Brian's Blog

Eliminate your mortgage payment, stave off a foreclosure with a reverse mortgage...

2008-08-18T08:51:16Z

I wanted to reiterate a major point that seems to be missed when it comes to reverse mortgages, and that is, the borrower does not have to own the home free and clear to be eligible. One of the major advantages of a reverse mortgage is the elimination of the borrowers monthly mortgage payment. We are even using the reverse mortgage program to stave off foreclosures for senior home owners.

I currently have a client that is 3 months delinquent on their monthly mortgage payment. They are both in their mid-70's living in a $75,000 home that they still owe $40,000 on a current mortgage. We are able loan them enough through the reverse mortgage to payoff their existing mortgage debt. What did we do for them? We eliminated their monthly payment, saved their home, and protected their credit, while giving them the right to own and occupy that home for the rest of their life.

It is no secret that the current foreclosure rate in our country is high with a good portion of these homeowners being seniors. Many are losing their homes at the courthouse steps without ever being told a reverse mortgage might be a solution. Don't let this happen, spread the word. Eliminate a mortgage payment or stave off a foreclosure...Why wouldn't someone explore reverse mortgages as an option?

Shopping for a Reverse Mortgage Lender

2008-07-30T15:45:20Z

Reverse Mortgages are a very confusing and complex product, so shopping around for the correct lender can often be difficult. However, there are 6 main points that a homeowner can focus on to make this process easier and ensure they are choosing the best lender for their needs.

1. Cost:

What is the reverse mortgage going to cost me? There are many upfront fees associated with a reverse mortgage that will differ from lender to lender. Always ask for a Good Faith Estimate(GFE). This document will itemize the closing cost that you can expect to pay for the reverse mortgage.

2. Available Funds:

How much money am I eligible for? Find out how much money each lender estimates can be loaned to you. In most cases your net available funds from each lender will differ, however, the lender offering the most money isn't always the best choice.

3. Servicing:

Who will be servicing my loan? In many cases the lender or broker that originates your loan might not be the company that services your loan. To many borrowers this is discouraging. The company that won their trust in the beginning sometimes have nothing to do with the loan after it closes. There are only two companies in the country that can fund and service their own reverse mortgages for the life of the loan, and they are Wells Fargo and Financial Freedom.

4. Local offices:

Is there a local representative that can assist me? Many reverse mortgage companies operate through the mail or over the internet. If you would prefer to have a local originator that can give you personal service ask for one. If the company can't provide someone then they probably are not the lender for you.

5. Reputation:

Does this lender have a good reputation? Ask the lender if they are members of the National Reverse Mortgage Lenders Association(NRMLA). This is the professional association for reverse mortgage lenders that set the guidelines for the best practices in the industry. Members of this association are committed to the highest standard of consumer satisfaction and ethical lending. If your lender is not a member of NRMLA, be cautious. Also, take note of the company's size, years in business, and success in the industry to help gauge their reputation.

6. Other Services:

Do you offer any other services? Many reverse mortgage originators in the industry today are also insurance salesmen or securities officers. If they are hawking other services like annuities, life insurance, long-term care insurance, or investments be very cautious. Many of these originators will be high pressure and make it seem that if you take advantage of a reverse mortgage you must spend some of the proceeds on these other products. So find a lender that specializes in reverse mortgages and nothing else.

If I may be of any assistance or can answer any questions concerning reverse mortgages, please don't hesitate to give me a call. Thank you.

Protecting a spouse with a reverse mortgage.

2008-07-29T09:55:39Z

As the awareness of Reverse Mortgages grow, many folks are learning the benefits of this government insured program and adapting it to their financial planning needs. I have recently seen an increase in couples inquiring about Reverse Mortgages as a financial protection tool for their spouses in the case of one of their deaths. You see, the largest benefit of a Reverse Mortgage is the elimination of a monthly mortgage payment. Many couples who are easily making their mortgage payment now, would not be making that payment so easily had their income been cut in half by the death of a spouse. In this situation, a couple may be making a $500 monthly mortgage payment on a Social Security income of $2000 a month. However, in the case where a woman is recently widowed, she not only loses her husband but she also loses his monthly income. Now, making that same $500 monthly payment on only a $1000 monthly income becomes much more difficult.

Using a Reverse Mortgage as a planning tool keeps the remaining spouse from this financial hardship and gives them the right to own and occupy that home for the rest of their life without a monthly payment obligation. In the above example, we often see the widowed spouse try to maintain the same monthly bills on only half the income, only to come up short and risk losing the home to foreclosure or ruining their credit. Don't allow this to happen to someone you know. Make them aware of the benefits of Reverse Mortgages and how to use those benefits to plan through the retirement years. For more information, or for your free Reverse Mortgage Guide don't hesitate to call me at 859-260-3429. I look forward to your call.

Top 10 Reverse Mortgage Myths!!!

2008-07-02T10:49:52Z

Myth #1 - The bank takes the house OR the borrower can lose the house.

With a reverse mortgage, the borrower retains title to the home throughout the life of the reverse mortgage. The borrower cannot, as a result of the reverse mortgage be forced out of his or her home, as long as property charges, such as taxes and insurance, are paid and the home is maintained in reasonable living condition.

Once the last borrower permanently moves out of the home, the loan must be repaid. Most properties secured by reverse mortgages still have equity when a maturity event occurs and therefore the borrower or his/her heirs choose to sell the home to repay the loan and preserve this equity for the benefit of the borrower or his/her estate.

Myth #2 - The home must be paid off or be debt-free to qualify for a reverse mortgage.

Reverse mortgages convert home equity into cash. As long as there is sufficient equity in the property, the homeowner may be eligible for a reverse mortgage. In fact, many seniors use a reverse mortgage to pay off an existing mortgage in order to eliminate a required monthly mortgage payment.

Myth #3 - When a reverse mortgage becomes due, the bank sells the home.

The borrower is in control of the home and retains title, not the bank or lender. So while it's common for the borrower or the heirs to sell the home to repay the loan, it's a decision the borrower or his heirs make. The borrower or the heirs might also refinance the home in order to repay the loan.

Myth #4 - It's cheaper to move to a smaller house.

While this strategy might be right for different reasons, seniors need to analyze their costs carefully before making this assumption. The process of selling a home and moving into a new home can be expensive. The typical real estate commission of 6% on a $300,000 home would be $18,000. Add moving costs, and the undertaking to find a new home and the decision is not as simple.

Myth #5 - Children want the home or don't feel comfortable with a reverse mortgage.

Seniors are encouraged to talk with their children about reverse mortgages. Many baby boomers are faced with trying to plan for their retirement and pay for their children's education. Often, the children of many seniors are happy that their parents have a financial solution available to help them live more independently and financially secure.

Myth #6 - The borrower could end up owing more than the home is worth.

Two of the great safeguards for reverse mortgages are that they are structured so that the borrower or his estate can never owe more than the value of the home upon repayment. In addition, the HECM products are insured by the Federal Housing Administration, an arm of the U.S. Department of Housing and Urban Development (HUD).

Myth #7 - Reverse mortgage proceeds will impact Social Security and Medicare benefits.

A reverse mortgage will generally not affect regular Social Security payments or Medicare benefits. Depending upon the borrower's situation, a reverse mortgage may affect benefits one receives, if any, from the Federal Supplemental Security Income (SSI) program, or state-administered programs like Medicaid. It is recommended that the borrower speak with his or her financial advisor and appropriate governmental agencies.

Myth #8 - There are restrictions on how the money is used.

Actually there are no restrictions. The cash proceeds from the reverse mortgage can be used for any purpose. It is recommended that the borrower speak to a financial advisor. Many seniors have used reverse mortgages to travel, pay off debts, help their kids, make a luxury purchase or just live more comfortably.

Myth #9 - Once the proceeds are received, taxes will need to be paid.

The cash proceeds from a reverse mortgage are tax free because it is already your money. It is recommended that the borrower consult with a financial advisor.

Myth #10 - Reverse mortgages are only for seniors in need, or for the "house rich, cash poor".

The reverse mortgage is an excellent financial planning tool that has been used by homeowners from all walks of life to enhance their retirement years. Increasingly, lenders are seeing interest and growth among jumbo reverse mortgages geared toward borrowers whose homes exceed the FHA lending limits, which peak below $400,000. Many seniors with multi-million dollar homes are using reverse mortgages as part of their estate or legacy planning in conjunction with advice from financial advisors.

If you know anyone that may benefit from a reverse mortgage please get this information in their hands. Or they can call me at 859-260-3429 for their free quote and consultation. With the rising price of food, prescriptions, fuel, and energy, most fixed incomes such as Social Security aren't able stretch. Seniors need to be made aware of the safety and viability of this government regulated and insured program for homeowners 62 and older. I look forward to the call. Thank You.

Why are reverse mortgages so scary?

2008-05-28T14:08:02Z

It's troubling to me that with today's high prices of gasoline, food, energy, etc. that senior citizens are reluctant to take advantage of a reverse mortgage because of their fear of the program. Why is a reverse mortgage so scary?

Reverse mortgages saw some popularity in the 1980's and with this popularity came some unscrupulous lenders who took advantage of our country's seniors. Reverse mortgages at the time were unregulated and lenders were playing by their own rules. Many seniors paid extremely high fees, were forced out of their homes, and many simply lost their homes to bad loans. So the fear and negative stigma with reverse mortgages is not unwarranted. However, what most people haven't been made aware of is that our federal government put a stop to these predatory practices in 1991 and began regulating the product under the umbrella of HUD and FHA. Today, a reverse mortgage is regulated and insured by FHA and probably one of the most consumer protected products that a senior can get involved with.

I know what you're thinking. You have recently seen some negative news about reverse mortgages, and if it's so safe, why the negative media in 2008? Remember those unscrupulous lenders from the 1980's? They're back. This time in the form of insurance agents or securities officers, and they are originating reverse mortgages also. The negative press today is coming from originators who are convincing seniors they need a reverse mortgage then pressuring them to use those proceeds on insurance or investment products. The reverse mortgage is not the problem. It is how the borrowers are pressured into spending the proceeds of the reverse mortgage that is the problem, however, the headlines always say "REVERSE MORTGAGE". These borrowers would have just what they needed if they had the cash to accomplish their retirement goals not put away into complex investments that keep their money out of reach. This is why reverse mortgages are so scary. It's a lack of awareness on the safety of the product and an uncertainty of the intentions of companies offering the product.

Why are people so afraid of reverse mortgages?

2008-04-30T14:38:46Z

Why are people so afraid of reverse mortgages? You can walk into any room and ask for people's ideas about reverse mortgages and you will hear words like "scam", "predatory", and "steal". Let me be the first to tell you that these feelings are not unwarranted. Back in the 1980's when reverse mortgages first became popular, lenders were playing by their own rules. At the time, reverse mortgages were an unregulated product and senior citizens did get taken advantage of. Some were forced out of their homes, others lost lots of money and some even lost their homes. It was so rampant you heard horrible reverse mortgage stories even on the national news. This is why there is still such a negative stigma with reverse mortgages now 20 years later.

What most people don't know, or haven't been told is that in 1991 our federal government recognized that something had to be done to stop the unscrupulous lenders from preying on our seniors. The government also recognized that reverse mortgages did have benefits for seniors on a fixed income if the product was handled correctly. That is when they introduced the FHA Home Equity Conversion Mortgage, or "reverse mortgage". The reverse mortgage was now government regulated and government insured with many consumer safeguards and protections. Today, an FHA endorsed reverse mortgage is one of the most consumer protected programs that a senior citizen can get involved in.

Some of these protections include:

Third Party Independent Counseling: Borrowers must meet with a third-party money management counselor who will review the transaction and answer questions.
No Maturity Date: No required payments and a lifetime right to own and occupy the home, provides protections from future circumstances that other loans cannot offer.
Limitation on Fees Charged: Fees are limited by HUD regulations and may be financed, enabling a borrower to incur very little out-of-pocket expenses.
Advanced Disclosure of Costs: A total annual loan cost disclosure displays the total transaction costs over the projected life of the loan.
Standard & Capped Interest Rates: The interest rate is the same no matter which lender a borrower chooses and the rates have lifetime caps.
No Prepayment Penalty: Although the loan is not due until the borrower no longer occupies the home, it can be paid off at any time with no additional costs.
Three Day Right of Rescission: Even after the loan closes, a senior has up to three days to cancel the transaction for any reason whatsoever.
Asset Protection: The amount due can never exceed the value of the home. A borrower can never fall "up-side down" on a reverse mortgage. Title and deed of the home always remain with the borrower and any remaining value after the loan is paid back belongs to the estate or the heirs.

I know there are seniors out there who are falling behind on their mortgage payment, struggling to put gas in the car, or just need some money to do home repairs, that a reverse mortgage would benefit. But they don't explore it as an option because they are scared of what might happen because they don't realize the safety of the product today. The answer to all their problems exist within a reverse mortgage; financial security, peace of mind, or the preservation of their legacy are all at their fingertip. It's just that no one has taken the time to sit them down and educate them and steer them down the right path. What are you waiting for? Tell someone you love about reverse mortgages today.

I'm proud to offer Reverse Mortgages...You've got to read this story!

2008-04-28T21:01:25Z

When I first began in the reverse mortgage business I was embarrassed to tell friends and family what I was doing because of the negative perception of the product. I did not want my friends and family to believe that I was "preying" on senior citizens with a predatory loan product. I truly believed in my heart that this was a great product for many, it was just easier to avoid the conflict rather than constantly arguing and educating the masses. I often told people I was originating mortgages when asked. I just left out the minor detail of "reverse" mortgages. However, this all soon changed.

One day while talking to a friend I learned that his Mother had ran into some financial trouble and lost her home to foreclosure. I learned she had nearly $75,000 equity in her $160,000 home and had lost it all due to her inability to make her monthly payments after her husband's death and now lacking his Social Security income. To make matters worse, to take care of his mother, now with limited income, no home, and tainted credit, he saw no other option than to welcome her into his home. Six months later, this is not going well for the family, which is mom, husband & wife, and a 15 year-old son in a three bedroom home.

After hearing this my heart sank and I was immediately filled with guilt. Reverse mortgages, the product I specialize in, could have helped this family. We could have prevented the foreclosure, saved her credit, and kept her in her home all without a monthly payment. If only my friend and his mother knew about this solution. If only I'd had mentioned it in passing before. If only...If only...If only... The very next day I composed a letter to every friend, family member, or acquaintance I could think of explaining my new profession and the benefits of the program. I vowed to proudly explain what "I do" when some one asks. And now there is no sweeter question in the world than, "What do you do for a living?"

Allow me to speak from experience. There IS someone you know that would benefit from a reverse mortgage. Don't allow this solution to go undiscovered any longer. Whether it be a news story, a business card, or a polite suggestion, talk to the people you love about the benefits of reverse mortgages today.

You can offer reverse mortgages too...

2008-04-28T12:51:13Z

With the popularity of reverse mortgages many people are looking to get in on the action. I offer a program to non-FHA licensed mortgage brokers where they can broker-in our reverse mortgage product. Banks, credit unions, and savings & loans are exempt from licensing requirements and therefore ARE eligible. With this Reverse Mortgage Broker-In program brokers can earn a minimum of $500 per closed loan for very limited involvement. This is an easy way to add another product to your services and make great revenue for your company at the same time. We all understand how many non-FHA brokers are struggling due to the current market. This is a tool that can help produce some needed revenue. Please contact me if you have any questions or would like additional information.

Reverse mortgages as a tool for real estate agents.

2008-04-28T12:11:42Z

I was recently contacted by a local real estate agent about our reverse mortgage program. She had a client who had $150,000 to spend on a home. The problem was, this client liked all the $200,000 homes, however, she did not want a monthly mortgage payment. The agent asked me, "Can your program come up with the $50,000 shortfall?" This agent did not exactly understand the program but here is how we helped. I advised that the client go ahead and get a contract on the home she liked. This did end up being a $200,000 home. She put her $150,000 down and mortgaged the remaining $50,000. We then did a reverse mortgage on the $200,000 home. By calculating her age, home's value, and the interest rate we determined that we could loan her approx. $120,000. With these funds we first paid off her $50,000 mortgage balance, eliminating her monthly payment. With the remaining $70,000 we set up a line of credit for her to use as "rainy day" funds.

Through this reverse mortgage, the client got the higher value home she wanted with no monthly payment as well as the availability to an additional $70,000 in funds, while the agent made commissions on a $200,000 home instead of a $150,000 home. The only real setback with this situation was the borrower had to pay closing costs on her "forward" mortgage as well as the reverse mortgage. To assist with this situation, Wells Fargo is close to offering a "reverse mortgage for purchase" product that should be available by the end of 2008.

Feel free to contact me with any questions you might have regarding our Wells Fargo Reverse Mortgages. I offer free consultations right over the phone for any clients or scenarios you might have. I look forward to hearing from you.

What is a reverse mortgage?

2008-04-28T11:34:11Z

What is a reverse mortgage? A reverse mortgage is a special type of loan that enable seniors to convert some of their homes equity into tax-free funds. Unlike traditional equity loans, no repayment is required until thet home is no longer the borrower's primary residence.

Who is eligible? Senior homeowners, over the age of 62 who occupy the property as their principal residence. We can do reverse mortgages on single-family homes, town-homes, condos, and even 2 to 4 unit dwellings. The best part is there are no income, credit or employment requirements to qualify.

What are some of the benefits? With a reverse mortgage the borrower always has the right to own and occupy the home. The lender never takes ownership of the property. The available cash can be used for any purpose and does not affect Social Security and Medicare benefits. Also, unlike popularly believed, the heirs can keep the home once the reverse mortgage is repaid.

How is the loan repaid? A reverse mortgage is due and payable when the property is no longer considered the borrower's primary residence. The loan must be repaid in one payment - either from the sale of the home or from other resources.

I hope this is some valuable information about this government regulated and insured program. There are many myths and misconceptions about reverse mortgages. Get yourself educated. This program may just be the answer to the problems of someone you know. Also, for you real estate agents, this program can also be an additional tool for you to increase you business. I'll explain more about that in later blogs.