makes grocery shopping a lot easier too.”
“The only way we could comfortably stay in our home of 42 years”
“A reverse mortgage means I’ll have a place to live even in case of serious illness.”

Options should be considered however their homework has not been done when reporters, politicians, and even “senior advocacy” groups state:

“The reverse mortgage should be a last resort.” A last resort to what? As one of my borrowers stated, “When retired it is the last resort.”
“Get a home-equity line.” First, most seniors don’t qualify for a conventional loan and if they could, they would have to make payments (often what they are trying to eliminate or avoid). And even if they can afford the payments today, what happens when “life happens” and they juggle between making mortgage payments, paying their utilities or paying medical bills and putting food on the table.

Besides, the reverse mortgage IS a home equity loan. It is a home equity loan with special terms for seniors including no income or credit score qualifications, no monthly payments and is a non-recourse loan insured by FHA with a lower interest than they can qualify for with a conventional “forward” loan. The loan is not due and payable until the home is no longer the primary residence or on their 150^th birthday. It also offers more flexibility on how they can receive their funds including monthly payments, line of credit, lump sum or a combination of these.

“Sell and move.” Most seniors want to stay in their home where they have raised their children, are familiar with the neighbors and neighborhood and have a lot of emotional ties. Additionally moving and selling can cost more than a reverse mortgage. Read my Blog, “I Want To Stay In My Home – Don’t Tell Me To Sell!” which compares the costs.

Another common misstatement and myth is “reverse mortgages have high fees.” Actually the costs of the reverse mortgage are comparable to a conventional FHA loan. When comparing costs side by side to a conventional loan the difference is the up-front FHA Mortgage Insurance Premium. The benefits of FHA insuring the loan include guaranteed funds, a lower interest and the loan being non-recourse. For a better understanding of costs and a comparison read “Reverse Mortgage Closing Costs – High or Mythical?”

To make sure you aren’t working with a predatory lender, check references, check to ensure they are a HUD approved lender, know they specialize in reverse mortgages, have experience, knowledge, and are willing to meet with you to review the details, before the application, during the application and at closing. You should review “Don’t Let Fear Keep You From A Reverse Mortgage But Know What To Look For In A Lender” to know the questions to ask when talking with an originator.

Our company is proud to receive comments such as “I am completely satisfied with all aspects of my reverse mortgage. From start to finish, it was handled very professionally. I never had a feeling that my questions and input were not of importance (thank you – I had many questions!!) Beth, you assured me that the procedure was on time and going smoothly, and that was a wonderful feeling! Thank you for being the kind of super advisor that makes you so special”

So don’t let the bad apple spoil the bushel of reverse mortgages for you. Get the facts, know what to look for in a lender, and explore the option to see if it might benefit you as it has benefitted hundreds of thousands of senior homeowners.

To get the details and facts straight, the media should read a couple of my other Blog articles: “The Media Needs Their Reverse Mortgage Facts!” “But Wait, There’s More… Reverse Mortgage Facts the Media Needs To Know” and “When You Don’t Know What You Don’t Know About Reverse Mortgages.”

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

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

Who Are We To Judge How Reverse Mortgage Funds Should Be Used?

Posted on September 13, 2009 by Beth Paterson, CRMP

The media and politicians are stating reverse mortgage funds shouldn’t be used for pleasure items such as vacations, giving to children, buying a car, boat or RV. Yes, if a borrower uses their funds now for pleasure items, give money to their children or grandchildren, or even on bills or other expenses, there is a chance they won’t have funds at a later date. Seniors, as anyone, should use their funds wisely. But who are ‘we’ (media, politicians, lenders, counselors, attorneys, public, etc.) to judge and make decisions on how one’s funds should be used? Do you want someone else making decisions for you? Do you want the media, politicians, your friends, a lender or counselor to tell you that you can’t take a dream vacation because you may not have funds for your medical bills or housing at a future date?

Reverse Mortgage Allowed Travel to Florida

Reverse Mortgage Allowed Escape from Cold MN Winter & Travel to Florida

Larry and Lori did a reverse mortgage so they could continue to travel to Florida every winter. The reverse mortgage allowed them to continue their lifestyle of escaping the cold Minnesota winters and to visit family in Florida. Who are ‘we’ to determine whether this was right or not? When their health started failing, they could no longer make the trips however the reverse mortgage gave them those extra years of travel and the security to be able to do so.

Two days after closing her reverse mortgage, Jane was on a flight to England to fulfill her dream of seeing a play that was ending the weekend after the closing. The reverse mortgage made that dream a reality. Were we to take control and choice away from her and say this was the wrong use of reverse mortgage funds “just because” in future years she may need funds for “something” else? Were ‘we’ to take that dream away even if she might never be short funds for who knows what in the future?

We talk about creating a “bucket list” – the things we want to do before we die. After working for years, raising families, serving their country why can’t a senior use their reverse mortgage funds to check an item or items off their “bucket list” while they are still healthy and able to fulfill their dream? Seniors shouldn’t be treated like children, as one who can’t make their own decisions. Living on this earth for many years does not mean one can’t make their own decisions. If for some reason they cannot, then they should have a conservator appointed.

After his wife died, Bob did the reverse mortgage to replace the additional income lost from her Social Security. Catching up on bills, with peace of mind of having extra cash flow each month by receiving monthly payments, he was so excited that he could also take a dream vacation and go to Yellowstone. Taking the trip with his nephew last summer, months later he is still glowing that he was able to fulfill his dream. Was this a “wrong” decision on his part? Were we supposed to kill his dream?

Carl was in need of a new car. Because he didn’t want to make car payments, he did the reverse mortgage to meet this need of purchasing a new car without having a monthly payment. He’s still able to drive, should ‘we’ deny him his dignity and independence and say he shouldn’t purchase this car just because he is older and may have a need of funds for who knows what in the future?

If YOU, at age 30, 40, or 50, take a vacation today, are you aware that you may not have funds for your mortgage payment (or rent if you’re a renter) or living expenses, medical bills, etc. at some future date? What if you take a vacation today and next month you are in a car accident and left disabled or diagnosed with cancer and can’t work, make your mortgage or rent payment, and pay your bills? Since this is a possibility for any one of us, do you not take that vacation just because this could happen to you? We all need to act responsibly but if we live totally as if the worse is going to happen to us no one would “live” life today – we would just live in a cocoon not really living.

If you, at age 30, 40 or 50, were forced to pay off your mortgage how much money would you have for “life” – pay for food, clothes; daily needs such as soap, shampoo, hair cuts; utilities; taxes; maintain your home; automobile, gas and auto insurance; health insurance and medical expenses; go out to eat; take your vacation, etc.? Since everyone who has a mortgage is using the equity of their home for these purposes, I bet you would have a very different lifestyle if you weren’t using the equity in your home to maintain your lifestyle – whether a senior or you or me. The media and politicians need to stop judging the decisions seniors make on how they use the equity in their home, just because they are a senior doesn’t mean they can’t make their own decisions or mean they need to live in that cocoon either.

Reverse Mortgage made it possible to attend family weddings

Bonnie did a reverse mortgage to pay off her forward mortgage and improve her cash flow. Years after the closing of her loan, Bonnie wrote, “A reverse mortgage has brought me bountiful solutions to resolving financial issues. Its benefits enabled me to achieve the means to better enjoy living in my own home. The equity available was spent in several areas for home improvement. Herewith also were personal challenges, as a pledge to my church fulfilled and travel to family weddings and reunions assured.

“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. Thus a respect for yourself increases.”

Are you going to say these personal uses of her reverse mortgage funds were wrong? Who are you or I to judge? I certainly don’t want someone to tell me how to use the funds from my mortgage. And I don’t want to tell a senior that they shouldn’t use their reverse mortgage funds to fulfill their dreams just because someone else doesn’t use their funds wisely or because they may not have funds for who knows what in the future.

With all of this said, I do believe it is important one should plan for what may happen in the future and everyone should use their funds wisely. An elder law attorney, financial advisor, and CPA educated in senior issues and reverse mortgages* can help seniors plan and think through their situations to help them make the best decisions for their circumstances. Note, I said help, not make the decisions for them. In the end, it should be the individual senior’s decision on what they choose to do with their reverse mortgage (or any) funds.

*They need to be educated with the facts from a reverse mortgage expert, not the media, politicians, word-of-mouth, etc. or they could be guiding the senior to make bad decisions.

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

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

Minnesota Reverse Mortgages SIDAC

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

Tag Archives: AARP

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A Letter to Minnesota Governor Tim Pawlenty Regarding Reverse Mortgages

Down To The Wire… The MN Reverse Mortgage Amendment Was Sneaked In and Likely To Have Negative Consequences For Seniors And Reverse Mortgage Businesses

Do You Know The Best Kept Reverse Mortgage Secret in Minnesota?

You Need To Know Reverse Mortgage Borrowers Are Highly Protected!

The Impact Of A Reverse Mortgage On A Community Spouse

One Bad Apple Spoils The Bushel of Reverse Mortgages

Who Are We To Judge How Reverse Mortgage Funds Should Be Used?