Who Should You Believe About Reverse Mortgages?

Posted on July 31, 2010 by Beth Paterson, CRMP

With the media publishing articles about reverse mortgages by so called reporters and comments by professionals (financial, CPA, attorney), legislators, and the general public, everyone has an opinion about reverse mortgages. The many articles that have surfaced about reverse mortgages including in MSNBC, Time Magazine, Parade Magazine, Consumer Reports, and the National Consumer Law Center Report all provide information trying to give the impression the reporters have done their research.

Unfortunately these so called reporters have NOT done their research and their articles are NOT based on facts of reverse mortgages. They don’t have documentation supporting their statements. If they had done their research and had the documentation to support their statements the articles would read much differently. Consequently the articles misrepresent reverse mortgages and are painting negative images based on the so called reporters’ biased opinions which spread the misconceptions and misunderstandings of reverse mortgages.

Even the articles that outline the facts have comments that reflect ignorance of reverse mortgages. And the sad point is that people are believing these sources who don’t have the facts or take the time to get the facts.

Think about it. Would you go to a plumber for health issues? Of course not! You go to a doctor. And don’t you go to a specialist for the area of your concern, i.e. a heart specialist for heart disease? So why go to the media, professionals, legislators or others instead of going to a reverse mortgage specialist for the facts on reverse mortgages?

Let me share 15 facts about reveres mortgages that are often misunderstood:

A reverse mortgage is a mortgage just like any home equity loan where one uses the equity of the home but it has special terms for seniors 62 and older.
The lender or bank does NOT own the home – YOU OWN THE HOME, you keep the title and are responsible for property taxes and insurance, association dues (if applicable), maintaining the property and abiding by the terms of the loan.
There are no income or credit score requirements to qualify for the FHA Home Equity Conversion Mortgage (HECM). (Some proprietary jumbo reverse mortgages may have credit qualifications.)
No monthly mortgage payments are required.
There is no limitation on how the funds can be used.
Offers more options – Funds can be received in monthly payments structured for life or as needed, line of credit (with a growth rate), lump sum, or a combination of these.
Social Security and Medicare are not affected because it is a loan, not considered income.
Medicaid (Medical Assistance (MA) in Minnesota) and other government benefits can still be received with the reverse mortgage.
Borrowers can stay in the home as long as it is their primary residence or in the case of a couple as long as one borrower is still in the home as their primary residence. The due date on the mortgage is the youngest borrower’s 150th birthday.
At the time of sale if the home is sold for more than the loan balance, the borrower(s) or their heirs receive the difference. The lender or bank does NOT keep the difference!
The loan is non-recourse which means there is no personal liability to the borrower or their heirs if they are not retaining ownership. So borrowers or their heirs don’t have to come up with the difference if the loan balance is higher than what the home is be sold for as long as they are not retaining ownership. Borrowers are not leaving a debt to their children.
As borrowers use the funds/equity and are not making monthly payments the loan balance increases meaning because they used the money now, there will be less available when the loan is being repaid. (With a conventional mortgage one is using the equity but making monthly payments which repays the interest and a portion of the principal each month.)
Fees are regulated and only HUD allowed fees are permitted with no mark-ups or junk fees. Even though many times they are considered expensive or high they compare to conventional loans, in fact the difference comes down to the FHA Mortgage Insurance Premium. You can see a comparison of the costs in my article, “Reverse Mortgage Costs – High or Mythical?” and “Do You Understand The Reverse Mortgage Closing Costs?”
FHA offers and insures through HUD the majority of reverse mortgages known as the Home Equity Conversion Mortgage or HECM, making it the most highly regulated mortgage available. The advantages include:
- Guaranteeing the funds are available for you.
- Guaranteeing the lender against default or shortfalls which means the interest rates are lower (currently under 3% on the adjustable rate; 5.56% on the fixed) compared to other mortgages.
- Providing a line of credit growth rate (available only with reverse mortgages).
- Insuring as a reverse mortgage it is a non-recourse (no personal liability) loan.
The HECM borrowers are highly protected. See my Blog article “You Need To know Reverse Mortgage Borrowers Are Highly Protected!”

These facts are all supported in the documents signed at application and at closing including the Important Terms and the Loan Agreement. With the reverse mortgage the sample closing documents are required to be provided to borrowers at the time of application so they have the opportunity to review, have their family and/or attorney review the documents before signing. If they read them they will have the facts as outlined above.

One would think it is a simple answer to the question, “Who Should You Believe About Reverse Mortgages?” However seeing the many articles along with the comments it appears people believe the wrong source. So are you going to believe the media and non reverse mortgage professionals about reverse mortgages? I encourage you to get the facts from a reverse mortgage specialist just as you get your health facts from the health care specialist. Then decide if it is right for your situation.

This material my be re-posted provided it is re-posted in its entirety and without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-n4

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.

Should One Refinance Their Reverse Mortgage?

Posted on July 18, 2010 by Beth Paterson, CRMP

Current reverse mortgage borrowers are receiving letters encouraging them to refinance. Even their monthly statements are encouraging them to look at refinancing. While refinancing a reverse mortgage is an option, let’s explore whether it should be considered.

Just like refinancing a conventional, or what we call a forward, mortgage borrowers consider refinancing a reverse mortgage when they need more money. But just like a forward mortgage, one needs to make sure they are going to receive a benefit when they refinance. And just like a forward mortgage, when refinancing the closing costs are part of the transaction.

When I receive the calls from my borrowers who have received the letters or encouragement on their statements I start with these questions:

How long ago did you take out your reverse mortgage?
What was the value of your home at that time?
What is the value of your home now?
What is your current loan balance on your reverse mortgage?
Are you receiving monthly payments?
Do you have funds in a Line of Credit?

These questions are pertinent in helping one decide if it makes sense to consider refinancing.

Keep in mind the factors used to determine the amount a senior can receive from their reverse mortgage include: the interest rate of the program chosen, the age of the borrower (the older one is the more funds one can receive), and the home value based on an FHA appraisal or the FHA Lending Limit.

The first three questions are important in determining if they will be able receive more money when refinancing. As one aged during the time home vales were increasing refinancing made more sense because borrowers were more likely to be able to receive additional funds.

Now generally one’s home value has decreased so we find that the they will not receive additional funds from refinancing their reverse mortgage. If, however, the initial reverse mortgage was taken when there was a lower lending limit, i.e. $251,750 and their current home value is, say $400,000, then refinancing may be considered.

For many years the FHA Lending Limit was based on the county in which one lived. In 2008 the Lending Limit was changed to a national limit of $417,000. For 2009 and 2010 the national limit has been increased to $625,500. Because the limit will be going down to the $417,000 January 1, 2011 there is a push with marketing letters and statements encouraging borrowers to take advantage of the higher lending limit. Is refinancing a good idea here? Not necessarily, especially if one’s home value isn’t in the higher valued range.

The current loan balance is important because when refinancing the reverse mortgage, the current reverse mortgage needs to be repaid. If there aren’t enough proceeds to pay off the current mortgage and to receive additional money then refinancing doesn’t make sense.

The final two questions, whether they are receiving monthly payments or have funds in a line of credit, are important because it doesn’t make sense to refinance a reverse mortgage if they still have funds available to them.

With a forward mortgage sometimes refinancing is done to reduce the interest rate. With the reverse mortgage it doesn’t make sense to refinance for the interest rate. Remember one isn’t making payments with a reverse mortgage so the interest rate doesn’t impact their monthly cash flow, it only impacts the amount that will be repaid when the loan becomes due and payable.

It is important to note that the reverse mortgage is non-recourse which means there is no personal liability to the borrower if the loan balance is higher than what the home can be sold for as long as the borrower or their heirs are not retaining ownership.

Until 2008 all reverse mortgages were adjustable rate mortgages. Now, don’t panic, this isn’t a bad thing with a reverse mortgage. Additionally, the interest rates are remaining low, certainly under 4% and likely under 2% or 3%. The interest rate is made up of an index and a margin and the current margin is higher than the earlier years meaning that the current interest rates will be slightly higher than what borrowers currently have on their reverse mortgage.

In 2008 a fixed rate was introduced. Even though the current fixed rate is a little lower than when it was initially introduced one is not going to gain a benefit of more funds available by refinancing for a lower interest rate – enough time hasn’t passed to offset the costs of refinancing.

Even if the interest rate increases or is higher than what is available now, costs of refinancing will not offset the lower interest rate. Consequently at this time it doesn’t make sense to refinance for a lower interest rate.

The Streamline Refinance of the FHA Housing and Urban Development (HUD) Home Equity Conversion Mortgage or HECM reverse mortgage requires a calculation demonstrating borrowers receive at least 5% more or they must go through the counseling session to review their situation. Some lenders require the counseling for any borrower refinancing their reverse mortgage. This is a strong protection to help borrowers from falling for a lender’s marketing letters and thinking refinancing may be a good idea when it really isn’t. Unfortunately it can cost seniors to find out this information as counselors are allowed to charge up to $125 for the counseling session.

While options should always be considered, after reviewing the above questions and their answers at this time refinancing generally doesn’t make sense for reverse mortgage borrowers. Hopefully seniors don’t get sucked in with marketing letters & statements by completing an application so that the lender can just take an application when refinancing doesn’t make sense for them.

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-mT

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.

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.

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.

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.

Do You Understand The Reverse Mortgage Closing Costs?

Posted on May 24, 2010 by Beth Paterson, CRMP

Signing Reverse Mortgage Application As with a conventional mortgage, there are costs associated with a reverse mortgage. While perceived as high, once understood you’ll see the reverse mortgage costs are comparable to a conventional loan. Most people don’t understand the fees, what they cover or why they have to be paid with a conventional loan either, they just accept them as part of doing a loan.

One difference is that with the HUD insured reverse mortgage, the Home Equity Conversion Mortgage (HECM), HUD regulates the fees and does not allow marked up or “junk fees,” borrowers only pay the actual costs.

To get clear, let’s understand what the Minnesota fees are and what they cover.

Fee	Explanation	Cost/Charge
Origination Fee	Covers the lender’s time and costs associated with originating the loan including: loan officer’s and staff’s salary, administrative costs, business overhead (computers, office space, utilities, health insurance, office supplies, marketing, processing, underwriting, etc.) (Note processing and underwriting fees are generally additional fees on conventional loans but have to be included in the origination fee on FHA reverse mortgages loans.)	HUD sets guidelines for the origination fee: Maximum of 2% of the first $200,000 of the home value or lending limit, 1% on the balance thereafter with a cap of $6,000 or a minimum of $2,500.
FHA Mortgage Insurance Premium	A required charge from FHA because they are insuring the loan. Keeps the interest rate lower, allows more to be borrowed, guarantee funds are available, and covers risk so borrower or heirs are not personally liable.	2% of the property value or mortgage lending limit, whichever is less.
Appraisal	Fee for FHA licensed appraiser to determine the market value of the property. Includes a management fee for an independent company to order the appraisal.	$450 – $500
Repair Administration Fee	All loans with repairs are charged an administration fee for overseeing that the repairs are completed, ordering inspection, processing payments, etc.	1.5% of the repair bid
Credit Report Fee	This is to check if there are any liens or judgements against the property or person that would need to be paid or other contradictory information.	$18 – $20
Flood Certification Fee	For verifying whether flood insurance is required or not.	$15 – $20
Courier Fee	To send pay offs to a current lender if there are any.	Approximately $30 each
Counseling by Third-party HUD approved counselor	A fee may be charged to the borrower for counseling services as long as it does not create a hardship. The counselors must make a determination about the borrowers ability to pay which may include factors such as income and debt obligations – HUD recommends a written procedure for this. Counselors must inform borrowers of the fee structure in advance of services and cannot be turned away, nor the counseling certificate be withheld based on failure to pay. The Counseling fee may become part of the costs at closing.	Up to $125 allowed by HUD
Document Preparation Fee	Charge for preparing the loan documents for closing. A specialized company prepares the loan package.	$100-$125
Escrow, Settlement or Closing Fee	Charged by the title company for handling the title work and closing of the loan.- – – – – – – – – – – – – – – – – – – – – – – – – – – – – -Sometimes there is an additional signing/notary fee or an additional fee for going to a borrower’s home.	Generally $250 – $350- – – – – – – – – – – – – – – $125-$200 signing/ notary fee
Abstract or Title Search	This charge is for searching the county records.	$150-$185
Title Examination	This is for the examiner to review the title and put the commitment together.	$135-$150
Title Insurance	Title company’s insurance on the property guaranteeing clear ownership and protect lender if there is a defect in the title. Different than owner’s title insurance policy.	Based on property value.
Recording Fees	Fees for recording documents with the county such as mortgage, deeds, county taxes, bankruptcy, name change due to divorce or loss of spouse	$46 each + a $5 conservation fee
County Tax	Mortgage Registration Tax required in Minnesota and collected by the county.	Based on Principal Limit
Survey/Plat Drawing; Name & Assessment Search	Fee for obtaining and reviewing the plat drawing; Fee for searching names and assessments on title	$60; $30; $30 = $120 combined (higher for some counties)
Fees Paid by Lender to Broker such as Yield Spread Premium; Service Release Premium; Lender Paid Broker Compensation	Brokers/originating lenders are paid in two ways, one by you (the origination fee) the other by the lenders. Lenders pay brokers/originating lenders compensation for submitting loans to their company. This compensation also covers the broker’s/originating lender’s time and costs associated with their running their business.It does need to be disclosed on the Good Faith Estimate. Note that federally chartered banks do not have to disclose this information to borrowers even though the same compensation is paid.	This is NOT A BORROWER EXPENSE!To disclose this to you, on the GFE it will be shown as a fee then credited back so it is not actually charged to you.

As the RESPA (Real Estate Settlement and Procedures Act) changes effective January 1, 2010 a Good Faith Estimate (GFE) can ONLY be provided with an actual application. It is no longer allowed for the informational or quote package to include a GFE.

Information (in addition to the name, birthday, property information, current loan details,) that will trigger the application include the Social Security Number, Monthly Income, assets, debts, any other pertinent information. This information should NOT be provided until lender is chosen and ready to proceed with an application. Once lenders have this information they may start processing the loan.

Note that the fees, other than the Appraisal and possibly the counseling fee, are wrapped into the loan so there are no other out of pocket costs.

Being clear and having an understanding of the reverse mortgage costs helps you make better decisions and takes the fear away from the reverse 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.

A Letter to Minnesota Governor Tim Pawlenty Regarding Reverse Mortgages

Posted on May 17, 2010 by Beth Paterson, CRMP

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

Dear Governor Pawlenty,

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

Besides the facts I have pointed out previously:

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

The main issues include:

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

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

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

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

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

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

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

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

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

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

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

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

Thank you,

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

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

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

Minnesota Reverse Mortgages SIDAC

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

Tag Archives: Senior Advocacy

Should One Refinance Their Reverse Mortgage?

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

Do You Understand The Reverse Mortgage Closing Costs?

A Letter to Minnesota Governor Tim Pawlenty Regarding Reverse Mortgages