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

October 14, 2013

The Caregiving dilemma – losses and rewards

Filed under: caregiving,Reverse Mortgage — Scott Larson @ 4:21 pm

CNN posted an article that outlines what many of us have or are dealing with. Caregiving for your parents… you can take a look at the article here.  One of the decisions that I made is that I couldn’t do it…

We all have to look at our gifts and see if they match with the needs of our parents.  Mine did not match up to true caregiving.  That’s not to say that I was not there… I was… felt like all the time.  There are wonderful gifted people that have that set of gifts, and they are hugely important.

Caused me some distress for a while – shouldn’t I be there for Mom?  And the answer was yes… but that does not mean that you have to do everything.  Balancing that is part of the art of dealing with parents (with everything really), and part of my balance was hiring a caregiver so that I could be there long term in a way that blessed her, and allowed me to survive.

If your choice is to do it yourself – Go for it!  But make sure that you take care of yourself.  In-home agencies can be hired for respite care, or many assisted living communities will take your parents for a “vacation” in their facility to allow you to get away.  Make sure that is part of your plan.  Also take a look at caregiving.org for other ways to make sure your plan is sustainable…

October 11, 2013

Three Horsemen of the Retirement Apocalypse

Filed under: Reverse Mortgage — Scott Larson @ 9:06 am

Time Magazine (remember them?) has a story out saying that the three pillars of retirement
Social Security, employer sponsored plans and personal savings have all weakened over “recent years.”

Hmmm… Ya’ think?  They have some interesting perspectives on what might happen, but it doesn’t appear that their recommended “out of the box” thinking includes reverse mortgages…

Th Time story can be found here and Blackrock’s report on retirement needs can be found here (more on that later)

August 4, 2010

Yellow Flags in Reverse Mortgages

Filed under: Uncategorized — Scott Larson @ 2:17 pm

In the mortgage industry we are always looking for “red flags,” items that might indicate fraud or misrepresentation.  But in an article yesterday in National Mortgage Professional, Dr.Barbara Stucki  of the National Council on Aging talks about a new counseling protocol that includes

a series of questions relating to risk factors that may not be considered a normal part of the discussion in taking out a loan. For example, is the person living alone? Have they had a recent fall? Do they live in a house with stairs or other barriers?

By themselves, each of these issues may not be a risk, but they can add up. For example, seniors who live alone may have few other resources so they may be overly dependent on a reverse mortgage. If they are also in poor health and their financial needs exceed their expectations, they may soon find themselves unable to fulfill their borrower obligations, such as paying property taxes, homeowners’ insurance and home maintenance. These types of risks, which we call “yellow flags,” are important and should be added to the overall assessment of a person’s needs and goals.

These help to address the “appropriateness” issue that I have talked about for so long.  The counseling provides a score that helps to indicate where more attention needs to be paid to the other details of the transaction to make sure that a reverse mortgage is a long term solution for the senior.

To read the whole article, click here.

July 9, 2010

ABC covers reverse mortgages

Filed under: Uncategorized — Scott Larson @ 10:25 am

ABC’s Good Money recently ran a nice summary of reverse mortgages… take a look!

ABC\'s Good Money on Reverse Mortgages

April 29, 2010

Reverse mortgages and trusts

Filed under: Uncategorized — Scott Larson @ 12:34 pm

 There have been a lot of questions lately regarding reverse mortgages and trusts, specifically can we make a reverse mortgage when a “standard” revocable trust is involved.

 The answer is yes,  at least most of the time.  The reverse mortgage can accommodate vesting the property in the trust, and allowing the trust powers to be exercised once the reverse mortgage is in place.

 Where we run into problems is when one or more of the principals of the trust is unable to sign or understand a reverse mortgage.  Even though powers to convey or borrow may be granted in a trust to a successor trustee, HUD holds us to a higher standard. 

 We will typically run into this when a child is caring for an aging parent suffering from Alzheimer’s, dementia, or a stroke.  The child has assumed responsibility for the bills, and/or medical treatment and has been operating as a successor trustee, sometimes for years.  Then the money runs out, and the child looks to the home to help provide for mom or dad.  Unless a power of attorney has been previously prepared, the process cannot even be started. 

 There are only 3  acceptable ways that a reverse mortgage can be started, according to HUD – in person, using a power of attorney (dated before the disabling event), or using a conservatorship.  This keeps the loan officer and/or underwriter from being responsible for determining the ability of the senior to understand the transaction. 

 This may seem harsh or unreasonable, but when considered in light of protecting the senior makes some sense. 

 Part of the issue is that many people view an estate plan as a “set it and forget it” type of document.  The trust has been in place for years, and in most cases only used occasionally.  Meanwhile, the standard of care has increased, so  we are dealing with the changes that may have occurred over many years, sometimes decades.

 A conservatorship is an extended, expensive project, so the advice here is to make sure the estate plan updated regularly.  An annual review might  seem expensive, but only until you compare it to the costs of not doing it.

March 30, 2010

Underwriting Requirements?

Filed under: Uncategorized — Scott Larson @ 11:36 am

One of the most talked about issues in the industry publications is the issue of “technical defaults.”  This is where the homeowner is not able to keep the property taxes paid, and the home insured.

This is one of the few areas where the inaction of the owner can result in a foreclosure. Until now the issue of the technical default has been (and may still be) an issue that only affects a very small portion of the reverse mortgage consumers, but as we continue through these difficult economic times more consumers are at risk of defaulting. HUD is not releasing the figures of the people that are in technical default.

One way that this is to be addressed is by way of an announcement of a new HUD counseling protocol. With its next revision HUD will require an analysis of a seniors income and assets to make sure that there is a likelihood that the senior will retain the ability to keep the taxes current and the property insured.

Should this appear to be an issue, HUD may allow/require a set aside for the payment of these items, reducing the net amount available for the senior.

This is not a credit or financial underwriting, just another measure designed to protect the senior, making sure that the program is not a stopgap measure.  A reverse mortgage does not have income or credit requirements.

As always, should you have any questions please give me a call.

March 24, 2010

a GREAT summary of the economy

Filed under: Uncategorized — Scott Larson @ 8:54 am

Going through some of my paperwork and found this summary of the economy Definitely worth a few minutes to look at!

A better use of retirement funds?

Filed under: Uncategorized — Scott Larson @ 8:34 am

I had an inquiry today for a person that owed a little to much to get a reverse mortgage, she would have had to bring in cash to the escrow company to pay down her current mortgage to the new loan.  While I have not heard back from her yet, I  think the answer I gave to her is instructive;

I have had people take money out of retirement accounts to close a reverse mortgage.  Sometimes a better use of the money than leaving it to “grow” in retirement and generate $1300-$3450 income per year (2-5% return) is to use it to pay down the mortgage and “save” (not pay) $24,000/yr. 

It’s hard to really play this out on a financial level, because there are so many variables.

  • How many years will she live?
  • How else could she invest the money?
  • How much of her savings/retirement would this use up?
  • How long does she expect to be in the property?

There is a significant cost to a reverse mortgage, both as an up front cost, and the cost of the interest, but if you look at eliminating over $24,000  per year in cash flow, that can make a significant difference in a retirement!

March 18, 2010

Another source of funds for seniors

Filed under: Uncategorized — Scott Larson @ 10:26 am

The  New York Times today has an article on life insurance and selling it to generate cash for a senior, cash that can be used for any purpose… I always hate to see advice like this, because it is never placed in the context of  this is a one time event, you can’t go back to this well again.

When considering a reverse, or selling insurance, make sure this decision is not made lightly.  Yes, there is a place for using some of these proceeds to enjoy life, to help children etc., but this must be placed in the overall financial picture.   

And especially with the life insurance product, don’t take the first offer you get;

Oklahoma needed to address a spate of out-of-state buyers who solicited older residents and encouraged them to buy and then sell policies, offering perhaps $30,000 or $35,000 for rights to a $1 million policy, she said. (emphasis mine)

Each state regulates these types of sales, unlike reverse mortgages which are federally regulated.

Read the rest of the article here.

March 17, 2010

Backround information

Filed under: Uncategorized — Scott Larson @ 10:36 am

In a post in Origination News today, Brad Finkelstein writes about the demand for mortgage backed securities based on reverse mortgages, but the comment that caught my attention was this (emphasis mine):

The underlying current of the meeting is NRMLA’s code of ethics. “I have been in the business for over 40 years and I have never been around a group of people who are so focused on treating the customer right,” Mr. Yeary said, adding the aim is to make sure as a trade association all of the members are following the code of ethics.

“Let’s face it, when you are dealing with seniors, one bad actor can stir up a whole bunch of stuff that can have a negative effect on the program,” he continued.

Mr. Yeary also noted the passing of a milestone, that reverse mortgages now have a market share penetration of greater than 1% of the eligible population.

“We’re all very optimistic this program will continue to be a viable alternative for a lot of seniors.”

Nice to see this recognized.  You can read the rest of the article here.

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