Reverse Mortgages: Ten Myths Debunked

Below are common myths that are important for  you to be aware of as you  investigate the benefits of our product!

Myth 1: I have heard that I won’t qualify for a reverse mortgage because of my limited income.

Most traditional mortgages require income qualifications and a monthly mortgage payment; HECM (Home Equity Conversion Mortgage) reverse mortgages require income qualifications, too, but many seniors who don’t qualify for traditional financing a e still eligible for a reverse mortgage. [Read more…]

Reverse Mortgage Changes 2017

2017!

Does that sound as odd to you as it does to me?  Seems like it was only yesterday that HUD finally lifted the county by county limits on the HECM program and we went to a national limit of $417,000 that was raised just a year later to $625,500 and just stayed there but that was actually 2008/2009.

Just last week when we were worrying about the Y2K bug, when all the computers were supposed to go haywire in the year 2000.  And just a year or two ago when I still had brown hair but I digress and I am not divulging how long ago that was!  ;>) [Read more…]

How to Trade-Up (or Down) Using a Reverese Mortgage

Home prices in many markets have gone up recently. This is leaving many retirees with sticker shock when it comes to trading up, or even trading down.

Consider Anna and Olaf who are in the process of selling their $400,000 home. They’ll be left with net proceeds of approx. $364,000 after paying 9% in sales expenses (transfer taxes, real estate commissions, etc.). The new house they want to purchase costs $500,000, leaving them $136,000 short.

  • Option 1: sell or liquidate $136,000 worth of investments or retirement assets. They will need to “gross up” the withdrawal for taxes if the funds are in a taxable account such as a conventional 401(k). Assuming a 25% tax bracket, they will actually need to withdraw $181,333 from the account, pay their 25% income taxes, and walk away with net proceeds of $136,000. Ouch!
  • Option 2: use a $136,000 Home Equity Conversion Mortgage (HECM), also known as a “reverse mortgage”. In this case, there would be no monthly mortgage payment. Anna and Olaf could preserve their retirement assets and buy their new home without any impact on their cash flow.

Please contact me for more information or if you’d like for me to run the numbers for your situation.

Or click here to apply for a mortgage loan.

Don Parsons
NMLS Number: 287222
Commerce Home Mortgage
Corporate NMLS Number: 1839
dparsons@commercemtg.com
http://www.donparsons.com
(949) 428-3099
450 Newport Center Dr. Suite 200
Newport Beach, California 92660

Reverse Mortgage Rules Take Effect March 2nd, 2015

In the last 72 hours I sent an e-mail to all my clients, consumers as well as professionals, in order to alert seniors, specifically those 62 or over, about the NEW FINANCIAL ASSESSMENT RULES for REVERSE MORTGAGES.  Everyone has family, friends, neighbors, or associates that may be impacted.

The new rules were to take effect March 2, but have been postponed 30-60 days. [Read more…]

The Reverse Mortgage – 62 & over – Is it a Wise Option?

As the Reverse Mortgage ads heat up (conventional mortgage rates moved up and refinances became scarcer) due to a new strategy by the big lending house hounds, to attract business, I wanted to address a few things regarding this very important mortgage product.  The Reverse Mortgage in general is a fantastic product, for the right people.  If you call up the local TV ad sales person who has a script in hand, they will not know anything about retirement, tax or financial implications, or the art of mortgage planning integrated with your personal financial goals and retirement plan.  “If you are 62, you should have this product” goes the script. And then the numerous benefits are rolled off the tongue much like the Storage Wars auction on TV, which I happen to enjoy on occasion…… Yup!

The Reverse is not necessarily a last resort loan as many believe, just to keep the client in the home, but rather it is a financial tool that can assist a person in not drawing down their 401K, IRA’s, or savings; the retirement assets of course, subject to taxation whether it is voluntary distributions or RMD’s (required minimum distributions).

The challenge with this product is that the required HUD counseling (over the phone for 1 hour) is pretty much a FAQ session where the counselor simply lays out the options and answers a few questions. Other than that, the “salesman” (referred to as a Reverse Mortgage Specialist, and there are even certifications bantered out to impress you during the “sales pitch”) will try and convince you how easy and non-qualifying this product is, along with the stream of tempting uses of the equity in your home towards vacations, toys, better life style, and possibly a pitch for your favorite charity tossed in for good emotional measure.

house-of-moneyHowever, it is critical to understand ALL the components of this product and whether it is a wise decision to obtain it or not.  Maybe it would be great for a client, but just not now, maybe a year from now…..Only by working with a professional mortgage planner can a family really weigh the pros and cons of this type of loan product.  Often my questions relate to “how other family members, if involved, feel about the reverse; are they able to attend a meeting to discuss the product and it’s options; what are the type and amount of current assets, liquid and non-liquid of the client; what are the plans for living in the current property (you must occupy the residence though there is no stipulation on how much you can travel, or vacation, etc.)  Does the client understand they are “still owners and on title” of the property, and still responsible for property taxes, insurance, HOA if applicable and maintenance; are they aware that at this time there is no deficiency or liability if in the unlikely event the loan exceeds the value of the property when client moves out or departs.  Are there any repairs or modifications to the home that need to be done at some point for the convenience of the client, such as handrails, or wheelchair access, etc.?  The Reverse with adequate equity often can distribute monthly income just like social security, (for virtually any purpose) except it is NOT taxable, and there are NEVER any monthly loan payments while living in the property….. We have only scratched the surface here and as rules continue to change (at end of year several changes occurring and more qualification likely) the Reverse Mortgage will be getting more difficult to obtain.

In conclusion, if you or anyone you know has an interest in the Reverse Mortgage product, please contact me for a free interview and analysis of the situation so we can be sure you make the best and wisest decisions.

Reverse Mortgage Fixed Rate Product Being Eliminated

alert-redOn April 1st FHA is eliminating the popular Fixed Rate Reverse Mortgage. Only those who obtain a counseling certificate and sign an application in time to pull an FHA Case number before April 1st will have the option of obtaining this Fixed rate product.

While the HECM Line of Credit will still be available, and the Fixed Saver product (fixed rate
with much lower draw capacity, or in conventional terms, much lower loan to value requirement) the most popular Fixed product helping the consumer who has a larger mortgage the most, will disappear like the dinosaur.

The Reverse Mortgage, which has had some bad rap in the past, mostly before FHA began to insure and regulate the program, has in recent years become a serious financial planning vehicle. Many consumers over the years would pay down their home quicker than the amortization schedule called for in order to have their home free and clear at retirement, but not invest adequately in retirement accounts. The unplanned result at retirement was a nice home free and clear but not much more than social security to pay the bills. This did not, and does not turn out well, due to lack of financial planning. So, though in this case the Reverse Mortgage becomes a homeowner’s financial salvation so to speak, it has also often become the financially sound homeowner’s greatest financial planning vehicle.  A homeowner age 62 or older, regardless of income or credit (to some degree) can “eliminate their mortgage payment “for life” while they are occupying their home.  If there is a larger mortgage it can be paid off in many cases and the Fixed rate product is usually advisable.  If there is no mortgage or a smaller one, it is generally wiser to apply for the Line of Credit to draw on monthly via auto deposit much like the monthly distribution of an IRA or 401K, but without the tax consequences.  Since the program is very versatile, a consumer can draw out what they need any time they want for repairs on the home, medical care, in home care, anything virtually without qualification.

For more information or a brochure please e-mail me with Reverse in the subject line and simply ask for it, free of charge.  don@donparsons.com

However, if you are 62 or older or have a family member or friend who might want to consider this financial option, it is IMPERATIVE THAT YOU CALL ME ASAP, if merely to determine if the Fixed Rate Product is the correct program for you.  If it is, you have only 1 or 2 days left by which you will be able to get in the system.  Otherwise the still viable Line of Credit program will be the most likely choice for most.

Shake Up in Reverse Mortgage Lending?

Recently Wells Fargo departed from the Reverse Mortgage Market. This after B of A pulled the plug not too long ago.  The facts of the matter are; Reverse Mortgages are still plentiful and will remain available to seniors unless HUD (unlikely) cancels the insurance program.

However they may be tweaked in two specific areasFirst, the loan limits will most likely drop from $625,500 (high cost areas like LA/Orange counties) to $417,000.  Secondly, there is an effort and need to protect lenders from T&I default.  (Property Taxes and Homeowner’s Insurance)  This is primarily what has been the bone of contention for those leaving the arena. FHA guidelines have not made income or credit a “qualifying criteria” for obtaining a reverse mortgage. (exceptions being liens, judgments, etc.)   After all, there are no mortgage payments required by the homeowner until you no longer occupy the property and then you or your heirs must refinance or sell the property to pay off the mortgage.  The solution to this does not need to be complicated or layered with reams of new guidelines as only the government can invent, but rather some common sense underwriting by the lenders themselves.

Probably the important focus currently is that with each congressional budget comes the squeeze for dollars; senior programs are always targets.  The reverse mortgage will be no different.  While I believe some common ground can be found to solve the tax and insurance defaults, the loan limit reductions are a more serious situation in my opinion.  Innumerable seniors will not qualify for the lower limits program due to existing loan balances/lack of equity.  That means many who have had their IRA’s or 401k’s ravaged by the markets the last several years will be drawing down their retirement dollars much faster and will end up out of money, possibly having to sell their home and move in with family or a small apartment, unless they can access a program like the Reverse Mortgage with high enough loan limits.

There is a rare “jumbo product” available, at least currently, but at a much higher interest rate and is not near as good a solution.  IF YOU KNOW SOMEONE THINKING OF APPLYING FOR A REVERSE MORTGAGE AND WAITING, WE NEED TO DO AN IMMEDIATE ANALYSIS BEFORE THE LIMITS CHANGE.

Lastly, never before has experience and skill in this industry meant so much for clients struggling and trying to navigate safely in these financial times, whether it be real estate or mortgages.  Fully 1/4 of my time is voluntarily invested in taking calls of folks referred to me who do not know what to do with their home or mortgage. “I just had a cousin get in the business…” I have this guy or gal I just met in my networking group who does this…..” I heard this ad on the radio where……”  “I was online and found….”
STOP!!! STOP!!!  Run, don’t walk from this, as fast as you can and call and EXPERT! This is not the time to give out 3 names to CYA or refer a “nice guy”.  This market is for experts only.  Little to no experience?  Don’t apply, sorry.  We have had enough bad advice and ‘used car sales tactics selling rates and fees”  by so called lenders.  The financial success or failure of humans is at risk!

Reverse Mortgages – Dream Loan or Equity Pit?

The Reverse Mortgage Purchase Option

This link goes takes you to a 2 page document that discusses briefly using a Reverse Mortgage to purchase a property.

Often seniors (those 62 and over)  will consider placing a Reverse Mortgage on their home for a multitude of reasons, many of which are the same if you use the Reverse Mortgage to “Purchase” a home.  Click on the link above for a brief summary of the FHA HECM Reverse Purchase Mortgage.  Many who have lost homes and had some liquid assets can still buy a home using the “Reverse Mortgage” without the 2-4 year waiting period which is required in normal mortgage loans.  Feel free to contact my office at 949-428-3099 for additional information or a meeting to discuss your or a family members possible needs for this specific type of product.