TOP 5 – Borrower Misconceptions about Reverse Mortgages

If I take out a reverse mortgage, the lender will own my home

This is the most common misconception. Homeowners still retain title and ownership, and can choose to sell the home at any time. They must simply continue to pay taxes and insurance, live in and maintain the home.

Only poor, desperate, low-income seniors get reverse mortgages

There is a misperception that this is a “last resort”. While a HECM is effective at preventing foreclosures, many simply prefer to be free of monthly payments. Some homeowners can now retire or improve the quality of their retiring years.

Lenders pressure seniors to buy products or take advantage of them

Generation Mortgage only offers reverse mortgage products. In some states it is illegal to be compensated to “cross-sell” with a RM. But we are in the business of improving senior’s lives, and we expect those that work with us to strive for this.

My children will be responsible for the repayment of the loan

A HECM is a non-recourse loan. This means the borrower never owes more than the home is worth. There is NO RECOURSE for deficiency. The heirs can sell or refinance the home, but FHA takes the risk of the loan being upside down.

I can’t qualify for a mortgage because of my credit and income

While there is limited underwriting for them, FHA is less concerned with a borrower’s income, assets, credit score, or credit history. Many seniors who do not qualify for traditional financing ARE good candidates for a reverse mortgage.

HONORABLE MENTION

There are restrictions on how I can use my HECM Proceed                                        False – There are no restrictions for the use of Net Proceeds.

I cannot get a reverse mortgage if I have a forward mortgage.
False – Most of our borrowers are paying off a mortgage at closing.

If I outlive my life expectancy, the lender will evict me.
False – There is no time limit and you still own your home.

I don’t have an objective advisor with whom to  speak                                                 False – Counseling is not only encouraged, it is required.

A recent article printed in the February 2012 Journal of Financial Planning is suggesting that the commonly accepted practice of recommending a Reverse Mortgage as an option of last resort is not the best way to maximize retirement cash flow. Two researchers used extensive mathematical analysis to arrive at the conclusion that, early use of a Reverse Mortgage line of credit can lead to “substantially greater cash flow survival probabilities” for people who are planning for retirement. Read http://www.fpanet.org/journal/ReversingtheConventionalWisdom/

In a second event this February indicating a change in thought, the NCOA or National Council on Aging launched a new consumer website Home Equity Advisor.org. It offers information on using the equity in your home for retirement income. “The website was made possible by a generous grant from the FINRA Investor Education Foundation.” Financial Industry Regulatory Authority (FINRA) has regulatory oversight over all securities firms that do business with the public.

In the past a Reverse Mortgage was considered to be an expensive loan of last resort, not anymore! Reverse Mortgages are becoming main stream and as such lenders are adapting. We now have a new loan programs with lower costs and lower loan amounts that address the cash flow needs of a more affluent borrower. This borrower may have net worth of 1 to 3 million dollars and is looking at a Reverse Mortgage as a financial planning tool. This borrower may be trying to fund the cost of Long Term Care Insurance or, simply have a Line of Credit to offset lack of income caused by market fluctuations without the burden of additional monthly debt service. This is what the saver program does.

We will continue to see change in our industry that will shape our products and benefits, some required, some requested, all designed to meet the needs of our senior clients.

If you would like more information about the saver loan programs, call me.

Chuck Rizzo
Mortgage Services III
630-235-6586

Complaints are not fraud. While I believe the numbers are accurate we need to look at the time period we are evaluating. We have experienced the largest economic downturn in our lifetimes during this timeframe. Are the complaints of “fraud” truly fraud or, merely the expression of frustration by seniors as they watched the value of their retirement assets and homes diminish at a time they were expecting to use them.

These types of dramatic headlines are eye-catching but dangerous. They create fear and misunderstanding and they present honest and responsible financial professionals in a bad light. While I do believe fraud should be prosecuted, let us not confuse a complaint with fraud.

1)  Costs for doing a reverse are comparable to a conventional mortgage…even though you always hear they are high cost. Since this is a FHA insured loan , the difference is the cost of the Mortgage Insurance Premium.  All fees are regulated and only HUD allowed fees are permitted with no mark-ups or junk fees.
2)  Social security and Medicare are NOT affected if you take out cash from  a Reverse Mortgage, because it is a loan so the IRS does not consider the proceeds income.
3) The Lender or bank does NOT own your home..You OWN the home and are on title.
4)  There are no monthly mortgage payments , however you still must pay your taxes and insurance.
5) A reverse is a non-recourse loan. This means the borrower or heirs are not responsible for any difference if the home is sold for less than what is owed. Borrowers are NOT leaving debt to their children.
To talk to a Reveres Mortgage Specialist  at MSI Reverse call 855 901 3100

According to Wikipedia the online dictionary below are the definitions of Medicare and Medicaid. Many seniors believe that these two medical payment systems are all they need for healthcare without every really understanding what they do or how they work. The financial consequences of understanding how and when each of these apply can make a huge difference in a persons quality of life and/or care, it pays to know these differences.

Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other special criteria like the End Stage Reneal Disease program (ESRD).

Medicaid is the United States health program for certain people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states.^[1] People served by Medicaid are U.S. citizens or legal permanent residents, including low-income adults, their children, and people with certain disabilities. Poverty alone does not necessarily qualify someone for Medicaid. Medicaid is the largest source of funding for medical and health-related services for people with limited income in the United States.

Medicaid is basically charity, and while it serves a function of assistance in society there are strict rules and regulations for qualifying. If you are concerned or interested I suggest speaking to a certified elder law attorney or one the specializes in wills, trusts or succession planning.

If you need a referral or are an attorney wishing to be referred you may contact me at crizzo@msiloans.biz

So I did some checking to see what is still made in America:
Here’s are 10 things stills made here:

1. Motorcycles – Harley-Davidson and  Victory, also Snowmobiles by Polaris
2. Baseball bats by Louisville Slugger and Wilson footballs
3. Kitchen Appliances – KitchenAid and Viking
4. Guitars – by Gibson
5. Crayola Crayons and silly putty
6. Hallmark greeting cards
7. Pianos by Steinway
8. Guns…Smith & Wesson
9. Chopsticks! by Georgia Chopsticks
10. Cars – believe it or not 80% of the parts on a Toyota Camry are made in America, 75% on a Chevy Malibu!

Have a Great New Years and all the best to everyone in 2012!

Examples of this include accessible entrance doors; entry-level hallways that are wide enough for mobility devices; ramped or beveled door thresholds; and accessible bathroom.

“Because of the profound demographic shift, state legislators will want to be aware of how the policies discussed in this report affect the ability of older adults to age in place as they consider introducing or amending similar legislation,” AARP concludes in its report. “On the whole, state adoption of policies and practices that facilitate aging in place is a prudent way to help ensure our communities are livable throughout the lifespan.

Because seniors want to stay in their homes, a reverse mortgage is an option that seniors should look at to help them have access to their equity and use it for home health care , or to make their home more handicap accessible if needed.

Read the full report, “Aging in Place: A State Survey of Livability Policies and Practices ^[1].”

Written by Alyssa Gerace ^[2]