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

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.

© 2010 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-jJ

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.

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

MN Reverse Mortgage LegislationDuring 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.

MN Reverse Mortgage Best Kept SecretI 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.

© 2010 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-jg

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.

Basics of Reverse Mortgages – On The Radio

Reverse Mortgage MN on The RadioThis past week I had the pleasure of being a guest on the radio show, “The Unexpected Caregiver” hosted by Kari Berit.  We covered the basics of reverse mortgages to clarify the facts and share some stories of Minnesota reverse mortgage borrowers and how they have benefited from a reverse mortgage.  Rather than writing this blog post I thought I’d share the link to the show for your listening:  The Unexpected Caregiver – The Reverse Mortgage Basics with Beth Paterson – Part 1

Next week I will again be a guest on the radio show when we will cover the myths of reverse mortgages.  Be sure to come back and check out this show to learn more about reverse mortgages.

Kari was a great host and deligtful to work with.  In addition to Kari hosting the radio show she is an author, speaker and coach.  Her book, “The Unexpeccted Caregiver” is full of ideas and resources to use as a caregiver.   I love her book and highly recommend it.  You can find more information at her website, www.TheUnexpectedCaregiver.com

© 2010 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-j0

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 Be Embarrassed To Do A Reverse Mortgage?

MN House with Reverse MortgageOften thought to be a mortgage for those who are cash poor and house rich, with a reverse mortgage there may be an attitude of “I hope to never have to do a reverse mortgage.”  And seniors may be embarrassed to let others know they did a reverse mortgage.

Why should there be embarrassment when doing a reverse mortgage when there isn’t an embarrassment when one has a conventional mortgage?  Most homeowners have a mortgage or at least did one to purchase their home aren’t embarrassed by this fact.  Well, it should be the same with a reverse mortgage.  Just as a conventional mortgage isn’t just for the cash poor, house rich the reverse mortgage isn’t either.

A reverse mortgage is a mortgage just like any other but has special terms for senior homeowners 62 and older. To qualify for a conventional mortgage, lenders look at one’s income, credit score, and risks to ensure the loan payments can be made. The reverse mortgage has no income or credit score requirements and no monthly payment requirements which benefits seniors who are often on a fixed income.  With a conventional mortgage monthly payments are required – these can sometimes be difficult for seniors to make on their fixed income.

As with a conventional mortgage the title stays in the borrower’s name and the homeowners are responsible for paying their taxes, insurance and maintaining the property.

Additionally there are more options on how the funds are received including monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these.  Another difference and benefit for seniors who do a reverse mortgage is that the loan is non-recourse, which means there is no personal liability for borrowers or their estate as long as the borrower or the heirs are not retaining ownership.

The loan amount on the reverse mortgage is determined by the home value, the age of the borrower and what’s called an Expected Interest Rate (only used to determine the loan amount – the interest on the loan can be different).  The older one is the more funds are available to them.  Closing costs are comparable to a conventional mortgage with an origination fee, appraisal fee, title company charges and recording fees.  As a FHA HUD insured loan the Home Equity Conversion Mortgage or HECM fees are regulated by HUD.

HUD insuring the loan provides advantages including guaranteeing the funds are available for borrowers; guaranteeing the lender against default or shortfalls which means the interest rates are lower (currently under 4% on the adjustable rate, 5.56% on the fixed) compared to other mortgages; providing a line of credit growth rate (available only with reverse mortgages); insuring as a reverse mortgage it is a non-recourse (no personal liability) loan.

In the current mortgage market many seniors don’t qualify for a conventional mortgage so the reverse mortgage is a great option for them.  Even if they do qualify for a conventional mortgage, the reverse mortgage can be more beneficial.  If they have a conventional mortgage and “life” were to happen seniors often then juggle trying to make the mortgage payments or paying their medical expense or life necessities.

With a limited or fixed income seniors often struggle to maintain their lifestyle.  Sometimes they feel they need to work just to pay their bills or pay their conventional mortgage.  Refinancing with a reverse mortgage can mean improved cash flow allowing borrowers to maintain their lifestyle.  It can also mean that they don’t have to work.

At the age of 70, Len was still working a physically challenging job just to be able to pay their conventional mortgage.  When they did the reverse mortgage Len was able to retire and enjoy his time with his family.  “[The reverse mortgage] definitely saved us.”  they said.

Helen, another Minnesota homeowner, has some retirement investments but rather than cashing in on those she chose to do a reverse mortgage.  This allowed her to do some desired home repairs as well as have cash for future needs.

Cheryl's Reverse Mortgage allows desires to be fulfilledCheryl wanted to travel so she did the reverse mortgage on her Minnesota home so she could pay off her conventional mortgage and improve her cash flow allowing her the funds to fulfill her desires without touching her retirement funds.

Knowing that the reverse mortgage is like any mortgage but with special terms one should not be embarrassed to do a reverse mortgage rather than a conventional mortgage – after all it’s just another mortgage option.

© 2010 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-iQ

Related articles:

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

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

Reverse Mortgage Helps Minnesota Senior To Be Prepared for Future

Reverse Mortgage Helped Bob Be Prepared

Reverse Mortgage Helped Bob Be Prepared

Bob’s wife passed away so her Social Security was no longer received.  To replace the 2nd Social Security check his financial advisor suggested a reverse mortgage so he could stay in his home and maintain his lifestyle.

We met and discussed his situation, the facts of the reverse mortgage and how it would benefit him.  During his decision period, a friend suggested he sell and move into a senior apartment.  But he wanted to stay in his home where he had lived for many years and with his many memories.  He also wanted to keep his dog, his loyal companion.  Besides he decided that moving and selling wasn’t cheaper than staying in his home and living in a senior apartment meant he’d have to make monthly rent payments which would not improve his cash flow which was his goal.

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

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

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

In Bob’s situation, the reverse mortgage paid off his current conventional mortgage and eliminated his mortgage payments – this improved his cash flow.  Then Monthly Payments were set up to add the extra money he needed each month to maintain his lifestyle.  Additionally funds were left in the line of credit for future needs.

A summer after he did his reverse mortgage he used some of the funds to take a desired vacation to Yellowstone National Park with his nephew – creating memories for both of them.  After he returned from his trip Bob called me to share how happy he was that he was able to take the trip.

Reverse Mortgage Paid To Modified Home For FutureThen, as many of my borrowers do, recently he called again.  As we were chatting he said that I wouldn’t recognize his house because he’s done some upgrading.  In addition he had the home modified so it would be wheelchair accessible.  While he doesn’t need this now, he’s prepared for the future when it will be needed.   The joy in his voice showed.

Even though he didn’t have his wife to share his life he is able to have the funds to maintain his lifestyle and be prepared for his future in his home.  Bob is enjoying his live with security, independence, dignity and control.

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

© 2010 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-iz

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.

Does Elimination of the Origination Fee Really Benefit Seniors and The Reverse Mortgage Industry?

Reverse Mortgage Broker has Business ExpensesJust like any business, mortgage brokers have expenses to run their business.  For reverse mortgage brokers, we have to cover the loan officer’s and staff salaries, administrative costs, business overhead including computers, office space, utilities, taxes, health insurance, marketing expenses, processing, underwriting, etc.  (Note that processing and underwriting fees are generally additional fees on conventional loans but have to be included in the origination fee on FHA reverse mortgage loans.)

HUD regulates the fees that can be charged on the reverse mortgage including the origination fee. The guidelines are 2% on the first $200,000, 1% on the balance thereafter with a maximum of $6,000 and a minimum of $2,500.

For many years the origination fee was the only way reverse mortgage brokers received funds to cover their business expenses.  In the last few years lenders started offering reverse mortgage brokers a Yield Spread Premium (YSP) or broker compensation, the fee lenders pay brokers/originating lenders for submitting loans to their company.  Forward or conventional brokers have historically received the YSP.

On the Good Faith Estimate (GFE) all the fees need to be disclosed including the origination fee and the YSP.  However mortgage brokers are not on the same page as the FDIC banks because the FDIC banks do not have to disclose the YSP on the GFE even though they are receiving the same compensation.

When borrowers are comparing fees between a mortgage broker and the FDIC banks, it looks like the FDIC banks are offering a better deal even though the compensation is the same.  This confuses borrowers.

The mortgage brokers offer more personal service than the large FDIC banks.  The large bank lenders often mail the application package and all the details are not even discussed with the senior borrowers.  After the loan is closed seniors often have questions but when they have done their loan with the large banks, they can’t get the answers they need or want.  We as reverse mortgage brokers often receive calls from borrowers who did their reverse mortgage with the large bank asking for explanations stating that they can’t reach their original loan officer and the bank’s customer service won’t/can’t answer their questions.

Mortgage brokers have the option of working with many lenders which means they have more options to offer our senior clients rather than just offering the bank’s options.  Knowledge, experience, and customer service have a high value – it’s not always just about price.  Don’t you consider quality and service when you are purchasing any product?

Recently lenders have been offering an option of ‘no origination fee’ on the HECM fixed rate reverse mortgage program.  This sounds good on the surface but let’s look at the real implications.

Origination fees are the norm on forward loans.  Borrowers are used to having to pay an origination fee to lenders.  I have found that when the purpose of the origination fee and what it covers is explained to borrowers, they accept that we need to be paid for our services. In fact, at the application or at the closing they often want to ensure that I am being paid and don’t question the amount of the origination fee.  It is a matter of communication so borrowers understand the fees and what they cover.

The ‘no origination fee’ is only available on the HECM fixed rate not on the adjustable rate program.  With the reverse mortgage, the adjustable rate may often be the best option for a senior.  To understand the differences between these options read “Which Is Best… A Fixed Rate or Adjustable Rate Reverse Mortgage?”  So borrowers, if shown a comparison of fees between the fixed rate and the adjustable rate may choose the fixed rate ‘no origination fee’ even though the option may not be the best decision for their circumstances.  Or they will question why they have to pay the origination fee on the HECM adjustable rate but not the HECM fixed rate.  Or will seniors think that loan officers are hiding something because of the differences.  In any case they are likely to be more confused.

The fixed rate reverse mortgage offers a much higher YSP than the adjustable rate.  I have heard of some reverse mortgage loan officers pushing borrowers into the fixed rate so they can receive a higher commission/YSP.  The ‘no origination fee’ option may have the same affect, loan officers pushing the fixed rate over the adjustable rate even though the adjustable rate may be the best option for a senior’s situation.

Generally the YSP is lower when the full HUD allowable origination fee is charged.  Although at this time the secondary market is favorable so lenders can pay a higher YSP to the brokers meaning brokers will be compensated even if they offer no origination fees.  However, this is only temporary and as we have seen in the past, this can change rather quickly.  This could mean that if an origination fee was not initially quoted on the GFE, brokers are at risk of not being compensated through an origination or through the YSP.  Where does this leave the reverse mortgage industry and/or the seniors?

Besides the ‘origination fee’ or ‘no origination fee’ being confusing to borrowers this could impact the service seniors receive. Additionally, borrowers will come to expect the ‘no origination fee’ option even when the market changes and doesn’t allow for the higher YSP/’no origination fee’ option.

There is talk of outlawing the YSP and actually this has already been done in some states.  With no origination fee when the YSP goes away it could leave the brokers broke and out of business, only leaving the FDIC banks to control and/or offer the loans.  Is this really the best for the reverse mortgage industry and/or the seniors?

Reverse Mortgage Percent RateI believe the industry will be better served if the closing cost structure is left the same and the favorable secondary market is passed along to borrowers with a lower interest rate.  While I understand the borrower won’t receive the benefit up front, in the long term they will receive savings through a lower interest rate.  This is will keep things simpler, less complicated and less confusing.

Are we in the reverse mortgage industry devaluing our worth with borrowers not paying an origination fee? I believe in general people recognize that they have to pay for products and services.  The quote, “There’s no free lunch” comes to mind and I don’t think borrowers expect a free lunch to get a reverse mortgage.  As I stated earlier, I have found once the details and reason of the origination fee has been explained borrowers accept it.  We don’t need to devalue the services we provide by not having borrowers pay the origination fee.

Seniors and their families can already be confused by the details of the reverse mortgage especially when the program has not been explained to them in detail.  In the future the confusion will increase.  When borrowers who did a reverse mortgage with no origination fee tell their friends that they didn’t pay an origination fee, the new reverse borrower who will have to pay the origination fee due to market circumstances and/or the outlawing of the YSP, will likely not understand why they have to pay the origination fee.

Reverse mortgage borrowers are required to receive independent counseling.  The counselors are to explain the details of the loan and the HUD allowable fees.  Counselors are not to steer to lenders.  However if the counselors don’t understand the secondary market (and my experience with the counselors says they don’t understand this aspect of the loans) in their explanation of fees they could be adding to the confusion of the seniors as well as they will be steering borrowers to lenders who don’t charge the origination fee.

While in the short run the ‘no origination’ fee may look like it’s good for the industry, all of the changes that are happening are adding to the fear of reverse mortgages and the stalemate of the industry.   The ‘no origination fee’ is just one more change contributing to this. When seniors are too afraid to do the reverse mortgage that could benefit them, it is not good for seniors and not good for the reverse mortgage industry.

And as we have seen in the past with the one-percent margin, what looks good today can turn out to be a disaster tomorrow both to the reverse mortgage industry and to the seniors themselves.

© 2010 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-ij

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.

Let’s Get Real About Equity Required For A Reverse Mortgage

Reverse Mortgage Home Equity - MNIt is a common belief that one has to have a lot of equity in their home in order to do a reverse mortgage. In reality a reverse mortgage can be done if there are enough proceeds from the reverse mortgage to pay off any current liens. If there aren’t enough reverse mortgage proceeds if the borrower can come up with the difference a reverse mortgage can still be done and benefit them.

The Reverse Mortgage improves cash flow because one doesn’t have to make mortgage payments. Even if the reverse mortgage proceeds are used to pay off current liens the senior’s cash flow will be improved because they will have eliminated their mortgage payment.

For example, Wayne was struggling to make his mortgage payments of $1,200 a month. The reverse mortgage proceeds were just enough to pay off his current liens. While he didn’t have funds available from the reverse mortgage beyond paying off the mortgage, his cash flow improved by $1,200 a month because he no longer had to make the mortgage payments.

When we ran the calculations for Minnesota home owners, Jerry and Dorothy the reverse mortgage proceeds were short $3,000 to pay off their current mortgage. They chose to pull some funds from their savings so they could do the reverse mortgage and eliminate their mortgage payments – a benefit and savings in the long run. (Note that HUD, who insures the most common reverse mortgage, the Home Equity Conversion Mortgage (HECM)  does not allow the difference to be from another loan or credit cards. If the funds are coming from an outside source, not from your own resources, then it must be a gift, not a loan to be repaid.)

If one is having a hard time making the payments and facing foreclosure the revere mortgage may be the solution in saving their home. Because income and credit scores are not considered to qualify for a reverse mortgage, the reverse mortgage may be a solution. If reverse mortgage funds are not enough to pay off the current loan, we work with foreclosure and housing counselors and lenders to receive a short payoff using the reverse mortgage as the funds to pay off the current mortgage.

If one is unable to handle monthly loan payments of their mortgage or credit card payments, a reverse mortgage may be the solution. Or maybe one chooses not to make monthly payments any more. A reverse mortgage may be the solution for this situation also. Once the reverse mortgage pays off one’s current lien(s) or mortgage(s), there are no more monthly payments.

MN Reverse Mortgage Borrower Improved Cash Flow With A Reverse MortgageMinnesota borrower, Dave said he did the reverse mortgage “to remove a monthly payment from my budget.” Adding, “A reverse mortgage means I’ll have a place to live even in case of serious illness.”

So don’t dismiss the reverse mortgage thinking you don’t have enough equity. Consider the option and see if there is a way that the reverse mortgage may benefit you.

© 2010 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-ib

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 you so afraid of reverse mortgages?

Do not be afraid of reverse mortgagesI had a call the other day from a daughter who was inquiring about helping her mom who owns her home but is currently in a nursing home.  When I mentioned “reverse mortgage” she stated, “I don’t want her to get a reverse mortgage.”  Before I could even get a better understanding of the circumstances to see if a reverse mortgage was even an option the conversation ended.  With her mind already made up that reverse mortgages “are bad” she obviously didn’t even want the facts.

When a home health care aid, financial advisor, attorney or other professional suggest a reverse mortgage they often can see the “wall” go up and the resistance along with the response, “Oh no, I wouldn’t do that.”

Comments on articles and Blogs or in discussions show lack of information and belief of the misinformation about reverse mortgages.  As I have often stated and posted in my Blog, there are many misconceptions about reverse mortgages.  So why are you judging them and afraid to get the facts from an expert?

I’ve had seniors tell me that their friends have said they shouldn’t do a reverse mortgage.  When I’ve asked them “Why?” the response I receive is “We’ve heard bad things about them.”  “They are a scam.”  But when I ask what those were or why they think this, they have no response – no real documentation or knowledge of what is bad about reverse mortgages or why they think they are a scam.  It is all based on fear and misinformation.

Are you afraid to go to the doctor when treatment can make a difference for a health condition?  Are you afraid to go to an accountant or attorney when they can help your circumstances?  Why are you afraid of a reverse mortgage when it could make a difference in your life?

Edna is Happy MN Revere Mortgage BorrowerEdna explains her experience with the reverse mortgage with this statement:  “After retiring I found that my income was too little for the active life I was used to, with trips to family, and a modest vacation each year.  But bills were piling up and I needed a real solution if I was to stay in my home!  I turned to Beth Paterson for information and was very pleased to learn there were still good choices for my situation and I could stay in my pleasant home avoiding a move!  Beth your help was great!  My children thank you for the time you took to explain things for them as well. I have my dignity and security back again.  What a relief!

Maybe your fear is based on the unknown.  Maybe it’s based on misstatements you’ve heard.  You don’t have to be afraid of reverse mortgages!  Let’s look at the facts to ease your fears:

  • A reverse mortgage is a mortgage just like any loan against the home but it has special terms for seniors 62 and older.
  • The lender or bank does NOT own the home YOU OWN THE HOME, you keep the title!
  • There are no income or credit score requirements to qualify.
  • No monthly payments required.
  • There is no limitation on how the funds can be used.
  • More options – Funds can be received in monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these.
  • Social Security and Medicare are not affected because it is a loan, not considered income.
  • Medicaid (Medical in Minnesota) can still be received with the reverse mortgage.
  • Borrowers can stay in the home as long as it is their primary residence or in the case of a couple as long as one borrower is still in the home as their primary residence.  The due date on the mortgage is the youngest borrower’s 150th birthday.
  • At the time of sale if the home is sold for more than the loan balance, the borrower(s) or their heirs receive the difference.  The bank does NOT keep the difference!
  • The loan is non-recourse which means there is no personal liability to the borrower or their heirs if they are not retaining ownership.  So borrowers or their heirs don’t have to come up with the difference if the loan balance is higher than what the home is be sold for as long as they are not retaining ownership.  Borrowers are not leaving a debt to their children.
  • Just like any mortgage, borrowers still have the title and are responsible for property taxes and insurance, association dues (if applicable), maintaining the property and abiding by the terms of the loan.
  • A reverse mortgage is a mortgage just like any other mortgage where the borrower is using the equity of their home to meet their needs and desires now.
  • As borrowers use the funds/equity and are not making monthly payments the loan balance increases meaning because they used the money now, there will be less available when the loan is being repaid.  (With a conventional mortgage one is using the equity but making monthly payments which repays the interest and a portion of the principal each month.)
  • Fees are regulated and only HUD allowed fees are permitted with no mark-ups or junk fees.  Even though many times they are considered expensive or high they compare to conventional loans, in fact the difference comes down to the FHA Mortgage Insurance Premium.  You can see a comparison of the costs in my article, “Reverse Mortgage Costs – High or Mythical?”
  • FHA offers and insures through HUD the majority of reverse mortgages known as the Home Equity Conversion Mortgage or HECM, making it the most highly regulated mortgage available.
  • HUD insuring the reverse mortgage provides advantages including:
    • Guaranteeing the funds are available for you.
    • Guaranteeing the lender against default or shortfalls which means the interest rates are lower (currently under 4% on the adjustable rate; 5.56% on the fixed) compared to other mortgages.
    • Providing a line of credit growth rate (available only with reverse mortgages).
    • Insuring as a reverse mortgage it is a non-recourse (no personal liability) loan.
  • The HECMs are highly protected.  See my Blog article “You Need To know Reverse Mortgage Borrowers Are Highly Protected.”

No other loan has as many advantages, protections or benefits to seniors like the reverse mortgage! So are why are you so afraid of reverse mortgages?

Corine, a happy MN Reverse Mortgage BorrowerAbout her reverse mortgage, Corine says, “Having a reverse mortgage has taken some of the fear away that I had for the future.  I have more means to meet future needs. My experience with the reverse mortgage was most positive.  Beth was wonderful and most informative.  Very patient and steadfast.  I felt I could really trust her to safe guard my interests.”

Kay has this to say about her reverse mortgage, “Steve was extremely knowledgeable and helpful throughout the whole process.  I never felt pressured to make the decision by I am very glad I did it, particularly since the volatility of the stock market pretty much wiped out my IRAs! Thank you so very much.”

If you still have your fears of reverse mortgages after seeing the facts and testimonies of those who have benefited from them, contact us so we can address your concerns and provide you with the facts.  You shouldn’t have a fear about reverse mortgages.

Everyone’s situation is different and as you do with an accountant or attorney you discuss your situation and get the facts and potential solutions.  As a type of home equity mortgage with special terms for seniors, the facts of reverse mortgages should be received from a reverse mortgage expert to determine if it is right for your situation.  At least accept the fact that it could be an option and don’t be afraid of them.  A reverse mortgage may just improve your life during your retirement as they have done for hundreds of thousands of seniors.

To help overcome your fears, read more stories on how reverse mortgages made a difference for those who did one:

© 2010 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-hT

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.

Beware Of Reverse Mortgage Misstatements – The Fact Is Reverse Mortgage Lenders Do NOT Own The Home!

Reverse Mortgage Borrowers Own The HomeThere are many myths and misconceptions of reverse mortgages!  Probably the most flagrant is the misconception that reverse mortgage lenders own the home.  I get very frustrated when I constantly see or hear the statements: “You lose ownership of your home.”  “The lender will own the home.” and “Good for the lender, bad for the borrower.”

The fact is a reverse mortgage is a mortgage just like any other mortgage where the borrower is using the equity of their home to meet their needs and desires now.  As with a conventional mortgage, a reverse mortgage is a method of using the home as collateral to borrow money and a lien is placed against the property.  The title remains in the borrowers’ name. The borrower is still responsible for taxes, insurance, maintaining the home, and abiding by the terms of the loan.

The difference between a conventional mortgage and the reverse mortgage:

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

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

The reverse mortgage needs to be in first lien position which means any current liens or mortgages must be paid off from the proceeds of the new loan.  When refinancing with conventional home equity loans current liens or mortgages must also be paid off.  In either situation there needs to be enough equity from the home to pay off any current mortgage.

Sometimes one can take a second mortgage with a conventional mortgage.  With a reverse mortgage HUD does not allow a second mortgage.  If the reverse mortgage funds are not enough to pay off the current mortgage, the borrower may choose to pay down the difference with their own funds or gifted funds.  The intention of HUD is that borrowers are not incurring debt in order to do a reverse mortgage.

When Linda passed away and the loan became due and payable her heirs sold the home, they chose the real estate agent and made the decision of what the listing price would be as well as decided on the acceptable sale price.  In this situation the home was sold for more than the loan balance so the remaining equity went to the heirs.  The title of the home had remained in Linda’s name with the reverse mortgage, she was able to have funds to meet her needs and the heirs were able to receive the remaining equity.Home With Reverse Mortgage Sold

Dennis took out his reverse mortgage in 2002.  When he passed away this year the reverse mortgage loan balance was higher than what the house could be sold for.  In his situation the FHA Mortgage Insurance Premium covered the difference so his heirs did not have to come up with the difference.  Dennis was able retain ownership of his home and to use the equity during his lifetime for his needs and he did not leave a debt to his children.

With either a conventional mortgage or a reverse mortgage borrowers own the home, the title remains in their name and the mortgage is a method of using the home as collateral to borrower money. For seniors there are many advantages to doing a reverse mortgage instead of a conventional mortgage.

© 2010 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-hE

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.

Food For Thought To Fulfill Key Messages of Social Work Month 2010

Food For Thought For Social Work MonthDuring March we recognize and honor Social Workers for the value they bring to our seniors. In a variety of roles, with their knowledge and experience in providing resources social workers assist our seniors. The National Association of Social Workers provides a list of Key Messages for Social Work Month 2010. These include inspiring to improve lives and assisting with problem solving as well as resolving issues that may negatively impact the community. I’d like to offer some food for thought tying into these messages.

Ninety-three percent of seniors want to remain in their home. They are comfortable living in the home and community with their memories where they raised their children, know the neighbors, are familiar with the grocery store and the pharmacy. They feel safe and warm in their familiar surroundings. With the home as their identity it gives them comfort being in their long time home. So let’s talk about a couple ways to help fulfill the desires of seniors, improve their lives and help them stay in their home and their community.

Read rest of article at Home Instead Senior Care Burnsville or Home Instead Senior Care Hastings

© 2010 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-hu

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.