What To Consider When Choosing Your Reverse Mortgage Originator

Posted on September 16, 2012 by sidac

When you have decided to explore or to proceed with a reverse mortgage you want to make sure you are working with an originator you are comfortable and has the knowledge and experience to guide you through the process. Originating the reverse mortgage takes patience, kindness, a “social worker” attitude and a teacher aptitude versus a sales approach. There is a difference in originators with their expertise, knowledge and experience with reverse mortgages along with the customer service they provide.

To help ensure that you are working with an originator (also referred to as Loan Officer/Reverse Mortgage Specialist, Reverse Mortgage Advisor or Reverse Mortgage Consultant) who is experienced, knowledgeable and meets the industry’s standards, consider the following when choosing your reverse mortgage originator. Yes, the list is long but knowing the answers to this list of questions will help support and protect you.

How much experience does the Reverse Mortgage Originator have with reverse mortgages – not just conventional mortgages as they are quite different?
- Work with experienced reverse mortgage originators who specialize in reverse mortgages. Ask how many years they have been originating and if/what training they have received.

How many reverse mortgage loans has the Reverse Mortgage Originator done?
- Experienced loan officers have originated hundreds of reverse mortgage loans. Ask how many they have originated, not just their company or lender, but them personally.

Does the mortgage company and Reverse Mortgage Originator have the required federal and state licensing?
- Mortgage Brokers/Originators have completed federal and state education, testing and licensing requirements. FDIC Banks and Credit Unions are registered but have not completed the education, testing and licensing requirements.
- Ask your originator to provide documentation that they personally are licensed and/or look them up at the National Mortgage Licensing System – if the person you are talking with is not listed they are not licensed to originate loans.
  - Make sure they are licensed in the state you are located. In Minnesota all individual mortgage loan officers (performing marketing, educating, originating functions) have to be licensed. This includes completing the application – the originator should be guiding you through the application and explaining the documents you are signing, not just having a notary at the application as they are not approved to provide you information or explanations on the documents you are signing.

Who is the mortgage company’s lender sponsor?
- Originating mortgage broker companies (Third Party Originators) have to be sponsored by a Reverse Mortgage Lender who is FHA licensed.
Do they offer all reverse mortgage programs available for FHA’s HECM and when available, proprietary (private)?
- Experienced originators should offer and be familiar with all the various programs available.
If you are in a manufactured home, log home or unique property, do they work with a lender who will accept these properties?
- Many lenders no longer accept these properties but some do and as a broker, we, Reverse Mortgages SIDAC work with lenders who do accept these properties.

Do they assist you in determining which program is most suitable for your needs?
- Experienced originators should discuss the various programs and help you to assess the program most suitable for your needs. Originators should be showing you at least 3 if not 4 options. Is the adjustable rate program better than the fixed rate program for your situation. Are they discussing how you may be able reduce the upfront Mortgage Insurance Premium (MIP)?

Do they just try to “sell” the program to you or do they help you determine if the program is appropriate for your situation?
- An originator should not pressure you or sell you a particular program, they should discuss the various programs and options and have YOUR best interests at heart, i.e. is an adjustable rate better than a fixed rate for your situation.

Will they meet with you face-to-face for an information session and the application? Or do they just mail you the application package or send a notary to the application?
- Because of the complexities of the program, originators should meet with you face-to-face to complete the application package. These sessions normally take around 2 hours to review all the documentation and insure you understand what you are signing. Don’t sign a package that is mailed to you or one where a notary is observing your signature – find an experienced originator who is local/in your state to work with you.

Do they disclose ALL information and identify ALL costs, explaining the program(s) and details and terms accurately and clearly so you understand them?
- Originators should be willing to disclose and discuss all information regarding reverse mortgages in terms and a way so you understand them. They should welcome your questions and be able to answer them to help ensure you have an understanding.

Do they know what costs are not allowed by FHA?
- HUD regulates the fees and a mark-up of fees are not allowed – you should only be paying the actual cost of the service. Your originator should know which fees are allowed by HUD and which aren’t. They should fight for you if a title company is charging processing or “junk” fees. (Many charge processing fees without the lender or originator addressing it with their title company.) The cost of the settlement statement should reflect this actual amount.

Where are their loans processed?
- Your loan should be processed in an office where they can provide a personal touch vs sending them across the country to a processing center.

How fast do they process their reverse mortgage loans?
- Because the rates can change so quickly, processing (application to closing) should be able to be completed in 30 to 45 days under normal circumstances. If additional documents are needed from you and you don’t provide them, the processing could take longer.

Who does the processing of the reverse mortgage loans? Does the processor have experience processing reverse mortgages, not just conventional mortgages? How much experience does the Reverse Mortgage Originator have with processing and solving the issues that arise during processing?
- Because reverse mortgages are different than forward mortgages, the processor should have experience with reverse mortgages. Originators should also have an understanding of the processing and assist in solving any issues that arise during the processing – they should not just be focused on getting the sale and then moving on.

What type of customer service do they provide? Do they have testimonials and/or references?
- Experienced originators should pride themselves on their customer service and be able to provide testimonials and references from their reverse mortgage clients – ask for them.

Will they (the Reverse Mortgage Originator) answer questions and continue to provide customer service once the loan is closed?
- Originator’s customer service should include being available even after the loan is closed. If they don’t have a lot of experience and/or they move from one lender to another you may not get your future questions answered.

Does the Reverse Mortgage Originator have the knowledge and experience on how the reverse mortgage and other Minnesota programs interact? Programs such as Medical Assistance/Medicaid, Elder Waiver, home improvement loans from cities and counties.
- Originators should be familiar with how the reverse mortgage interacts with other programs. If they don’t find a different originator to originate your loan. You may not need this now, but you may in the future and need assistance with this.

Does the Reverse Mortgage Originator have the knowledge and experience with the requirements of the reverse mortgage if there is a power of attorney, guardian or conservator, a bankruptcy, Trust or Life Estate?
- Originators should have knowledge of what the requirements are or you may start your loan but it may not make it through underwriting or be insured by HUD if your loan doesn’t meet their requirements.

Do they or the companies work with (mortgage company, lender, underwriter, servicer, etc.) offer financial or insurance products in addition to the reverse mortgage? Are they trying to cross-sell (selling more than one product) during the origination of your reverse mortgage? Will you be contacted and offered other services such as financial or insurance products by them or the companies they work with after the loan is closed?
- Cross-selling is not allowed. Originators should only specialize in reverse mortgages and not sell or encourage you to purchase other products. You are not required to purchase annuities, insurance or financial products with your reverse mortgage proceeds.

Are you treated with respect and dignity?
- You, of course should be treated with respect and dignity. If you feel you are not, find a different originator.

Do they protect your privacy and confidentiality and not distribute personal financial information to any third party without permission from you?
- To protect against identity theft you want to be assured that your information is private and kept confidential. Ask what their policies and procedures are.

Do they encourage you to discuss the loan transaction with family and/or trusted advisors?
- Originators should encourage you and welcome talking with your family and/or trusted advisors about your decision to do the reverse mortgage. But respect you if you chose otherwise.

When completing the application do they leave you copies of what you have signed and copies of the sample closing documents?
- At the time of application or within three days, originators are required to leave you copies of what you signed including the calculations and Good Faith Estimate, booklets, and samples of the closing documents. If you do not receive these, request them, if you have problems receiving them, change to a different originator.

Do they provide a list of FHA counselors without steering you to a particular one?
- HUD does not allow an originator to steer or be involved in your choosing or receiving counseling. Minnesota law requires borrowers be counseled by a counselor located in Minnesota, they cannot choose any of the national counselor.
Are they familiar with the Minnesota state laws (or whichever state they are originating in)?
- If an originator is originating in your state they should be familiar with the state’s laws, i.e. Minnesota has some particular laws that pertain to reverse mortgages – all originators are, unfortunately, not familiar with them.

Be cautious that you do not complete an application or give the originator the counseling certificate until you have made your final decision of the originator you are choosing. Once an originator or lender has the counseling certificate they can obtain a FHA number and lock you into using them when they might not be your choice of originator or lender.

Be educated on reverse mortgages and work with an originator and lender who is experienced, knowledgeable, meets the industry’s requirements and fulfills the above list of expectations.

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-YR

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 Don’t Need To Have A Mortgage To Do A Reverse Mortgage

Posted on September 9, 2012 by sidac

A reverse mortgage is often used to pay off a mortgage which improves the homeowner’s cash flow by eliminating their mortgage payments. But you don’t have to have a mortgage to “reverse the mortgage.”

My borrower, Marjorie didn’t have a mortgage on her home but did a reverse mortgage to be prepared for future needs. She used some of the initial funds to purchase hearing aides and left the rest in a line of credit. She was happy with her decision to do her reverse mortgage because she now has security knowing she has funds available for her needs, independence to live on her own without relying on her family for financial support, she’s maintained her dignity of being able to pay her own bills, and continues having control of her life and the ability to make her own choices. She recently took some funds from her line of credit to make a trip from Minnesota to California to visit her daughter who lives there – she wouldn’t have been able to do this without having her reverse mortgage.

A reverse mortgage is a mortgage with special terms for seniors 62 and older that provides them cash for whatever they need or want. Monthly mortgage payments are not required and income or credit scores are not considered to qualify. The funds can be received in a monthly payment, paid to you, a line of credit with a growth rate, a lump sum or a combination of these. The loan is due when the home is no longer the primary residence of the borrower(s) or on the 150th birthday of the youngest borrower. The borrower is still responsible for paying taxes, insurance and maintaining the property.

A reverse mortgage doesn’t mean you are reversing a current mortgage, it means that rather than having to make payments on a mortgage, funds can be available to you without monthly mortgage payments.

The amount loaned is based on the appraised value (determined by a FHA licensed appraiser) or FHA Lending Limit, whichever is lower, the age of the borrower, the expected interest rate and the program chosen. Any liens or mortgages need to be paid prior to determining the amount available in a line of credit, monthly payments or lump sum.

When there are no current liens or mortgages on a property, more accessible funds are available for borrowers.

As an example, with a $200,000 home value for a 75 year old person and the current interest rate on an adjustable loan (the program that offers the monthly payment, line of credit option, lump sum or combination option; the fixed rate requires all funds be drawn in a lump sum), the amount available after closing costs is $128,805.

The $128,805 can be left in a line of credit or taken in monthly tenure payments of $767, this means you are paid this amount each month as long as you are living in the home as your primary residence.

If there is a current lien or mortgage that needs to be paid, say in the amount of $50,000, the amount available after paying for the current lien or mortgage and the closing costs is $78,804 which can be left in a line of credit or $469 received in monthly tenure payments.

Either situation can provide security, independence, dignity and control for borrowers but with no current mortgage to be paid off, more accessible funds are available. The funds can be used for whatever the borrower needs or wants, such as enhancing one’s retirement, home modifications or repairs, medical expenses, home care, or even just giving that extra elbow room.

Some pertinent facts about reverse mortgages:

You own the home, no one else does.
You won’t lose your home because of a reverse mortgage – you don’t have to make monthly mortgage payments. If you don’t pay property taxes, insurance, maintain the home or abide by other terms of the loan, the loan may be called due and payable.
Tax-free money – consult tax advisor but make sure they know the facts about reverse mortgages
The most common reverse mortgage, HUD’s Home Equity Conversion Mortgage or HECM, and only one available in Minnesota, is government insured and funds are guaranteed to be there for you.
You or your heirs get to keep any remaining equity after the loan balance is paid off.
There is no personal liability to you or your estate when repaying the loan and the loan balance is higher than what the home can be sold for.
There are no out of pocket costs other than the cost of the appraisal.
Closing costs typically become part of the loan balance. Closing costs compare to those on a conventional or “forward” mortgage – the difference is the FHA Mortgage Insurance Premium.
A credit report is pulled to check for any federal liens or debts that would be required to be paid.
You can’t access 100% of your home value at the time of your closing – the amount available is based on your age, your home value or FHA lending limit (currently $625,500), an Expected Interest Rate and the program chosen.
The funds may be received in a line of credit, lump sum, monthly payments or a combination of these.
- Line of credit grows based on the current interest rate plus 1.25%
- Monthly payments may be received as tenure payments (for life as long as the home is your primary residence) or structured to fit your needs.
Historically the interest rate is lower than conventional loans.

Just because you don’t have a current mortgage doesn’t mean a reverse mortgage wouldn’t be beneficial to you. Consider having security knowing you have funds available during your retirement years with the benefit of improved financial health just like Marjorie did.

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-YQ

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.

Be Cautious on Reverse Mortgages… And From Whom You Are Getting Your Reverse Mortgage Information

Posted on August 26, 2012 by sidac

Cautious is defined as showing or using caution; a warning or having alertness or taking care in a situation. Therefore I feel you should be cautious of the food you are putting in your mouth, the medications you are taking, the safety of the products you purchase, the credit card you are applying for, how you are spending your money, answering the door when you weren’t expecting anyone, purchasing services from the person going door-to-door, the car you are purchasing, the home you are buying. Should you be cautious of reverse mortgages? Of course you should be cautious of reverse mortgages. But you also need to be cautious of who you are getting your reverse mortgage information.

State Attorney Generals, politicians and other government agencies are issuing cautions on reverse mortgages. Some of their advice is good, unfortunately, with many of these “warnings” the information is not accurate. Their advice that one should get information and have an understanding the product and it’s pros and cons is good advice… just as you should for any product or service. Unfortunately one government agency, the Consumer Financial Protections Bureau (CFBP) didn’t even talk with borrowers to write their report, therefore their report is not based on actual circumstances and discredits the quality of their information.

Senior advocacy groups also offer their cautions on reverse mortgages without having facts or experience with these unique products. Their opinions include that reverse mortgages should be used as a last resort; should only be for older seniors; are for the cash poor, not for those planning for long-term care. In my years of specializing in reverse mortgages (since 1999) I have found that these are misguided cautions. Everyone’s situation is different, so assumptions should not be made and generalized for all situations.

The reverse mortgage should not necessarily be a last resort; can benefit those 62 as well as those 82 or 92; those needing a better cash flow because their home is their only asset or those who want to protect some of their assets for their long-term care planning purposes. Rather than being an advocate, cautions of these sorts are really a disservice because they scare people rather than encourage them to get the facts and allow seniors to make their own decisions.

On a news talk show recently they were discussing reverse mortgages with a financial advisor who was being portrayed as a reverse mortgage expert. As I listened to the interview I was astounded by the inaccurate information provided by this so-called “expert.” Being financial advisors are not allowed to offer reverse mortgages, they are not the reverse mortgage specialists or the experts so they don’t have all the facts. They have their areas of specialties, as reverse mortgage specialists, we have ours. At the end of this interview an 800 number was provided with the statement that this was the HUD number to be call to get more information. I didn’t get the number written down so I don’t know whether this was a number to HUD or not. What really made my jaw drop was the interviewer’s statement that one shouldn’t need to call the number because they just heard all the “facts” from “Mr. Financial Advisor.” Unfortunately if they listened to those “facts” they would be very misled and not really understand the reverse mortgage or have the truths about them.

The FHA insured, HUD reverse mortgage, the Home Equity Conversion Mortgage or HECM, is the most common reverse mortgage in the country and the only one available in Minnesota. One can obtain reverse mortgage information from HUD. Note all those who offer reverse mortgages are not included on the FHA list of lenders. In January 2011, HUD issued a Final Rule eliminating their approval process of loan correspondents or brokers although brokers can still participate through a sponsorship from a FHA approved sponsor. For example, we, Reverse Mortgages SIDAC, are a broker, with a FHA licensed sponsor and meeting the federal and state licensing requirements through the National Mortgage Licensing System (NMLS), NMLS #173899.

While not on the FHA list, brokers offer many benefits including working with many different lenders, are local, often meeting with you face-to-face in your home. Review the difference on my post, “Are You Confused on Whether to Use A Reverse Mortgage Broker, Bank or Lender.”

So yes, take precautions with reverse mortgages, as you should with everything. But also take precautions on who or where your information is coming from.

Do you go to a plumber, politician or the media if you have health issues? No you go to the doctor, and you go to the doctor who specializes in your specific condition. The same is true with reverse mortgages, go to the person who specializes in reverse mortgages.

Get the facts from someone who specializes in them, has years of experience and only offers reverse mortgages (not other mortgages), one who works with various lenders, is local in your state not a “call-center” where they only talk with you over the phone. A financial advisor can be part of the team to help you analyze your overall financial situation.

Keep in mind, the decision is yours on whether or not the reverse mortgage is right for your situation. It’s not up to the Attorney Generals, politicians, seniors advocates, media, reverse mortgage counselor or originator/loan officer.

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 Can Really Be Compared To Your Smart Phone

Posted on August 8, 2012 by sidac

I recently upgraded my phone to a “smart phone.” There’s lots more features than my old cell phone, lots of “bells and whistles” as they say. In fact the phone is so smart I’ve had to take classes and talk to the phone representative to learn now to use it and I still don’t understand all of the features. So how does this compare to a reverse mortgage?

It’s often said that a reverse mortgage is complex and complicated which has a scare factor for some people, including by the Consumer Financial Protections Bureau (CFBP) who claims they are complex and consequently needs additional protections to prevent seniors from making unwise decisions.

At a recent meeting I asked how many understand their conventional mortgage and can explain the terms. The response was laughs of embarrassment and shaking of heads, and comments that they can’t explain much more than there is interest and they have to make payments and when they are due. They don’t understand how the interest rate or payment amount is calculated, generally don’t look at the fees or understand what they cover, the risks the lenders and/or investors take, etc.

Do you know how the interest rate and payment was determined on your mortgage? Do you know what the fees were on your conventional mortgage? When I’ve shared the Explanation of Closing Costs with borrowers, I’ve been told, “We’ve purchased many homes and no one has explained the fees like this so we understand them.”

The same when purchasing a car and getting financing, one looks at the features of the car but doesn’t necessarily pay attention to the terms of the loan to purchase the car they desire other than the interest and payment and when it’s due.

Yes, the reverse mortgage is “different” than what one usually thinks of for a mortgage. Based on the FHA insured Home Equity Conversion Mortgage (HECM), the most popular reverse mortgage and only one available in Minnesota, the differences include:

the interest rate is not determined by one’s income, assets or credit scores
there are no monthly mortgage payments required,
the loan is not due until the borrowers are no longer living in their home as their primary residence or on their 150th birthday and they are non-recourse
there are many protections including counseling by an independent third-party HUD trained and approved counselor

Like with your smart phone where you’ve had to read, study and get educated on the features and terms to enjoy the benefits, once one does some studying, gets the facts and details from a knowledgeable and experienced reverse mortgage specialist, and goes through the required counseling, one finds that the reverse mortgage isn’t that complicated and there are many benefits.

As with any purchase, a smart phone, a car, a mortgage, a credit card, even an appliance, one needs to be educated on what they are obtaining. With knowledge one can make educated decisions for their situation and enjoy the benefits of the product without the fear that they are making an unwise decision.

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 Provide Independence

Posted on July 4, 2012 by sidac

July 4^th we celebrate Independence Day in America honoring the day our country signed the Declaration of Independence. Signing the reverse mortgage documents is a way for seniors 62 and older to sign their own declaration of independence.

Independence is defined as “freedom from the control, influence, support, aid, or the like, of others.” This fits senior’s attitudes, they want to maintain control of their life, make their own decisions and not depend on others for assistance. They may be short funds for maintaining their lifestyle and sometimes they will eat cat or dog food because it is cheap and they do not want to rely on their children. Yet I’ll hear, “I want to leave my house as an inheritance to my children.”

Let me share a story of one of my clients, I’ll call them Ted and Anna. He was 91, she was 87. Being proud, they didn’t want to discuss their financial situation. However, their son-in-law finally talked to them about doing a reverse mortgage. When I met them and we started the reverse mortgage process, the children and I were told they were doing the reverse mortgage so they could put new linoleum on their kitchen floor. Once the loan was closed I was informed by their children that they had indeed put in the new linoleum along with new windows and they bought some new furniture. The kids were going to Ted and Anna’s and were told, “Don’t pull in the drive way, we just had it blacktopped.” When Ted and Anna went out to eat with their kids, they could pay for their kid’s meals too making them feel good that they could treat their children to a meal. Then one day the mother and daughter were sitting at the kitchen table and mom shared that before their reverse mortgage they used to go 3 days at the end of month without food or even milk because they would run out of money from their Social Security. As they were sitting there and looking at the paper, mom exclaimed, “Look, Depends are on sale, I can now stock up.”

While Ted and Anna were too proud to let their children know their financial situation and they didn’t want to depend on them to assist with their living expenses, once they signed the reverse mortgage documents they kept their independence and had funds for their needs and desires. This also improved their dignity.

Unfortunately while not wanting to rely on their children and wanting to leave their home as an inheritance to their children, seniors are doing without. This isn’t what their kids want – they don’t want their parents doing without so they can have an inheritance. Kids actually want their parents to have funds to remain independent.

Then we have the kids who are taking care of their parents by paying for groceries, meals when they go out, paying their bills, taking time from their busy schedules to clean their house, provide home care, and helping meet their other needs. This can have a negative impact on these kids’ finances. Yet their parents don’t want to use the equity in their home and do a reverse mortgage now just so they can leave an inheritance for these kids. In essence the kids are using their funds to take care of their parents now in exchange for an inheritance after their parents are gone.

Neither one of these scenarios make sense. Why be insistent on leaving an inheritance to the kids while you’re doing without now? Why depend on your kids and use their money to take care of you today so you can leave them an inheritance? They want you to have your independence now and they aren’t looking for the inheritance when you need to funds now. Actually the best inheritance you can leave your children would be to take care of yourself so they don’t have to worry about you.

Improve your cash flow during your retirement – sign your own Declaration of Independence with a reverse mortgage – then celebrate your independence.

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.

Are “Hefty Fees” Really A Drawback of the Reverse Mortgage?

Posted on May 6, 2012 by Beth Paterson, CRMP

An all too common statement is that a drawback of the reverse mortgage is the hefty or high up front fees. But are they really hefty? Are the fees really a drawback?

First, have you looked at the fees to obtain a conventional mortgage? Do you realize the reverse mortgage fees compare to a conventional mortgage with the FHA Mortgage Insurance Premium being the difference? I’ve done side-by-side comparisons.

These comparisons reflect the third-party fees, including the appraisal, credit report, flood certificate, title fees, recording fees, Minnesota Mortgage Registration Tax, etc. are almost identical. Actually because HUD regulates the fees, mark-up and junk fees or processing fees aren’t allowed so the third-party fees may even be a little less than a conventional mortgage.

Another fee associated with both the reverse mortgage and a conventional mortgage is the origination fee, the fee that covers the lender’s time and costs associated with originating the loan including: loan officer’s and staff’s salary, licensing, administrative costs, business overhead (computers, electricity, health insurance, marketing, processing, underwriting,) etc. The underwriting fees are generally additional fees on conventional loans but have to be included in the origination fee on FHA reverse mortgages loans.

On a conventional mortgage one can “buy” a lower interest by paying a higher origination fee or a lower interest rate with a higher origination fee. The reverse mortgage is similar however the rate versus paying an origination fee or not is determined by the product (fixed or adjustable rate) and what the lender sets as allowable. For example, with the fixed rate one may have zero origination fee but the interest is a set amount determined by the lender or there may be a lower interest rate but the FHA allowable origination fee is included. (2% of the first $200,000, 1% on thereafter, with a cap of $6,000). Again the fee is comparable between a reverse mortgage and a conventional mortgage.

The fee that really makes the difference from a conventional mortgage is the FHA Mortgage Insurance Premium (MIP). The most common reverse mortgage, and only one available in Minnesota, is the HUD Home Equity Conversion Mortgage or HECM. With the Standard Reverse Mortgage the up-front MIP is 2% of the home value. (The MIP on a forward FHA loan is currently 1.75%.)

The many benefits of paying the FHA MIP on the reverse mortgage include:

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; FHA makes up the difference if the loan balance is higher than what the home can be sold for.
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.”

One must understand that the reverse mortgage is an open-ended term loan (the due date on the mortgage is the youngest borrower’s 150th birthday*) with no limit to how high the balance can grow and the collateral is only limited to the property (a non-recourse loan with no personal liability to the borrower or the heirs). With FHA’s generous allowance of proceeds, not based on income, assets, or credit scores, some reverse mortgages will end up with loan balances higher than the value of the home either due to the current declining home values or the nature of the loan with no monthly payments being made and accrued interest and on-going FHA MIP (essentially one is borrowing these fees each month). Therefore the MIP and other closing costs are necessary to make the program viable and are not a drawback to the reverse mortgage.

When comparing the costs of a conventional mortgage to the HECM Saver program which reduces the upfront MIP to .01%, the fees are essentially the same. However, in exchange for the reduced upfront MIP, reverse mortgage borrowers receive fewer funds and the interest rate is higher.

It’s important to note that the fees become part of the reverse mortgage loan balance – there are no out-of-pocket fees other than the cost of the appraisal. So borrowers are not required to come up with the money to cover the fees before they do a reverse mortgage.

If one thinks about it selling one’s home could also be considered expensive with similar fees to the reverse mortgage (the generally higher real estate agent’s commission and again the FHA MIP is the difference). Are the real estate commission and closing fees a drawback to selling one’s home?

Besides looking at the costs of a conventional loan or selling one’s home, how expensive are credit cards? While they don’t have up front costs, the interest on credit cards can be outrageous which over time this can make the credit card expensive. We often find seniors have high credit card debt because that is what they are using to finance their living expenses. The cost of credit cards don’t seem to be a drawback, people still get and use credit cards.

If a senior can’t afford to make mortgage payments, if they need funds for repairs, for home care or medical expenses, for daily living expenses, for the extra elbow room, funds to make that trip for a family reunion or wedding, or even to be able to check something off their bucket list, the benefits may outweigh the costs. The security, independence, dignity and control and peace of mind received from the reverse mortgage may outweigh the costs.

Do you not refinance or purchase a home because the of the fees on a conventional loan? And what about the costs of surgery? Would you not have surgery if it would improve or save your life just because of the fees? The cost of food is going up but do you do without food because of the costs? Not if the benefits outweigh the costs, right? Well, if the benefits of the reverse mortgage outweigh the costs, then the fees are not a drawback of the reverse mortgage.

*The reverse mortgage is due and payable when the home is no longer the primary residence of the borrower(s), i.e. when they sell, move, die. The due date on the reverse mortgage is the 150th birthday of the youngest borrower rather than a 15 or 30 year term on 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.

Seniors Find Hope and Opportunity With Reverse Mortgages

Posted on April 8, 2012 by Beth Paterson, CRMP

It’s the season of hope and new growth and opportunity. Flowers are blooming, trees are budding, the grass is growing. As with the season, seniors can find this hope, new growth and have new opportunities that they can remain in their home with security, independence, dignity and control. And like the many types of flowers, buds and new growth, the variety of how the reverse mortgage funds are used and numerous, basically endless. Here are some of the ways seniors have found hope and opportunity with their reverse mortgage.

Stay in one’s home where they may have raised their family, are familiar with the neighborhood and their neighbors and where they usually want to remain.
Pay off a current mortgage to eliminate the monthly mortgage payments.
Save one’s home when faced with foreclosure or tax forfeiture.
Have improved cash flow with no monthly mortgage payments.
Have funds for making home improvements or home modifications.
Retire and not feeling like you have to work just to have money to pay the bills.
Have cash flow to be able to pay taxes.
Have funds to pay for home health care.
Have funds for some assistance with home care or companion services.
Have funds for adult day services.
Have funds for medical expenses and prescriptions.
Afford going to the dentist.
Afford new eye glasses.
Have funds for the needed hearing aid.
Have funds to cover long term care expenses.
Cover everyday living expenses.
Not rely on credit cards.
Not rely on children.
Have funds for the little extras in life, like:
- getting one’s hair done,
- having cable TV,
- buying groceries,
- going to lunch with friends,
- treating their children to dinner,
- going to community plays or the theater or a concert,
- taking the grandchildren to the zoo or a movie,
- Depends (I had a client say with their reverse mortgage they could now afford to buy Depends),
- being able to do hobbies.

Purchase a more dependable car
Afford transportation if one can no longer drive.
Afford the travel for the family wedding or reunion.
Take the vacation they have dreamed of all their life.
Protect some of their other retirement funds or investments where there might be taxes or penalties on withdrawals.
Purchase a new home to downsize and/or move closer to family
Have funds for emergencies.
Reduce financial stress.
Have funds to full fill needs and goals.
To live with security, independence, dignity and control.

It’s fulfilling to me to be able to help seniors find hope, growth, and opportunity with reverse mortgage (visit the links below for some stories). A reverse mortgage has given hope and opportunity to thousands of Minnesota seniors so they can remain in their home with security, independence, dignity and control even during trying times. If you know a senior who is looking for hope and opportunity, a reverse mortgage may be their answer.

To determine if a reverse mortgage is right for one’s situation, talk with an experienced licensed reverse mortgage expert to get the facts. Learn some of the facts at our website: www.RMSIDAC.com. “What to Consider When Talking With Reverse Mortgage Lenders” will help you determine questions to ask when choosing your originator.

Related articles of stories on how seniors have used the reverse mortgage and how it’s made a difference in their lives:

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 People So Resistant to Reverse Mortgages?

Posted on February 17, 2012 by Beth Paterson, CRMP

I was at a resource provider network meeting the other morning when a Minnesota County government agency talked about their financial and foreclosure counseling services. When I mentioned they should keep in mind that a reverse mortgage should be considered for homeowners over 62 the response was resistance. Here’s how the conversation went.

Me: “Keep in mind that a reverse mortgage may be an option for your clients who are homeowners 62 and over.”

Agency: “Our clients don’t qualify for a reverse mortgage.”

Me: “Why do you say that? Are they homeowners 62 and over?”

Agency with hesitancy: “Some, but not many.”

Me: “Well for those 62 and over a reverse mortgage may help them.”

Agency, again with hesitancy: “They are in foreclosure.”

Me: “But a reverse mortgage may help save their home from foreclosure.”

Agency, defensively: “But one spouse may not be 62.”

Me: “The requirement is that both borrowers be 62 so the younger one would need to be removed from the title, and while that is risky and not normally recommended, if it’s a matter of losing their home or being able to stay in their home, the reverse mortgage may be an option. It’s at least worth considering.*”

*I suggest they talk with an attorney so they are aware of the risks of removing a younger person from the title.

Agency: “But there may not be enough funds to pay off their mortgage.”

Me: “We can work with the banks to negotiate them taking the reverse mortgage proceeds as a payoff. It’s been done where the banks accept the reverse mortgage as a payoff. It can be a challenge but it is at least worth a discussion and a try. We have done some amazing things.

“All I’m saying is that instead of saying there aren’t options, we can’t help, the reverse mortgage should at least considered as an option and explored for those over 62.”

This conversation raises the question, why are people resistant to reverse mortgages when it can make such a difference in the lives of seniors?

Are they so hung up that it’s not their agency solving the problem they don’t think anyone can? Or is it they don’t want someone else to help? Are they afraid that someone else can help and they can’t? Is it because their funding depends on them solving the problem and it’s more beneficial to them to not help and not provide all options? Is it because they are a non-profit government agency and we are a private for-profit company? Is it they don’t think I should get paid for my services (after all as a government non-profit agency and as paid staff they are making a salary with sick days and vacation days while I’m commissioned, no paid sick or vacation days.)? Or is it they just don’t understand reverse mortgages?

I don’t understand why they or others wouldn’t want to offer an option that may benefit the seniors even if it’s not their program that solves the problem. Even if it helps just one person/couple, isn’t it worth it?

A reverse mortgage is a mortgage that has special terms for those 62 and older to use their equity while they still own and live in the home. Income and credit aren’t considered to qualify for an interest rate and monthly payments are not required during the term of the loan. The loan is due when the home is no longer the primary residence of the borrower(s).

The most common reverse mortgage, and only one available in Minnesota, is the HUD Home Equity Conversion Mortgage or HECM which is insured by FHA. The borrowers pay a FHA Mortgage Insurance Premium (MIP).

When the loan is being paid off, the borrower or the estate keep any difference between the loan balance and the sale price. As a non-recourse loan, if the loan balance is higher than the sale price on the home, the lender is repaid the fair market value and the borrower doesn’t have to pay the difference – the FHA MIP covers the difference. The loan documents spell out there is no personal liability to the borrower or their estate, unlike conventional mortgages that can get funds from the estate to cover the loan balance.

One of the other meeting attendees commented to me after the meeting, “It appears they don’t really care to be helping people.” That’s a sad impression to give when you are an agency paid to help the community.

I believe we all need to work together and offer options to help, whether non-profit, government or private for-profit. If the reverse mortgage is considered and explored but is not the right option, I want to be able to know about other options and people who may help so I can do referrals to someone who might be able to assist them. This is why I attend provider network meetings to learn about resources and options.

I wish others wouldn’t be so resistant to reverse mortgages when they can make such a difference for seniors.

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

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

Are you afraid to do a reverse mortgage? Twelve Reasons You Shouldn’t Be.

Posted on October 30, 2011 by Beth Paterson, CRMP

Does what you’ve heard about reverse mortgages make you afraid of them? Has your fear kept you from getting the facts to see if one might benefit you?

A reverse mortgage is a mortgage with special terms for seniors 62 and older. The most popular, and only one available in Minnesota, a Home Equity Conversion Mortgage or HECM, is insured by HUD. Let’s look at twelve reasons you shouldn’t be afraid of reverse mortgages.

Reverse mortgages are highly protected – One of the protections includes that borrowers receive counseling from a HUD trained and approved third-party counselor. Others include prohibiting cross-selling, disclosures and implementing requirements that limit scams and fraud.
No monthly payments required – Your cash flow improves because you don’t have to make a monthly mortgage payment. Instead of making monthly mortgage payments, the reverse mortgage is due when the home is no longer the primary residence of the borrower(s) or on the 150th birthday of the youngest borrower. And with no monthly mortgage payments required, the risk of foreclosure is reduced.
A variety of program options are available – The HECM Standard, HECM Saver and Home Purchase Programs are available with a fixed rate and adjustable rate options. This gives you options to find one that is right for your situation.
The interest rate is not determined by your income and credit score – The interest rate is based on the program chosen, no matter what one’s income or credit score is. With a conventional mortgage, one’s credit score, income and assets will impact the interest rate of their loan – with a fixed income the interest rate is likely to be higher if one even qualifies for a conventional mortgage.
Funds are guaranteed to be available during the term of the loan – As long as one abides by the terms of the loan, the funds are guaranteed to be available. Borrowers are responsible to pay property taxes, insurance and maintain the home and if applicable pay home owner association fees.
Flexibility on how funds are received – Funds are available to borrowers in a line of credit (has a growth rate), monthly payments (structured to your needs), lump sum or a combination of these.
No limitations on how the funds can be used – One can use the funds received from the reverse mortgage however they choose – there are no restrictions. The reverse mortgage is like any other mortgage where the borrower is using the equity of their home to meet their needs and desires now.
The title stays in your name – the bank does NOT own your home, you continue to own the home.
Closing costs are comparable to conventional loans – as with any mortgage there are closing costs. While often said to be expensive, actually the reverse mortgage closing costs compare to those of a conventional loan.
Fees charged are regulated by HUD – HUD only allows the necessary fees which are standard and customary – no mark up and “junk” fees are allowed.
Reverse mortgages are non-recourse – This means if the loan balance is higher than what the home can be sold for, the borrower or their estate does not have to come up with the difference. If the home is sold for more than the loan balance, the difference goes to the borrower or their heirs.
Social Security and Medicare are not Impacted – One can still receive Social Security and Medicare with a reverse mortgage. Medicaid may also be received under ceratin circumstances. The reverse mortgage is a loan and the proceeds are not considered income.

Face your fear and get the facts about reverse mortgages and see if one may be right for your situation. You may find that a reverse mortgage could make your life easier and provide you cash for your needs and desires.

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.

Evaluating HECM Reverse Mortgage Payment Plan Options

Posted on October 23, 2011 by Beth Paterson, CRMP

A Home Equity Conversion Mortgage or HECM, also known as a reverse mortgage, is a mortgage which allows seniors 62 and over to convert the equity of there home into cash. Unlike a conventional mortgage, with the HUD insured HECM there are no monthly mortgage payments required. Instead the borrowers have options on how they want to receive the cash “paid” to them: a lump sum, monthly payments, a line of credit, or a combination of these. It shouldn’t be looked at as “one size fits all.” One needs to evaluate the different options to decide which is best for their situation. Let’s review them here.

A Lump Sum – A lump sum is pulling an amount of funds at the time of closing. A lump sum can be done with both the adjustable rate program and the fixed rate program. The adjustable rate program offers more flexibility because one can choose the amount they want at the time of closing with the remainder received in monthly payments or a line of credit. The fixed rate program requires borrowers pull out all of the funds in a lump sum at the time of closing.

Considerations that need to be taken into account with the lump sum:

Pulling all funds at closing is ideal if one has a use for all the funds. For example used to pay off a current mortgage or other debt or to purchase a new home without the requirement of monthly mortgage payments.
If one doesn’t have a use for all the funds, what will be done with funds not used? A savings account and CDs are not paying much interest so that is generally not wise to pull all funds and place in savings accounts or CDs.
The interest starts accruing on the loan balance when the funds are drawn so in the case of a lump sum, the interest is added on the amount drawn up front. If one doesn’t have a use for the funds and they are put in a savings account, the interest accrued will likely be higher than what is earned as interest on funds in a savings account.
Pulling all the funds in a lump sum could impact one who is on or going on Medicaid (Medical Assistance in MN) or other public benefits. Funds from the reverse mortgage are not considered income because it is a loan against the property, so they are not considered an asset for Medicaid qualifications. However if one pulls funds from the reverse mortgage and place them in their checking account, savings account, a CD or other investments, they could then be considered an asset and impact qualifying for Medicaid and other public benefits.

Minnesota law allows for reverse mortgage borrowers to pull funds and spend them in the month they were received and not impact their Medical Assistance and other public benefits. Check with your state’s laws to see what is allowed where you live.

For example I had a borrower who was on Medical Assistance (MA), doing the reverse mortgage to be able to remain in her home with home care. For her convenience the family was having a bathroom installed on the main floor. At the time of closing they pulled $10,000 for the bathroom installation. Because it was spent within the month, she remained on MA. However if they had only spent $5,000 of the lump sum draw, she may have lost her MA benefit because the additional $5,000 would have put her over the allowable $3,000 in assets. (Check with an elder law attorney to see what is allowable in your state.)

With their fixed income Paul and Mary were struggling making their mortgage payments on their conventional mortgage. They did a fixed rate payment plan HECM using all the funds available from the reverse mortgage to pay off their conventional mortgage. Without having monthly mortgage payments their cash flow improved: the $1,200 monthly mortgage payment they had been making on their conventional mortgage was now available to meet their other needs.

Jim and Paula used the fixed rate reverse mortgage to purchase a new home closer to their children.

I emphasize that choosing to pull the funds out in a lump sum should only be done if you have a use for all or the majority of the funds at the time of the draw.

Monthly Payment Option – The amount of money one could receive as a monthly payment. The borrower can receive tenure (for “life”/as long as the home is your primary residence) payments or determine the amount they wish to receive each month. For example, a term payment can be received for a certain period of time, i.e. 10 years. Or a fixed amount each month, i.e. $100 each month or $800 each month. This option is only available with the adjustable rate program.

Considerations for receiving monthly payments:

It’s a great option to add extra cash each month in an amount that fits one’s needs if they need a regular amount each month.
Offers control so one pulls out what one needs each month.
The loan balance won’t grow as quickly as with a full lump sum draw. Interest only accrues on the amount pulled at which time it becomes part of the loan balance.
If one has not accessed all the funds via monthly payments they are not part of the loan balance to be repaid.
One can receive Medicaid and other public benefits while receiving funds in monthly increments.
If one is not spending the funds each month and one is leaving them or a portion of them in their checking account, their checking account balance could accumulate so that they have an asset more than what is allowable for Medicaid or other public benefits.

Margaret was receiving home care and needed additional funds to cover the private pay charges. A reverse mortgage was set up for the amount she needed each month.

With his reverse mortgage, Gene chose the monthly payment option to meet his need of an additional $200 a month to supplement his Social Security payments.

A line of credit – A credit amount from which the borrower can receive funds at any time and in any amount of their choosing. With the reverse mortgage the amount of the line of credit cannot exceed the Principal Limit. This option is only available with the adjustable rate program.

Considerations for the line of credit payment option:

One chooses when they want to draw funds and in the amount they need or want.
Offers flexibility and control over your cash flow.
The loan balance won’t grow as quickly as with a full lump sum draw. The loan balance is increased at the time the borrower accesses funds in the line of credit.
If one has not accessed the funds in the line of credit they are not part of the loan balance to be repaid.
One can receive Medicaid and other public benefits with the line of credit option – as long as the funds pulled are spent in the month they are received (check with your state).
Money in the line of credit can grow, so more money could be available to the borrower in the future. Often confused as an interest rate, it is actually a growth rate. Growth rate means more funds are available for use at a future date. If one has not accessed the money in the line of credit it is not their money so interest is not earned.

Connie did a reverse mortgage so she would have funds available in a line of credit for emergency needs.

After paying off a conventional mortgage for Bob, he left the balance in a line of credit. A year later he pulled some funds and took a dream vacation to Yellowstone with his nephew. He also pulled funds at a later date to modify his home so it would accommodate a wheel chair when the time came.

A combination of payment plans – An option to pull funds as a lump sum at closing, leave some funds in a line of credit and receive monthly payments; pull funds as a lump sum to meed an immediate need then leave the balance in a line or credit or set up as monthly payments; or leave some funds in a line of credit as well as receive monthly payments. This option is only available with the adjustable rate program.

Considerations for the combination payment plan:

Offers flexibility to meet one’s needs.
Review considerations for each option outlined above.

When Jerry and Delores did their reverse mortgage a conventional mortgage was paid off, they pulled $3,000 out in a lump sum for some immediate needs, set up a payment plan of $300 a month and left the rest in a line of credit. This fit their needs to improve their cash flow.

Dorothy needed hearing aides. She did her reverse mortgage, using a lump sum draw to purchase her hearing aides then leaving the balance in her line of credit for her future needs.

Note that with the adjustable rate program one can change the payment plan during the term of the loan. For example, after having a mortgage of $50,000 paid off at closing, and initially one pulls $1,000 at the time of close but leaves the balance in the line of credit, after 3 years one can have the payment plan restructured to receive a monthly payment amount. There is a one-time fee of $20 for the payment plan change.

Three years after Jerry and Delores did their reverse mortgage they no longer needed the monthly payments so they contacted the servicer of their reverse mortgage and stopped the monthly payment, leaving all the funds in the line of credit.

These same payment plan options are available for both the HECM Standard and the HECM Saver.

The reverse mortgage is beneficial to seniors if the right payment plan is chosen. As outlined, there are advantages and disadvantages for each of the options. Review these considerations and work with your reverse mortgage expert to help you decide which option is right for your 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.

Minnesota Reverse Mortgages SIDAC

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

Tag Archives: Reverse Mortgage Details

What To Consider When Choosing Your Reverse Mortgage Originator

You Don’t Need To Have A Mortgage To Do A Reverse Mortgage

Be Cautious on Reverse Mortgages… And From Whom You Are Getting Your Reverse Mortgage Information

A Reverse Mortgage Can Really Be Compared To Your Smart Phone

Seniors Find Hope and Opportunity With Reverse Mortgages

Why Are People So Resistant to Reverse Mortgages?