Tag Archives: Boomers

A Reverse Mortgage Doesn’t Leave An Inheritance. But How Are You Going To Meet Mom’s Needs Today?

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A reverse mortgage provides for Mom's needs today“I want to leave an inheritance for my kids.”  “I want my son to get my house.”  “The reverse mortgage will eat up my inheritance.”  “The reverse mortgage isn’t good for the kids.”  “The reverse mortgage should only be done with those who don’t have children.” These are statements that are often seen or heard when a reverse mortgage is mentioned.  My question is, do you, the children, have the money needed to cover the costs of mom or dad’s needs today if they don’t have the money and don’t do a reverse mortgage?

Let me share a story.  As I always do, I have a discussion on the needs and desires of one who is considering a Home Equity Conversion Mortgage (HECM) or a reverse mortgage.  In this one particular situation, the woman, Chris, was living off her Social Security income of about $600 a month.  She needed new teeth, new glasses, some new clothes, and her home needed some repairs.  She loved going to plays but couldn’t even afford the community plays for $5 to $10.  Doing a reverse mortgage would help Chris “live with more” so she completed the application.

A few days later she called to say she decided not to proceed. When I inquired why the change, she replied that her son didn’t want her to do it.  After some exploratory questions as to why, she said her son wanted her home after she had passed away so he could rent it out and make money.

How outrageous is this?  Was she really going to do without all the things she needed as basic necessities not to mention just being able to have some money for a few extra things to enjoy life while she’s still alive just so her son could make money off her house after she passed away?

While I was astounded by this response, I kept my tongue in check and calmly asked her if her son was going to provide the money she needed now or was she going to do without the glasses, teeth, clothes, and home repairs so her son could benefit after she passed away.  She said, “Of course not, he doesn’t have the money to help me.”

Is 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 dignity such as having lunch with friends, getting one’s hair done, or having cable TV really a good option over a reverse mortgage?  Why should one be more concerned about leaving an inheritance than having their independence and control of their life and living comfortably?  Why do children think they deserve an inheritance rather than their parents being able to live comfortably, have security, independence, dignity and control of their lives?  Aren’t these the same things every one of us wants?  Why would you deny your parents?

Even if one’s children are able to help their parents today, do their parents really want to be dependent on their children?  What happens if “life happens” to their children, they lose their job, get sick, have to come up with money to pay for their kid’s college, etc. and they no longer have the funds to help their parents?  This can impact everyone!

What if one needs home care or has medical expenses?  Why should one do without needed care so they can leave an inheritance?  Why do children think they should receive an inheritance over their parents having the dignity of paying for their own care and expenses?

If one moves into senior housing, whether independent living, assisted living or skilled care, does one really think there will be funds left to leave for an inheritance?  Or will the children have to help pay for the senior housing?  Whether private pay or services paid by Medicaid or other government funds, there may not be an inheritance.

And whose money is it anyway?  Who should benefit from the use of funds or assets that the senior worked so hard for?  Shouldn’t the money and assets be used for whatever one’s parents need or want?

Many seniors say, “My kids are doing better than I am.”  This is often the case but even if this isn’t the case, why should one be concerned about leaving money after their gone?

A reverse mortgage is a loan against one’s home to allow seniors 62 and older to remain in their home with security, independence, dignity and control.  The most common, and only one available in Minnesota, is the FHA insured HECM.  The reverse mortgage offers many benefits including no monthly mortgage payment requirements, and no income or credit requirements to qualify for a low interest rate.  The loan is due and payable when the home is no longer the primary residence of the borrower(s) or on the 150th birthday of the youngest borrower.  As a non-recourse loan, if the loan balance is higher than what the home can be sold for at fair market value, the borrower or their estate are not responsible for the difference.  And the opposite is true too, if the loan balance is lower than what the home is sold for, the borrower or their estate receives the difference.

The borrower remains the owner of the home with the title staying in the name of the borrower(s).  In addition, the reverse mortgage has many protections, likely more than any other financial product or service.  To learn what these are read, “You Need To Know Reverse Mortgage Borrowers Are Highly Protected.”

A reverse mortgage provides security, independence, dignity and controlI’m happy to say Chris did proceed with her reverse mortgage.  And for the last six years I’ve received at least one call, sometimes a couple calls, a year saying she’s so relieved to have the money to meet her needs.  Besides the initial needs, she has had funds to fix her car when it needed some repairs, to cover some medical expenses and she had funds to take a trip to attend a family wedding.  And yes, she’s even enjoying the community plays every now and then.

Once Chris passes away her son will have the opportunity to keep the home by obtaining a conventional mortgage to pay off the reverse mortgage.  If he’s renting the property out, the rent payments he will be receiving will cover the mortgage payment – he could still make money if priced accordingly.  In the meantime Chris is remaining in her home with the security, independence, dignity and control she deserves and enjoying her life.

So what do you think is better?  Doing without today just so a child can have an inheritance or the senior being able to fulfill one’s needs and wants while they are alive?

© 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-yv

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.

Seniors Find Hope and Opportunity With Reverse Mortgages

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Seniors find hope and opportunity with reverse mortgagesIt’s the season of hope and new growth and opportunity.  Flowers are blooming, trees are budding, the grass is growing.  As with the season, seniors can find this hope, new growth and have new opportunities that they can remain in their home with security, independence, dignity and control.  And like the many types of flowers, buds and new growth, the variety of how the reverse mortgage funds are used and numerous, basically endless.  Here are some of the ways seniors have found hope and opportunity with their reverse mortgage.

  • Stay in one’s home where they may have raised their family, are familiar with the neighborhood and their neighbors and where they usually want to remain.
  • Pay off a current mortgage to eliminate the monthly mortgage payments.
  • Save one’s home when faced with foreclosure or tax forfeiture.
  • Have improved cash flow with no monthly mortgage payments.
  •  Have funds for making home improvements or home modifications.
  •  Retire and not feeling like you have to work just to have money to pay the bills.
  •  Have cash flow to be able to pay taxes.
  •  Have funds to pay for home health care.
  •  Have funds for some assistance with home care or companion services.
  •  Have funds for adult day services.
  •  Have funds for medical expenses and prescriptions.Seniors find hope and opportunity with reverse mortgages
  •  Afford going to the dentist.
  •  Afford new eye glasses.
  •  Have funds for the needed hearing aid.
  •  Have funds to cover long term care expenses.
  •  Cover everyday living expenses.
  •  Not rely on credit cards.
  •  Not rely on children.
  •  Have funds for the little extras in life, like:
    • getting one’s hair done,
    • having cable TV,
    • buying groceries,
    • going to lunch with friends,
    • treating their children to dinner,
    • going to community plays or the theater or a concert,
    • taking the grandchildren to the zoo or a movie,
    • Depends (I had a client say with their reverse mortgage they could now afford to buy Depends),
    • being able to do hobbies.
  • Purchase a more dependable car
  • Afford transportation if one can no longer drive.
  • Afford the travel for the family wedding or reunion.
  • Take the vacation they have dreamed of all their life.
  • Protect some of their other retirement funds or investments where there might be taxes or penalties on withdrawals.
  • Purchase a new home to downsize and/or  move closer to family
  • Have funds for emergencies.
  • Reduce financial stress.
  • Have funds to full fill needs and goals.
  • To live with security, independence, dignity and control.

Seniors find hope and opportunity with reverse mortgagesIt’s fulfilling to me to be able to help seniors find hope, growth, and opportunity with  reverse mortgage (visit the links below for some stories).  A reverse mortgage has given hope and opportunity to thousands of Minnesota seniors so they can remain in their home with security, independence, dignity and control even during trying times.  If you know a senior who is looking for hope and opportunity, a reverse mortgage may be their answer.

To determine if a reverse mortgage is right for one’s situation, talk with an experienced licensed reverse mortgage expert to get the facts.  Learn some of the facts at our website: www.RMSIDAC.com.  “What to Consider When Talking With Reverse Mortgage Lenders” will help you determine questions to ask when choosing your originator.

© 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-y9

Related articles of stories on how seniors have used the reverse mortgage and how it’s made a difference in their lives:

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

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

Reverse Mortgages Receive Some Good PR Coverage

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

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

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

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

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

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

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

Related articles:

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

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

Why Are People So Resistant to Reverse Mortgages?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© 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-xc

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.

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

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

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

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

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

© 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-wT

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.

Where The Heart Is: Using Technology To Remain At Home

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I was privileged to present a webinar for GrandCare Systems webinar series:

Where The Heart Is: Using Technology To Remain At Home

You have the opportunity to listen and view the webinar.

Seniors have always wanted to remain at home. Now with the housing market where it is, seniors are staying at home even longer. We’ll discuss how using technology adds benefits to remaining at home.

In this webinar you will learn:

  • How housing conditions are impacting seniors remaining in their homes longer.
  • The benefits of using technology to remain at home.
  • How using technology and a reverse mortgage can be cost effective and expand the time one can remain at home vs moving to senior housing.

Access the webinar here:  http://grandcare.wordpress.com/2011/12/07/1215-webinar-where-the-heart-is-using-technology-to-remain-at-home-with/

© 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-wH

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.

Giving Thanks Because of Our Reverse Mortgage Customers

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Giving Thanks Because of Our Reverse Mortgage Borrowers (c) 2008 Beth PatersonMy reverse mortgage borrowers often call to say “Thank you!” for helping them obtain their reverse mortgage.  They proceed to tell me what a difference it has made in their lives as well as for their families.  I always appreciate hearing from them as well as hearing their stories.

I also receive comments and notes of appreciation from others who work with seniors, my referral sources, the vendors who we need to do a reverse mortgage and operate our business, and those in my networks.

For me it goes beyond receiving the thank you’s from others.  I too have to say “Thank you!”  Thank you to my reverse mortgage borrowers and all I work with for the opportunity I have to serve.  I am rewarded to be able to assist in making a difference in the lives of seniors.  I  recognize that it is because of you I have this opportunity to serve and I feel blessed to be able to do so.

Many years ago I found the following poem on a restaurant place mat.  I don’t know who wrote it but I did copy it down and have it hanging on my office wall… a wonderful reminder.

Because the Customer

Because the customer has a need,
we have a job to do.

Because the customer has a choice,
we must be the better choice.

Because the customer has sensibilities,
we must be considerate.

Because the customer has urgency,
we must be quick.

Because the customer is unique,
we must be flexible

Because the customer has high expectations,
we must excel.

Because the customer has influence,
we have the hope of more customers.

Because of the customer,
we exist!

Thank you to my reverse mortgage borrowers, my referral sources, my vendors, my networks and all who help make a difference in the lives of seniors.  It is because of YOU I exist and am so rewarded.

May you find reasons to give thanks for the blessings in your lives this Thanksgiving day and every day.

© 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-wo

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© 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-v0

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.

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

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

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

Continued Decline in Real Estate Values and Sales Volume

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

Properties that qualify

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

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

Reduced Principal Limits

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

No Servicing Fees/Set-Asides

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

Higher Expected Interest Rates Equals Less Funds Available

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

Now a few years after Mary did her reverse mortgage, Mary is still happy with her decision to do have done her reverse mortgage sooner than later.  She has security knowing she has funds available for her needs, independence to live on her own without relying on others for financial support, she’s maintained her dignity of being able to pay her own bills, and continues having control of her life and the ability to make her own choices.

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

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

© 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-uP

Related articles:

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

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

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

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

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

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

  • The bank does not own the home and the title is not passed to the bank.  The title remains in the name of the borrower(s) as long as the home is the primary residence of the borrower.  If the borrower does not abide by the terms of the loan (pay property taxes, insurance and maintain the home, the home may go into foreclosure just as with a conventional mortgage.)
  • One report stated that a danger of the reverse mortgage is if one spouse passes or goes into senior housing, the other may have to pay back the loan.  In reality as long as one borrower remains in the home, the loan does not become due and payable until they, the second spouse, is no longer in the home as their primary residence.  If a non-borrowing spouse (one that is not on title with the reverse mortgage) is the one remaining in the home, yes, the loan is due and payable because the borrower (the one on title) is no longer in the home as their primary residence – this is the terms of the loan.
  • HUD Home Equity Conversion Mortgages (HECM) are FHA insured.  As with a conventional/forward FHA mortgage, borrowers pay an up-front Mortgage Insurance Premium (MIP) as well as an on-going MIP.  The benefits to FHA insuring the reverse mortgage include:
    • Guaranteeing the funds are available for you.
    • Guaranteeing the lender against default or shortfalls
    • Keeping the interest rates lower, the interest rates have historically been lower compared to other mortgages.
    • Providing a line of credit growth rate (available only with reverse mortgages).
    • Ensuring as a reverse mortgage it is a non-recourse (no personal liability) loan.  If the loan balance is higher than what the home can be sold for at fair market value, FHA will cover the difference because one has paid the MIP.
    • Requiring counseling by a third party HUD trained and approved counselor.
    • The HECMs are highly protected.  See my Blog article “You Need To know Reverse Mortgage Borrowers Are Highly Protected.”
  • “The Government will step in” is another statement I’ve heard.  The government doesn’t “step in,” borrowers are paying the FHA Mortgage Insurance to receive the above listed benefits.
  • And of course we have the all too common statement that reverse mortgages are expensive.  Unfortunately, many do not look at the costs of a conventional mortgage, they just make blanket statements without really doing the comparison as I have done.  I’ve written blog articles to address this misstatement:

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

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

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

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

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

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

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

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

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

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

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

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

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-u4

Related Articles:

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

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