My Reverse Mortgage Funds Are Used… Now What?

Posted on July 11, 2010 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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-mD

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

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

Reverse Mortgages Equal Independence For Seniors

Posted on July 2, 2010 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Reverse Mortgage Borrowers’ Responsibilities… or Consequences

Posted on June 27, 2010 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Having reverse mortgage terms and responsibilities explained

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

Related articles on Reverse Mortgages in Minnestoa:

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

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

Fast Forward To August… Seniors Would Have Lost Their Home To Foreclosure Under New Minnesota Reverse Mortgage Law

Posted on June 22, 2010 by Beth Paterson, CRMP

A couple days ago I shared the story of how the reverse mortgage was used to save Ken and Mary’s home from foreclosure. While we were able to make this happen now in just the 3 weeks we had, if we had received the call from Ken and Mary after August 1, 2010 when the new Minnesota reverse mortgage law is in affect, the ending would be different.

Because of the new 7-day “cooling off” period requirement, Ken and Mary would have lost their home. Why? Because the new law requires that borrowers receive and sign a commitment and then wait 7 days before the loan can be closed. This is in addition to the 3-day federal required rescission.

Let’s look at the timing. The loan was underwritten and cleared on a Friday, just 5 days before the payment was needed to be in the sheriff’s office. This, from my understanding is when the commitment would be issued. So if the commitment was issued on a Friday, the borrowers would need to receive the commitment, sign it and return it. Even if this was able to be implemented on Friday, the borrowers would need to wait 7 days before the closing could take place. (I’m assuming actual days, not excluding Sundays and Holidays as the 3-day rescission period does – this has yet to be defined.)

The 7th day would be the following Friday, already 2 days past the redemption date. Then we have the 3-day rescission period, Saturday, Monday, Tuesday. Funding would take place on the next Wednesday. This would have been 7 days after the redemption period. Seven days too late!

An additional risk of delay as a result of the new law could be the counseling. Currently reverse mortgage borrowers can receive counseling from HUD-approved counselors in the state or from a list of national counselors.

The new Minnesota law requires the reverse mortgage borrowers only receive counseling from HUD-approved counselors located in the state. Because there are only 7 counseling agencies in the state of Minnesota, with all borrowers needing to receive the counseling from these 7 agencies, borrowers could face a longer wait time to receive their counseling. Even now scheduling times with a counselor can be 2 to 3 weeks out. While they make some exceptions if one is in foreclosure, there could still be a longer wait to receive the counseling, not necessarily the next day as Ken and Mary were able to receive now.

Being processing of a reverse mortgage cannot start until after borrowers have received and signed the counseling certificate, the longer time frame could also mean the seniors losing their home.

The law makers, in an effort to “protect” seniors, will be causing some seniors to lose their home to foreclosure. Interesting enough the reverse mortgage bill was added as an amendment to the foreclosure bill.

I’m glad we were able to help Ken and Mary save their home. It’s going to be a sad day come August 1st when we have to tell the “Ken’s and Mary’s” who call us and say we have 3 weeks to redeem our home from foreclosure, “Sorry, we can’t take your application, process, close and fund the loan in that time frame because there is a new law that says you have to find a counselor in Minnesota that can do your counseling tomorrow and then after the file is underwritten and ready to close you have to have a 7-day cooling off period in addition to a 3-day rescission period.” This will break my heart.

In my opinion, one senior losing their home because of the new law and an extra unnecessary “cooling off” period is one too many!

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.

At The Eleventh Hour… Reverse Mortgage Used To Save MN Senior’s Home

Posted on June 20, 2010 by Beth Paterson, CRMP

The call came it at 5:00 p.m. on a Wednesday afternoon, “We’re in foreclosure, the redemption period ends in three weeks. We need a reverse mortgage.” Ken and Mary, in their 60’s, were in a tight spot and about to lose their home if we couldn’t get the reverse mortgage application taken, processed, closed and funded within the three weeks to the date of the late afternoon phone call. There were no exceptions to getting an extension of the redemption period.

Being from a smaller town, they hadn’t heard about reverse mortgages previously until they were visiting relatives in another state and heard them advertised. When back in Minnesota they looked up reverse mortgages and found their way to us. After an initial two-hour conversation explaining the details and terms of the HUD insured Home Equity Conversion Mortgage (or HECM) they decided to proceed knowing their only option to save their home was the reverse mortgage… they had already checked out other options with no success.

The first thing needed was their HUD required reverse mortgage counseling. Fortunately they were able to receive the counseling the next day. Once we received the counseling certificate with their signatures, on Friday, the following day, the application was taken and then the processing began. FHA Case number was assigned, title work ordered, appraisal order placed, credit report and flood certification obtained.

Then the surprises arrived. First was a lien from Veterans Affairs that would need to be paid. The credit report showed a judgment from a credit card debt that was also required to be paid. Then the appraised value came in less than expected. And the appraiser stated the roof needed repair along with another small repair. This meant that the Ken and Mary would need to get contractor bids for the required repairs.

These factors meant a difference in the amount of reverse mortgage funds that would be available. When the calculations were run, in order to pay off the mortgage in foreclosure, the VA lien, the judgment, and set aside funds for the repairs, Ken and Mary needed to bring money to the closing or lose their home.

HUD does not allow extra funds to be borrowed, funds need to be from the borrower’s own resources or a gift. This caused an additional obstacle: they had to come up with the extra money.

Determined to save their home from the foreclosure Ken and Mary worked and addressed all the issues that they faced. Fortunately they received the gift of funds, provided the necessary gift letter and documentation. The contractor’s bids were submitted to us and title work and payoff statements received.

Not an easy task with all the obstacles that popped up along with two weekends and a holiday falling during this time frame. However with lots of phone calls, explanations, guidance, and scrambling to pull everything together, the file was processed and submitted to underwriting, just 12 days after the application, 14 days after the initial phone call.

Two days later the file was underwritten, conditions received, addressed and then cleared. This was on the last day for the file to be closed in order to allow the 3-day rescission period before funding on the last day of the redemption period. The closing department rushed to get the closing package assembled and sent to the title company in time for the Friday afternoon closing.

The following Wednesday, just 3 weeks after that 5:00 p.m. phone call and on the last day for Ken and Mary to redeem their home from foreclosure, the reverse mortgage was funded. The title company representative drove to the county sheriff’s office to personally deliver the payment. Whew, just in time.

With sighs of relief, Ken and Mary are able to stay in the home that they had built and lived in since 1972.

It took a team of many who cared enough to rush things through to save this home from foreclosure. Besides our originator and processor, this included the counselor, the title company, the appraisal management company and appraiser, the lender’s processors, underwriter, closing and funding departments. How rewarding this is for all of us!

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

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

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

Posted on June 12, 2010 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

“I was very pleased with what happened.”

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

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

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

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

Posted on June 6, 2010 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Letter to Minnesota Governor Tim Pawlenty Regarding Reverse Mortgages

Posted on May 17, 2010 by Beth Paterson, CRMP

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

Dear Governor Pawlenty,

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

Besides the facts I have pointed out previously:

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

The main issues include:

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

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

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

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

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

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

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

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

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

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

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

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

Thank you,

Beth Paterson
Executive Vice President
Prestige Mortgage LLC
Reverse Mortgages SIDAC
Security, Independence, Dignity and Control
The Experts Excelling In Service
Phone: 651-762-9648
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While Governor Pawlenty recognizes the issues as he stated in his 2009 veto letter, the unfortunate fact is that this legislation was not a stand alone bill but is attached to a foreclosure bill and without the line-item-veto authority may be signed into law. If this is the case it will be very unfortunate for Minnesota seniors as well as the reverse mortgage industry.

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

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

Down To The Wire… The MN Reverse Mortgage Amendment Was Sneaked In and Likely To Have Negative Consequences For Seniors And Reverse Mortgage Businesses

Posted on May 14, 2010 by Beth Paterson, CRMP

Not disclosing any of the details before hand, the reverse mortgage amendment was added to bill SF2430/HF2699. Being passed in Congress we now hope to receive a veto from Governor Pawlenty to protect Minnesota Seniors and the reverse mortgage businesses.
I along with others have concerns about the bill:

This bill has not been transparent. While I have been inquiring and searching for information for months, I did not learn the bill number or the details of the bill until the evening of May 14th – just before the May 17th end of the 2010 legislation session.
This reverse mortgage legislation is controversial. Any reverse mortgage legislation should not happen without a full hearing. And without all of us impacted, especially brokers and lenders who are not federal chartered banks having an opportunity to see and address any proposed legislation.
This law would mean increased costs to reverse mortgage borrowers and/or cause some lenders to refrain from offering reverse mortgages in Minnesota. As with the 2009 SF489/HF528 bill which Governor Pawlenty vetoed last year this bill still contains some of the same language and would have the same impact.
Reverse Mortgage Borrowers are highly protected – why confuse the issue with state laws. Currently the only reverse mortgages available in Minnesota are the FHA insured Home Equity Conversion Mortgages or HECMs and these are highly protected and regulated by HUD. Visit my blog, “You Need To Know Reverse Mortgage Borrowers Are Highly Protected!” for details.
There are so many changes on the Federal level it would be a disservice to Minnesota seniors to implement state laws. The state would have to oversee any differences from federal regulations.
This law would be additional costs to the state. While the bill may not be showing as a having a budget expenditure, there would be additional costs to the state in overseeing that state laws are followed versus the difference of the federal regulations. More seniors are likely to lose their homes without the reverse mortgage option. Consequently the foreclosures would increase and more housing would be needed for seniors and much of this would be born as state expense.
All lenders do not have to abide by the state rules. Federal chartered banks do not have to abide by the state rules because they are federal chartered yet brokers and non-federal chartered banks and lenders would have to follow any state laws. As I sated in my blog, “Do You Know The Best Kept Reverse Mortgage Secret in Minnesota?,” this would be amonopolistic-like advantage for the FDIC banks over other lenders. This obviously does not foster fair competition between all lenders and small business.

If Govenor Pawlenty signs the SF2430/HF2699 bill into law there will be negative consequences to our Minnesota seniors as well as reverse mortgage brokers and lenders in Minnesota.

While some are claiming the changes made from the 2009 bill now has widespread support, those of us in the reverse mortgage industry have not had an opportunity to review or address this legislation – we are NOT supporting it. Sneaking this legislation on at the last minute when it has not been transpartnet and is so controversial seems to me does not fit into the democratic consitution of our country or state.

I have asked that Governor Pawlenty veto the bill so we in the industry, who are senior advocates and would be directly impacted by the law chances, have the opportunity to review and address as well as write proposed legislation that will be in favor of protecting seniors as well as the reverse mortgage businesses.

Please join me in requesting Governor Pawlenty veto SF2430/HF2699 by sending him an email at tim.pawlenty@state.mn.us. Use my above outlined issues as reasons for your request for a veto.

Thank you for your assistance in protecting Minnesota seniors as well as revesre mortgage borrowers.

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

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

Do You Know The Best Kept Reverse Mortgage Secret in Minnesota?

Posted on May 7, 2010 by Beth Paterson, CRMP

During the 2009 Minnesota Legislation Session a reverse mortgage bill, SF489/HF528 was introduced and then passed by the Senate and House but eventually vetoed by Governor Tim Pawlenty. During this session I was very involved in addressing my concerns as a reverse mortgage originator, processor and senior advocate, testifying against the bills at every hearing, writing to the Attorney General Lori Swanson, the authors of the bills, Senator Tarryl Clark and Representative Jim Davnie as well as Governor Pawlenty explaining the facts of reverse mortgages and the issues with the bill if signed into law. Actually I was the only person who testified during this legislation that has actually originated and processed reverse mortgages. The others who testified were all lobbyists, attorneys or had little knowledge and no experience with the details or originating reverse mortgages.

Some of the issues of the bill included a 10-day rescission period, originators determining suitability and cross-selling prohibition that those who do a reverse mortgage could not purchase insurance products within the 18 months after the reverse mortgage closing.

Governor Pawlenty’s veto letter stated that it is important that reverse mortgages continue to be offered in Minnesota and the legislation could have unintended consequences causing mortgage bankers to refrain from offering reverse mortgages. He stated the suitability clause was poorly written and would cause litigation. Governor Pawlenty encouraged the authors to rewrite legislation that protects seniors but does not limit the availability of reverse mortgages in Minnesota.

Early during the 2010 legislation session I heard through the grapevine that a FDIC bank was supporting and “pushing” a bill modeled after the California reverse mortgage law into this legislation session. For months now I have been researching to find details about this potential legislation but to little avail. While I was so involved during the 2009 legislation, and as an actual originator trying to educate the bill authors and legislators on reverse mortgages, the process and issues with their bill, I was not contacted by any of them to assist with any new legislation.

Last month the National Reverse Mortgage Lenders Association (NRMLA) stated that a senator was expected to add an amendment on reverse mortgages to a bill that was slated to pass. My research has continued and I have learned that, yes, the author of last year’s Senate bill is working on finding a bill to add the reverse mortgage amendment to but with no confirmation of which bill and/or the verbiage of the anticipated amendment.

I have also learned that a FDIC bank is working on verbiage for the reverse mortgage amendment. Not sure if this would be the same bill or two different bills. For some undetermined reason this legislative act has taken on a shroud of secrecy.

My concern with this process and any amendment that may be added to legislation is that this is a very controversial issue that could impact those of us who are brokers or lenders that are not federal chartered banks. We are not on the same playing field – federal chartered banks do not have to abide by the state rules because they are federal chartered yet brokers and non-federal chartered banks and lenders would have to follow any state laws.

What does this mean? If a 10-day rescission is implemented, the FDIC bank would still be working off the 3-day rescission; yet non-federal chartered banks and lenders would have to operate with the 10-day rescission. The same is true for a suitability clause and for cross-selling. This would be a monopolistic-like advantage over other lenders. This obviously does not foster fair competition between all lenders and small business. Is this the purpose of the FDIC Bank in supporting and pushing through legislation that they don’t even have to follow? Is this for their gain rather than for the seniors?

Additionally this legislation has not been transparent. We have not been able to find out exactly what the legislation entails. From what I have heard there is potential that it could be similar to or even worse than last year’s legislation but this is being kept a secret.

I feel that any reverse mortgage legislation should not happen without a full hearing. And without all of us impacted, especially brokers and lenders who are not federal chartered banks having an opportunity to see and address any proposed legislation. Without disclosing the information and keeping this a secret and not consulting those who it will actually be impacting (i.e. the non-federal chartered bank originators who actually work in the field on a daily basis and with the seniors) it appears legislators are not looking at protecting seniors yet looking out for their own political gain.

When we are trying to help homeowners stay in their home, receive help with their mortgages and/or avoid foreclosure it would be a disservice to seniors to pass Minnesota reverse mortgage legislation at this time. Additionally at this time when there are so many changes on the federal level through HUD affecting reverse mortgages, it will be a disservice to Minnesota seniors to pass state legislation adding to the confusion of the product.

Additional suggested reading:

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 Mortgages News

Reverse Mortgage Borrowers’ Responsibilities… or Consequences

Fast Forward To August… Seniors Would Have Lost Their Home To Foreclosure Under New Minnesota Reverse Mortgage Law

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

A Letter to Minnesota Governor Tim Pawlenty Regarding Reverse Mortgages

Down To The Wire… The MN Reverse Mortgage Amendment Was Sneaked In and Likely To Have Negative Consequences For Seniors And Reverse Mortgage Businesses

Do You Know The Best Kept Reverse Mortgage Secret in Minnesota?