Posted tagged ‘aging in place’

Changing the Role of Home Equity

July 15, 2009

j0440988I recently have read a the results of a study issued by MetLife and the National Council on Aging called Tapping Home Equity in Retirement. The purpose of the study was to examine the different options for using home equity in responding to new retirement realities. The study comes from the consumer perspective and the role that home equity is having on retirement. As retirement resources have changed, due to recent economic conditions, this report analysis their findings and provides legitimate opportunities for many retirees when evaluating their retirement resources. As the Baby Boomer generation matures and swoops into the retirement scene, home equity may become a very good option for security during this time period. On the other hand, if used unwisely, without proper counsel, it could become a source of financial insecurity, according to the report.

The study breaks down the market into four different groups: 1) Affluent, 2) Middle Income, 3) Poor. Each demographic is impacted differently in their use of equity in retirement, and each has different implications.

For financial planners, CPA’s, attorney’s and other professionals who deal in the retirement market, this report is thorough. It really is a must read as we all work to educate, inform, and provide guidance into the financial world.

Tapping Home Equity in Retirement

Reverse Mortgages: The Future?

May 19, 2009

j0433797If you have been one to follow the reverse mortgage industry over the years, you have seen a lot of change. For the first 15 years of the HECM product, there was virtually little change. The product was what the product was. HECM150 was basically what was sold as the main product throughout the country. Today there is change what seems to be every week. With the economic issues that our country is facing, the industry has been required to change.

Dennis Haber an attorney that has focused on the reverse mortgage industry and has been influential within this industry. He has written a couple of blogs that draw attention to the current and pending situation around the reverse mortgage product and is an advocate for the industry. Here, he explains what he calls the Reverse Mortgage Storm, Hurricane 1 & 2:

The Reverse Mortgage Storm, Hurricane 1

The Reverse Mortgage Storm, Hurricane 2

Reverse Mortgage Industry – Current Implications

May 14, 2009

j0440988The reverse mortgage industry continues to grow nationwide. The numbers Year to Date have increased both in applications and in total endorsements (closings). But this is just a small picture of the overall industry. Over the past two years we have seen an industry get hit hard by a drop in home values, economic uncertanties, and interest rate adjustments. In addition, there has been a huge increase in the number of people who are originating reverse mortgages. Though this is good news from the standpoint that this product has become more of a standard product within the financial industry, it has impacted the total number of loans that any one individual can do. So we have a small increase in the total number of endorsements, coupled by more people doing them. This leaves many unable to close enough loans to make any kind of a marginal living. Many originators are finding business very difficult as competition has impacted the overall market.

This scenario is not surprising to me. Four years ago when I started in the industry it was an inevitable consequence to the financial condition of many of our seniors. I predicted the fact that banks and credit unions, as well as mortgage brokers would find this tool as one they need to add to their product mix. It was my attempt to make an impact in the industry at that time to position myself to be the local expert. And I have done just that!

What I did not see coming was the huge reduction in home values. At that time values were going, let me just say “bazerko” (sorry, probably not a word). Values are often much lower than the homeowners realize. Recently I had a home appraised that the homeowner was expecting $600-$700k in value. It is a phenomenal home! It was appraised at $485k. Now this is somewhat of an anomoly because of the lack of similar comparisons available, but more times than not, values are underestimated because there was a lack of understanding. The conversation of value is a critical one to have with the homeowners. Managing expectations provides open communication, and in the end, good relationships with clients (whether or not they were able to do the loan).

The other thing that was not expected was the increase in interest rate margins that we have seen with Fannie Mae. Fannie Mae, who purchases 90% of all reverse mortgages, has moved into a live pricing environment where the interest rates could fluctuate during the processing of the loan. For some, this reduces the expected benefit or all out takes them out of their ability to attain a reverse mortgage. Though I have been able to work around most of these situations to this point, it remains an unsettling reality in today’s market.

HECM for Purchase

April 30, 2009

CB028929Recently, HUD has authorized the use of a reverse mortgage to purchase a home. Sounds a little odd, but is actually a great way for seniors to downsize with the added “No Monthly Payment” that reverse mortgages offer.

Here is how it works. Let’s say that a couple are in a two story home that they really don’t see as a functional house for them as they age and their ability to get up and down the stairs becomes more difficult. Though their income is at a point where they don’t really want to add an additional monthly payment. A HECM for Purchase will allow them to come in with a down payment, likely used from the sale of their home, of anywhere between 35%-40% (depending on the age of the youngest borrower) of the appraised value of the new home and not have any payments for the remaining years of their life while they live at home.

The reverse mortgage comes with all of the guarantees that a typical reverse mortgage would have. Though it was possible to do a reverse mortgage in the past on a purchased home, it could only be done after the original mortgage (we call it a forward mortgage) was approved and completed. The problem with this is that they would have to double pay closing costs, origination fees for both loans. This provides more flexibility and options for those who would like to move, but didn’t feel that they wanted to pay the additional fees upfront.

Be aware that because it is a different type of transaction and that underwriting is more along the lines of a traditional mortgage underwriting, if there are plans to rent their existing home, disclosures of income may be a requirement, as well as other disclosures may be required.

For more details surrounding this new program, visit here.

Funding Long Term Care

April 29, 2009

CB044104It appears that long term care costs continue to increase which is putting a squeeze on those baby boomers who are on the brink of retirement. “Because the costs of long term care insurance and other health related expenditures are rising and the income system is contracting, these latest findings raise major concerns about the retirement security of baby boomers and succeeding generations.” That is the outlook from Alicia H. Munnell, Director of Center for Retirement Research at Boston College.

Options for long term care financing include Long Term Care Insurance, Medicaid, or private pay. And how much does one need in order to cover these expenses? That is a loaded question, but figure a good long term care facility starts at $3,500/month. Private pay as an option could be a spendy one. Medicaid will cover those with few financial assets, but the level of care is minimal, and finding a facility that takes Medicaid can be difficult.

For those who are considering their long term care plan, it would be wise to talk to an expert in the field. Long Term Care Insurance costs vary depending on a lot of factors. If you are concerned about this cost, take a look at how a reverse mortgage may play a role in financing this high cost product. If health history prevents a Long Term Care Insurance policy, then it really does pay to look into the reverse mortgage option. Planning for this type of event is not necessarily a fun thing to do, it may prevent a major headache down the road both for you and your heirs.

For questions about any of these options, please visit my website here. And for a full report on the rising costs of long term care, visit this article.

Check Out My Website

April 28, 2009

f0796_gullifordg1For years I have wanted to develop my own website that provides information about who I am and answers many of the questions that people have about reverse mortgages. I am proud to say that it has finally happened and much thanks goes to Rachel in marketing at Genworth Financial Home Equity Access. It is finally completed and looks great! Check it out at here!

My Longest Living Reverse Mortgage Client

April 25, 2009

FOW088My longest living client called me the other day. Three years ago I helped her with her reverse mortgage. At that time she was 96 years old. I met with her and her nephew and explained all of the benefits of a reverse mortgage, as well as all of the future implications. She had had her home free and clear and simply needed to supplement her income and have some money left on the side for emergency purposes. A very common situation.

Today she is 99. She called me and in her sweet voice said, “This is Mary Smith . . . do you remember me?” Well, of course, I remembered her. . . . how could I forget her? Though she is 99, she still gets around. Her favorite thing to do is to gamble. Now she doesn’t do it real often, but she has a friend that takes her to the casinos periodically. In fact, the last time she went she won $1,000. But of course, she decided to give it back.

One of Ms. Smith’s favorite things to do is to garden. Even at 99 she keeps up her yard, getting on her knees, and working the soil so that it produces the best harvest possible. She told me that she has done it since she was a little girl. Her mother taught her all of the ins and outs of gardening, and she still loves it today.

My favorite memory of Ms. Smith is how she gets around the house. Yes, she is 99, but she pushes a walker like there is no tomorrow. She knows where she wants to go and she gets there without a bump in the road. Ms. Smith also loves to do puzzles. I suppose that that is why she is so sharp. Her mind is incredible.

It is a gift to be a part of the lives of my clients. We talk periodically and I continue to assist them in any way that I can.  With all of the lender issues occuring today, they are often concerned that the economic conditions will effect their prized reverse mortgage.  I am always happy to tell them that they are safe and secure!