Facts Are Needed About The 101 year-old Woman Who Did A HECM Reverse Mortgage And Was Evicted

Headlines give misinformation about HECM Reverse MortgagesThis last week headlines across the country talked about the eviction of a 101 year-old Detroit woman with a FHA insured HUD Home Equity Conversion Mortgage (HECM) reverse mortgage.  In reading the articles and viewing the TV media pieces I find that facts were missing or misconstrued about this situation and reverse mortgages.  While Ms. Texana Hollis is returning home, her story leaves a lot of misinformation about reverse mortgages and the benefits they provide to the many borrowers.  Let’s take a look at the misconceptions of Ms. Hollis situation.

  • Foreclosure/eviction of Ms. Hollis was not due to reverse mortgage but due to lack of payment of taxes, a requirement of the loan (all mortgages as a matter of fact).
  • Ms. Hollis son and POA facilitated her in getting the reverse mortgage but didn’t follow through on assisting in making sure the terms of the loan were followed, i.e. he or other family members ignored the requirements to pay property taxes, insurance and maintain the home.
  • I’ve seen statements such as “signed the house over to a reverse mortgage.”  A reverse mortgage is a mortgage with special terms for seniors 62 and older. The title remains in the borrower’s name – they are not signing the house over to anyone, they are taking out a mortgage with a lien against the property.  My blog article “Beware Of Reverse Mortgage Misstatements – The Fact Is Reverse Mortgage Lenders Do NOT Own The Home!” addresses this fact.
  • Articles state that the son failed to make payments on the mortgage.  Payments are not required on a reverse mortgage.  One of the special terms of the reverse mortgage is that the borrower can have access to funds without making monthly mortgage payments.  The loan is repaid when the home is no longer the primary residence of the borrower(s).  The amount repaid includes the funds received up-front or through monthly payments or draws on the line of credit along with the closing costs, interest and on-going FHA Mortgage Insurance Premiums (MIP).
  • Ms. Hollis’ reverse mortgage funds were used for home repairs.  It appears from several sources that they were also used by the son for his purchase of a car, donations to a church and other things.  If this is the case, this is financial exploitation, NOT the fault of the reverse mortgage and NOT reverse mortgage fraud as some articles indicated.
  • Statements such as, “Ms. Hollis only learned about the eviction when the police arrived and carried out her belongings” are misleading.  In reality loss mitigation notices were sent by HUD, however it appears that those who were taking responsibility to “assist” Ms. Hollis ignored these notices.  I’ve seen statements that her son who is her POA didn’t tell her about the notices because he “didn’t want to worry her.”  In some reports he has admitted to ignoring and throwing the notices away.  She personally may not have been informed of the eviction because her family intercepted the notices.  Don’t blame HUD or the reverse mortgage for actions of her family.  If her family didn’t respond to notices it is neglect on their part (i.e. the son/POA) – not HUD or the reverse mortgage.

And now let’s look at the facts of the misconceptions of reverse mortgages which have been shared along with this story and other media coverage.

  • The bank does not own the home and the title is not passed to the bank.  The title remains in the name of the borrower(s) as long as the home is the primary residence of the borrower.  If the borrower does not abide by the terms of the loan (pay property taxes, insurance and maintain the home, the home may go into foreclosure just as with a conventional mortgage.)
  • One report stated that a danger of the reverse mortgage is if one spouse passes or goes into senior housing, the other may have to pay back the loan.  In reality as long as one borrower remains in the home, the loan does not become due and payable until they, the second spouse, is no longer in the home as their primary residence.  If a non-borrowing spouse (one that is not on title with the reverse mortgage) is the one remaining in the home, yes, the loan is due and payable because the borrower (the one on title) is no longer in the home as their primary residence – this is the terms of the loan.
  • HUD Home Equity Conversion Mortgages (HECM) are FHA insured.  As with a conventional/forward FHA mortgage, borrowers pay an up-front Mortgage Insurance Premium (MIP) as well as an on-going MIP.  The benefits to FHA insuring 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.  If the loan balance is higher than what the home can be sold for at fair market value, FHA will cover the difference because one has paid the MIP.
    • 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.
  • “The Government will step in” is another statement I’ve heard.  The government doesn’t “step in,” borrowers are paying the FHA Mortgage Insurance to receive the above listed benefits.
  • And of course we have the all too common statement that reverse mortgages are expensive.  Unfortunately, many do not look at the costs of a conventional mortgage, they just make blanket statements without really doing the comparison as I have done.  I’ve written blog articles to address this misstatement:

I think it’s important to note that with a forward FHA mortgage, the up-front Mortgage Insurance Premium is 2.25% vs the 2% on the FHA reverse mortgage. So the forward FHA mortgage is more expensive than a reverse mortgage.

Ms. Hollis story has a happy ending, she is being allowed to return to her home of 50+ years according to HUD spoke’s person Brian Sullivan.  Unfortunately the story still led to a lot of misinformation and misunderstanding about reverse mortgages giving them a bad name.  It would be nice if the media would provide corrections and facts about these valuable and beneficial options for seniors.

Update September 24, 2011:  Facts are still needed!  The revere mortgage took a hit in the media with misinformation about this viable option for seniors yet we still don’t know if this was a reverse mortgage or a conventional/2nd mortgage that was on Ms. Hollis’ home.  However it appears it was NOT a Reverse Mortgage but a 2nd mortgage on the home… or maybe for non-payment of taxes.  Earlier in the week another article reported:

“Action News also found out the background on what really happened and why Texana and her son Warren Hollis were evicted from their home.

“At first, it was thought that Texana’s son had signed a reverse mortgage on the house or that maybe it was a back-taxes issue.

“It turns out that Warren took out a second mortgage on the home in return for $32,000. He claims the money was spent on repairs for the house. He also admits to buying a car with the money and donating some of the money to his church.

“He says the remaining $5,000 was used to pay a number of other expenses. Warren Hollis defaulted on the second mortgage and never told his mother what was going on or that he was receiving eviction notices and warnings. The news broke her heart and she had no time to prepare for being evicted.

“The house no longer belonged to Texana Hollis or her son Warren – who had been living with her. It belonged to HUD. The agency had asked for a court order to have the occupants removed from the home.

“One of the judges from the 36th District Court granted that order several weeks ago and the order was carried out on Monday.

And in another story it was reported that it was brought on by HUD due to many years of non-payment of taxes.

I wonder if we will ever know all the details and what type of mortgage it was or if it was for non-payment of taxes…

© 2011 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-u4

Related Articles:

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

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

You Need To Know Reverse Mortgage Borrowers Are Highly Protected!

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

  • Third-party counseling is required on all reverse mortgages.  Counseling is absolutely mandated with no exceptions and is provided by HUD trained and approved counselors.  During the counseling sessions the counselors are required to follow a protocol approved by HUD.  Evolving over time, HUD’s counseling guidelines and regulations now require distance between the counselors and lenders.  Lenders are required to provide borrowers with a list of 5 local and 5 national counselors without steering borrowers to any specific counselor.  Additionally, counselors are restricted from steering to lenders.
    • The counselor’s role is to educate about reverse mortgages, explain the allowable fees, and terms of the loan so potential borrowers have an understanding of the reverse mortgage.  They also provide other potential options.  They counselors are not to make a decision for the borrower on whether they should or should not do the reverse mortgage.
  • Cross-selling is prohibited.  Mortgagee Letter 2008-24 (HUD’s guidelines and requirements) states that a “HECM mortgage originator or any other party that participates in the origination of a FHA insured HECM mortgage shall not participate in, or be associated with, or employ any party that participates in or is associated with, any other financial or insurance activity.”  Additionally if a lender or bank has financial departments they must demonstrate to the Secretary of HUD that they have and maintain “firewalls and other safeguards designed to ensure that (i) individuals participating in the origination of a HECM mortgage have no involvement with, or incentive to provide the mortgagor with, any other financial or insurance product; and (ii) the mortgagor shall not be required, directly or indirectly, as a condition of obtaining a mortgage under this section, to purchase any other financial or insurance product.”
    • Lenders require mortgage brokers sign forms that they do not sell insurance and do not cross-sell.
    • All lenders application packages have disclosures stating that annuities and/or other financial products are not required to be purchased with reverse mortgage funds.
  • HUD regulates the fees.  HUD outlines what lenders and third-parties may charge stating they must be customary and reasonable costs necessary to close the mortgage.  Mark-ups are not allowed.  You may find HUD guidelines at their website (http://www.hud.gov/offices/hsg/sfh/ref/sfhp2-15.cfm) and in Mortgagee Letters 2008-34; 2006-07; 2006-04; 2004-18; 2000-10.
  • The Good Faith Estimate (GFE) must disclose all fees.  RESPA (Real Estate Settlement and Protections Act) requires all fees be disclosed at the time of application, restricts what fees can be changed and for the fees that can be changed borrowers must receive new disclosures.
  • The Total Annual Loan Costs (TALC) must be disclosed.  Providing a comparison of the percent of the costs to the amount received through the loan, this document discloses that the longer one keeps the loan the less expensive it is.
  • Sample Closing Documents must be provided at the time of application.  HUD requires that borrowers must receive the sample closing documents as well as a booklet regarding home equity loans.  This gives borrowers time to review the documents they will be signing at closing.  They may also have family, trusted friends or their attorney review the documents during the processing.
  • Disclosures must be provided to borrowers at application.  There are a variety of disclosures including:
    • Non-borrowing spouse disclosures outlining the risks if a spouse will not be on the loan.
    • Taxes and Insurances are the responsibility of the borrower(s).
    • Annuities and/or other insurance and financial products are not required with a reverse mortgage.
      • If annuities are being purchased the costs of the annuity are to be included on the TALC.
  • Three-day Right of Recession.  As with any refinance, there is a three-day right of recession giving the borrower(s) time to review and decide whether or not to proceed.
  • HUD insures and guarantees the funds.  As a HUD insured loan the funds are guaranteed to be available to the borrower as long as the borrower(s) abide by the terms of the loan.
  • Non-recourse loan.  Unlike any other loan, the reverse mortgage is a non-recourse loan which means there is no personal liability to the borrower or the estate as long as the borrower or their estate is not retaining ownership when the loan is due and payable.
  • There are guidelines for marketing practices.  HUD, The Federal Trade Commission and industry associations review and have cracked down on misleading advertisements.
  • State licensing and the SAFE Act.  Many states require mortgage brokers take test and receive licensing in order to originate loans including reverse mortgages.  (Note: FDIC insured banks are exempt from these requirements.)  The Housing and Economic Recovery Act of 2008 (HERA) enhances consumer protections including encouraging states to establish minimum standards for licensing and registration of mortgage loan originators.  The SAFE Act will establish and maintain a national mortgage licensing system and registry for the residential mortgage industry.
Protected MN Reverse Mortgage Borrowers

Protected MN Reverse Mortgage Borrowers

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

  • A reverse mortgage compares to a regular home equity loan in the fact that regardless of age the mortgages are used to finance lifestyle using the home equity.  With a forward/conventional loan the funds are taken as a lump sum and can be used however one wishes.
  • If a senior is selling they have costs associated with sale and receive funds in a lump sum.  No one is controlling how they use the remaining equity from the sale of the home.  And they have to determine where they are going to live.  If they are renting (i.e. regular apartment, independent living, or assisted living) the money may only last for a short period of time and they may still not have funds for future needs.
  • If the senior (or anyone) does a forward/conventional loan the funds are received in a lump sum.  They can do whatever they want with this equity.  And they have to make payments which can become difficult for them if “life happens.”
  • If they win the lottery they have money in a lump sum which can be spent however they wish.
  • With credit cards seniors (or anyone) are not restricted on how they are used.  They can charge for whatever they want.  And they then have created debt that has to be paid back on a monthly basis.

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

© 2010 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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

Related articles:

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

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

They’ll Say Anything To Get A Reverse Mortgage Application

Senior Considering a Reverse MortgageMarie lives in a manufactured home (sometimes called a mobile home).  It’s a beautiful home built around the original form so you can’t even tell it’s a manufactured home.  Two years ago I worked with Marie but unfortunately we were not able to do a reverse mortgage because her manufactured home did not meet HUD’s requirements.  While we can do a reverse mortgage on manufactured homes they have to meet the long list of HUD’s requirements.

Two weeks ago Marie called and said she had talked with an originator of a large bank who told her that the reverse mortgage can be done on her home.  Marie said she had called me because she trusted me.  As I discussed the situation with her she said the other originator had told her that they found on the internet that her property had been reclassified.  Additionally Marie said at the suggestion of the other originator she had scheduled her required counseling.

Not believing that a manufactured home could be reclassified, I told Marie to cancel the counseling (potential cost of $125 which she didn’t need to spend if her property wouldn’t qualify) and that I would check to see what I could find out for her regarding a reclassification.

After doing some checking on the internet, reviewing HUD’s requirements and checking with an underwriter, I called Marie back to confirm what I initially thought, her property was not reclassified from HUD’s standpoint and HUD would not insure her property.  A manufactured home is a manufactured home no matter how much you have done to change the look.

Fortunately Marie had called me – if she had proceeded with the other lender she would have spent $125 for counseling, $450 to $500 for an appraisal and then found out that she still couldn’t do the reverse mortgage.  She took it in good humor, stating, “They’ll do anything to get an application.”  While I would have loved to do the reverse mortgage for her, I believe in servicing the client even if it means I won’t earn a commission.

Another call I received was from someone who was shopping for lenders.  They lived on a rural property and after talking with them about their property I determined that it would not meet HUD’s requirements because of commercial use.  This person said they were told by a large bank originator that they could do the reverse mortgage.  If they proceed in with the counseling, application and the process with the other lender when the file gets to underwriting (hopefully) or to HUD they will be very disappointed when they learn the reverse mortgage can’t be done, especially when they have paid for the counseling and appraisal, credit and flood certificate fees.

Reverse Mortgages can be lifesavers for seniors but the property has to qualify.  Keep in mind that some lenders require originators submit a number of applications as part of their employment, even if they don’t close.  These are just a couple of examples, we receive other calls on unusual properties where other originators have led the borrower to believe a reverse mortgage can be done where in fact HUD will not insure the property.  While this is not reverse mortgage fraud, I consider it to be unethical.

Work with Experienced Reverse Mortgage OriginatorSeniors should contact and work with originators who have years of reverse mortgage experience not only in originating but also with HUD’s as well as the investor’s requirements, processing, underwriting.  Ask for references.   Additionally the originator should look out for the seniors, i.e. be a senior advocate – we don’t want to get senior’s hopes up and have them pay out hard earned money if they aren’t going to qualify for a reverse mortgage.

Don’t be afraid to ask the originator questions about their knowledge and experience with the various aspects of reverse mortgages, from origination, processing, underwriting, closing, servicing, etc.  Utilize the questions in my Blog article “Don’t Let Fear Keep You From A Reverse Mortgages But Know What To Look For In a Lender.”  Additional information can be found on our website: “What To Consider When Talking With Reveres Mortgage Lenders” and “Why Choose Prestige Mortgage, LLC/Reverse Mortgage SIDAC.”

© 2010 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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

Also read how reverse mortgages have made a difference in the lives of those who do qualify:

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

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

One Bad Apple Spoils The Bushel of Reverse Mortgages

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© 2009 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-8l

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.

It is NOT Reverse Mortgage Fraud When…

You may have seen some headlines about reverse mortgage fraud.  But I want to clarify that what is often being called reverse mortgage fraud is not really reverse mortgage fraud.

  • It is NOT reverse mortgage fraud when a senior who has a reverse mortgage and has a child or grandchild who scams their parent of money.  It is theft, financial exploitation, and abuse by the child or grandchild!  Children and grandchildren also steal, financially exploit and/or abuse seniors who don’t have a reverse mortgage.
  • It is NOT reverse mortgage fraud if a Power of Attorney misuses the funds from a senior’s reverse mortgage.  It is financial exploitation and abuse by the Power of Attorney, not of, or because of, the reverse mortgage.
  • It is NOT reverse mortgage fraud when a title company’s closer doesn’t follow the regulations (as the story in the recent Wall Street Journal reported) and they take the money the lender sent to pay off a borrower’s current liens.  It is theft and fraud by a title company’s closer and can, and has, happened with conventional loans.

As unfortunate as these situations are, they are NOT reverse mortgage fraud and the media should not call it such.

Let’s look at an analogy:  If a store selling TV’s is robbed because the thief was enticed and wanted the TV it is the person who did the stealing that committed the crime, not the TV manufacturer.  In this scenario the store represents the senior, both are victims.  The money or reverse mortgage funds are represented by the TV.  And the lender, provider of the reverse mortgage funds is represented by the TV manufacturer and provider of the merchandise.TV

So this is not fraud by the TV manufacture just because the thief stole the manufacturer’s TV.  Nor is it reverse mortgage fraud just because the reverse mortgage provided the funds for someone to steal from or abuse a senior.

Do you we see the media publishing articles that TV manufactures committed fraud when one of their TV’s was stolen?   Then why does the media and politicians accuse reverse mortgage lenders of fraud when someone else is committing the crime?  Why are the words reverse mortgage used in the same sentence as fraud in these types of circumstances?

For the facts the media should know read my previous posts:

© 2009 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-5O

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.

But Wait, There’s More… Reverse Mortgage Facts The Media Needs To Know

Man reading newspaperWith the fear factor and incorrect information the media is publishing, seniors don’t even want to include a reverse mortgage with other options they are considering to determine which would be the best for their situation.  Unfortunately they just assume the reverse mortgage shouldn’t be done and that any other option would be a better decision.  Maybe another option would be best, maybe not.  The media needs to stop throwing the baby out with the bathwater and let the decision be based on the facts of the reverse mortgage, not on a fear factor.

The media and politicians need to stop assuming that a conventional mortgage or HELOC is available to seniors.  Generally seniors don’t qualify for these loans.  And even if they do, they too have costs similar to the reverse mortgage, a higher interest rate than the reverse mortgage, and risks to the homeowner and the lender when “life happens” and payments can’t be made.  Even if they do qualify today, what happens in six months, a year, two years or five years when they can’t make the payment?  Doing the reverse mortgage instead of a conventional mortgage or HELOC is generally a better option for seniors.  Read “Is Waiting To Do A Reverse Mortgage The Best Decision?”

Reverse mortgages are not riskier or more complex than any other financial decision made by seniors, or anyone else for that matter.  In fact, NOT getting a reverse mortgage could be riskier for a senior.

Homeownership offers more benefits than renting.  One owns the home, and can benefit from the equity.  If renting, one has the expense of monthly payments and covering utilities (whether included in the rent or separate) and insurance.  If a senior does the reverse mortgage, payments are not required which improves their cash flow (no mortgage or rent payments).  The amount of their utilities, taxes, insurance and maintenance of their home is probably less than monthly rent of another property and they are at the mercy of future escalating rental rates.  If they can’t afford the rent payments where are they going to live?  On subsidized housing?  The reverse mortgage allows them to stay in the home without monthly payments and allows them control and choices of their living conditions.

Reverse mortgage borrowers are, however, still responsible for paying their taxes, insurance, and maintaining the home as they would be under any circumstances.  If they don’t pay taxes the county can foreclose, if they don’t have insurance and there is a fire or other destruction to the home, they won’t have a home, if they don’t maintain the home and it becomes really run down the city may fine and/or evict them whether or not they have a reverse mortgage.  If they are renting and can’t pay the rent they would be evicted.

Another common statement is the reverse mortgage has high closing costs – compared to what?  What other financial option is available that offers seniors the same benefits?

It shouldn’t be considered a loan of last resort.  As Mary, one of my borrowers who used the loan in order to retire stated, “When you retire is IS the last resort – you no longer have that income coming in.”  So what do you consider a last resort?

That reverse mortgages could be the “next sub-prime” mortgage is another fear the media and politicians are forcing on all of us with no substantial or viable comparisons.  Don’t let this keep you from a reverse mortgage, read my article, “Don’t Let Fear Keep You From A Reverse Mortgage But Know What To Look For In A Lender.”

The reverse mortgage has protections unlike any other loan or financial option.  Borrowers are required to go through third party HUD approved counseling which reviews the program, costs, positives and negatives, risks, and other options that may be available for them.  HUD is implementing a new counseling protocol for added protections.

Enjoying Life with Their Reverse Mortgage

Enjoying Life with Their Reverse Mortgage

Let’s review the facts of some benefits a reverse mortgage provides:

  • The title stays in the borrower’s name same as with any mortgage.  The borrower owns the home, no one else does.
  • The borrower may be able to stay in their home as long as it’s their primary residence or until their 150th birthday.
  • Lower interest rates than other loans – historically the reverse mortgage interest rates have been lower than conventional loans, lines of credit and credit cards.
  • A borrower won’t lose their home because of a reverse mortgage – they don’t have to make monthly payments.  They are however, as with any loan, responsible for taxes, insurance and maintaining the property and abiding by the terms of the loan agreement.
  • The reverse mortgage funds are tax-free (although if proceeds are used for certain purposes taxes may apply – consult with a tax advisor).
  • The proceeds are not considered income so Social Security and Medicare are not impacted and one can receive Medicaid.
  • The HECM is government insured and guaranteed to be available for borrowers. (Currently proprietary reverse mortgages are not available or are limited by county and city offerings.)
  • Borrowers or their heirs get to keep any remaining equity after the loan is paid off.
  • Allows access to more funds without paying additional closing costs – there is a growth rate with the line of credit and monthly payment options.
  • There are no out of pocket costs, income or credit qualifications for the reverse mortgage.
  • There are no prepayment penalties.
  • Seniors can have money for covering their everyday living expenses, making home repairs, covering medical expenses, paying for long term care, paying taxes and debts, paying off their current mortgage to improve their cash flow, buy a new car, taking a desired vacation or visiting children who live out of town.
  • The reverse mortgage has helped many seniors save their home from foreclosure.
  • The reverse mortgage gives seniors their security, independence, dignity and control.

Ed wrote, “Our reverse mortgage is great.  Gives us some elbow room.  Special thanks to you.”  Now these are the facts the media should be using!

© 2009 Beth Paterson http://bethsreversemortgageblog.wordpress.com 651-762-9648

Don’t Let Fear Keep You From A Reverse Mortgage But Know What To Look For In An Originator

MN Reverse Mortgage Borrowers Working With Experienced OriginatorThere seems to be a fear that lenders who caused the downfall of the mortgage industry are entering the reverse mortgage industry and will be the next subprime product.  Legislators here in Minnesota and elsewhere and even the US Banking Regulator, John Dugan, has made statements to this account.  However, in reality those originators are few and far between in the reverse mortgage side of things.

Originating the reverse mortgage takes patience, kindness, a “social worker” attitude and a teacher aptitude versus a sales approach.  The subprime lenders don’t fit this profile.  They are looking for a quick and fast process to make money and move on to the next “deal.”

Because of this fear seniors and their families are afraid to consider a reverse mortgage that could really benefit them during their retirement years.  Addressing this issue, Atlanta’s NBC affiliate featured Joe Morris, President of Generation Mortgage, a leader in the reverse mortgage industry and a lender whom we at Reverse Mortgages SIDAC, are partners.  You can view the interview by clicking here:  http://www.11alive.com/news/local/story.aspx?storyid=131277.

While seniors and their families shouldn’t be afraid of the reverse mortgages and lenders shouldn’t have the high fear factor of the induction of subprime lenders into the reverse mortgage arena, there are some lenders that shouldn’t be originating reverse mortgages.  You can help protect against this.  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 talking with reverse mortgage lenders.  Yes, the list is long but knowing the answers to this list of questions will help 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 lenders 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 loans.  Ask how many they have originated, not just their company or lender, but them personally.
  • Do 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 are licensed and/or look them up at http://mortgage.nationwidelicensingsystem.org under “Consumer Access” – if they are not listed they are not licensed to originate loans.
      • In Minnesota all individual mortgage loan officers (performing marketing, educating, originating functions) have to be licensed.
  • Who is the mortgage company’s lender sponsor?
    • Originating mortgage broker companies 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.
  • 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.
  • 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 have YOUR best interests at heart.
  • Will they meet with you face-to-face for an information session and the application?  Or do they just mail you the application package?
    • 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 – find an experienced local lender 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 fees.  (Many charge processing fees without the lender or originator addressing it with their title company.)  The cost of the appraisal should be their actual charge – ask them what they charge, the settlement statement should reflect this actual amount.  (Proprietary products, when available, followed these same guidelines.)
  • 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.  Loan Officers 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 – 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 lender to originate your loan.  You may not need this now, but you may in the future.
  • 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 lender.
  • 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.
  • 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, two 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 lender.
  • Do they provide a list of FHA counselors without steering you to a particular one?
    • HUD does not allow a lender to steer or be involved in your choosing or receiving counseling.

Be cautious that you do not complete an application or give the lender the counseling certificate until you have made your final decision of the lender 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.

Don’t be afraid of reverse mortgages or reverse mortgage lenders.  Reverse mortgages won’t be the next subprime product.  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.

Updated 2011.

© 2009-2011 Beth Paterson, Beth’s Reverse Mortgage Blog,651-762-9648

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