How Do We Determine If A Reverse Mortgage Is Not Right For Us?

Posted on February 19, 2011 by Beth Paterson, CRMP

“Do you have any info on how to tell if a reverse mortgage is not right for you?” is a question I recently received from Stan Cohen of www.MaturityMatters.net. He stated that one of the big issues he hears about is that seniors are afraid that a reverse mortgage may not be right for them. He also stated that he has heard seniors are afraid of outliving their money and being forced from their homes. Additionally he expressed the concerns of being hospital/nursing home bound for over a year and negating their contracts.

Following is my reply to help seniors and their families have a better understanding and overcome their fears of reverse mortgages.

There are a lot of misconceptions about reverse mortgages and I believe this puts the fear into the seniors and their families.

A reverse mortgage is a mortgage just like any mortgage but with special terms for seniors 62 and older. With a reverse mortgage there are no income or credit score qualifications and no monthly mortgage payments. Another difference from a conventional mortgage is the reverse mortgage loan is not due and payable until the home is no longer the primary residence of the borrower or on their 150th birthday.

One can go into the nursing home temporarily as long as the home remains their primary residence and they are returning to the home within a year.

Once a reverse mortgage is in place, even if they use all their funds from the reverse mortgage the borrowers can stay in their home. The advantage is they don’t have mortgage payments to make which takes away the risk of foreclosure from not making a monthly mortgage payment.

Just like a conventional mortgage, borrowers are responsible for keeping insurance on the property, paying property taxes and maintaining the home. As long as they abide by the terms of the loan they are not forced from their home.

Some of my blog posts may help you clarify the facts:

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

“Beware of Reverse Mortgage Misconceptions – The Fact is Reverse Mortgage Lenders Do NOT Own The Home!”

“Why Are You So Afraid of Reverse Mortgages?“

There isn’t a check list to say when one should or shouldn’t do a reverse mortgage or whether it’s right or not right for them. It’s very personal for everyone.

The first evaluation should be to determine if they qualify, i.e. they are old enough, the property qualifies, and they have enough equity to pay off any current mortgage(s).

Generally we say the reverse mortgage is not right for one who plans on moving in a short period of time. However I have seen where it has been a huge benefit to seniors and their families even when the home is sold in a short period of time after the closing. One needs to be educated on the pros and cons of the reverse mortgage for their situation and then decide if it will meet their needs.

One should work with a reverse mortgage originator who will take time to meet with the borrower and discuss their needs, goals, and situation and help them evaluate whether the reverse mortgage might benefit them or whether another option may better suit their situation. I’ve provided a checklist of questions to ask an originator in my blog article “Don’t Let Fear Keep You From A Reverse Mortgage… But Know What To Look For In A Lender.” On our Reverse Mortgages SIDAC website I have an updated version of this check list at http://rmsidac.com/WhattoConsiderWhenTalkingtoLenders.php.

Another article that may help is: “A Reverse Mortgage…Or? Other Options To Consider.”

I recommend you meet with a local originator rather than working with a lender from another state who just mails you an application package. You’ll receive more personalized service and information. We meet with our Minnesota seniors and usually spend two hours with them explaining the details of reverse mortgages and reviewing their situation along with the pros and cons. This is even before we do an application. The application is done in person, generally at their home, where we spend another hour and a half to two hours.

Do you go to a plumber if you are having health problems? No, you go to a doctor. And you don’t go to a generalist if you have cancer or heart disease, you go to the specialist. The same is true for a reverse mortgage, go to a reverse mortgage specialist/expert to get the facts and options for one’s situation then decide what will best fit your situation.

Hope this information helps you with your decision to explore a reverse mortgage to determine if it might be right for you.

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-p7

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…? Other Options To Consider

Posted on September 6, 2010 by Beth Paterson, CRMP

Seniors need money for a variety of reasons including home repairs or modifications, medical expenses, home care, long term care, taxes, insurance, cash for emergencies, covering mortgage payments, a reliable car, everyday living expenses and even just maintaining their lifestyle. There are always options to consider and they should be reviewed when making important decisions especially when they are big decisions such as doing a reverse mortgage.

Before looking at some of the other options let’s define a reverse mortgage. The most common reverse mortgage is the FHA insured Home Equity Conversion Mortgage or HECM offered through HUD. A jumbo or proprietary/private reverse mortgage may be available in some states (not available in Minnesota). A mortgage like a conventional mortgage, a reverse mortgage is a loan against one’s home using the equity now with the home as collateral, however, the reverse mortgage has special terms for those 62 and older. The amount loaned is based on the age of the borrower, the home value and an expected rate rather than on one’s credit score and income. The older one is the more funds they can receive. Just like a conventional mortgage, the homeowner remains on title – the bank does not own the home.

Proceeds from the reverse mortgage can be taken as monthly payments, line of credit, lump sum or a combination of these. Monthly mortgage payments aren’t required but the loan is due and payable when the home is no longer one’s primary residence. In the case of a joint tenants as long as one is still in the home as their primary residence the loan is not due until both have left the home as their primary residence. The due date on the mortgage is the 150th birth date of the youngest borrower.

Another benefit of the reverse mortgage is the fact that it is a non-recourse loan which means there is no personal liability to the borrower or their heirs as long as they are not retaining ownership. In other words if the loan balance due on one’s home is $250,000 but the home can only be sold for $200,000 the borrowers or their heirs are not required to come up with the difference of the $50,000 as long as they are selling the home and not keeping it in the family. The opposite also is also a benefit, if the home is sold for more than the loan balance, the borrower or the heirs receive the difference.

Social Security and Medicare are not affected and one can still receive Medicaid or Minnesota’s Medical Assistance as long as the loan proceeds are structured properly. Because the funds are considered loan proceeds, not income, generally the IRS does not consider the reverse mortgage proceeds as income for tax purposes. Additionally reverse mortgages are more highly protected than any other financial option available.

Now let’s look at some other options.

State and Community programs for special purposes such as home repairs. There may be some options for low or no interest loans or grants to help seniors or those with low-income have funds for home repairs. These are often forgiven if you are in the home for a period of time such as 10 years. This can be a great option if one only needs funds for repairs such as a new roof or repair a bathroom. Unfortunately the funds for these programs are not as readily available. Additionally we have found that seniors often have more needs than just home repairs such as they have credit card debt or their Social Security just isn’t enough for meeting their living expenses.
Property tax deferrals. If a senior is having difficulty paying their taxes they may qualify for a property tax deferral. This is a program that allows property taxes to be deferred or delayed until one sells their home. This can be a great option if paying taxes is the only issue. Again, seniors often have a need for more cash than just covering their taxes.
Liquidation of stocks, bonds, 401Ks, and/or other investments. If one has other investments this may be an option which would have no outside approval needed and possible minimal costs to access the funds although there may be penalties and/or tax consequences. Things to consider is there enough funds to meet the needs of cash? And is it better to keep those investments until when the value increases (opportunity costs). When liquidating other investments one may lose the additional financial security.
Sale of other assets, for example lake home, RV, boat, real estate property. This may provide extra cash although it may be difficult or time consuming to sell and may not provide enough funds for their needs. Additionally it may reduce one’s quality of life.
Loans from relatives. Loans from relatives can be an easy transaction to complete, cost effective, i.e. no or low interest and possibly no or low payments. Is there a relative who will loan the money? Will the loan be enough to meet one’s needs? What happens if the relative’s life changes, i.e. they have medical issues or lose their job and they need money for their own needs – will they require the senior repay the loan and how will this be done? How will this impact the senior at this point? What will it do to family relationships?
Relative becomes “bank” and provides loan using home as equity. As noted above, it could be an easy transaction, credit and income may not be considered, and it could be cost effective with a lower interest and low payments. The above questions and concerns should also be considered when doing this type of transaction. When doing this type of arrangement I would recommend setting up legal documents to reflect terms of the loan just as with a loan from a professional lender would do.
Sell home to relative or investor and lease or rent back. This can have the same advantages as I noted above. As pointed out above, I would recommend setting up legal documents to reflect terms of the loan just as with a loan from a professional lender would do. And again the same concerns that I pointed out above should be considered before entering this type of arrangement. If it is a lease back/rental situation what happens when the senior can’t make the payments? Will they be forced to leave their home? If the relative is doing the loan and their situation changes they may not be able pay the mortgage on the home they may need to sell the home or they could face foreclosure. This will be a difficult situation for all parties involved and hurt the family relationships. If the investor’s plans or goals change they may decide to or need to sell and then what happens to the senior?
Selling, moving and renting. This could provide one with access to all equity in the home with no restrictions on the use of the funds. If one is in a home too large to manage or it is no longer safe for them to be in the home and they can’t afford the home care, this may be the best option. Things to consider are the costs of selling, how disruptive will the selling and move be since seniors want to stay in their home with familiar surroundings. Where are they going to live and will the funds be enough to cover the living expenses now and in the future especially if they are renting. Will their quality of life be reduced if they want to stay in their neighborhood. Selling and receiving all funds in a lump sum could affect receiving government benefits such as Medical Assistance.
Moving in with children or other relatives. Selling and moving in with children or other relatives could provide extra cash as well as support or care by their loved ones. Things to consider would be if the children have space for their parent(s) to move in with them. Do the children have time to provide the extra care? Can they afford to give the extra support to their parents? What will it do to the family relationships? Seniors don’t want to rely on their children so how will this impact the senior?
Home sharing. Remember the TV show “The Golden Girls”? Setting up a home sharing situation could be an advantage to increase cash flow as it would reduce expenses by sharing costs. Another advantage could be having someone else around. If the senior is selling and moving in with someone else consider the costs of selling and moving, the disruption to their lifestyle, and living with someone else. If they are the one renting will they have enough funds to cover living expenses in the future. And how will it impact the receipt of government benefits?
Line of credit or Home Equity Line of Credit (HELOC). A line of credit at a bank will allow one to borrower only what is needed and the initial loan costs may be low. They will be able to access the cash as the needed it. At this time it may be difficult to qualify because of their fixed income and/or credit. They may not qualify for enough funds to meet their needs and even if they have what they need now, will they need an additional loan for future needs? If they do qualify for a bank line of credit they will have to make payments and defeat the purpose of improved cash flow. And if life changes they may not be able to make the payments.
Home Equity loan. This may be an option if one can qualify… to qualify one needs to meet the requirements of income, credit and ability to repay the loan which also determine the interest rate. One may borrow only what is needed, i.e. $30,000 and the loan origination fee is based on the actual amount of the loan. Historically the interest rate is higher than with a reverse mortgage. Being payments are required if life changes, one may not be able to make the payments and then may face foreclosure.

The reverse mortgage may be a bigger benefit to a senior than these options but before one makes the final decision, the negatives of the reverse mortgage should also be reviewed. Generally the negative is there will be less funds available for heirs or when the loan is being repaid because the loan balance is increasing as one is using the funds during the life of the loan and not making payments.

Another negative is the interest is not a deduction until it is paid generally at the time the loan is being paid off. Although payments can be made on the reverse mortgage and once the FHA Mortgage Insurance Premium is paid payments can be applied to the interest to receive a tax deduction on interest paid.

Closing costs are often perceived as high although they are comparable to a conventional mortgage. An explanation of the costs can be found at “Do You Understand The Reverse Mortgage Closing Costs?” and a comparison of the costs are at “Reverse Mortgage Closing Costs – High or Mythical?”

Does the reverse mortgage have more pros over the other options? Reverse mortgage borrowers who have evaluated their options feel the positives outweigh the negatives because they want to remain in their home, live comfortably, have some “elbow room,” and be independent with financial peace of mind without being burden on their children. Usually the children are doing fine on their own and want their parents to eliminate their financial worries and enjoy their life more fully.

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.

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-lL

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.

Using The Reverse Mortgage As A Tool To Strategically Manage One’s Assets

Posted on June 6, 2010 by Beth Paterson, CRMP

Dorothy closed on her Home Equity Conversion Mortgage (HECM) reverse mortgage in 2006. Now four years later during a presentation where she joined me at a Minnesota senior resource fair workshop , she shared how the reverse mortgage has been a tool to strategically manage her assets and the benefits she has received from her reverse mortgage. Here’s what she had to say.

“I have a single family residence and have lived there for many years and working and wasn’t looking too much to the future. I ‘knew’ Social Security was going to take care of me… my mother had gotten by on it and I figured I would too.

“I had worked part time as a travel escort and the travel bug had bitten me through the years. I retired at 65. While the career line I had allowed me to take extra vacation time to escort tours what it didn’t do was provide a pension. So I had no hospitalization or a pension when I retired. I didn’t face those facts right away. I had invested and purchased stocks over the years in modest amounts. I figured that would be my answer to any and everything. When I wanted to travel I just cashed in part of a stock and I took off and did some great fun things.

“However we know the stock market took a plunge a couple of times and what I had was back down to half or less than what I had built up. Also I was having to use this in addition to my Social Security income. Fortunately I was able to have paid off my mortgage by the time I retired so I didn’t have those payments. I thought it would be easy street.

“I had a house paid for and was able to get a line of credit from the bank. Anything I wanted to do I would I just borrow the money on the line of credit. After that climbed I would cash some stock in to pay the line of credit.

“Pretty soon I needed a car. I took out a loan on the car. Those payments got kind of high. Pretty soon I’m paying the line of credit and the car payment. And I was using up my stock portfolio. I was owing more to the bank than I had stock to pay off all this line of credit. The stock broker I was talking with said, you have your house paid for, the best thing I could do would be to get a reverse mortgage.

“Luckily I was able to meet up with Beth Paterson. We talked so I would understand the program. The man I had worked for was a very astute business man and had run a mortgage company. So I took the information to him and asked if there was anything that looked doubtful to him; is there anything that I don’t see or is this something I should do? He said, ‘It’s the best thing in the world for you. I can’t advise you to do anything better for you.’

“I have my reverse mortgage. I decided that as long as I was getting my Social Security and didn’t have to touch my stock, I wanted a reverse mortgage line of credit. I didn’t want a lump sum. My reverse mortgage line of credit would grow at nice increments – it was growing faster than my stock portfolio was growing. [The reverse mortgage line of credit grows at .5% more than the interest on the loan. For example if the interest on the loan is 2.5% the growth rate is 3% on funds left in the line of credit.]

“I also decided to take a minimal monthly payment. Now I’m going to get that payment until I’m 150. I’m going to be 83 this year and I’ve got my mind set that I’m going to live to 150 so that I can get that last dollar from HUD that I’m helping to pay into on this insurance program. [Note the due date listed on the reverse mortgage recorded at the county is the 150th birth date of the youngest borrower.]

“The reverse mortgage has given me a great feeling of security. Because if I want to take a trip I just send a fax in and request the amount of money I want. I don’t have to touch my stock. My line of credit is going up every month as long as there are funds there. It’s much better than CDs.

“I’ve done home repairs, this winter I had to replace my car and it turned out I couldn’t use my driveway so I’ve taken some funds to get my driveway repaired. My yard needed some attention that I had overlooked because I didn’t want to spend the money. So I’ve taken some funds for that too. I still have a nice sum in my line of credit and I haven’t had to use my stock.

“I watch the market go up and down and it’s not life and death like it had been before when I knew I just had that stock and when it was gone then what would I do.

“It’s worked wonders for me. I’ve been able to take trips with the money, repair my house, re-roof it, and do this and that. It’s given me ease of mind and it’s certainly helped my kids because at one point I think they thought they would have to help me financially and they weren’t looking forward to that. Now that worry is off their mind. So as long as I can, I will stay in my home, and that’s what I plan to do.”

This is one example of how a reverse mortgage has made a positive difference in the life of a senior and allowed her to strategically manage her assets during her retirement years.

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 Letter to Minnesota Governor Tim Pawlenty Regarding Reverse Mortgages

Posted on May 17, 2010 by Beth Paterson, CRMP

From the time I first heard about the proposed reverse mortgage legislation in 2009, SF489, I have been writing to and in contact with MN Governor Pawlenty’s office. This year even prior to having details of the bill I started contacting Governor Pawlenty’s office, sending emails regarding the suspected legislation. After Friday evening May 14, 2010 when I finally found the details of the bill SF2430 I again sent Governor Pawlenty a message requesting a veto this time outlining with the details of the issues of the bill. Following is the latest letter I sent to him requesting a veto.

Dear Governor Pawlenty,

After having time to review the reverse mortgage amendment to SF2430/HF2699 I want to provide the reasons why this reverse mortgage legislation should be vetoed.

Besides the facts I have pointed out previously:

This bill has not been transparent – the amendment was just added on the afternoon of May 14, 2010 with no prior knowledge of the details to those of us in the reverse mortgage industry.
This reverse mortgage legislation is controversial. Any reverse mortgage legislation should not happen without a full hearing.
While it appears they pulled the language of suitability, this bill still contains some of the same language as the 2009 SF489/HF528 which was vetoed last year which would mean increased costs to reveres mortgage borrowers and/or cause some lenders to refrain from offering reverse mortgages in Minnesota.

The main issues include:

1. Why should a lender receive a civil penalty an dhave to pay $1,000 for something a counselor does or doesn’t do? Who and how is this going to be overseen?

The language of this is subjective setting up an opportunity for litigation and lenders may decide not to lend in the state if there is a risk of civil penalty for something they have no control over.

Implementing state laws that are different than the HUD requirements will make it more difficult for prospective borrowers to receive counseling.
- Some of the counseling opportunities currently available to our Minnesota borrowers will no longer be an option as some of the counseling agencies may decide that with different regulations they will not provide counseling in the state.
Having the state oversee counseling different than the HUD requirements is likely to be costly for the state in seeing that these regulations are followed by counselors in the state as well as across the country.

2. Adding the language for Lender default and forfeiture may mean lenders will choose not to loan with this requirement and HUD may choose not to insure the loans with these requirements.

3. Seven-day cooling off period; right of rescission will mean the loans will be more expensive for seniors and without the opportunity to waive the provision under certain circumstances such as foreclosure may mean that seniors could lose their home because the reverse mortgage could not be done timely.

It appears they changed the 10-day rescission period language to a seven-day cooling off period but it would have the same negative consequences as the 10-day rescission period.
Language is vague and subjective, i.e. “written commitment to make the reverse mortgage loan. “ What does “written commitment” mean? This makes it more likely for litigation.

4. This law would be additional costs to the state. While the bill may not be showing as a having a budget expenditure, there would be additional costs to the state in overseeing that state laws are followed versus the difference from the federal regulations. If the loan becomes more expensive to seniors and/or lenders choose not to loan in the state more seniors are likely to lose their homes without the reverse mortgage option. Consequently the foreclosures would increase and more housing would be needed for seniors and much of this would be born as state expense.

5. All lenders do not have to abide by the state rules. Federal chartered banks do not have to abide by the state rules because they are federal chartered yet brokers and non-federal chartered banks and lenders would have to follow any state laws. This would be a monopolistic-like advantage for the FDIC banks over other lenders. This obviously does not foster fair competition between all lenders and small business.

6. Seniors can apply for and if they qualify can receive a conventional or home equity loan to refinance without all the regulations that are done with a reverse mortgage. Sometimes they may feel it is easier and less invasive to do so. Unfortunately many who have taken a conventional or home equity loan run into problems making the required monthly payments then inquire about a reverse mortgage. With the lower home values many times these seniors do not qualify for the reverse mortgage and then often face foreclosure and lose their homes. Or they may just use credit cards to finance their retirement expenses then run into problems when they can’t make the payments. There aren’t additional requirements for seniors to qualify for credit cards. And there aren’t additional requirements for seniors to take out a car loan. So why have such tight regulations on reverse mortgages when seniors can make other choices that could be more detrimental to them.

7. Implementing this legislation is insulting to our seniors who have worked hard all of their lives – they are not children, they have lots of experience and knowledge – some that we could and should learn from – so why are we treating them like children? They have the right to be educated on their options then decide what is right for their situation, not have legislators, counselors, or lenders make decisions for them.

Keep in mind that: A reverse mortgage is a mortgage just like any other loan but has special terms for seniors 62 and older. And besides the special terms to benefit them to qualify and improve their life the reverse mortgage borrowers are already highly protected (see attached article)! I would like to educate those making legislative decisions on the facts and terms of reverse mortgages then determine what legislation needs to be implemented for proprietary reverse mortgages.

Again, I ask that you veto the reverse mortgage legislation SF2430/HF2699 to protect Minnesota Seniors and the reverse mortgage businesses.

Thank you,

Beth Paterson
Executive Vice President
Prestige Mortgage LLC
Reverse Mortgages SIDAC
Security, Independence, Dignity and Control
The Experts Excelling In Service
Phone: 651-762-9648
Toll Free: 1-877-590-9648
Fax: 651-653-0878
Be sure to visit our website and
Blog for reverse mortgage facts and details:
www.RMSIDAC.com and
http://BethsReverseMortgageBlog.wordpress.com
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While Governor Pawlenty recognizes the issues as he stated in his 2009 veto letter, the unfortunate fact is that this legislation was not a stand alone bill but is attached to a foreclosure bill and without the line-item-veto authority may be signed into law. If this is the case it will be very unfortunate for Minnesota seniors as well as the reverse mortgage industry.

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.

The Impact Of A Reverse Mortgage On A Community Spouse

Posted on February 20, 2010 by Beth Paterson, CRMP

I want to provide the facts on a comment I received regarding a reverse mortgage for a couple where one is considered a community spouse, i.e. one living in the community and the other is not and receiving Medicaid assistance. This person stated that if a reverse mortgage was put in place for a couple to provide the money for the expenses where one needs more in home care than the spouse can give, then after the ill person passes away, the remaining “community spouse” would have no or little money AND no place to live.

In reality, the reverse mortgage is a great tool for keeping seniors in their homes and paying for home care whether a single person or as a couple. An additional benefit for them is the reverse mortgage is not considered income so the borrowers may still receive public benefits such as Medicaid or other county benefits in addition to the reverse mortgage. They can also receive VA benefits if they qualify. Depending on the circumstances, Medicaid could cover the home care costs, the reverse mortgage could be used for things not covered by Medicaid and for the needs of the community spouse, i.e. maintaining the home, paying taxes, insurance, auto expenses, groceries, etc.

With both names on title, when the ill person passes away the community spouse would still have a place to live as they can stay in the home because the loan is not due and payable until the home is no longer their primary residence or on the 150th birthday of the youngest borrower. This means they can still have a roof over their head without having to make monthly mortgage or rent payments.

In fact the reverse mortgage can provide funds for more care than selling and moving into senior housing. When one sells, the net proceeds would be used to pay rent in senior housing as well as for home care whereas when staying in ones’ home the expense is lower, there is no rent payment and they would have a roof over their head. One of my Blog articles, “Be Educated About Your Options of Care And Financing The Care,” compares the differences of costs of selling and moving to staying in the home with a reverse mortgage and receiving home care.

Let me share the story of my clients, Bob and Jean. Jean had some memory loss issues so she was in a memory care Assisted Living facility. At the recommendation of their Elder Law Attorney Bob decided to do the reverse mortgage to pay for Jean’s rent and care. Jean was living in a private pay facility so the reverse mortgage allowed her to remain in the same place and not have her rely on government funding. The reverse mortgage provided them the control and choice of where Jean would live. The reverse mortgage also freed up some cash flow for Bob as the community spouse since Jean’s care was no longer coming from his Social Security or pension.

Reverse Mortgage Benefits MN Community Spouse

When Jean passed away the reverse mortgage funds were no longer needed for her care so there was more funds were available for Bob’s use. When Bob needed some additional care assistance of his own the reverse mortgage funds were used for his home care needs. Bob was able to have funds and live in his home until his death several years after the reverse mortgage was originated. This couple received what everyone of us desires: their desired security (having a place to live), independence (not relying on others), dignity (they could make their own decisions), and control (deciding where they were to live).

Experienced reverse mortgage originators along with a team of an Elder Law Attorney, care manager, and home care agency who is familiar with reverse mortgages can to help determine what is right for a senior’s situation especially when they may need home care or the decision of when one may need a care center.

The reverse mortgage can be a lifesaver for seniors even as a community spouse. Through the years I’ve been fortunate to help many seniors in these circumstances providing them with security, independence, dignity, and control.

Review these additional articles for facts and how reverse mortgages have benefited 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.

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.

Reverse Mortgages Finance Home Care

Posted on November 3, 2009 by Beth Paterson, CRMP

Reverse Mortgage paid for grandma's home care

Reverse Mortgage pays for grandma’s home care

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

Last week I talked with a daughter who said that moving her dad to a nursing home would “kill him,” causing him to die faster than if he stayed in his home. I constantly hear, “You’re going to drag me out of here (home) in a wooden box.” “I want to go home, not to a nursing home,” is a common statement children hear from their parents after a hospital stay.” But the challenge is how to make this happen.

Are you trying to figure out how to keep a loved one at home and have the financing to meet their needs? Home care can provide the care and a reverse mortgage may be your financing solution. The reverse mortgage can help seniors stay in their home and receive the care they need whether it’s long term or short term, a couple hours or 24 hours of care. Just been released from the rehab center Margaret needed a home health care aide to assist her so she could remain in her home as she recuperated. The reverse mortgage allowed her to hire the home care agency of her choice.

Did you know for seniors 62 and older, by converting the equity of their home into cash with a reverse mortgage…

They own home, no one else does.
They can stay in Their home as long as it’s their primary residence (in the case of a couple as long as one is still in the home).
They won’t lose their home because of a reverse mortgage if they abide by the terms of the loan – they don’t have to make monthly payments.
Tax-free money is government insured and guaranteed to be there for them (consult your tax advisor).
There is no personal liability to them or their heirs when the loan is repaid as long as they or their heirs are not retaining ownership.
They or their heirs get to keep any remaining equity after the loan is paid off.
There are no out of pocket costs, income or credit score qualifications for the loan.

Consider this…

They can access more funds if their mortgage is currently paid off or has a low balance.
Their cash flow improves when their current mortgage or lien payment is eliminated.
They’ll have extra cash for whatever they need or want! For example:
- Paying for care at home
- Make home repairs or modifications
- Cover medical expenses
- Pay taxes or debts
- Cover everyday living expenses
- Strengthen personal and financial independence

Home care and a reverse mortgage can help fulfill a senior’s wish of staying in their home when some extra help is needed. Consider the desires of the senior, what are their wishes? What will make them comfortable and give them peace of mind? Don’t deny a senior based on your opinion of reverse mortgages. Don’t let reverse mortgage closing costs scare you, they compare to the costs of conventional loans but with a lot of additional benefits and protections. If they want to stay in their home, don’t tell them to sell, realize there are solutions right under their roof.

Know the facts about reverse mortgages and work with a lender who has knowledge and expertise in reverse mortgages – it can make a difference for your satisfaction and making your life easier. I’m proud to have received this statement from Liz whose grandma I assisted with a reverse mortgage: “We make phone inquiries to 7 different reverse mortgage companies. Beth at Reverse Mortgages SIDAC had the best combination of resources, years in the field, step-by-step explanation of the process, investigating and appraising us of the options, comprehensive written materials sent promptly, advanced sills in communication with us and grandma, and high degree of emotional sensitivity. We were under pressure to have the funds to pay for grandma’s care, so their skillful management of the process proved to be critical. We appreciate Reverse Mortgages SIDAC and would recommend them without reservation.”

Additional suggested reading: Be Educated About Your Options of Care and Financing The Care

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: Negatives of Reverse Mortgages

Reverse Mortgage Borrowers’ Responsibilities… or Consequences

A Letter to Minnesota Governor Tim Pawlenty Regarding Reverse Mortgages

The Impact Of A Reverse Mortgage On A Community Spouse

Irrational Statements Show Ignorance of Reverse Mortgages

Reverse Mortgages Finance Home Care