Basics of Reverse Mortgages – On The Radio

Posted on May 1, 2010 by Beth Paterson, CRMP

This past week I had the pleasure of being a guest on the radio show, “The Unexpected Caregiver” hosted by Kari Berit. We covered the basics of reverse mortgages to clarify the facts and share some stories of Minnesota reverse mortgage borrowers and how they have benefited from a reverse mortgage. Rather than writing this blog post I thought I’d share the link to the show for your listening: The Unexpected Caregiver – The Reverse Mortgage Basics with Beth Paterson – Part 1

Next week I will again be a guest on the radio show when we will cover the myths of reverse mortgages. Be sure to come back and check out this show to learn more about reverse mortgages.

Kari was a great host and deligtful to work with. In addition to Kari hosting the radio show she is an author, speaker and coach. Her book, “The Unexpeccted Caregiver” is full of ideas and resources to use as a caregiver. I love her book and highly recommend it. You can find more information at her website, www.TheUnexpectedCaregiver.com

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-j0

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

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

Why Be Embarrassed To Do A Reverse Mortgage?

Posted on April 25, 2010 by Beth Paterson, CRMP

Often thought to be a mortgage for those who are cash poor and house rich, with a reverse mortgage there may be an attitude of “I hope to never have to do a reverse mortgage.” And seniors may be embarrassed to let others know they did a reverse mortgage.

Why should there be embarrassment when doing a reverse mortgage when there isn’t an embarrassment when one has a conventional mortgage? Most homeowners have a mortgage or at least did one to purchase their home aren’t embarrassed by this fact. Well, it should be the same with a reverse mortgage. Just as a conventional mortgage isn’t just for the cash poor, house rich the reverse mortgage isn’t either.

A reverse mortgage is a mortgage just like any other but has special terms for senior homeowners 62 and older. To qualify for a conventional mortgage, lenders look at one’s income, credit score, and risks to ensure the loan payments can be made. The reverse mortgage has no income or credit score requirements and no monthly payment requirements which benefits seniors who are often on a fixed income. With a conventional mortgage monthly payments are required – these can sometimes be difficult for seniors to make on their fixed income.

As with a conventional mortgage the title stays in the borrower’s name and the homeowners are responsible for paying their taxes, insurance and maintaining the property.

Additionally there are more options on how the funds are received including monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these. Another difference and benefit for seniors who do a reverse mortgage is that the loan is non-recourse, which means there is no personal liability for borrowers or their estate as long as the borrower or the heirs are not retaining ownership.

The loan amount on the reverse mortgage is determined by the home value, the age of the borrower and what’s called an Expected Interest Rate (only used to determine the loan amount – the interest on the loan can be different). The older one is the more funds are available to them. Closing costs are comparable to a conventional mortgage with an origination fee, appraisal fee, title company charges and recording fees. As a FHA HUD insured loan the Home Equity Conversion Mortgage or HECM fees are regulated by HUD.

HUD insuring the loan provides advantages including guaranteeing the funds are available for borrowers; guaranteeing the lender against default or shortfalls which means the interest rates are lower (currently under 4% on the adjustable rate, 5.56% on the fixed) compared to other mortgages; providing a line of credit growth rate (available only with reverse mortgages); insuring as a reverse mortgage it is a non-recourse (no personal liability) loan.

In the current mortgage market many seniors don’t qualify for a conventional mortgage so the reverse mortgage is a great option for them. Even if they do qualify for a conventional mortgage, the reverse mortgage can be more beneficial. If they have a conventional mortgage and “life” were to happen seniors often then juggle trying to make the mortgage payments or paying their medical expense or life necessities.

With a limited or fixed income seniors often struggle to maintain their lifestyle. Sometimes they feel they need to work just to pay their bills or pay their conventional mortgage. Refinancing with a reverse mortgage can mean improved cash flow allowing borrowers to maintain their lifestyle. It can also mean that they don’t have to work.

At the age of 70, Len was still working a physically challenging job just to be able to pay their conventional mortgage. When they did the reverse mortgage Len was able to retire and enjoy his time with his family. “[The reverse mortgage] definitely saved us.” they said.

Helen, another Minnesota homeowner, has some retirement investments but rather than cashing in on those she chose to do a reverse mortgage. This allowed her to do some desired home repairs as well as have cash for future needs.

Cheryl wanted to travel so she did the reverse mortgage on her Minnesota home so she could pay off her conventional mortgage and improve her cash flow allowing her the funds to fulfill her desires without touching her retirement funds.

Knowing that the reverse mortgage is like any mortgage but with special terms one should not be embarrassed to do a reverse mortgage rather than a conventional mortgage – after all it’s just another mortgage option.

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-iQ

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 Helps Minnesota Senior To Be Prepared for Future

Posted on April 17, 2010 by Beth Paterson, CRMP

Reverse Mortgage Helped Bob Be Prepared

Bob’s wife passed away so her Social Security was no longer received. To replace the 2^nd Social Security check his financial advisor suggested a reverse mortgage so he could stay in his home and maintain his lifestyle.

We met and discussed his situation, the facts of the reverse mortgage and how it would benefit him. During his decision period, a friend suggested he sell and move into a senior apartment. But he wanted to stay in his home where he had lived for many years and with his many memories. He also wanted to keep his dog, his loyal companion. Besides he decided that moving and selling wasn’t cheaper than staying in his home and living in a senior apartment meant he’d have to make monthly rent payments which would not improve his cash flow which was his goal.

A reverse mortgage is a mortgage like any other mortgage, using the equity in one’s home, but has special terms for senior homeowners 62 and over. There are no income or credit score qualifications and no monthly payments required.* (See below for Financial Assessment requirement.) Senior homeowners maintain the title as the reverse mortgage lender does not own the home. Borrowers are responsible for paying their property taxes and insurance as well as maintaining the home. Reverse mortgage borrowers are highly protected – more so than with any other loan.

The HECM Adjustable Rate program allows for borrowers to receive their funds in monthly payments, line of credit, lump sum or a combination of these. The monthly payments can be structured as tenure payments, received as long as borrowers occupy home as their primary residence, or as they need. The line of credit grows so more funds become available in the future. There is also a HECM Fixed Rate option which is favorable if one is pulling all their funds out in a lump sum.

As a non recourse loan there is no personal responsibility to repay the loan as long as the borrower or the estate is not retaining ownership. This means if the loan balance when due and payable is $200,000 but the home can only be sold for $150,000 the borrower or the estate do not have to come up with the $50,000 as long as they are not retaining ownership. The loan is generally repaid from the sale of the property when the home is no longer the primary residence of the borrower, usually when they move, die or sell. If the home is sold for more than the loan balance the remaining equity goes to the borrower or the estate.

In Bob’s situation, the reverse mortgage paid off his current conventional mortgage and eliminated his mortgage payments – this improved his cash flow. Then Monthly Payments were set up to add the extra money he needed each month to maintain his lifestyle. Additionally funds were left in the line of credit for future needs.

A summer after he did his reverse mortgage he used some of the funds to take a desired vacation to Yellowstone National Park with his nephew – creating memories for both of them. After he returned from his trip Bob called me to share how happy he was that he was able to take the trip.

Then, as many of my borrowers do, recently he called again. As we were chatting he said that I wouldn’t recognize his house because he’s done some upgrading. In addition he had the home modified so it would be wheelchair accessible. While he doesn’t need this now, he’s prepared for the future when it will be needed. The joy in his voice showed.

Even though he didn’t have his wife to share his life he is able to have the funds to maintain his lifestyle and be prepared for his future in his home. Bob is enjoying his live with security, independence, dignity and control.

*In April 2015 a Financial Assessment was implemented to determine borrower’s ability and willingness to pay property taxes and insurance into the future. This safeguard help make the reverse mortgage more sustainable so borrowers can remain in their home.

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

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

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

Posted on April 12, 2010 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted on March 21, 2010 by Beth Paterson, CRMP

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

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

The difference between a conventional mortgage and the reverse mortgage:

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

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

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

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

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

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

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

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

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

You Need To Know Reverse Mortgage Borrowers Are Highly Protected!

Posted on March 7, 2010 by Beth Paterson, CRMP

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

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

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

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

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

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

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

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

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

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

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

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

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

Protected MN Reverse Mortgage Borrowers

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

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

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

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

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

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

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

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

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

Reverse Mortgages Come To The Rescue for Senior Homeowners

Posted on February 28, 2010 by Beth Paterson, CRMP

Are you looking for some funds to supplement your retirement? Do you need to modify your home to meet your needs? Are you looking for a way to pay for the home health care you need? Do you have a mortgage and find making the payments is a struggle? Or maybe you want to continue making your trip south during the winter but funds are short to do so.

A reverse mortgage may be your answer. A reverse mortgage is a home equity loan with special terms for senior homeowners 62 and older. Similar to a conventional loan, you own the home and are responsible for taxes, insurance, and the maintenance. The difference, and the benefit to seniors, is there is no income or credit score qualifications and no monthly payments required. It also offers more flexibility on how you can receive the funds including monthly payments, line of credit, lump sum or a combination of these versus a lump sum with a conventional mortgage.

An additional benefit is funds left in the line of credit grow so more funds become available over time. The loan becomes due and payable when the home is no longer the primary residence of the borrowers or on their 150^thbirthday. Another difference and benefit of the reverse mortgage is that the reverse mortgages are non-recourse loans. This means there is no personal liability if the loan balance is higher than what the home can be sold for and the borrower or their estate are not maintaining ownership.

There are no limitations on how you spend the funds. Look at how the reverse mortgage benefited some seniors:

Eliminate Mortgage Payments, Home Upgrades and Line of Credit: Dee and Peter did a reverse mortgage to eliminate their current mortgage payment, take a lump sum for some home upgrades, receive an extra $300 a month in monthly payments to supplement their Social Security, and still have funds in a line of credit for future use.
Maintain Lifestyle: Helen and Harold did a Reverse Mortgage to afford to take their annual trip to Florida during the winter months. They are thankful they are able to maintain their lifestyle.
Not Rely on Children: Nancy had accrued some debt including some credit cards and borrowing from her children. She did a Reverse Mortgage to pay off those debts and to have a line of credit available for future needs. She also enjoyed having some extra cash to purchase some things to fix up her home and to go to lunch with friends on occasion. Because her children had their own expenses and needs, they were relieved that their mother had done the Reverse Mortgage and could live more comfortably without relying on them.
Protect Other Investments: To have extra spending money without having to cash out their CDs or other investments, Jerry and Carol decided to do a Reverse Mortgage. Providing them more freedom and control of their life during retirement.
Purchase a New Home: Marilyn wanted to purchase a new home so she used the Reverse Mortgage rather than a conventional mortgage to finance her new home. This meant she didn’t have mortgage payments to make and provides her a better cash flow during her retirement years.
For more ideas on how seniors used their reverse mortgage funds visit “Meet Our Borrowers” and “Uses of Proceeds” on our Reverse Mortgages SIDAC website.

As with any mortgage loan there are closing costs. The costs of the reverse mortgage are comparable to a conventional mortgage. They include the origination fee, appraisal, title settlement and recording fees. With the FHA HECM (Home Equity Conversion Mortgage) reverse mortgage HUD regulates the fees and requires that only the actual cost may be charged to the borrower, they do not allow mark ups such as processing fees. As a FHA loan the fees include the FHA Mortgage Insurance Premium – this would be the same if they are doing 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 as well as regulating the fees. “Reverse Mortgage Closing Costs – High or Mythical” provides a side-by-side comparison.

When considering whether to do a conventional mortgage or a reverse mortgage you must consider if you can even qualify for a conventional mortgage; then if you can make the payments over time. For example, what happens if “life happens,” could you continue making those payments? Would you be stressed trying to pay living expenses, medical bills, or would you be facing foreclosure? These articles can assist you in reviewing what to do: “A Reverse Mortgage Or A Conventional Mortgage? That Is The Question.“or “Is Waiting To Do A Reverse Mortgage The Best Decision?”

When you decide to do a reverse mortgage make sure you work with an originator or loan officer who is FHA licensed, specializes in Reverse Mortgages, has years of experience and knowledge in reverse mortgages in your state, meets the state licensing requirements (for example in MN mortgage brokers need to be individually licensed – even if they are calling you from another state), and are willing to meet with you to review the details, before the application, during the application and at closing. I would caution about working with a lender from another state who is mailing all the documentation, including the application and not “meeting” with you to explain and review what you are signing. Ask for references and find out if they will be there for you even after the loan has closed. If you feel pressured, call another lender. You can find a list of questions to ask an originator at our webite: www.RMSIDAC.com, “Why Choose SIDAC,” “What To Consider When Talking To Lenders.” Or my blog article, “Don’t Let Fear Keep You From a Reverse Mortgage But Know What To Look For In A Lender.”

To ensure that borrowers understand reverse mortgages HUD requires anyone doing a reverse mortgage to complete counseling through a third-party. They will review the program and discuss other options that may be available.

Will the reverse mortgage be the answer to your financial retirement needs? Explore the option, get the facts, know what to look for in a lender, you might find it will benefit you as it has benefited hundreds of thousands of other seniors.

Additional 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.

Respect for Oneself Increases With A Reverse Mortgage

Posted on January 29, 2010 by Beth Paterson, CRMP

“A reverse mortgage has brought me bountiful solutions to resolving financial issues. Its benefits enabled me to achieve the means to better enjoy living in my own home. The equity available was spent in several areas for home improvement. Included were remodeling of my bathroom, new carpeting throughout my home, and installment of a sump pump to prevent basement floodings. Herewith also personal challenges, as a pledge to my church fulfilled and travel to family weddings and reunion assured.

“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. Thus a respect for yourself increases.”

This is a letter I received from a borrower who had taken out her reverse mortgage over 5 years ago. Through the years I have heard from other borrowers on how the reverse mortgage has made a difference in their lives.

Another borrower called a couple weeks ago to tell me that they are moving into a care center because of with his Alzheimer’s she can’t care for him and it’s not safe for him at home any longer. As we talked she told me how thankful she was for the reverse mortgage and what a difference it and I have made in their life. They did their initial reverse mortgage over 8 years ago and we refinanced it for them about 3 years ago. For years the funds from the reverse mortgage allowed them to maintain their lifestyle and go to Florida and escape the Minnesota winters. No longer able to make the trip to Florida they have used their funds for other needs including medical expenses and home care allowing them to stay at home as long as they could.

Reverse Mortgage Made Difference for MN Man

Dick really wanted to stay in his home of many years. The reverse mortgage funds were used for home improvements and allowed him to participate in a mission trip. Since his reverse mortgage was taken out in 2002 he has called and shared how the reverse mortgage has helped him live his life comfortably and to stay in his home as he desires.

The reverse mortgage has helped seniors retire and still have funds for their lifestyle. Using the funds for home repairs has helped seniors keep up their home so they could remain in the neighborhood where they are familiar. Other times the reverse has been considered a life saver to pay for home care and keep the senior at home where they are most comfortable.

I have specialized in reverse mortgages since 1999 and have helped hundreds of seniors stay in their home with security, independence, dignity, and control. I hope to continue to receive the letters and calls from my borrowers on how the reverse mortgage and I have made a difference in their life. It’s a good feeling knowing that seniors have a better life and more respect for themselves.

For more articles on how reverse mortgages have helped seniors, read:

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

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

Irrational Statements Show Ignorance of Reverse Mortgages

Posted on January 25, 2010 by Beth Paterson, CRMP

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

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

There are no income or credit score requirements to qualify.
No monthly payments required.
There is no limitation on how the funds can be used.
Funds can be received in monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these.
Social Security and Medicare are not affected because it is a loan.
Medicaid can still be received with the reverse mortgage.
Borrowers can stay in the home as long as it is their primary residence or in the case of a couple as long as one borrower is still in the home as their primary residence.
The loan is non-recourse which means there is no personal liability to the borrower or their heirs if they are not retaining ownership. So they don’t have to come up with the difference if the loan balance is higher than what the home is be sold for as long as they are not retaining ownership.
At the time of sale if the home is sold for more than the loan balance, the borrower(s) or their heirs receive the difference.

Just like any mortgage, borrowers still have the title and are responsible for property taxes and insurance, association dues (if applicable), maintaining the property and abiding by the terms of the loan.

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

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

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

Happy MN Reverse Mortgage Borrower

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

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

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

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

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

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

Posted on January 9, 2010 by Beth Paterson, CRMP

Reviewing Reverse Mortgage Fees

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

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

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

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

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

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

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

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

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

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

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

Minnesota Reverse Mortgages SIDAC

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

Tag Archives: Reverse Mortgages News

Basics of Reverse Mortgages – On The Radio

Why Be Embarrassed To Do A Reverse Mortgage?

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

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

You Need To Know Reverse Mortgage Borrowers Are Highly Protected!

Reverse Mortgages Come To The Rescue for Senior Homeowners

Respect for Oneself Increases With A Reverse Mortgage

Irrational Statements Show Ignorance of Reverse Mortgages

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