Seventeen Facts About Reverse Mortgages You May Not Know.

Posted on April 30, 2011 by Beth Paterson, CRMP

With the many misunderstandings about reverse mortgages I want to share seventeen facts to help clear up the misconceptions.

A reverse mortgage is a mortgage just like any loan against the home where the borrower is using the equity of their home to meet their needs and desires now, but with special terms for seniors 62 and older.
The lender or bank does NOT own the home – YOU OWN THE HOME, you keep the title! The lender or bank does NOT take your home when you die.
Income and credit scores do not determine the interest rate. Interest rate is determined by the margin and the program chosen.
No monthly mortgage payments are required. Borrowers are responsible for paying property taxes, hazard insurance, maintaining the property, paying HOA dues if applicable.
The home does not have to be free and clear or have a lot of equity. Although enough equity is needed to pay off current liens and/or mortgages.
There is no limitation on how the funds can be used. Some common uses include paying off a current mortgage, paying for home repairs or modifications, planning for retirement and long term care, home health care or adult day services, medical expenses, every day living expenses and even to purchase a home. Whatever one needs or wants.
More options are available than with a conventional or home equity mortgage – 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, and not considered income.
Medicaid (Medical Assistance [MA] in Minnesota) can still be received with the reverse mortgage. (Your originator should know this and be able to assist you if or when you are going on Medicaid.)
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, and they are abiding by the terms of the loan. The due date on the mortgage is the youngest borrower’s 150th birthday. Eligible non-borrowing spouses may be eligible for a Deferral Period.
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. This means borrowers or their heirs don’t have to come up with the difference if the loan balance is higher than what the home is sold (at fair market value). Borrowers are not leaving a debt to their children.
Just like any mortgage, borrowers are responsible for property taxes and insurance, association dues (if applicable), maintaining the property and abiding by the terms of the loan.
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.) With the reverse mortgage, one has the flexibility to choose to make payments to reduce the loan balance, funds then become available to re-borrower in the future.
Closing costs are comparable to a conventional mortgage – 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. Fees are regulated and only HUD allowed fees are permitted with no mark-ups or junk fees. You can see a comparison of the costs in my article, “Surprise! Reverse Mortgage Closing Costs Actually Compare to Conventional Mortgage Costs” Note, there are no out of pocket costs except for the appraisal, possibly engineering inspections and counseling. The costs typically become part of the loan balance.
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

Keeping the interest rates lower, the interest rates have historically been lower compared to other mortgages.

Providing a line of credit growth rate (available only with reverse mortgages).

Ensuring as a reverse mortgage it is a non-recourse (no personal liability) loan.

Requiring counseling by a third party HUD trained and approved counselor.

The HECMs are highly protected. See my Blog article “You Need To know Reverse Mortgage Borrowers Are Highly Protected.”

Before dismissing a reverse mortgage as an option, know the facts and talk with a reverse mortgage expert to see if one is right for your situation. Originators do not charge to meet with you and educate you on reverse mortgages. No product or service is right for everyone but with the facts you can make an informed decision.

Originally posted in 2011, updated in 2015.

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-qc

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.

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

Posted on April 12, 2010 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted on March 21, 2010 by Beth Paterson, CRMP

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

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

The difference between a conventional mortgage and the reverse mortgage:

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

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

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

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

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

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

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

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

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

You Need To Know Reverse Mortgage Borrowers Are Highly Protected!

Posted on March 7, 2010 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

Protected MN Reverse Mortgage Borrowers

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

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

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

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

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

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

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

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

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

The Misconceptions of Reverse Mortgages Abound… What Do You Know?

Posted on February 14, 2010 by Beth Paterson, CRMP

MN Reverse Mortgage Borrowers Learned The Facts

As those of us who specialize in reverse mortgages know, there are more misconceptions about reverse mortgages than knowledge of the facts. Let me clarify the facts for you. First, a reverse mortgage is a mortgage just like any other mortgage but has special terms for seniors 62 and older.

Like any other mortgage the borrower owns the home, keeps the title, is responsible for paying the taxes, insurance and maintaining the home as well as abiding by the terms of the loan. The initial difference between conventional mortgages and reverse mortgages is in the qualifying, with the fact that there are no income or credit score qualifications and no monthly payments required.

Closing costs are comparable to conventional loans – the difference is the FHA mortgage insurance. See a side-by-side comparison at my blog post, “Reverse Mortgage Closing Costs – High or Mythical?”

Income, assets, credit and risk is used to determine the interest rate on a conventional mortgage. When you’re a senior on a fixed income the interest will be higher. Whereas with the reverse mortgage the interest rate is historically lower than conventional mortgages. While the interest rate will vary from the program chosen and the time of closing, the interest rate is the same for all seniors – it doesn’t matter if you are receiving only Social Security or also receiving pension and/or still working and earning an income and don’t have any additional assets. Currently the interest rate is under 3.5% for the adjustable rate and 5.56% for the fixed rate.

Reverse mortgage loan balance increases over time because borrowers are not making payments. Often criticized because the loan balance will be higher in the end, you need to keep in mind that borrowers have access to these funds without making payments. Yes, the interest, servicing fee and FHA Mortgage Insurance Premiums are being added over time but have you added together what you have paid in interest payments? You’ll find that if you weren’t making payments they too would look high. Essentially the borrower is also borrowing these fees each month.

The amount loaned from the reverse mortgage is based on the home value, Expected Interest Rate (used only for this purpose – not the interest accruing on the loan) and the age of the youngest borrower. The older one is the more they can access. This is determined by a formula set by HUD and the margin generally set by Fannie Mae or Ginne Mae.

An advantage of the reverse mortgage for seniors is they can use the equity in their home for their needs or wants, whatever those may be up to the maximum allowed by the loan. Seniors often take advantage of this fact and the reverse mortgage helps them stay in their home as long as they desire or until their death. To read about how some have used their reverse mortgage proceeds click here.

Reverse mortgage funds can be received in a lump sum, monthly payments, line of credit or a combination of these. Unlike any other line of credit, the funds left in the line of credit grow so more funds become available in the future. Monthly payments can be structured as tenure (for life) or in a monthly amount desired. In essence, over time the senior can be borrowing more than the home value that was determined at the time of closing.

The reverse mortgage loan becomes due and payable when the home is no longer the primary residence of the borrower(s) or on their 150^th birthday. As with a conventional loan the borrowers can decide to stay in their home or to sell when they desire.

The borrower or the estate communicating with the servicing company is crucial when the home is no longer the primary residence of the borrower. HUD insures most reverse mortgage loans so their terms must be followed by the borrowers and the servicing companies.

Once the loan is closed funds are guaranteed to be available for the borrowers based on the home value at the time of closing. The lender cannot decide to lower how much one can access in the future or call the loan due and payable as long as the terms of the loan are being abided by.

Yes, in a down market the home values have dropped. The advantage of the reverse mortgage for the seniors who took one out when the market had higher home values is the seniors could access more funds that were/are guaranteed to be there for them.

As a non-recourse loan, the reverse mortgage is repaid only from the property when it is sold, there is no personal liability to the borrower or their estate as long as they are not retaining ownership. A huge advantage for seniors – they do not leave a debt to their heirs.

With a conventional mortgage the borrower or their estate could still be responsible for paying back the full value of the loan whereas with the reverse mortgage the lender is only paid back from the sale the home as long as the borrower or their heirs are not retaining ownership.

And another important factor is if the loan balance is less than what the home can be sold for the borrower or the heirs keep the difference.

Satisfied MN Reverse Mortgage Borrowers Who Reviewed Documents

It is a requirement that when doing a reverse mortgage sample closing documents are to be left (or provided within 3 days) at the time application. This gives the borrowers time to review the terms, have them reviewed with their family, advisors or an attorney. Having the time to review these during the processing of the loan provides an opportunity to get the facts and terms of the reverse mortgage. Reviewing these should help dispel the many misconceptions there are about reverse mortgages.

Once understood, seniors find the reverse mortgage very favorable. As one of my clients, Jim, wrote: “The Reverse Mortgage enables us to live in our home without mortgage payments. Line of credit will grow for our future needs. The whole package is a win-win for my wife and me.”

Review these articles for another look at the facts:

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.

Irrational Statements Show Ignorance of Reverse Mortgages

Posted on January 25, 2010 by Beth Paterson, CRMP

Have you made or heard these statements? “Stay away from reverse mortgages!” “I wouldn’t recommend a reverse mortgage.” “It’s the worst thing you could do.” “Reverse mortgages are a scam.” “Don’t do it! Too many things can go wrong.” “Reverse mortgages only benefit the banks.” “The bank owns the home.” “You can outlive the mortgage.” These statements get my ire up because it shows people making these statements don’t know what they are talking about when it comes to reverse mortgages.

Let me give you the facts: A reverse mortgage is a mortgage just like any loan against the home but it has special terms for seniors 62 and older.

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.
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.
Medicaid 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 loan is non-recourse which means there is no personal liability to the borrower or their heirs if they are not retaining ownership. So they 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.
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.

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.

FHA offers and insures the majority of reverse mortgages known as the Home Equity Conversion Mortgage, or HECM, making it the most highly regulated mortgage available. Lenders are regulated by RESPA (Real Estate Settlement Procedures Act) and HUD (Housing and Urban Development). Funds are guaranteed by HUD. Application and Closing documents include many disclosures, in fact at the time of Application it is required that sample closing documents be provided to the borrowers. Additionally, all borrowers are required to go through third-party counseling by HUD approved counselors.

Fees are regulated and only HUD allowed fees are permitted with no mark-ups. Even though many times they are considered expensive or high the compare to conventional loans, in fact the difference comes down to FHA Mortgage Insurance Premium. You can see a comparison of the costs in my article, “Reverse Mortgage Costs – High or Mythical?”

In the last few years HUD and RESPA have implemented more regulations and protections. And recently HUD has been charging those who have not followed these regulations and even pulled their licensing.

Happy MN Reverse Mortgage Borrower

The reverse mortgage has been a life saver for many. According to an AARP report 93% of the borrowers are satisfied. Based on a survey of our borrowers our company has 100% satisfaction. I just talked with one borrower last week who told me the reverse mortgage has made a huge positive difference in her and the one her sister had made a big difference in her life also. (Her sister has now passed away.) One day we received a call from a man who said, “I want a reverse mortgage because since Jim got his, he’s a new man.” Some of my other Blog posts share other stories on how the reverse mortgage has made a difference in the lives of seniors: “Finance Retirement With A Reverse Mortgage,” “Know A Senior Who Wants Security, Independence, Dignity, and Control? A Reverse Mortgage May Be The Answer!” “Reverse Mortgages Finance Home Care,” and “Reverse Mortgages Answers Prayers.”

I’ve posted some Blog articles addressing the media’s attacks on reverse mortgages, “The Media Needs The Reverse Mortgage Facts,” “But Wait, There’s More… Reverse Mortgage Facts The Media Needs To Know,” and “It Is NOT Reverse Mortgage Fraud When…” It’s obvious the public needs these facts too when they make the statements that are in the opening paragraph.

When people make such irrational statements they don’t know what they are talking about. The reverse mortgage is not right for everyone but everyone has the right to get the details and facts so their decision can be based on the truth, not on opinion. As asked in my Blog, “When You Don’t Know What You Don’t Know About Reverse Mortgages,” would you go to a plumber for health problems? And to expand on that, would you go to a general practitioner if you have heart problems? No, you would go to the specialist. So before making or believing such irrational statements, contact a specialist and get the facts. Our website, www.RMSIDAC.com is full of information and facts and if you are in Minnesota we’d love to provide the facts for you via phone or in person.

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 Reverse Mortgage Or A Conventional Mortgage For Senior Homeowners? That Is The Question.

Posted on January 17, 2010 by Beth Paterson, CRMP

The call comes in: “I took a loan out 3 years ago and now I want a reverse mortgage because I can’t make the payments.” I respond, “Great, the reverse mortgage eliminates mortgage payments and allows borrowers to stay in their home.” I define that a reverse mortgage is a mortgage like any other loan but with special terms for seniors 62 and older and 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. Then I also review some other details of the reverse mortgage including that:

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.
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.
Medicaid can still be received with the reverse mortgage.
The loan is non-recourse which means there is no personal liability to the borrower or their heirs if they are not retaining ownership.
If the home is sold for more than the loan balance, the borrowers or their estate keep the difference.

Then after further discussion and review of their situation, I state, “Let me get some information so I can see how much reverse mortgage proceeds there are in your situation.”

The reverse mortgage needs to be in first lien position which means any current liens need to be paid off with the reverse mortgage. There needs to be enough funds from the reverse mortgage to do this. Often when a mortgage was done a few years ago, when I run the numbers I often find there aren’t enough proceeds to pay off their current mortgage. Sometimes they are only short a few hundred dollars and they can come up with the funds needed to do the reverse mortgage (sometimes it’s only a matter of a monthly payment). Other times they are short thousands. For one couple who called a couple of weeks ago they were short over $40,000 to pay off their current mortgage. Once I run the calculation with these scenarios I then have the difficult call back to tell this senior that the reverse mortgage is not an option.

I often hear of 70 and 80 year olds who are taking out a 30 year conventional mortgage and then they have to work in order to make the mortgage payments. What happens when they can’t work and can’t make their mortgage payment?

I wish they would get the facts on reverse mortgages and get over their fear and do the reverse mortgage instead of a conventional mortgage in the first place. Instead of doing the conventional loan, if the reverse mortgage would have been done originally the senior would be in a different situation now – a much better one.

Lower home values and higher loan balances contribute to the issue. While the reverse mortgage rate is historically lower than conventional mortgages and the reverse mortgage has many benefits over conventional loans, there was a fear that made the senior take out a conventional mortgage instead of a reverse mortgage. Then “life happens” and we get the call and we often have to deliver the bad news, not enough reverse mortgages funds to pay off the currant mortgage.

Closing costs are comparable (See my Blog, “Reverse Mortgage Costs – High or Mythical’), interest rates historically lower, so in the big picture the reverse mortgage costs less. No monthly payments and options on how the funds can be received, the guarantee of funds and non-recourse features all make a reverse mortgage a better choice for seniors.

Even if one can qualify for a conventional loan today, when “life happens” (health, medical issues, can’t or don’t want to work any more, home repairs or modifications needed) and the monthly payment can’t be made, the seniors get into the balancing act of, “Do I make my mortgage payment or pay my other expenses.” and if they can’t or don’t make the payments they’ll be at risk of foreclosure. With the reverse mortgage this risk goes away because no monthly payments are required so they don’t have to worry about deciding between paying the mortgage or their other expenses.

Let’s look at one senior couple. Four years ago they took out a conventional loan for $25,000 to meet their immediate needs. Last year because they needed more funds they looked at a reverse mortgage. Based on their home value of $120,000 and their age they would qualify for $75,000 in reverse mortgage funds, closing costs of $9,000 and a lower interest than their current conventional loan or than what they would qualify for on a new conventional loan. (Remember to qualify for a conventional loan income, credit, assets and risks are taken into consideration to determine interest rate. The reverse mortgage interest rate is not affected by income, credit, or assets.)

Yes, the closing costs on the $25,000 conventional loan were lower than the reverse mortgage because the conventional bases the fees on the amount received, $25,000 in this case and the reverse mortgage bases the fees on the full home value – this is because over time they can be access the full home value or even more than the home value. In their situation the initial loan closing costs were $3,000 for the conventional loan.

With the reverse mortgage they would have had a lower interest rate, no monthly payment requirements and funds in a line of credit that would grow so more would be available for future needs. One can’t get these benefits with any other loan.

They decide against the reverse mortgage and to do a conventional loan for another $25,000 and pay closing costs of another $3,000.

Now let’s look their situation in another two years:

They initially accessed $25,000 with closing costs of $3,000
The 2^nd loan they accessed for another $25,000 with closing costs of another $3,000 totally $50,000 in funds received and $6,000 in closing costs.
Looking at their financial history, in another 2 years more than likely they will be contacting their bank for another loan. So at this point their situation would be (if they can even qualify) another $25,000 and another $3,000 in closing costs totally accessing $75,000 and a total of $9,000 in closing costs. This doesn’t include the interest rate expense that would be higher than on a reverse mortgage.

They would have been smarter if the reverse mortgage would have been done initially or at least at this point in time. Over time would have been able to access more than $75,000 including the growth rate, closing costs would have been the same and interest expense would have been less. In addition they would not have had to make payments, improving their cash flow through the years, the funds would be guaranteed for them, and the reverse mortgage is non-recourse so in the end they only pay what the home could be sold for without having to come up with the difference, or they get to keep any remaining equity if the home is sold for more than the loan balance. (On a conventional loan the borrower or the estate could be responsible for the difference if the loan balance is higher than what the home can be sold for.)

And a few years from now they may not qualify for a conventional loan so they would have paid the $6,000 in closing costs to receive $50,000 and have made payments through the years. Then when “life happens” and they can’t afford those payments, they could be facing foreclosure, and maybe not qualifying for a reverse mortgage. And if they do qualify for the reverse mortgage, they will then have to pay the closing costs adding the closing expense on top of what they have already paid. All in all, the reverse mortgage would have been less expense in the long run. View “Is Waiting To Do A Reverse Mortgage The Best Decision” for a comparison of funds now or in the future. It’s important to note that their banker thought that the reverse mortgage through us was a much better option for this couple.

Satisfied MN Reverse Mortgage Client

Marlene who initially did a conventional mortgage and then turned to us to do a reverse mortgage said when she did the conventional loan she didn’t understand the reverse mortgage and so was afraid to do it. At the reverse mortgage closing she said she wished she had done the reverse mortgage in the first place. She’s just glad that we were able to help with the reverse mortgage when we did.

In conclusion, when one is in their senior years the reverse mortgage is generally a better choice than a conventional mortgage, even if they do qualify for a conventional loan. If one does the reverse mortgage instead of a conventional loan their retirement years will be so much smoother, less stressful – they’ll have peace of mind along with security, independence, dignity, and control. And when at a future date they do decide to do a reverse mortgage we won’t have to deliver the bad news that there aren’t enough funds to pay off a current mortgage. They should have done the reverse mortgage in the first place.

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.

Changes With The Good Faith Estimate Leave Reverse Mortgage Borrowers Confused And At Risk

Posted on January 9, 2010 by Beth Paterson, CRMP

Reviewing Reverse Mortgage Fees

As we welcome in the new year we are also looking at many changes with reverse mortgages. The first of which is the New RESPA (Real Estate Settlement and Procedures Act) requirements. These include a new Good Faith Estimate (GFE) and HUD-1 (closing Settlement Statement). (Note, these RESPA changes apply to conventional loans also – so if you are looking are refinancing or purchasing you’ll want to be familiar with them too.) The intent is to make it easier for borrowers to compare fees between service providers, application and final HUD-1 Settlement Statement fees, and disclosure of yield spread premiums or lender paid fees.

With the new regulations a GFE will ONLY be provided with an actual application. It is no longer allowed for the informational or quote package to include a GFE. The borrowers are at risk because they may just want to receive estimates on the fees when they request a GFE, and not knowing the new regulations they will be signing an application and the broker/lender may start processing the loan even before they’ve made a final decision – especially the unethical originators and lenders. Besides the info needed for information purposes such as name, address, birth dates, home value/estimated home value, amount of balance of current loans, information that will trigger the application include the Social Security Number, monthly income and assets and other pertinent personal information. This information should NOT be provided until lender is chosen and ready to proceed with an application.

Included are now three fee categories on the GFE: those that cannot change, those that have a 10% tolerance, and those that can change without restrictions. There are areas of allowance for “Changed circumstances” which will include:

Fees that may change due to a difference in the appraised value include, i.e. origination fee, FHA Mortgage Insurance Premium, Title Insurance, MN Registration Tax, inspections, surveys, certifications, etc.
Required services not known prior to the application, such as but not limited to roof, foundation, engineering inspections or certifications, and surveys.
Recording fees for unknown liens, mortgages, loans, judgements, title changes such as deeds, trusts, death certificates, Power of Attorney, and release fees, etc.
Required services by providers chosen by borrower rather than the lender, such as title services and fees, title insurance, and notary fees
Other circumstances particular to the borrower of transaction, including the need for flood insurance or environmental problems
Acts of God, War, disaster or other emergency
Changing from one product to another.
Home Owners Insurance

A new GFE will need to be provided to the borrower within 3 days for these changes to be permitted at closing. It is the broker/lender’s responsibility to disclose and document the disclosure of the new GFE to the borrower(s). If not disclosed properly, the broker/lender will have to pay the difference, it cannot be charged to the borrower(s).

At the time of inquiry and for information purposes only, we, Prestige Mortgage/Reverse Mortgages SIDAC, will, as we have always done, be providing an explanation of closing costs.

While we have always provided accurate GFE’s (usually within only $100 difference between application and actual fees at closing) you can now expect all lenders to be providing the GFE fees to be the same as at closing.

Unfortunately in the process of trying to make sure all fees are disclosed to borrowers the new 3 page GFE (formerly 1-page) is more complicated and will be more confusing for borrowers. We will do our best to help borrowers understand the fees, changes, and forms.

Review a comparison of Minnesota Reverse Mortgage costs to conventional loan fees in the post, “Reverse Mortgage Costs – High or Mythical?”

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

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

One Bad Apple Spoils The Bushel of Reverse Mortgages

Posted on October 26, 2009 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Minnesota Reverse Mortgages SIDAC

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

Tag Archives: Mortgage Costs

Seventeen Facts About Reverse Mortgages You May Not Know.

Do You Understand The Reverse Mortgage Closing Costs?

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

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

You Need To Know Reverse Mortgage Borrowers Are Highly Protected!

The Misconceptions of Reverse Mortgages Abound… What Do You Know?

Irrational Statements Show Ignorance of Reverse Mortgages

A Reverse Mortgage Or A Conventional Mortgage For Senior Homeowners? That Is The Question.

Changes With The Good Faith Estimate Leave Reverse Mortgage Borrowers Confused And At Risk

One Bad Apple Spoils The Bushel of Reverse Mortgages