Archive for January 2008

Again, It’s All About Timing

January 30, 2008

1020_sa_biz_bizb.jpgIn most big decisions that we make, much of it has to do with our timing. Whether it is buying a car, purchasing a home, refinancing our mortgage, or remodeling our home, timing is everthing. It is no different with decisions regarding reverse mortgages, and thus with one of my most recent discussions with a prospect.

Throughout my interview process, it is important for me to get a handle on several things about wishes and desires of my clients. What are their goals? Do they want to stay in their home for an extended period of time? What is their current income? Are they currently working? What is their current financial situation? These are just a few of the questions I ask to help determine if the situation is right for them to enter into a reverse mortgage. If done too soon, it may put them in a difficult situation later on.

Many most recent client is a nurse. She works part time earning about $1,000 per month to supplement her social security income. She is 63 years old and sees herself working for the next 5+ years. In evaluating her current situation, she is not in such a tight financial position where she needs to have more incoome. Her current financial situation should take care of her for the next few years without too much problem. Yes, she would like to have some extra money for the unexpected events, but it is not pressing for her. At 63 years old, the greatest benefit for her would be to pay off her current mortgage. With the little amount left over, it provide her with a small line of credit, or an income of a couple hundred dollars more per month, which she really doesn’t need at the moment.

Together we decided that it might be in her best interest to wait. Why so, you ask? With reverse mortgages, the older the age, the more one can receive. In fact, the average age is roughly around 72 years old. Though everybody’s situation is different, it seems to be the age when the financial crunch hits people the most. Medical expenses and liquidity become the most pressing issues.

It is important to evaluate each situation carefully. Not only do I feel better about the purchase, but the client usually very much appreciates the assistance in evaluating their options. It may mean, in this situation, that a simple refinance of their current mortgage will free up some extra cash each month which may hold them over for a period of time. The only thing one does not want to do (if they are looking for a reverse mortgage in the future), is to NOT do a cash-out refinance. Once they start dipping into the equity, it may move them out of the possibility of doing a reverse mortgage later on.

Selling reverse mortgages is not really about selling at all, though that is what we call it. Acting as a consultant and doing what is in the best interest of the senior client is what reverse mortgage sales is really about. It makes me sleep better at night!


We Have Been Pleased with Our Reverse Mortgage

January 25, 2008

j0409123.jpgOver the past several months I have been in conversation with a client that took out a reverse mortgage about 2 years ago. Their home is valued around $400,000. It has been an interesting conversation as they have been very pleased with what their reverse mortgage has done for them over the past 2 years. It has provided them a chance to enjoy their life more without the constant stress about finances.

Both husband and wife have said, “We want to use the maximum amount that we can. We don’t plan on leaving anything.” Now, I must say, I don’t get this kind of comment very often. They have three or four children who currently live in different parts of the country, and all of their children have encouraged them to use the reverse mortgage any way that they can to improve their quality of life. In fact, they have mentioned several times that their children all make more money in a given year than they ever have.

If you know much about reverse mortgages, HECM’s (the FHA insured product) has county lending limits that will limit the value of homes that exceed that limit. In this case, when my clients took out their original reverse mortgage, the limit was $284,600. This left them with almost $115,000 of equity that FHA did not recognize in getting the loan. Today, as we await lending limits to go up with the passage of the FHA Modernization Bill, they would be able to access another $60,000-$70,000 of their equity.

As we move into this new era of reverse mortgages, more and more seniors, who are struggling to take care of their financial needs and desires during their retirement years, will have great opportunity to benefit from the host of benefits that reverse mortgages offer. With cautious optimism, we look forward to President Bush signing the bill that will impact the lives of seniors today and allow more people to benefit from the program.

My Clients – Some Reverse Mortgage Statistics

January 18, 2008

j0422176.jpgOver the last few years, I have kept some statistics about my clients. These statistics are based on nearly three years of working in the industry. Keep in mind that reverse mortgages have become much more accepted over that past year than they had prior to that time.

Average Age: 73.62
Youngest: 62
Oldest: 97

These stats are based on the age of the youngest borrower.

Primary Purpose:
Increase Income: 73.2%
Emergency Fund: 18.3%
Medical: 6%
Pending Home Project: 3%

Most of my clients had a combined purpose for taking out their reverse mortgages as many established an emergency fund with their line of credit, and either paid off their mortgage or received the tenure payment as income. In addition, many of my clients had medical bills that they needed to pay off, or they wanted an emergency fund in order to pay for some upcoming medical bills. Dental procedures and the desire to travel were additional reasons to consider a reverse mortgage. In most cases, the reason for taking out a reverse mortgage was based multiple reasons. In all actuality, though those listed above were the specific reasons, the more general and biggest result was that it created a peace-of-mind about their financial situation.

Married: 51%
Single: 49%

Referred by a friend/relative: 51%

Working in the senior industry, it is very common for people to lean on knowledge and experience from friends and family. In most cases, there is a level of trust that has already been established when a friend or family member refers someone. This has been my most enjoyable client to work with.

Reverse Mortgage Trends

January 9, 2008

j04013731.jpgSince being in the reverse mortgage industry for nearly three years, it is amazing to see how much it has grown . . . . .  and do believe we are in major growth spurt within the industry. 

At that time, these things were true:

  1. There were just a couple of major lenders of reverse mortgages. Wells Fargo, Financial Freedom, JB Nutter, and Seattle Mortgage, and some smaller lenders.
  2. Financial Freedom was the largest reverse mortgage lender
  3. The only product choice was the HECM Monthly and HECM Annual, as well as some proprietary products, mostly used in the Jumbo market.
  4. Reverse mortgages were mostly unknown in the lending and financial industry. Many professionals were not familiar with them. And even at that, they were largely misundersood.
  5. Reverse mortgages were largely sold to Fannie Mae.

Today, we live in a much different climate. Here are some of the things that are current today:

1. Wells Fargo leads the list of lenders who have done the most reverse mortgages with 21,893 in 2007 while Financial Freedom is now the second largest lender at 10,919. Bank of America (formerly Seattle Mortgage) jumped into the market this year, closed just over 2,600 reverse mortgages for the year. In addition, Countrywide Bank, one of the largest lenders in the country, jumped into the reverse market closing 1,115 reverse mortgages in 2007.

2. There is a myriad of HECM products including fixed rate, and libor based products. These products provide the borrower with more options in order to satisfy their long term objectives combined with interest rate flexibility.

3. Reverse mortgages are becoming common language among financial professionals, mortgage planners and seniors themselves. The reliability of the product coupled with an industry that strives to be integrity based, has allowed many to develop a trust that is needed in order to move forward in serving seniors and their families.

4. The secondary market is becoming more engaged with reverse mortgage loans. Ginny Mae has grown in their acceptance of reverse mortgages as they have created a HECM Mortgage backed security (MBS). According to Tom Geggel, a senior analyst with Callahan and Associates, Inc., “the move signifies the growing popularity of the reverse mortgage product and increases liquidity options for lenders.” You can read his article from “Reverse Mortgages Gaining Market Acceptance” for more insight into this trend.

Where reverse mortgages once were seen as a financial product for the lower class, they are becoming more and more of a tool used by people among all economic classes. Tax benefits, liquidity, cash flow, capped with a virual risk free solution, has come a long ways.

Though the list above is only a few of the trends that I have witnessed over the past few years, they will continue. Reverse mortgages will be a common retirement tool for millions of seniors in the future.

A Call for Help . . . . Love Your Neighbor

January 4, 2008

j0407501.jpgHappy New Year! I hope that 2008 brings much for all of my readers to celebrate. Being in the real estate industry it will be an interesting year to follow, and I am expecting great things to result in helping as many people as I can.

Around our country, though, 2008 will bring financial challenges for those that find their adjustable rates reset, and their payments exceed their ability to keep up. As a Certified Senior Advisor, I can’t help but think of those seniors in my community who will find themselves in a tragic situation with their mortgage. The media tells us that many are facing foreclosures, or are being forced to sell their home. Are we conscious of those seniors and referring them to someone that we know and trust.

Today’s American culture is very “ME” focused. We have become a group that keeps to ourselves. We build fences around our homes, we move away from our roots, we don’t get too involved in things that are not “our” business, the list goes on. The result is that we have neighbors who don’t know each other, loneliness, depression, and so on. In reality, someone near you is having challenges and could use your help. What would a phone call mean to them? What would they think if you just dropped by and asked how they were doing? It may mean the world to them . . . . and you just might have information that they need.

Sunday morning I received a knock on my door. It was a neighbor. Her name is Nora, and she just lost husband (of over 50 years) a few months ago. Still going through the challenges of learning to live on her own (though her family has been with her much of the time), she prays for strength and clings to her relationship with God to get her through the day.

As I came to the door in my “pajamas” Nora asked for help because her car wouldn’t start and she wanted to get to church. Though I am not a mechanic, I certainly know how to “jump” a car. It is something that she had always relied on her husband to do for her. In no time, I got her up and going and she was off to church with her friends. Boy that felt good!

Whether it is financial difficulties, or simply “jumping a car,” we need each other to get through life. See this as a challenge. . . . . find a friend or a neighbor that needs your help. It will bless you beyond what you can imagine!

Since my widget for Vodpod is not working on the sidebar, I have included one of my favorite videos along this topic.

Have a Super Year!