Savvy Senior Sources…Talking With Experts TV Show Released

I’m excited to announce the release the new TV show, Savvy Senior Sources…Talking With Experts that I host and produce.  The series of TV shows talk with experts for guiding your way through resources A to V in areas that seniors, their families, caregivers, and trusted advisors will find helpful for planning, aging in place with the ability to stay in their homes and remain independent or where to turn if and when going through the transition. The shows give viewers the opportunity to “meet” the trusted providers of senior services before making a phone call to them.

Brought to you from Savvy Senior Sources, LLC, Reverse Mortgages SIDAC and GWG Life, LLC are proud sponsors of the shows.

Please tune in and subscribe to the YouTube Channel Savvy Senior Sources to be notified when the new shows are broadcast. https://www.youtube.com/channel/UCmgVGVbfY6-RcHkeBc7WmPQ/feed

Enjoy the shows!

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

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 Roles of Social Workers

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. Social Workers are 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 to fulfill their key roles.

Over ninety 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.

Home care services are an option to help seniors who need some assistance to remain in their home. Everything from short time-frames to 24 hour care, including recovery care and respite care or even nursing level of care is available. Home care services can help seniors live at home indefinitely. The one-to-one ratio of care versus 1.5 or more of care per person in a nursing home offers safety.

Their services offer:

  • Companionship and socialization – home care aides can watch TV with them, play cards, do their hobbies, take seniors to the movies or watch them at home, shopping, or even travel with them.
  • Ensuring meals are prepared and eaten even providing someone to talk with during the meal
  • Medication reminders
  • Bathing, housekeeping, running errands
  • Escorting to appointments
  • Anything needed to maintain their life in their home

An assumption is often that one needs to move to assisted living, a nursing home or care center. What is not realized is that rent in assisted living can be $3,000 to $4,000 per month. Additionally home care services are added on to the rent bringing the monthly costs to over $5,000 to $8,000. Nursing home care can run $6,000 to $12,000 a month depending on a single or double room, the facility amenities and level of care.

Wondering how to pay for home care and keep the seniors in their home? A reverse mortgage may be the solution. A reverse mortgage is a home equity loan with special terms for senior homeowners 62 and older. Reverse mortgage facts are:

  • Borrowers own home, no one else does.
  • Seniors can stay in their home as long as it’s their primary residence (in the case of a couple as long as one is still in the home).
  • Borrowers won’t lose their home because of a reverse mortgage if they abide by the terms of the loan – they don’t have to make monthly mortgage payments but do need to pay property taxes, hazard insurance and maintain the property or they may face foreclosure.
  • Funds are generally not considered income for tax purposes.
  • Loan is government insured and guaranteed to be there for them.
  • There is no personal liability to them or their heirs when the loan is repaid, as a non-recourse loan the loan is repaid from the property only.
  • They or their heirs get to keep any remaining equity after the loan is paid off if the home is sold for more than the loan balance.

Consider this…

  • They can access more funds if their mortgage is currently paid off or has a low balance.
  • Their cash flow improves when their current mortgage or lien payment is eliminated.
  • They’ll have extra cash for whatever they need or want!
  • They can still receive Medical Assistance, Elderly Waiver or other public benefits and do a reverse mortgage.

I have often heard how seniors and their families have benefited from using a reverse mortgage to pay for home care. “Once we realized that we could only relieve the stress on us by contracting 24-hour [at home] nursing care for grandma, a reverse mortgage was the only way to do it.” Liz wrote me. Another borrower, Robert, did not want to go to a nursing home, yet he needed long term care. George, Robert’s son, decided they should do a reverse mortgage to pay for the home health care needed to keep Robert at home where he had raised his children. Robert is happy because he is living where he chooses. George is happy the family can fulfill Robert’s wishes of staying in his home and still receive the needed care.

Ruth had ALS and wanted to stay in her home until she passed.  Working with her Social Worker and home care company she did a reverse mortgage. Last week I received a call from her daughter telling me her mom had passed away in her home as she desired.  The reverse mortgage had helped her fulfill the dream of her staying in her home and receiving the 24-hour care she needed.

Giving seniors the freedom to stay in their home fulfills their desires of remaining in their home close to their memories and familiar surroundings. Social Workers offering home care and reverse mortgage options fulfill the Social Workers role of inspiring to improve lives, assisting with problem solving and resolving issues as well as having a positive impact on the community.
Happy Social Work Month to all our social workers!

Originally posted in 2010, Updated 2015
© 2010-2015 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-1c5

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.

Our Experiences with Getting Our Reverse Mortgage

Happy With Reverse MortgageActual reverse mortgage borrowers have good things to say about their reverse mortgage experiences.  Let me share what some of our Minnesota reverse mortgage borrowers have said.

Dave shared, “Having had an accident that eliminated my of my teeth, total dental implants was required.  Without a reverse mortgage I could not have raised the money to have the implants done.  It was a great relief to be able to smile again and eat sweet corn again.”

To increase his cash flow Bernie did a reverse mortgage and had this to say, “After talking with 2 other reverse mortgage representatives, receiving apologies for non-functioning DVDs, and talking to an attorney, I chose Reverse Mortgages SIDAC.  It is so helpful to deal with local persons.  Both Beth and Steve followed up with everything.  They were very helpful in personal visits and phone calls.  Beth has also been helpful with other senior issues.”

Larry and Karen* did the reverse mortgage to stabilize their finances.  They found Reverse Mortgages SIDAC to be friendly, courteous and respectful of them.  Additionally they shared they found that all pertinent information was discussed regarding reverse mortgage options and costs and the details were explained so they understood them.  They also felt that they were informed of what to expect during the processing and kept informed of the status through the process.  In addition they said they received explanations of the forms that were signed at closing.  Overall they shared their experience was positive.

Mike shared, “Without the help and knowledge of Beth Paterson who first told me about the reverse mortgage to buy I would never have been able to get our beautiful new townhome, which my wife needs because of her mobility to navigate a lot of stairs.  I owe Beth a big debt of gratitude.  She is the best!  She is knowledgeable and she cares and worked tirelessly for us.”

Wayne recommends us stating, “Reverse Mortgages SIDAC is very customer focused and will settle for no less than what the applicant request’s objectives are.  They knew the “system” very well and lead the borrower though it step by step.  Above all, Reverse Mortgages SIDAC is respectful and honest.”

Helping them out of foreclosure, Gary and Cathy* said, “Thanks so much! Beth and Steve you guys are the best!”

Satisfied Reverse Mortgage BorrowerYvonne wrote, “My experience with Beth and Steve was very enjoyable.  I was always able to reach one of them.  I paid off my mortgage, so eliminated the monthly mortgage payment!  It has made a big difference in my quality of life to have that additional income every month.”

To supplement her income, Marilyn did the reverse mortgage, sharing, “I didn’t really want to have to do this reverse mortgage because I’m too proud.  But thank goodness it was there for me.  Steve was so very helpful as was Beth.  At closing all documents were in order perfectly.  I’m very glad I reached out to this company.  Everything went so well.”

Bonnie did the reverse mortgage to “secure my retirement” allowing her to retire.  Of her experience she said, “Beth and Steve were wonderful!  Caring, efficient, thoughtful. All are words that describe them and their service – I had contacted a nationally advertised company but did not feel at all comfortable with them.  I went with Reverse Mortgages SIDAC because they are local and knowledgeable about Minnesota and my needs here.”

“Having Beth and Steve to guide me through every step of the process was the blessing that made a reverse mortgage possible.  We were able to complete the process in time to obtain the maximum possible funds under the old system, making my dream of remodeling possible,” Matthew stated.

These are just a few of the experiences reverse mortgage borrowers have had.  Keep them in mind as you hear about reverse mortgages and are considering one.  Work with a reverse mortgage originator who is local, specializes and has experience in reverse mortgages, is ethical adhering to the NRMLA pledge and takes their time to give you the details so you understand the reverse mortgage and will have a positive experience and find the benefits.  If you’re in Minnesota, give us a call.

*Some names changed to protect privacy.

© 2015 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-1bu

What to expect working with Reverse Mortgage Originators: Our pledge to our borrowers

Reverse Mortgage Borrower Satisfed with processI’ve heard from borrowers that when they have inquired about reverse mortgages from some lenders they sometimes feel pressured, receiving numerous phone calls, wanting to send them the counseling information and an application before they are ready to make a decision.

I happen to be sitting at the kitchen table with a homeowner informing her about reverse mortgages, providing her with all the details and facts and answering her questions when she received a call from another loan officer. She kindly explained to the caller that she was actually meeting with me face-to-face, a local originator and was not interested in further communication from them, the caller. Before hanging up, even though she had said she was taken care of, the other loan officer said they were still going to call her back. She expressed frustrations that they didn’t listen to her and that she had also received other calls pressuring her before she had heard about me.

As professional reverse mortgage originators we should respect your decisions and not pressure you into making a decision. Those of us who specialize in reverse mortgages and are members of the National Reverse Mortgage Lenders Association (NRMLA) pledge to a Code of Ethics and Professional Responsibility. Pledging to serve you with integrity and keep your best interests as our primary consideration, here is the pledge other NRMLA members and I have made that we will:Borrow with Confidence NRMLA Pledge

  • Know and comply with all State and Federal laws and regulations that protect reverse mortgage borrowers

  • Present you with the full range of reverse mortgage products available from our company.

  • Clearly explain the terms, benefits and costs of each product we present.

  • Inform you of your responsibilities as a reverse mortgage borrower including paying real estate taxes on time, keeping the property properly insured and maintaining the home in sound condition.

  • Work with you and, if you request, with your family and financial advisors either face-to-face or on the telephone as frequently as you choose to educate you, answer any and all questions and help you assess whether a reverse mortgage might be beneficial to you.

  • Explain the benefits of and statutory requirement that you have reverse mortgage counseling.

  • Provide you with a list of HUD-approved independent housing counseling organizations that employ exam qualified counselors to serve you. The choice of the organization is yours and yours alone.

  • Help you prepare for your counseling session to make it most effective by providing you with questions you might ask and information you should be prepared to provide to the counselor.

  • Prepare loan comparison projections and an amortization table for the loan being proposed to review at your counseling session.

  • Not charge any fees prior to the completion of mandatory counseling.

  • Help you analyze your financial ability to meet your responsibilities under the reverse mortgage.

  • Recommend that you seek professional advice if you Reverse Mortgage Originators Pledge to Borrowersare receiving assistance from SSI, Medicaid or other government programs.

  • Recommend you seek professional tax advice when appropriate.

  • Allow you to decide when to close on the reverse mortgage loan and not pressure you to make a decision.

  • Provide you with opportunities during the loan process to change your mind and not take the loan.

  • Pay off the existing liens shown of record, verify taxes are paid, and make sure that you have proper insurance upon closing.

CRMP Certified Reverse Mortgage ProfessionalBeyond the NRMLA pledge, there is a select group of specialists, the Certified Reverse Mortgage Professionals (CRMP), who have taken the extra step and demonstrated their knowledge and competency in reverse mortgages by having a minimum of two years’ experience, personally closing 50 or more loans, earning 12 hours of continuing education courses specific to reverse mortgages and ethics, passed a rigorous exam as well as a background check. Each year CRMPs must complete an additional 12 hours of continuing education to remain certified. CRMPs are dedicated to upholding the industry high standards of ethical and professional practices.

I am proud to say I have earned the CRMP designation. You can find a list of the other CRMPs on the NRMLA website.

Additionally Reverse Mortgages SIDAC has their own Code of Conduct that we adhere to.

As you explore the reverse mortgage option, make sure you are working with a reverse mortgage specialist who has experience with and knowledge about reverse mortgages, not just the title, one who adheres to the NRMLA Pledge to Reverse Mortgage Borrowers and even more specifically one who is a CRMP as well as one you are comfortable and respects you.

© 2015 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-1as

Related articles:

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

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

What do reverse mortgage originators do to earn their money?

Calculating reverse mortgage originator's timeOften stated, the reverse mortgage is expensive and the fee the originator makes is part of the reason. Originating reverse mortgages is not as easy as one, two, three but a very time consuming process whether one is a retail officer (works directly for the lender) or a broker (one who works with various lenders).  Note that brokers are often more involved in the process, not just taking an application and moving on to the next application.

My clients often make comments at the closing that they understand and appreciate all the work I did to get to the closing table.  To help you understand the work and time we, as reverse mortgage expert originators, put into originating and processing a reverse mortgage let me walk you through an outline and approximate time involved.  Note: While you may not read the outline word for word (yes, it’s long), you’ll at least have a good idea of the time involved for originating each reverse mortgage.  Make sure you go to the last five paragraphs for the conclusion.

  1. Take the phone call from one interested in a reverse mortgage.  Generally spend 30 to 60 minutes gathering information about the situation, why they are inquiring about the reverse mortgage, providing initial information, discussion options available, and getting information to run calculations to determine eligibility.
  2. We generally spend time on researching property values. This can be critical to determining the feasibility of completing a reverse mortgage if there is a significant mortgage balance outstanding and important even without debt payoff concerns just to give the homeowner the most accurate estimate of loan proceeds possible – 20 to 60 minutes.
  3. Enter information into computer program, run calculations, prepare informational folder – approximately 60 to 90 minutes.
  4. Drive 60+ minutes round trip to the prospect’s home for an initial educational meeting.
  5. Discuss their situation and educate them on the reverse mortgage, the various program options, i.e. adjustable rate vs fixed rate, monthly vs annual adjustable rate programs, cap on draw in 1st 12 months,  and possible other options – 1 to 3 hours.
    1. Leave a list of reverse mortgage counselors for the required FHA HUD insured Home Equity Conversion Mortgage (HECM) counseling.
  6. Generally there are numerous phone calls to answer additional questions.  These calls can be 15 minutes to an hour or more each call.
    1. Sometimes we talk with family members or have an additional 1 to 2 hours face-to-face with prospect and their family.
    2. If one is doing the HECM for Purchase, using the reverse mortgage to purchase a new home, we also meet with the real estate agent, building contractor, etc. – additional 1 to 2 hours with each along with numerous calls in between.
  7. Receive phone call that the prospect is ready to proceed with the loan.  Schedule application time and date – 10 to 30 minutes (longer if they have additional questions).
  8. Call prospect to gather information needed for application as well as which option they are choosing – 15 to 20 minutes.
  9. Enter complete information into computer program – 30 to 60 minutes.
  10. Prepare the full application package for signatures and a separate borrower set – 60+ minutes.
  11. Drive 60+ minutes round trip for the application.  Drive time can be 5 to 10 hours round trip if the client is outside the metro area.  (Some lenders will mail the application or use a notary however I believe that the face-to-face meeting provides better explanations of each of the forms one is signing.  Note that notaries, unless a licensed or registered mortgage originator, cannot answer any questions, they are there only to verify your identity and make sure you sign the application forms in the appropriate spots.)
  12. Spend 1 to 2 hours, sometimes longer to review information on application and get signatures.MN Reverse Mortgage Borrowers Signing Application
  13. If counseling wasn’t completed prior to the application, work with borrower to receive counseling certification with signatures of both the counselor and the borrower(s) which is needed prior to starting the processing of the loan – 15 to 30 minutes.
    1. Make phone calls to have the signed counseling certificate faxed – 15 minutes.  Or will drive to pick up certification – another 60+ minutes round trip plus 10 to 15 minutes with borrower.
    2. May need to contact counselor for corrections on address or correct names or Power of Attorneys – 15 to 30 minutes.
  14. Review file, making sure everything is collected and prepare for submitting for processing – 30+ minutes.
  15.  Start processing.  We are a reverse mortgage broker (one who works with more than one lender) and we process the loans in our office, we don’t send them off somewhere to another office or state to be processed.  While the processor is different than the originator, the originator of a broker is often involved in the facilitating the processing by working with the processor and the borrower through to the closing and funding, not just taking an application.
    1. Enter information into processing software program (one we have developed on our own) – Processor: 30 to 45 minutes.
    2. Request FHA Case Number – Processor: 10 minutes.
    3. Order Title Report – Processor: 10 minutes.
    4. Order appraisal from Appraisal Management Company – Processor: 10 to 15 minutes.
    5. Order Insurance Binder – Processor: 10 minutes.
    6. Pull Flood Certificate – Processor: 10 minutes.
    7. Pull Credit Report – Processor: 10 minutes.
    8. Pull other required documentation – Processor: 10 minutes each when necessary.
    9. Review Title Report when received – Processor and Originator: 15 to 30 minutes.
    10. Review appraisal when received – Processor and Originator: 30 minutes.
    11. Review Insurance Binder – Processor: 10 minutes.
    12. Review Flood Certificate – Processor: 10 minutes.
    13. Review Credit Report – Processor: 10 minutes.
    14. Request any changes if necessary – Processor: 10 minutes for each change that is necessary.Reverse Mortgage Borrower talking with MN Reverse Mortgage Loan Officer
    15. Phone calls with borrower for clarifications on any information that is on title, credit report, etc.   For example if a mortgage is on title that we didn’t know about, showing taxes weren’t paid, a judgment is on title or the credit report – Originator: 15 to 30 minutes each call; sometimes 3, 4 or more calls.
    16. When appraisal is received, enter new value, if repairs are required, etc. in software program for calculations – Originator: 15 to 30 minutes.
    17. Update processing software program with changes – Processor: 10 to 15 minutes.
    18. Call borrower to advise borrower of appraised value, required repairs if any, and any calculation changes – Originator: 15 to 30 minutes.
      1. Or up to several hours based on the appraised value, repairs, or other factors, the borrower decides a program change would be in their best interest (i.e., a change from fixed rate to adjustable rate), or contractor bids or additional inspections are needed for repairs.
    19. Prepare re-disclosure for borrower – Originator: 15 to 30 minutes.
      1. Or up to several hours or more if, based on the appraised value or other factors, the borrower decides a program change would be in their best interest (i.e., a change from fixed rate to adjustable rate).
    20. Mail re-disclosure to borrower – Originator: 10 to15 minutes.
    21. Review all documentation to make sure everything needed is in the file for underwriting – Processor: 20 to 30 minutes.
      1. Multiple follow up calls to the borrower may be necessary to remind them and/or advise them on missing, corrected or additional documents that are necessary (i.e., SS card shows maiden name, etc) – Originator: 10 to 20 minutes each call.
    22. Scan and submit file to underwriting – Processor: 15 minutes.
    23. Request final fees from title agent – Processor: 10 to minutes.
    24. Address any underwriting conditions by contacting title company, appraisal management company, borrower, or making other necessary changes – Processor: 30 minutes to several hours depending on the conditions.  Conditions are required so that HUD will insure the loan and the investors will provide the funding.
    25. Have borrower sign letterof commitment – required in MN to be signed and dated by borrower and can’t close for 7 days – Originator: 60+ minutes round trip to get borrower’s signature plus 10 to 15 minutes with borrower.  Can be done via fax or scanned and emailed if borrower has this capability.  If they live outside the metro area and don’t have capability to fax or scan and email the commitment will be done through the mail delaying the time for the closing (not what the borrowers want at this point).
    26. Gather, review and Submit changes/conditions to underwriter – Processor: 10 to 15 minutes.
    27. Discuss with borrower how they want their reverse mortgage funds and their availability for closing – Originator: 15 to 30 minutes.
    28. Schedule closing according to availability of title agent/signer (and possibly a notary), borrower and loan officer and lender’s closing department’s timing requirements, and possibly with family members and/or Power of Attorney (POA) – Processor and Originator: 30 to 40 minutes  each of the phone calls.
    29. Prepare closing document request to send to lender – Processor: 2+ hours.
    30. Receive closing documents, review that the numbers match those in our program; make sure title company’s and lenders numbers match- going back and forth between those involved – Processor: 2+ hours.
    31. Attend closing.  We believe in attending the closing with our borrowers to assist in explaining the closing documents.  We generally close at borrower’s home for their convenience or would drive to the title company’s office – Originator: 60+ minutes round trip drive time.   Drive time can be 5 to 10 hours round trip if the client is outside the metro area.
    32. Closing with borrower – 1 to 1 ½ hours.MN Reverse Mortgage Borrower Signing Closing Documents
    33. Follow up on funding conditions, i.e. missed signatures or documents,  if there are any (we rarely have any) – Processor: 30 to 60 minutes.
      1. If necessary, we may make another trip to the borrower’s home to get a signature on a document in order to keep on schedule for funding) – Originator: 60+ minutes round trip drive time.  If outside of the metro area we will assist borrower via phone and having sent over-night the necessary documentation – 60+ minutes.
    34. Keep borrower advised of funding status, i.e. when funds were wired to their bank and payments made for paying mortgages, taxes, etc. – Originator: 10 to 15 minutes per phone call, generally 2 calls.
    35. Once funded, send thank you letter – Originator and Processor: 15 minutes to prepare and mail.
  16. Answer questions from borrowers during the life the loan – generally 15 to 30 minutes each call.  We often talk with our borrowers once or twice a year.

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

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

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

The originator does NOT receive the full fee collected.  The fee received by the reverse mortgage broker covers the originator’s salary, the processor’s salary, overhead for the business such as computers, office supplies, copiers, health insurance for employees, taxes, licensing, marketing expenses, etc.  Originating a loan is not charged by the hour but this gives an idea of the hours involved for the originating and processing reverse mortgages.

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

© 2015 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-1a2

 

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.

Widower’s Financial Situation Improves with Reverse Mortgage

Reverse Mortgage benefited widower

Gary’s financial situation was impacted when his wife passed away a year ago.  Instead of having income from two Social Security checks, there was only one.  Having gone to just one Social Security check he wasn’t able to maintain his lifestyle as he had been accustomed and it was difficult to have enough funds to pay his property taxes.  And for awhile he started using a credit card to cover some of his living expenses.

Wanting to stay in his home of many years, Gary contacted me to do a reverse mortgage.  A reverse mortgage is a loan with special terms for those 62 and older. The funds available are based on the age of the youngest homeowner, the lessor of the appraised value or FHA lending limit of $625,500 and the Expected Interest Rate of the program chosen; income or credit score qualifications are not used for the interest rate.*  Similar to a traditional mortgage, the title stays in the homeowner’s name.  The most common, and only reverse mortgage currently available in Minnesota, is HUD’s FHA insured Home Equity Conversion Mortgage (HECM),

The additional benefits Gary liked about the reverse mortgage was he doesn’t have to make monthly mortgage payments and with the flexibility of the adjustable rate program he can receive funds in a lump sum, a line of credit with a growth rate, monthly payments or a combination of those.

In addition, Gary liked the fact that the loan isn’t due until he is no longer in the home as his primary residence or on his 150th birthday and it’s a non-recourse loan which means there is no personal liability when repaying the loan, it is repaid from the property only.  For example, if the loan balance is $300,000 when the loan become due and payable but the home can only be sold for $250,000 the borrower or the estate do not have to come up with the $50,000 difference.  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.

At closing Gary’s home equity line of credit was paid off so he didn’t have any more monthly mortgage payments.  Additionally his property taxes were brought current, he took out some funds to pay some bills that had accumulated.  And now he has funds in a line of credit.  There is a small amount available under HUD’s limit to 60% in the 1st 12 months with the balance available after the 1st year.  Recognizing he is responsible for paying his property taxes, keeping homeowners insurance on the property and maintaining the property, the reverse mortgage provides the funds he’ll need for these responsibilities as well as funds for emergencies and the little things that may come up.  Gary’s financial situation has improved and he can maintain his lifestyle going forward.

Think about how a reverse mortgage will make a difference in your life and contact your local originator, one who works with several lenders to be able to offer you all options available and one who will meet with you in person.

*As of April 27, 2015 income and credit are used for the Financial Assessment to determine borrower’s ability and willingness to pay property taxes and insurance into the future.

©2014-2015 Beth Paterson, CRMP Beth’s Reverse Mortgage Blog 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-19A

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 wonder if reverse mortgages are so good, why more people aren’t doing them?

This is a question that I was asked recently during an initial meeting from potential reverse mortgage borrowers.  A great question that I think has a couple answers.

  1. People still haven’t heard of them.  When I was talking with one of my reverse mortgage borrowers the other day he said he’s been mentioning that he had done one but is surprised on how many people still haven’t heard about them.  While there are many ads and media coverage, some people are still unfamiliar with them.
  2. Headlines give misinformation about HECM Reverse MortgagesA lot of misinformation has been spread through the media, politicians and the community putting fear into the minds of potential reverse mortgage borrowers.  Unfortunately the media, politicians and people in our communities have not reached out to the experts, those to who specialize in reverse mortgages, to get the facts but continually spread the misinformation. Even some of the articles that tend toward being accurate don’t get all the facts right.  Or the comments on the article contain misinformation.   This misinformation is what scares people from doing a reverse mortgage even when they could benefit from one.

Let’s look at the facts of reverse mortgages and some of the misinformation that people have that keeps them from doing a reverse mortgage.

A reverse mortgage is a mortgage that has special terms for those 62 and over. Unlike a conventional mortgage or Home Equity Line of Credit (HELOC) monthly mortgage payments are not required.  Income and credit scores are not factors in determining one’s interest rate or how much can be loaned.  As without or with a conventional mortgage, a HELOC, homeowners are responsible for paying their property taxes and homeowners insurance.

It is often stated that reverse mortgages are complicated or complex transactions.  In reality reverse mortgages aren’t any more complex than a conventional mortgage or other financial products.  Do you understand all the terms and features of a conventional mortgage or HELOC?  Do you understand your 401K’s, stock investments or other retirement plans?  What about your credit card(s)… do you know how they work?Comparing Your Smart Phone To A Reverse Mortgage

My smart phone has so many bells and whistles I don’t understand all the options or how it works… complex yes, but I still utilize one and I don’t think I could live without it any more.  If people are open to getting the facts, they will likely have a better understanding of reverse mortgage and might just find it useful.

People still think the bank or the lender will own the home once the reverse mortgage is done.  Or the bank or lender will take ownership once the loan becomes due and payable.  However, like a conventional mortgage or HELOC, the title remains in the homeowners name, the bank or lender does NOT own the home.  When the reverse mortgage borrowers are no longer in the home as their primary residence the loan become due and payable.

The amount repaid is the amount borrowed by the homeowners including interest and FHA Mortgage Insurance Premiums.  Any remaining funds go to the borrowers or their heirs.  As a non-recourse loan, if the loan balance is higher than the fair market value of the home, the borrowers or their heirs don’t have to come up with the difference.

Other false statements often seen or heard are that reverse mortgages are a scam, only the lender benefits.  They take advantage of people.  Let me clarify, the most common reverse mortgage, the Home Equity Conversion Mortgage (HECM) is  FHA insured and regulated by HUD – no, not scams but a valid loan using a home as collateral. 

Borrowers receive many benefits in having funds to use without having to make monthly mortgage payments, improved cash flow without restrictions on how the funds can be used, being able to stay in their home or purchase a new home.  Originators and lenders do get paid for reverse mortgage loans, but everyone gets paid for the work they do.  Personally I find it rewarding to help people, and I’m not ripping people off, in fact I and others I know in the industry are certainly not getting rich in this career…there is a lot of work involved to originate reverse mortgages, but we’re passionate in making a difference for people.  In fact, because of all the work, on some loans our compensation works out to very little.

Headlines have stated seniors are losing their homes to foreclosure if they don’t pay property taxes or keep insurance on the homeThink about it, with or without a mortgage if you don’t pay property taxes, the county will foreclose.  If you don’t have insurance on your property and the home is destroyed you will have lost your home and you won’t have the money to rebuild or replace it.  Neither of these are the fault of a reverse mortgage.  But these false headline statements scare people to not do a reverse mortgage.

We often see or hear that the reverse mortgage should be a last resort, to refinance with a conventional mortgage or HELOC or sell.  The problem with this is most seniors don’t qualify for conventional mortgages or HELOCs.  And if they do, the borrowers have to make monthly mortgage payments.  Even if they can make the payments now, if life happens they may not be able to make the payments in the future.  Rather than being a last resort the reverse mortgage can help one pay for retirement, long-term care.

The unused portion of the reverse mortgage line of credit so more funds can become available in the future.  And the funds in the line of credit could be higher than what one could qualify for in the future.  This can be very beneficial to seniors and isn’t available with any other loan. 

Relaxing with Reverse Mortgage in placeSeniors often want to stay in their home rather than moving so don’t tell them to sell.  If they do sell, where are they going to live?  They’d still have housing expenses…can they afford those or wouldn’t having no rent or monthly mortgage payments be more beneficial?

If they do wish to sell maybe to downsize, move closer to their children or to purchase the home of their dreams, the HECM for Purchase program gives them the option to purchase without having to make monthly mortgage payments.

Have you heard or read reverse mortgages are expensive?  Have you looked at the costs of a traditional or forward mortgage?  The costs are the same other than the FHA Mortgage Insurance Premium.  With a conventional mortgage people want to know what the payment will be and what the interest is, they generally don’t pay attention to the costs.  But when you look at the costs of the conventional mortgage you’ll likely be surprised, they aren’t really different from reverse mortgages.

HELOC’s may have lower up-front fees but the interest rate may be higher which in the long run could turn out to be more expensive than a reverse mortgage… besides one has to qualify on income, assets and credit.  Additionally payments have to be made on the HELOCs.  And there is a risk that they HELOC could be called due and at some point during the term the monthly payment must be increased to include the principal, not just the interest.

Seniors and children benefit from reverse mortgagesOther headlines or statements about reverse mortgages state the bank/lender gets the children’s inheritance.  Another false one!  The homeowners receive funds during the term of the loan, whether to pay off conventional loans or receiving funds monthly or draws from their line of credit.  When the loan is being paid, due when the home is no longer the primary residence of the borrower(s), there may or may not be funds left for an inheritance. The lender is receiving payment of principal and interest, this is NOT stealing the children’s inheritance from the remaining equity.  With the reverse mortgage, the homeowner is using the funds for their needs or wants.  Are you as heirs going to give them the funds they need just so you have an inheritance?  What about letting your parents live their quality of life and not worry about getting an inheritance?

The last one I’m going to cover today is the option that lowering your expenses is a better option.  Really?  Most seniors don’t have this option.  Seniors want to maintain their lifestyle and why shouldn’t they?  Do you want to be told to lower your expenses, stop getting your hair done, not having cable TV, being able to get together with friends for lunch, go to a family wedding or reunion?  Just because one turns 62 doesn’t mean they can’t enjoy life especially when they have equity in their home they can utilize.

Seniors discuss misinformation about reverse mortgagesDon’t buy into the scare tactics!  Before believing everything in the media, those commenting on stories, politicians or your friends or neighbors, get the facts about reverse mortgages.  As I often ask, “Do you go to a plumber if you’re having health issues?”  Of course you don’t!  So why are you listening to those who can’t or aren’t providing the facts on reverse mortgages?

Take time to understand and have the facts.  When people do, they see the benefits and more people will do a reverse mortgage!

And hopefully, as my borrower is doing, reverse mortgage borrowers will spread the word on how the reverse mortgage has benefitted them so more people will hear about them.

*As of April 27, 2015 income and credit are used for the Financial Assessment to determine borrower’s ability and willingness to pay property taxes and insurance into the future

 © 2014-2015 Beth Paterson http://rmsidac.com/beths-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-19

Related Articles:

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

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

We Were Able To Use A Reverse Mortgage To Purchase Our Beautiful New Home

HECM for Purchase allows one to buy a new home with a reverse mortgage“Without the help and knowledge of Beth Paterson who first told me about the reverse mortgage to buy I would never have been able to get our beautiful new townhome, which my wife needs because of her mobility to navigate a lot of stairs.”

This was comment I received from Mike after they closed on their HECM for Purchase (H4P) and moved into their new home.

Mike and I had originally talked about 6 years ago when he and Carol were considering a reverse mortgage on the home they had lived for many years.  For various reasons they decided to wait.  We did talk periodically and I kept them informed of product changes.  When Carol was having some issues navigating the stairs they had in their home they decided that it would be better to find a home without all the stairs.  This is when I introduced them to option of using use the reverse mortgage to purchase the new home.

Their search ensued until they found a beautiful townhome not too far from their current home in Minnesota but easier for Carol to navigate now and into the future.  Still interested in the idea of not having a mortgage payment, we met and discussed the H4P so they would have an understanding of the program.  We also met with their real estate agent and the builder to educate them on how this unique option worked.

Like it did for Mike and Carol, the HECM Home Purchase Program provides financing to those who desire to re-size, move closer to children or purchase a new home without having mortgage payments.

The advantages of using a reverse mortgage to purchase a home:

  • There are no monthly mortgage payments required (borrowers are responsible for paying property taxes, insurance and maintain the property).
  • Preserves cash savings and investments rather than liquidating savings and investments to pay all cash for the home purchase.
  • It is a way to leverage funds to make it possible to purchase a higher valued home.
  • Provides financing so one can re-size to a lower maintenance home, one-level home, a home more suitable for aging in place, move to be closer to children or even purchase one’s “dream home.”

Keep in mind, a reverse mortgage is a mortgage but has special terms for those 62 and older.  It offers the most flexibility on how the funds are received and when the loan needs to be repaid.

The steps to do purchase a home with the reverse mortgage are the same as with the regular reverse mortgage.  However there are some unique points for this beneficial home purchase option that one needs to be aware.

Eligibility requirements:

  • All borrowers going on title must be 62 years old or older.
  • The properties that qualify must be residential and include:
    • single family
    • 1 to 4 family dwelling units if the borrower/owner resides in one unit
    • FHA approved condos or manufactured homes that meet HUD’s standards
  • To determine how much is available from the reverse mortgage for the purchase, we run our calculations on the lessor of the final appraised value, sales price, or FHA mortgage limit for a one-family residence (currently $625,500).

For example, if the purchase price is $250,000 and the appraised value is $275,000, we would use the $250,000.  Or if the purchase price is $285,000 and the appraised value is $275,000, we use the $275,000.

  • The proceeds available to the borrower are calculated the same way as with any reverse mortgage, having all the closing costs (origination and FHA MIP, reports, title and escrow/settlement fees) included in the loan so there are no out of pocket expenses other than the appraisal and potentially any inspections.  The “Net Principal Limit” is the amount available to the borrower after costs.

Note: When I’m working with those exploring homes, I run several calculations at various possible home values so when the borrower and their real estate agent are looking for a home, they will have an idea of the home value and the cash the borrower will need at close.

  • The borrower will need to have the difference between the Net Principal Limit and the purchase price available.  For example:

If the purchase price and the appraised value is $275,000 and the Net Principal Limit is $165,000, the borrower will need $110,000* to purchase the $275,000 home.

Rather than using all reverse mortgage funds, more personal funds can be used for the purchase so the reverse mortgage can be set up with a line of credit option. (HECM LIBOR option only; the fixed rate requires you to pull all available funds at close and does not offer the line of credit option.)

 For example, if a borrower has $150,000 in funds they want to use to purchase the same $275,000 home, they could combine their $100,000 with the $165,000 from the reverse mortgage proceeds to purchase the home and then have $40,000 in their reverse mortgage line of credit.

  • The funds the borrowers use must be from cash on hand, cash from the sale, liquidation of assets or Gift funds (must meet HUD’s approved funding sources and source of funds needs to be documented).   

The additional funds cannot come from Builder incentives, Seller financing, Seller contributions or concessions, any person or entity that financially benefits from the transaction or third party that is directly or indirectly reimbursed by any of the parties benefitting in the transaction or Credit Card advances, sweat equity, trade equity, rent credit.  Purchasers cannot use loan discount points, interest rate buy downs, closing cost down payment assistance, gifts or personal property given by the seller or any other party involved in the transaction.  Seller can pay their share of taxes and Home Owner Association fees if applicable.           

  • The borrower may choose any of the options/interest rate options:
    • HECM Adjustable
    • HECM Fixed

For calculation purposes our rates change every week.  The rate cannot be confirmed until the week of closing.  However, on the adjustable rate LIBOR we have a Principal Limit Rate Lock which means we can use the rate at the time of application or closing, whichever is the most favorable to the borrower.  For the process of planning how much will be available to the borrower, I initially use the rate and amount of the program chosen at the time of application.

  • Seller has to be the owner of record for 90 days prior to the date of the sales contract (based on when recorded). (This is to protect against property flipping.)
  • Prior to completing an application HUD requires the Certification of Occupancy.
  • The Original Purchase Contract or Certified Copy of the Purchase Contract is needed for underwriting.
  • Counseling must be completed by a HUD approved HECM counseling agency that has been approved to provide reverse mortgage counseling. Minnesota requires that the counselor be located in Minnesota. We will provide a you a list of HUD approved counselors.
  • The property must be livable at the time of closing. Any required repairs must be completed prior to closing by the seller – no repairs or repair set asides are allowed.
  • Funds are provided at closing, as there is no rescission period.
  • The new property has to be the primary residence and occupancy must happen within 60 days of closing.
  • One’s existing home may be retained as rental property or if purchasing current home prior to the sale of existing home, income verification will be required to document the ability to maintain both properties. (This is prevent the practice of “buy and bail.”)

Using the reverse mortgage to finance the purchase of your new home may be your solution to meeting your goals without having a monthly mortgage payment.**

Like Mike and Carol, if you or someone you know are 62 or older and want to…

Happy HECM for Purchase Reverse Mortgage Borrowers…downsize
…move to a townhome so they don’t have to do the yard work

…move to a one-level home
…move closer to their children
…move to a larger home to have space for when their family comes to visit

The HECM for Purchase program may be your financing option!

*You may also need funds for property taxes, initial hazard insurance premium, home owner association dues, etc.
**Borrowers are still responsible for paying property taxes, hazard insurance, maintaining the home and abiding by the terms of the loan.

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:

– See more at: http://rmsidac.com/beths-reverse-mortgage-blog/#sthash.3C3ljz4F.dpuf

© 2014 Beth Paterson http://rmsidac.com/beths-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:

– See more at: http://rmsidac.com/beths-reverse-mortgage-blog/#sthash.3C3ljz4F.dpuf

© 2014 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-18l

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.

This site or information provided is not from, or approved by, HUD or FHA or any US Government Agency or Department. – See more at: http://rmsidac.com/#sthash.vv8MiYI8.dpuf
This site or information provided is not from, or approved by, HUD or FHA or any US Government Agency or Department. – See more at: http://rmsidac.com/#sthash.7ZcOk1EU.dpuf

© 2014 Beth Paterson http://rmsidac.com/beths-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:

– See more at: http://rmsidac.com/beths-reverse-mortgage-blog/#sthash.3C3ljz4F.dpuf

Using A Reverse Mortgage for Freedom, Life, Liberty and the Pursuit of Happiness

Using A Reverse Mortgage for Freedom, Life, Liberty and the Pursuit of HappinessAs we celebrate our country’s Independence this 4th of July we think of the freedom’s we have in addition to having the rights to life, liberty and the pursuit of happiness.  Personally we may look at having the freedom to make choices and not rely on others as well being able to pursue the things that make us happy to live life with independence.

Freedom to seniors may mean choosing to remain in their home, not rely on their children or the government financially.  Happiness likely means having the finances to enjoy retirement, maintain their lifestyle, go out to lunch with friends, to take their children or grandchildren out to eat or for a fun activity, maybe to the zoo or a play, or to be able to travel for family reunions or weddings.

Use a reverse mortgage to  feel more free, have choices, or pursue a better retirement lifeI’m guessing you know someone 62 and older who would be like to be able to feel more free, have choices, or want to pursue their retirement life with the following.  I’m also guessing they would feel happier being able to pursue any the things on this list during their retirement.

  • Stay in their 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.
  • Have improved cash flow with no monthly mortgage payments.
  • 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.
  • Have funds for making home improvements or home modifications.
  • Retire and not feeling like they have to work just to have money to pay the bills.
  • Save their home when faced with foreclosure or tax forfeiture.
  • 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.
  • 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:American Flag represents freedom and independence; a reverse mortgage provides financing for freedom and independence in retirement
    • 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 their grandchildren to the zoo or a movie,
  • Being able to do hobbies.
  • Purchase a more dependable car
  • Afford transportation when they can no longer drive.
  • Afford the travel for the family wedding or reunion.
  • Take the vacation they have dreamed of all their life.
  • Reduce financial stress.
  • Have funds to fulfill needs and goals.
  • To live with security, independence, dignity and control.

The equity in your home can provide security, independence, dignity and control through a reverse mortgageA reverse mortgage, a loan with special terms for homeowners 62 and older, may be the financial tool to provide the freedom, life, liberty and pursuit of happiness.

Offering many advantages for senior homeowners, a Home Equity Conversion Mortgage (HECM), the most common reverse mortgage, and only reverse mortgage currently available in Minnesota, has no monthly mortgage payments (borrowers are still responsible for paying property taxes, hazard insurance, maintaining the property), no income or credit score qualifications for determining the interest rate.*  This unique loan allows access to cash from the equity of the home to use through monthly payments, a line of credit with a growth rate, lump sum or a combination of these and pay it back when the home is no longer the primary residence of borrower(s).  When the home is sold any remaining equity goes to the borrower or their heirs.  With the reverse mortgage, if the loan balance is higher than the home can be sold for there is no personal liability to borrowers or their heirs.

While watching fireworks, consider how a reverse mortgage may provide freedom, life, liberty and the pursuit of happiness during retirement years.As you hang your flags, watch parades, gather for picnics, and watch fireworks celebrating the independence of the US, and the freedom, life, liberty and pursuit of happiness we have, ponder and discuss what this means to you and your senior loved ones.  Consider how a reverse mortgage may provide freedom, life, liberty and the pursuit of happiness during retirement years.

Happy Independence Day!

*As of April 27, 2015 income and credit are used for the Financial Assessment to determine borrower’s ability and willingness to pay property taxes and insurance into the future.

© 2014-2015 Beth Paterson http://rmsidac.com/beths-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-17Y

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.

© 2014 Beth Paterson http://rmsidac.com/beths-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://rmsidac.com/?p=4308

Related articles:

– See more at: http://rmsidac.com/beths-reverse-mortgage-blog/#sthash.X7efyTdj.dpuf

© 2014 Beth Paterson http://rmsidac.com/beths-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://rmsidac.com/?p=4308

Related articles:

– See more at: http://rmsidac.com/reverse-mortgages-offer-new-products-for-better-options-for-borrowers/#sthash.4OxwRx6J.dpuf

© 2014 Beth Paterson http://rmsidac.com/beths-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://rmsidac.com/?p=4308

Related articles:

– See more at: http://rmsidac.com/beths-reverse-mortgage-blog/#sthash.X7efyTdj.dpuf

Reverse Mortgages Offer New Products for Better Options for Borrowers

Reverse Mortgage OptionsChange doesn’t always have a positive image but change can be a good thing as it is with the recent reverse mortgage product changes that are insured by HUD.  Here is information on the reverse mortgage products available.

First let’s look at understanding the FHA/HUD Home Equity Conversion Mortgage (HECM), which is currently the most common reverse mortgage, and the only option currently available in Minnesota.  It is federally insured and regulated. Lending limits are set by the Federal Housing Administration (FHA). The maximum disbursement allowed at closing cannot exceed the greater of 60% of the Principal Limit/Maximum Loan Amount or the sum of mandatory obligations (closing costs, loan and judgment payoffs, set asides, etc.) plus 10% of the Principal Limit/Maximum Loan Amount.

The up-front FHA Mortgage Insurance Premium (MIP) is .5% for initial draws of 60% or less in the 1st 12 months.  If one draws more than 60% at closing or in the 1st 12 months due to mandatory obligations, the up-front MIP is 2.5%. The maximum distribution of funds allowed at closing and in the 1st 12 months is the greater of 60% of the Principal Limit or the total of mandatory obligations plus 10% of the Principal Limit; the amount drawn cannot exceed the Principal Limit.

*Mandatory Obligations include closing costs, loan and judgment payoffs, set asides, etc.

Features on all reverse mortgage programs include:

  • No monthly mortgage payments however borrowers are still responsible for property taxes, hazard insurance, maintaining the home and abiding by the terms of the loan
  • No income or credit qualifications for the interest rate*
  • No personal liability, they are all non-recourse
  • No equity sharing or appreciation sharing
  • Loan is due and payable when the home is no longer the primary residence of the borrower(s)
  • Independent Counseling is required

Now let’s look at the various program options including the adjustable rate options and the fixed rate options as well as the HECM For Purchase.

The Adjustable Rate Program, offering the most choices on how the funds are received makes it the most versatile reverse mortgage program.

  • Funds available in a line of credit, monthly tenure or term payments, lump sum or a combination of these subject to HUD program limits, i.e. cannot exceed 60% in the 1st 12 months.
  • The available funds in the unused line of credit grow so more funds become available over time.
  • With the Adjustable Program, after the 1st 12 months the remaining loan proceeds become available.
  • One can make repayments which reduce the loan balance and then have the option to re-borrow those funds again via monthly payments or the line of credit.
  • The interest rate is based on the LIBOR (London Inter-Bank Offered Rate) plus a margin.

One of the features of the Adjustable Rate program is the Principal Limit Protection feature, implemented in 2006, this allows the lock of the Expected Rate index – however it does not lock the margin. Click here to learn about the Principal Limit Protection feature.

Reverse Mortgage Adjustable Rate MortgageWith the HECM Monthly Adjustable Rate program the rate can change monthly with the first rate change occurring on the 1st day of the second full month and can occur every month thereafter.  There are no limits on the amount of the rate change each month. With the monthly adjustable rate there is a lifetime cap of 5 percentage points or 10 percentage points above the interest at the time of closing depending on the lender.

The HECM Annual Rate program has the same features as the Monthly Adjustable Rate although the rate adjusts annually with the first rate change occurring between 12 and 18 months from the date of closing.  The rate changes thereafter must occur every 12 months.  The rate cannot change more than 2 percentage points at each rate change with a lifetime cap of 5 percentage points above the initial rate at closing.

With some of the same features as the HECM Adjustable Rate program, the HECM Fixed Rate offers a fixed rate option. There is one interest rate, fixed for the term of the loan, for borrowers who are drawing 100% of their available funds up-front. With this option funds are NOT available in a line of credit or for monthly payments.

One may choose to make a payment on the fixed rate option which will reduce the loan balance however these funds are not available to re-borrower again in the future.

NOTE:  While a fixed rate reverse mortgage sounds enticing, once it is understood, it may not be the best choice for a reverse mortgage unless you need all the proceeds for the mandatory obligations at time of closing.

With the Fixed Rate the interest is being accrued on all funds drawn up front when it may not be necessary to take all the funds initially. Additionally, the growth rate is not available on the funds in the line of credit on all the Fixed Rate programs.  If you are doing the fixed rate, ask for the fixed program that offers the line of credit and monthly payment options for the most flexibility.

Using a reverse mortgage to purchase a homeAnother program of the reverse mortgage is the HECM Home Purchase Program which provides financing to those who desire to downsize, move closer to children or purchase a new home without having mortgage payments.

The steps to do so are the same as with the regular reverse mortgage.  However there are some unique points for this beneficial home purchase option.  If you are over 62 and purchasing a new home in Minnesota contact us to learn more about the HECM for Purchase.

While Proprietary or private Reverse Mortgage Programs are not available in Minnesota at this time there is currently one offered.  These reverse mortgages are generally for seniors with higher home values and are considered jumbo loans.  With much higher or unlimited lending limits, the amount of funds available to a borrower may be much greater for those with home values over $1million than other reverse mortgage programs.

One must always look at their situation, consider how the funds will be received and utilized, to determine which reverse mortgage program will work best for their circumstances.  If you are located in Minnesota, contact Reverse Mortgages SIDAC for a review of all the options of reverse mortgages in Minnesota to see which option will be the best for your situation.

*As of April 27, 2015 income and credit are used for the Financial Assessment to determine borrower’s ability and willingness to pay property taxes and insurance into the future.

© 2014-2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://rmsidac.com/?p=4308

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.