Making Sense of Reverse Mortgages Information you need to make a good decision!

November 26, 2013

Unintended consequences

Filed under: Uncategorized — Scott Larson @ 11:40 am

I have been thinking about second order effects, the mortgage business, the Dodd Frank Act and ObamaCare.

Sort of a strange mixture at first glance, but hear me out.

As we are witnessing the disastrous rollout of ObamaCare, one of the unintended consequences is that the front line sellers of private insurance, the agents, have been cut out of the picture.  These people have been replaced by “navigators” – newly hired people that are supposed to guide the unfamiliar through the insurance process after 20 hours of training.  Ignore for a moment that these people have not been background checked, and may be working for the next version of the corrupt ACORN housing agencies and look at what has happened to the agents.

They have been discarded.  And they won’t be coming back.

The agents have spent vast amounts of time getting licensed, and learning their business.  They have invested in their careers, have dealt with state licensing agencies, and passed continuing education requirements. I could go on and on about the requirements of the job.   As a result of Obamacare, these experts have had to re-orient their business to other lines of insurance, or leave the field due to government regulation.

Is the mortgage business next?

We have seen incredible changes to the mortgage business over the last 6 or 7 years, some good, some bad, many justified, some just patently stupid.  But during my re-licencing this year (45 hours of continuing education for my brokers license, another 8 for my NMLS) one statement stood out;

LESS than 10% of the Dodd Frank Act’s regulations have been implemented

Less than 10%! only 9 times more regulation to come – woo-hoo! Let’s add another fact.  Currently 95% of mortgage originations are sold to the government.  Want another?  The Consumer Financial Protection Board (CPFB) a non-elected, non accountable is going to be an additional regulator in the mortgage world.

That is a dangerous combination for the mortgage business.

I said earlier that the insurance agents would not be coming back.  That’s my opinion, based on what i see in the mortgage business.  This business, due to regulation, has become much more difficult, for much less reward.  As we get squeezed, other careers become more attractive.  If I was forced out of the business due to regulators/regulation, How likely would I be to return?  I wouldn’t.  If intrusive regulation happened once, it would happen again.  And the industry would lose 25 years of experience…  replaced by a “mortgage navigator” perhaps?  with 20 hours of training?

I am not against regulation – quite the contrary, it is necessary and appropriate.  but we need to have a balance between industry needs, government regulation, and consumer protection, not the government domination that we appear to be moving to.

I love my career, I love my clients, I love the service I can provide.  But if I am forced to leave… I’m not coming back

November 20, 2013

Feels good, but…

Filed under: mortgage,Uncategorized — Scott Larson @ 11:39 am

Not exactly on the reverse mortgage theme, but I had to comment on this article in the Wall Street Journal today.

J.P. Morgan Is Haunted by a 2006 Decision on Mortgages

The justice department fined Chase 13.6 Billion dollars in a settlement for bad behavior during the mortgage crisis.  Now I don’t have a problem with that, for Chase being fined for bad behavior.  They had a bunch of it going on, and they underwrote to bad standards just like the rest of the industry. Then they ignored internal warnings, bundled and sold those poor loans to investors and made big bucks on fees.

That’s bad behavior and should be punished.

But there is more.  Read this paragraph (emphasis mine)

Mr. Dimon, in a statement, said the bank is “pleased to have concluded this extensive agreement” and noted the settlement “covers a very significant portion” of the mortgage-backed securities issued by J.P. Morgan, as well as Bear Stearns and Washington Mutual, two companies J.P. Morgan bought during the financial crisis. On a conference call, however, Mr. Dimon added that J.P. Morgan “simply wouldn’t undertake” a deal like the Bear purchase again. “We never expected this kind of stuff to happen.”

In pursuing the bad behavior, the Feds went after Chase for mortgages they had no part in originating, underwriting or selling.  When Chase stepped in to buy Wamu and Bear, they negotiated with the FDIC to say we (Chase) will take on these banks, but would be “held harmless” for the bad loans. As the old joke says – no good deed goes unpunished.

The Justice Department basically said… too bad, we don’t like big banks and we have the power to make you pay up… In my opinion this is another example of the Obama Administration picking winners and losers, and there will be consequences to this short term “win”

As the WSJ said in another article

The only thing clear from this settlement is there will be no willing buyers during the next crisis.

The articles are here and here though with the WSJ, i am not sure if is behind a pay wall

November 11, 2013

Reverse Mortgage Planning

Filed under: Uncategorized — Scott Larson @ 12:39 pm
A good article about some of the changes to the reverse mortgage program
To summarize, the October changes reduced the amount available to most borrowers
the recent changes to the HECM program are a step in the right direction because
they aim to make the loans safer and encourage loan usage as a long-term financial-planning tool,  rather than as a disaster-recovery tool for households already facing significant financial stress.
The key takeaway in the article though is found here
Some planning experts have started advocating the use of HECM credit lines as a backup resource in lieu of a large cash reserve because the latter produces negative returns in the current ultralow interest-rate environment. Harold Evensky, president of  Evensky & Katz Wealth Management, is co-author of a paper published last year
examining how retirees can use a HECM line of credit in bear markets to avoid selling equities.  The strategy extends portfolio life anywhere from 20% to 60%, depending on the scenario specifics.

(Emphasis mine)

If you would like more information, or if you feel that this is something you would like to explore, give me a call.
In the meantime, you can read the article here


November 5, 2013

Helping an Aging parent from Afar

Filed under: Uncategorized — Scott Larson @ 11:06 am

Time Magazine online has some great tips to help with an aging parent.  Their perspective is from her experience which is long distance caregiving, but the principles are the same regardless of the distance.  Even her tip of planning and budgeting for travel can have an application if you have a local parent.  My mother was relatively local when she was in assisted living, but it was still a 3 hour minimum time commitment, and an extra two tanks of gas per month.

They suggest starting with CMS, the federal program,

Learn about sources of financial help. Depending on their situation, your parent(s) may be eligible for sources of financialassistance. As a long-distance caregiver, you can research the types of aid available and help your parents apply. Start with the Centers for Medicare & Medicaid Services (CMS) (the federal agency responsible for Medicare), and SHIP – the State Health Insurance Counseling and Assistance Program, which provides counseling to families on Medicare and Medicaid. Also research other benefits your parent may be eligible for if he or she is a veteran.

I would also suggest you start with your local Council on Aging, or Department of Aging with your city and County (make sure to check both places).  There are often a lot of local programs and resources that are available.  And (surprise) I am going to suggest you consider a reverse for a source of funds… if it is appropriate.

To read the Time article, click here

Thanks to Richard Wexler at Points of Life for bringing this to my attention

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