Not another "Reverse Mortgages Are So Bad" blog?!?!?!

By
Services for Real Estate Pros with Southwest Florida Notaries (Mortgage Notary Signing Agent)

I'm preaching again

OK, sorry to preach, but I just saw a blog about Reverse Mortgages by Michael Pinter.

First, let me commend him for his blog [I can't believe that so much media attention

about Reverse Mortgages is still negative] where he plainly states he doesn't

understand all the negative publicity about Reverse Mortgages.  Second, I keep

saying the same thing, those that are so negative about reverse mortgages usually

do not have all the correct facts about reverse mortgages!

 

Let me address several issues made in the comments:

  1. Reverse Mortgages WERE  a rip-off -
    • Honestly, to those that know or remember the reverse mortgage products from the '70's & '80's, they WERE a rip-off, but the FHA/HUD backed HECM Reverse Mortgage programs will not allow this - and for good reason.  There used to be equity sharing, forced annuities, etc.  These are no longer allowed - period! 
  2. The bank gets the home when the person dies OR the bank takes title to the home when I sign the reverse mortgage papers.
    • Or any other version of this perception.  This is one of THE most common myths.  I've addressed this several times in my blogs [blog1] [blog2] [blog3] [blog4] [blog5] [blog6] - boy did I say it that many times already (that I could easily find) yikes ! ! !  But it has been said many times over, and it can't be repeated enough -

      YOU OWN THE HOME WHEN YOU HAVE A REVERSE MORTGAGE! 

      It is a lien on the house, plain and simple.  No matter if you have 1, 10, or 100 liens, YOU still own YOUR home.  PERIOD!  Plain & simple facts!
  3. They are a BAD investment.
    • Now this is an interesting one.  I've been thinking about how to write a blog about this very topic.  Check back later, as I expect to blog about this in the future.  But the short version here - Many do not use the reverse mortgage specifically as an investment tool.  But, actually, if done correctly, this can not only be a tremendous help to the borrower, BUT it CAN be an great investment tool!  While what I am about to say and describe may not be feasible in all states, more than likely it would be - Lets say the home is worth $150K, they have a $40K existing mortgage paying $400/month.  And they have $1200/month income in pensions & SS.  So for disposable income, they really have $800/month.  Not a lot to cover food, electric, medicines (remember older - many more dollars here!!) & health care, telephone, taxes, etc.  Let's say they are 75 years old, qualify for $100K reverse mortgage, pay-off the existing mortgage, and have $50K left after closing costs, and any other up front payments.  Now this is where most stop, and just having the full $1200 to spend on these same expenditures is a tremendous help - lets take this 'investment' aspect one step further - they get $100K life insurance policy & they are in good health - and that costs $100 a month (I have no clue what it would cost any CFP's out there that can give better estimate??) so now they do have a reduced income to $1100 a month, BUT the family can pay off the loan when they die, or take the money, sell the home and get the remaining equity, or however they want to work it.  This also is not taxed as life insurance does not incur inheritance taxes (In FL anyway)  So I think you get my drift here! 
  4. You'll run out of money/equity in the home with a reverse mortgage as opposed to regular mortgage.
    • If you do run out of equity with a reverse mortgage, you still REMAIN in your home as long as your health permits.  PERIOD.  As long as you pay your taxes and homeowners insurance (and even on fixed income, virtually all seniors can do AT LEAST this!) you remain in your home no matter the balance.  With a regular mortgage (which you must meet income & credit qualifications - not required for reverse mortgage) it is MUCH more conceivable that you could lose a home to foreclosure if you are having troubles making the payments on the home.  With a reverse mortgage foreclosure is not impossible (see another blog: So, how many Reverse Mortgages are being forclosed upon?) but VERY unlikely to be foreclosed upon.  As long as taxes, homeowner insurance and condo/homeowners association fees are being paid, (about only reason for RM to be foreclosed upon) there is no other scenario that I can think of where you can have a reverse mortgage and be foreclosed upon.  Again, not impossible, but VERY unlikely!
  5. Reverse Mortgages are not a part of the lifestyle business
    • How so VERY  wrong!  A reverse mortgage can improve a person's lifestyle TREMENDOUSLY!  While more are doing it to financially survive (which is an improvement in their lifestyle!) some do it to take vacations and do other things to improve their life as well.  I can't think of a better way to do it!
  6. You'll leave nothing (including a home) for your heirs.
    • A lot of this was addressed in Point #3, but another thought.  Some heirs don't WANT the home.  Actually many do not.  They most often put it up for sale and get the remaining money back - a reverse mortgage is NO different, and if done like I mention in Point #3, you could actually inherit MORE money than just what is left from the home!
  7. A reverse mortgage doesn't add anything to the bottom line (financial) and is only a false sense of financial security.  It is bad financial planning for all but a few.
    • Talk to those that have got a RM over the last few years.  It has been a tremendous financial help to MANY over the last few years! I have a friend of the family (and many others that I have helped get a RM as well over the last several years) that one Christmas or Thanksgiving dinner we started discussing reverse mortgages (I didn't even know he had one at that point in time) and HE started mentioning how it was such a big lifesaver, and has been such a big benefit, and all the ways it benefited him financially as well as in general lifestyle - nothing more needed to be said - I knew EXACTLY what he was talking about!  If you learn more about reverse mortgages (today's not years ago!) you will understand more about how they REALLY work! 
  8. Reverse Mortgages have contributed to our current mortgage mess.
    • How?  Foreclosures?  Rarely foreclosed upon - PERIOD.  Lower quality of life?  As I said, virtually ALWAYS improves quality of life - all incoming money goes to bills & sometimes enjoyment things as well.  FORWARD mortgages, poorly informed borrowers (BTW - ALL  FHA/HUD HECM reverse mortgages REQUIRE counseling PRIOR to getting a reverse mortgage!), sometimes predatory lenders, negligent underwriting and/or qualifications,  and many other people and things associated with FORWARD mortgages  have been at fault, NOT reverse mortgages!!  That is a FACT!

I just can't say it enough - LEARN THE CORRECT FACTS about today's FHA/HUD backed HECM reverse mortgages before you are so down and negative on them.  Their impact can be a tremendous positive in so many ways.  Although I agree as many have said, they are NOT for everyone, but for SOOOO many, they have a unbelievable positive effect on the borrowers life!

===============================================================================

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Topic:
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Rainer
4,215
Deborah Huffert
Ace Mobile Notary, LLC - Phoenix, AZ

Well I have a thought about this subject.  I can't wait till I can do a reverse mortgage and get out from under my monthly debt.  It's the only way I'll ever be mortgage free because the penny slot machines just don't pay out enough on jackpots.

Sep 05, 2008 01:18 AM #1
Rainer
120,136
Ronald Gillis
Southwest Florida Notaries (Mortgage Notary Signing Agent) - Port Charlotte, FL
CNSA Southwest Florida. Notaries, Port Charlotte, 941-7-NOTARY

Oh Deborah, Deborah, you are WAY too funny!  Thanks for a great night laugh! Have a good one!

Signature of Ronald Gillis - owner of Southwest Florida Notaries - call them for all your mobile notary needs anywhere in Southwest Florida at 941-7-NOTARYVisit the Active Rain profile of Ronald Gillis - owner of Southwest Florida Notaries - call them for all your mobile notary needs anywhere in Southwest Florida at 941-7-NOTARY

Sep 05, 2008 01:28 AM #2
Anonymous
Ron

Seriously though, I have closed several reverse mortgages and more than half of them helped the senior borrower tremenduosly.  One borrower needed home care that could not be afforded any other way than to pay off the mortgage and get a cash out.  Another had no heat or AC.  Their lovely daughter was at the table all the time encouraging them to sign and saying, "my mom and dad deserve a good life."  They were going to be able to get a new heat/AC unit installed and an updated kitchen.  Another RM borrower got up every morning at dawn to go do her grocery shopping before it got hot because she had no AC in her car.  She was 85 and I had to hold back tears because she had no family and lived off SS.  She was going to be able to get her AC fixed in her car and believe me here in AZ it is a must to have AC in the summer time.  So, I've seen it do great things for seniors who needed help.

Sep 05, 2008 11:37 AM #3
Rainer
120,136
Ronald Gillis
Southwest Florida Notaries (Mortgage Notary Signing Agent) - Port Charlotte, FL
CNSA Southwest Florida. Notaries, Port Charlotte, 941-7-NOTARY

Ron, you certainly don't have to convince me, I've seen it first hand just like you have stated!  But sad to say, SOME care more about inheritance money than their relative!  I was dealing with a woman recently in Sarasota that will be going into foreclosure because her nephew wants all of his $40K due for an inheritance from his mom's portion of the home (BTW - he is living in multi-million dollar home in CT & RETIRED!!!) and if he would sign off on the Reverse Mortgage papers he would get approximately $25K now and the rest when she passes away.  BUT he refused saying that is not ALL he is owed.  HORRIBLE SCUM IN MY OPINION!!! (And that's the nice version of how I really feel about him!)

Signature of Ronald Gillis - owner of Southwest Florida Notaries - call them for all your mobile notary needs anywhere in Southwest Florida at 941-7-NOTARYVisit the Active Rain profile of Ronald Gillis - owner of Southwest Florida Notaries - call them for all your mobile notary needs anywhere in Southwest Florida at 941-7-NOTARY

Sep 05, 2008 12:01 PM #4
Anonymous
Anonymous

Ron:

I couldn't agree with you more-on every point. I have done over 150 RM closings over the last year which means 150+ families; each with their own, individual story. There is no right or wrong reason to do a reverse mortgage and it should be a decision based on each individual situation. I also find that those that are negative about the program have incorrect  information or "pieces" of the process and do not understand how it actually works.

Great post/blog!

Lora

 

Sep 17, 2008 09:40 PM #5
Rainmaker
172,806
Real Estate Virtual Assistant & North San Diego County Real Estate Agent
Christine Wade - Vista, CA

I just stumbled on this post and I was really happy to read it.  I keep telling my parents to consider a reverse mortgage.  It would provide income to them in their retirement and help with medical bills.  And if all the equity is gone in the house when they pass on - who cares?  None of us kids want to take on the house anyway...so let the bank take it back...at least they paid my parents to live out their time there.

Sep 23, 2008 12:57 PM #6
Rainer
290,849
Richard & Carol DeGrace
1st Colonial Community Bank | Bank - New Jersey - Cherry Hill, NJ
Mortgage Loan Officers NJ 609-209-3700

Ronald - I've more recently partnered with a financial advisor to work with reverse mortgages.  He gets the picture.  It is a financial planning tool that has its place.  My most common objective isn't the elderly, but the selfish kids.  :-/

Sep 25, 2008 09:02 AM #7
Rainmaker
46,747
Roy Paeth
Command Capital Mortgage Services - Sycamore, IL
FHA USDA and Homepath Mortgage Loans Illinois NMLS

Good stuff Ron. I have helped many seniors who were going to lose their home of 20 plus years were it not for the reverse mortgage. One of the biggest obstacles i have run into is the kids not wanting to lose that future inheritance. My come back is always to break out how much mom is short each month and let the kids know how mich they will have to contrubute in order to cover this monthly shortfall. Keep up the good work.blogging.

Oct 01, 2008 10:35 PM #8
Anonymous
bess cook

I enjoy your web site.  I have a condo worth about $170,000.  How much would I get back on a reverse mortgage?  I am 65 years old. currently unemployed, no savings at all, and I get $312 in SS. Thank you!

Sep 24, 2010 06:48 PM #9
Rainer
120,136
Ronald Gillis
Southwest Florida Notaries (Mortgage Notary Signing Agent) - Port Charlotte, FL
CNSA Southwest Florida. Notaries, Port Charlotte, 941-7-NOTARY

Bess, I contacted a mortgage loan officer for the answer, but have no way of writing back to you.  Please contact me, and I will forward his answer and his contact information so you can talk to him directly.  Good luck!        

Sep 26, 2010 01:01 AM #10
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Rainer
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Ronald Gillis

CNSA Southwest Florida. Notaries, Port Charlotte, 941-7-NOTARY
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