Find security, control in retirement

Posted on February 8, 2011 by Beth Paterson, CRMP

In retirement, top priorities are often estate planning, protecting investments and traveling. But large monthly home payments, high interest rates, foreclosures, home repairs and medical expenses can make doing those things difficult.

A solution to finance retirement, no matter one’s circumstances, may be a reverse mortgage.

A mortgage with special terms for homeowners 62 and older, a reverse mortgage has no income or credit score qualifications, and no monthly payment requirements, which offer many advantages for senior homeowners.

Recently, I worked with a couple in their 70s that needed some additional funds for home repairs, including a new energy efficient furnace. Anticipating future medical expenses, they liked that through a reverse mortgage they could get money for their immediate needs, eliminate their mortgage payment and still have funds for their future needs with a growing line of credit.

In a reverse mortgage, a homeowner still owns their home. Those who enter a reverse mortgage continue to be responsible for their taxes, homeowners insurance and maintenance of the property.

In a standard mortgage, homeowners have access to cash from the equity of their home, and also, when the home is sold any remaining equity goes to them or their estate.

In a reverse mortgage, residents also can borrow cash from the equity of their home, and often at interest rates lower than they would qualify for on a regular loan. They do not have to repay that loan until the home is no longer their primary residence.

When the resident is no longer living in the home, if there is any remaining equity, they will receive it just as in a standard mortgage. But if their loan balance is higher than the home can be sold for, there is no liability to them or their estate as long as they do not retain ownership of the home.

Generally, funds received through a reverse mortgage are considered tax-free (one should consult a tax advisor for their individual situation). Social Security and Medicare are also not affected and Medical Assistance and other public benefits can still be received.

A single woman I worked with appreciated that the reverse mortgage was explained to her and her children so they could all understand the details. With no restrictions on how the funds are used, after doing the reverse mortgage she got new windows and siding as well as took a vacation with her daughter.

Another couple I recently helped used their reverse mortgage to pay off their current mortgage and eliminate monthly payments. Not having to make payments, the husband was able to retire – a much awaited and deserved event at the age of 70.

A reverse mortgage has allowed thousands of Minnesota seniors to remain in their home with security, independence dignity and control no matter what their circumstances.

*** Written by Beth Paterson, MLO #342859, as Guest Colomist in The Edina Sun Current, Edina, MN Thursday, Feb. 3, 2011 www.minnlocal.com Sun Newspapers

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-oX

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.

Need Home Modifications To Age In Place? A Reverse Mortgage May Help

Posted on September 12, 2010 by Beth Paterson, CRMP

Most seniors want to stay in their homes and remain independent yet often believe they can’t for a number of reasons. Making some home modifications could make their wish of remaining in their home a reality by providing a safer more comfortable environment.

More than one third of those age 65 and older suffer injuries from a fall each year according to research from the National Center for Injury Control and Prevention. AARP research suggests the leading cause of injury and deaths among seniors is falls. Modifying one’s home can help to eliminate common hazards and help to improve the quality of living in one’s home. Improving the safety of one’s home can help one have more comfort, convenience, and remain independent and active in their community. Some people have mobility limitations from causes other than falls and still want to stay in their home. This too can be accomplished with some home modifications.

Bathing, toileting, cooking, and climbing stairs can be made easier to perform by adapting one’s home. Modifying one’s home can be as simple as installing grab bars in the bathrooms, removing throw rugs, moving electrical cords from hazardous locations, touch buttons for turning lights on and off to installing entrances to accommodate wheel chairs and lifts to access another level.

By assessing and modifying one’s home, one can live more safely, comfortably and remain independent. But how can one afford this? A reverse mortgage may be the solution beyond what Medicare or insurance will pay for.

A reverse mortgage is a special loan to allow seniors to remain in their home with security, independence, dignity, and control by converting the equity into cash. Similar to a conventional loan where a lien is placed on the home yet the borrower retains ownership. The reverse mortgage is different from a conventional loan with no income or credit scores required and no monthly mortgage payment requirements.

The reverse mortgage loan amount is based on the age of the borrower, their home value and an Expected Interest Rate. Due and payable when the home is no longer the primary residence, usually when they move, die or sell, a reverse mortgage can allow one to remain in their home and use the equity now. As a non-recourse loan there is no personal liability to the borrower or their estate as long as they are not retaining ownership. If the home is sold for more than the loan balance then the borrower(s) or their heirs keep the difference.

Bob, a Minnesota senior who had lost his wife wanted to stay in his home. He did the reverse mortgage and with a portion of his proceeds he modified his home to be prepared for the future such as having the doorways wider to accommodate a wheel chair and grab bars installed. He’s thrilled that he was able to have his home modified and will be able to remain there for years to come.

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-ob

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.

My Reverse Mortgage Funds Are Used… Now What?

Posted on July 11, 2010 by Beth Paterson, CRMP

A question on a recent post was “What happens when a borrower uses all the funds or out lives the money? This happened to a woman and then she had to pay rent she didn’t have.”

The first part of the question is common and shows the continued need to clarify the many misconceptions and lack of understanding of reverse mortgages. The second part of the question demonstrates confusion on whether the loan this woman had is a reverse mortgage and/or the misuse of the term “rent.”

A reverse mortgage is a loan, like any other conventional loan or home equity loan, using the equity in one’s home but has special terms for seniors 62 and older. The amount of the loan is determined by the age of the borrower, the home value or FHA lending limit, the Expected Interest Rate, and program chosen. Facts to consider:

Borrowers own the home, no one else does.
Borrowers can stay in their home as long it’s their primary residence. The due date on the reverse mortgage is the borrower’s 150th birthday. In the case of a couple, as long as one of the borrowers remains in the home as their primary residence, the loan can stay in place.
Borrowers don’t have to make monthly mortgage payments.
Borrowers won’t lose their home for the lack of making mortgage payments.
Loan proceeds are not subject to income tax, are government insured and guaranteed to be there for you.
Borrowers or their estate get to keep any remaining equity after the loan is paid off.
As a non-recourse loan there is no personal liability to borrowers or their estate when repaying the loan and borrowers or their estate are not retaining ownership.
There are no income or credit qualifications and generally no out of pocket costs other than the appraisal.

With a “true” reverse mortgage, the most common being insured by FHA’s Housing and Urban Development (HUD), the Home Equity Conversion Mortgage, or HECM, the borrowers can remain in their home as long as the home is their primary residence. Even if one has used all the funds available from the reverse mortgage, the borrowers can stay in the home without having monthly mortgage payments or rent payments. The loan is guaranteed by FHA.

Borrowers have options on receiving their funds which include monthly payments, line of credit, lump sum or a combination of these. When paying off current mortgages, a requirement of the loan, in some situations the reverse mortgage proceeds may be used up front in essence using all the funds right away. This means they can still have the loan without mortgage payments yet improving their cash flow because they don’t have to make mortgage payments.

The borrower’s responsibilities include paying property taxes, keeping home owner’s/hazard insurance on the property as well as maintaining the property. If a borrower does not pay their taxes and insurance the loan becomes due and payable.

In the question above, to assist borrowers, and not call the loan due, if there are no funds left from the reverse mortgage, the lender may have paid the taxes and insurance and then required the borrower make payments to cover the taxes and insurance. This is NOT rent but a repayment because in essence the lender is loaning more money beyond the terms of the reverse mortgage loan.

Previously lenders may have paid on the borrowers’ behalf the taxes and insurance such as this but that is about to change, see my blog article regarding this, “Reverse Mortgage Borrowers’ Responsibilities… Or Consequences.”

If rent is being required on the “reverse mortgage” as suggested in the question, I’m guessing it is not a reverse mortgage insured by HUD or a proprietary (private) reverse mortgage offered by the FHA lenders which are modeled after the HECM.

It may have been a loan set up by a bank or another lender or through a private person/family member calling it a reverse mortgage but not having the same terms as a true reverse mortgage insured by HUD or by a proprietary program modeled after the HECM that doesn’t require payments and is non-recourse.

Note that the HECM and these proprietary reverse mortgages offer more protections than any other type of financing including require counseling by third-party HUD approved counselors.

Or it may have been someone who purchased the home and set up terms to have the woman stay in the home with a lease back and when funds from the sale ran out she had to pay rent.

I’ve also received the question about someone taking out a “reverse mortgage” and having to make interest payments. Again this would not be a HECM or proprietary program offered by FHA HUD approved lenders who’s programs don’t require payments and are non-recourse.

If one is having to pay rent or make any other form of mortgage payment it is not a true reverse mortgage. I suggested to the questioner to review the loan documents to determine what are the actual terms of that loan.

This leads to the conclusion that one should work with a lender who specialized in the HUD Home Equity Conversion Mortgage, is familiar with and takes the time to explain the terms of the loan, as well as follows HUD’s requirements including the requirement of the HUD approved counseling. A list of things to consider when talking with lenders can be found by clicking here. Borrowers should not sign documents without understanding the terms of the loan and consequences if the terms are not abided by.

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

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

Reverse Mortgages Equal Independence For Seniors

Posted on July 2, 2010 by Beth Paterson, CRMP

As we look to celebrating the independence of our county let’s also look at how our seniors can celebrate their own independence. Defined as “sufficient income for comfortable self-support; a competence” at dictionary.com, independence is important to seniors.

When we talk with our clients we hear they want to be able to enjoy their retirement and maintain their lifestyle which includes having their independence. So how can they do this if they are living off their Social Security and if they have retirement investments but they have dropped in value?

Even though as one ages some help may be needed, they can still maintain their independence. A reverse mortgage can help provide this independence. After Edna did her reverse mortgage she said, “Now I have my dignity back and my independence.”

Some instances where the reverse mortgage can help one remain independent include having funds for home repairs, going out to lunch with friends, traveling, visiting family across the country, purchasing a new car, paying medical bills or for medications; paying for help with housework, meal preparation, yard work or transportation, whatever they desire.

Or if one needs more help to remain in their home they would have the funds to pay for the assistance from a home care agency to do so. While some additional assistance may be needed seniors can still have a sense of independence if they have the funds to get the additional help and choose the agency they wish.

Seniors have sometimes used their credit cards to fund their lifestyle or pay their bills, others have used a conventional home equity mortgage or a line of credit. And others look for additional cash by applying for a conventional home equity mortgage but don’t qualify.

The reverse mortgage can benefit here too. Interest rates on credit cards are high. Having the reverse mortgage can reduce their dependence on their credit cards. They usually don’t qualify for a conventional mortgage with today’s lending requirements especially since their only income is Social Security. Even if they do qualify or currently have a home equity mortgage or line of credit, they have to make payments which can be difficult on a fixed income or when “life happens.”

Another Minnesota reverse mortgage borrower said, “With a reverse mortgage you begin to have independence anew and you begin to feel more secure. Being free from monetary anxiety, you have better control over spending your equity.”

A reverse mortgage is a mortgage with special terms for senior home owners 62 and older to allow them to remain in their home. The loan amount is determined by the appraised home value (or FHA lending limit), the age of the borrower, and an Expected Interest Rate. Let’s review the facts of reverse mortgages:

The title stays in the borrower’s name same as with any mortgage. The borrower owns the home, no one else does.
Income and credit scores are not required for the HUD insured Home Equity Conversion Mortgage or HECM, the most common reverse mortgage.
The borrower may be able to stay in their home as long as it’s their primary residence or until their 150^th birthday.
Lower interest rates than other loans – historically the reverse mortgage interest rates have been lower than conventional loans, lines of credit and credit cards.
A borrower won’t lose their home because they can’t make a mortgage payment – they don’t have to make monthly payments. They are however, as with any loan, responsible for taxes, insurance and maintaining the property and abiding by the terms of the loan agreement.
The reverse mortgage funds are generally considered tax-free (although if proceeds are used for certain purposes taxes may apply – consult with a tax advisor).
The proceeds are not considered income so Social Security and Medicare are not impacted and one may still be able to receive Medicaid.
The HECM is government insured and guaranteed to be available for borrowers.
Allows access to more funds without paying additional closing costs – there is a growth rate with the line of credit and monthly payment options with the adjustable interest rate program.
There are no out of pocket costs other than the cost of the appraisal.
There are no prepayment penalties.
Borrowers or their heirs get to keep any remaining equity after the loan is paid off.
The loan is non-recourse which means there is no personal liability to the borrower or their estate as long as they are retaining ownership.

Paying off a mortgage on her home, Judy stated, “I truly believe in reverse mortgages, especially for someone like me with a limited income. I received enough from the reverse mortgage to pay off some other bills and still had a little to put into a “line of credit” account. Some of the bills I am paying are credit card debts which have a very high interest rate. It’s a good feeling to be able to do that. It makes bill paying each month less stressful.” Now this is senior independence.

Have a wonderful time celebrating the independence we have in this wonderful country of ours. And keep in mind that a reverse mortgage equals independence for seniors.

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

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

Reverse Mortgage Borrowers’ Responsibilities… or Consequences

Posted on June 27, 2010 by Beth Paterson, CRMP

When loan documents are signed at closing, borrowers agree to the terms of the loan, whether a conventional loan for purchase; a conventional home equity mortgage; or a Home Equity Conversion Mortgage (HECM), the reverse mortgage insured by HUD; or a proprietary (private) reverse mortgage. As with any home loan, with the reverse mortgage borrowers are using the equity in their home and the title of the home remains in the borrower’s name, no the bank doesn’t own the home, nor do they want the home.

The reverse mortgage has helped seniors 62 and older remain in their home with their security, independence, dignity and control but not without responsibilities to adhere to the terms of the loan. The main responsibilities are to not violate terms of the loan, generally these include:

Paying property taxes
Keeping hazard insurance on the property
Maintaining the property
Paying association dues if appropriate
Not changing/transferring the title

Paying property taxes means keeping up with the county property taxes, paying them on time. If one doesn’t pay property taxes, with or without a loan, the county could start tax forfeiture or foreclosure.

Keeping hazard insurance on the property helps protect the homeowner and lender if there is any damage to the property. Being the lenders are invested in the property by lending money based on the home equity, they require the insurance so their investment is protected if there is damage. For example if a tree falls on the home and damages the roof, the hazard insurance will cover the replacement of the roof and bring the home back to the condition required for lender’s investment.

Maintaining the property is required to protect the lender’s investment in the property and includes keeping the home in good condition including not letting the property become run down. Keeping the roof in good repair, insuring the siding and trim do not have chipped or bear wood but are protected against the elements. Ensuring against safety issues such as automatic garage doors will rise if something is under them, railings are in place and stable on stairs and decks rotten boards are replaced. Interior maintenance is also important, for example having heating, electricity, plumbing, water in working order as well as safety issues such as railings on stairs.

If one is in a condo or town home and association dues are required, loans require that the association dues are kept current. If they are not kept current then the association has the right to force the homeowner from the property.

What are the consequences if the requirements of the reverse mortgage loan terms are not abided by? If terms of the loan agreement are not followed, the lenders have the right to call the loan due and payable or foreclose.

Changing or transferring titles will mean the loan becomes due and payable. For example if one decides to add a person to the title of the property, implement a Life Estate, or sell the property this changes who the lender’s have invested their interests. If the property is going to be put in a trust it will not mean the loan will be come due and payable however the lender will need to review the trust to ensure that it meets the requirements of their investors and in the case of the HUD insured HECM, the trust must meet HUD’s guidelines.

The area that has caused the biggest problem is when borrowers don’t pay their the property taxes and hazard insurance. Even though there are a large number of borrowers who have fall into this area, to date there have been very few reverse mortgages foreclosed because of the default of payment for taxes and insurance. HUD has been very forgiving and not pressuring the servicing companies to foreclose, however this is about to change.

Due to FHA’s budget, the arm of Housing and Urban Development (HUD) who insures the majority of reverse mortgages, is looking to find a solution to their budget shortfalls and make the program profitable. Fannie Mae who has a large portfolio of the HUD reverse mortgages is also encouraging the HECM servicers to address the issue of delinquent taxes and insurance to protect their company from losses.

With conventional mortgages, if taxes and insurance are not paid, the lenders will start an escrow account, requiring more money from borrowers in their monthly payments for the escrow account. The lenders then make the tax and insurance payments on behalf of the borrower from their escrow accounts.

Being reverse mortgage borrowers are not making payments collecting funds for the escrow account is not an option. What the servicing companies have done if there is a line of credit is use these funds to pay the taxes. If a reveres mortgage borrower is receiving monthly payments, they will be restructured so that the taxes and insurance can be paid. Unfortunately if all the funds have been used and taxes and insurance have not been paid the loan is in default.

HUD is working toward establishing guidance for the reverse mortgage servicing companies to address the tax and insurance delinquencies. But if the borrowers do not have the capacity to pay the taxes and insurances they owe, the servicer will be forced to foreclose on the property per HUD’s requirements. (Note that reverse mortgage servicing companies are required to abide by HUD’s requirements.)

Having reverse mortgage terms and responsibilities explained

While the originators, counselors and loan documents spell out these requirements, borrowers must take their responsibilities seriously. It is also their responsibility to be sure to look at their budget and have a plan to be able to pay their property taxes, hazard insurance as well as maintaining the property. Then they can remain in their home and enjoy the many benefits of the reverse mortgage.

Related articles on Reverse Mortgages in Minnestoa:

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

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

A Minnesota Reverse Mortgage Borrower Speaks Out On The Benefits With Her Reverse Mortgage

Posted on June 12, 2010 by Beth Paterson, CRMP

“I’m a happy consumer of reverse mortgages. I feel that it’s had an unjustly bad name in the past, at least I’ve heard under currents of ‘oh, you wouldn’t like that.’ Well let’s get at this logically. I’ve had a good experience with it and I like Beth’s approach. So I wanted to share my experience and what had changed in my life.

“Life was happy and good with a family and a career. I was all happy and good with the insurance that goes with a nice job. When retirement time came I had a fair pension and that with Social Security were going to see me through things.

“But that didn’t match my goals. I wanted to travel more when I was retired and visit my now expanded family and I was getting charges of $400 – $500 for tickets 2-3 times a year plus indebtedness for rewiring in the house, I wanted to remodel things and was running across some fascinating new hobbies. So I wanted to have new hobbies and travel. And do what was the healthiest thing I could think of on earth which was having a very right good time now and let the future take care of itself if I took care.

“So that led me to talk to some friends when I was running low on funds. Several people referred to the fact that Beth Paterson was quoted on reverse mortgages. To be quoted was quite a credential. I had a meeting with Beth. I was 73 at the time. I was undecided at the time so I waited. Time changed and I still had a lot of ambition and 75 came along and I wanted some improvements in my home and I was confidently that I could likely spend 10 or more years happily in my home if I had home health care. That is a big deal to know when you are 70 something to know that if you fall and need some months of assistance.

“When I talked with Beth the 2nd time it all came together. I was very happy with the amount of care she spent with me. My family was able to call her and get answers to our questions and they were pretty astute questions. Beth took the time to answer every one of them. I had shopped around and I stayed with Beth.

“My life changed from uncertainty on how I was going to pay my electrical bills, and whether I could even stay in this community or whether I needed to move to assisted living which meant moving. That wasn’t the preferred path. I was sure I could stay in my home. I was sure I could get the reverse mortgage loan. And now I was able to get a nice low rate.

“I immediately found that I could get relief from my old small mortgage. [The reverse mortgage needs to be in first lien position which means any current mortgages or liens need to be paid off. This eliminates mortgage payments because there are no payments required on the reverse mortgage. Borrowers are responsible for property taxes and hazard insurance.] The relief was so great that I could now stop worrying about how I could pay this within my income. So I left my Line Of Credit alone – didn’t use it – just the relief for paying off the old mortgage and the old debts and some ability to understand my budget and handle it better.

“Now I have my dignity back and my independence. And my children are heaving sighs of relief because they aren’t worried about me any more – I’ve answered some of their questions: where I do I want to be cared for as I age. They aren’t going to be blind-sided.

“I was very pleased with what happened.”

Edna, who took out her Home Equity Conversion Mortgage (HECM) in 2008, shared this story during a presentation where she joined me recently at a Minnesota senior resource fair workshop.

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 Understand The Reverse Mortgage Closing Costs?

Posted on May 24, 2010 by Beth Paterson, CRMP

Signing Reverse Mortgage Application As with a conventional mortgage, there are costs associated with a reverse mortgage. While perceived as high, once understood you’ll see the reverse mortgage costs are comparable to a conventional loan. Most people don’t understand the fees, what they cover or why they have to be paid with a conventional loan either, they just accept them as part of doing a loan.

One difference is that with the HUD insured reverse mortgage, the Home Equity Conversion Mortgage (HECM), HUD regulates the fees and does not allow marked up or “junk fees,” borrowers only pay the actual costs.

To get clear, let’s understand what the Minnesota fees are and what they cover.

Fee	Explanation	Cost/Charge
Origination Fee	Covers the lender’s time and costs associated with originating the loan including: loan officer’s and staff’s salary, administrative costs, business overhead (computers, office space, utilities, health insurance, office supplies, marketing, processing, underwriting, etc.) (Note processing and underwriting fees are generally additional fees on conventional loans but have to be included in the origination fee on FHA reverse mortgages loans.)	HUD sets guidelines for the origination fee: Maximum of 2% of the first $200,000 of the home value or lending limit, 1% on the balance thereafter with a cap of $6,000 or a minimum of $2,500.
FHA Mortgage Insurance Premium	A required charge from FHA because they are insuring the loan. Keeps the interest rate lower, allows more to be borrowed, guarantee funds are available, and covers risk so borrower or heirs are not personally liable.	2% of the property value or mortgage lending limit, whichever is less.
Appraisal	Fee for FHA licensed appraiser to determine the market value of the property. Includes a management fee for an independent company to order the appraisal.	$450 – $500
Repair Administration Fee	All loans with repairs are charged an administration fee for overseeing that the repairs are completed, ordering inspection, processing payments, etc.	1.5% of the repair bid
Credit Report Fee	This is to check if there are any liens or judgements against the property or person that would need to be paid or other contradictory information.	$18 – $20
Flood Certification Fee	For verifying whether flood insurance is required or not.	$15 – $20
Courier Fee	To send pay offs to a current lender if there are any.	Approximately $30 each
Counseling by Third-party HUD approved counselor	A fee may be charged to the borrower for counseling services as long as it does not create a hardship. The counselors must make a determination about the borrowers ability to pay which may include factors such as income and debt obligations – HUD recommends a written procedure for this. Counselors must inform borrowers of the fee structure in advance of services and cannot be turned away, nor the counseling certificate be withheld based on failure to pay. The Counseling fee may become part of the costs at closing.	Up to $125 allowed by HUD
Document Preparation Fee	Charge for preparing the loan documents for closing. A specialized company prepares the loan package.	$100-$125
Escrow, Settlement or Closing Fee	Charged by the title company for handling the title work and closing of the loan.- – – – – – – – – – – – – – – – – – – – – – – – – – – – – -Sometimes there is an additional signing/notary fee or an additional fee for going to a borrower’s home.	Generally $250 – $350- – – – – – – – – – – – – – – $125-$200 signing/ notary fee
Abstract or Title Search	This charge is for searching the county records.	$150-$185
Title Examination	This is for the examiner to review the title and put the commitment together.	$135-$150
Title Insurance	Title company’s insurance on the property guaranteeing clear ownership and protect lender if there is a defect in the title. Different than owner’s title insurance policy.	Based on property value.
Recording Fees	Fees for recording documents with the county such as mortgage, deeds, county taxes, bankruptcy, name change due to divorce or loss of spouse	$46 each + a $5 conservation fee
County Tax	Mortgage Registration Tax required in Minnesota and collected by the county.	Based on Principal Limit
Survey/Plat Drawing; Name & Assessment Search	Fee for obtaining and reviewing the plat drawing; Fee for searching names and assessments on title	$60; $30; $30 = $120 combined (higher for some counties)
Fees Paid by Lender to Broker such as Yield Spread Premium; Service Release Premium; Lender Paid Broker Compensation	Brokers/originating lenders are paid in two ways, one by you (the origination fee) the other by the lenders. Lenders pay brokers/originating lenders compensation for submitting loans to their company. This compensation also covers the broker’s/originating lender’s time and costs associated with their running their business.It does need to be disclosed on the Good Faith Estimate. Note that federally chartered banks do not have to disclose this information to borrowers even though the same compensation is paid.	This is NOT A BORROWER EXPENSE!To disclose this to you, on the GFE it will be shown as a fee then credited back so it is not actually charged to you.

As the RESPA (Real Estate Settlement and Procedures Act) changes effective January 1, 2010 a Good Faith Estimate (GFE) can ONLY be provided with an actual application. It is no longer allowed for the informational or quote package to include a GFE.

Information (in addition to the name, birthday, property information, current loan details,) that will trigger the application include the Social Security Number, Monthly Income, assets, debts, any other pertinent information. This information should NOT be provided until lender is chosen and ready to proceed with an application. Once lenders have this information they may start processing the loan.

Note that the fees, other than the Appraisal and possibly the counseling fee, are wrapped into the loan so there are no other out of pocket costs.

Being clear and having an understanding of the reverse mortgage costs helps you make better decisions and takes the fear away from the reverse mortgage.

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

Posted on May 1, 2010 by Beth Paterson, CRMP

This 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

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

Posted on April 4, 2010 by Beth Paterson, CRMP

It 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.

Minnesota 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.

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?

Posted on March 28, 2010 by Beth Paterson, CRMP

I 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 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 150^th 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?

About 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:

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.

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