When it Comes to Reverse Mortgages, Sooner is Better than Later……….. Reprint from The Union Nevada County Newspaper

 

seniors walking in fall

Happy Fall !   Here is a reprint of an article from the Union Newspaper of Nevada County:

Clients come to me to: establish a reverse mortgage credit line, pay off an existing loan, or purchase a home. I then analyze their qualifications under current RM rules, emphasis on “current”.  Housing and Urban Development, “HUD”, creates RM lending rules. When HUD issues rule changes we receive little or no notice. However, HUD RM program changes do NOT affect a completed loan.

When advising client(s) they qualify for a RM loan, they may chose to “do the loan later”. Upon return my “later” clients are unhappy to learn they no longer qualify, or if they qualify, HUD changes are not advantageous to them, some examples:

  • “Later” clients returned when one of them became dementia incapacitated, in-home care expenses were mounting, but it was difficult to establish a RM credit line loan to pay for expenses because using a power of attorney/conservatorship to initiate a RM loan, once one borrower has become incapacitated, is complicated. It is less complicated to use POA/conservatorship documents to keep credit line funds flowing to pay for expenses when the RM credit line was completed at a point in time when both borrowers had capacity. If one co-borrower remains living in the home with a RM loan, the other co-borrower may reside in assisted living if that need arises; also, the sooner a credit line loan is established, the more advantageous the credit line growth feature becomes.
  • A client wanted to pay off his existing mortgage with an RM loan, eliminating his monthly mortgage payment, thus increasing monthly liquidity. He was initially qualified but decided to wait. In the interim, HUD lowered the lending formula, creating a shortfall of lendable funds to pay off the existing mortgage. Having funds in a retirement account he is able to complete the shortfall to pay off the existing mortgage by bringing funds into escrow, but wishes he had completed the loan earlier.
  • New clients selling their home and wanting to purchase a replacement home with a reverse mortgage waited for a loan consultation until after their existing house was in escrow and a replacement home found, the wait caused a loss of the replacement home to a competing buyer; per newer HUD rules on RM purchase loans, 2-3 weeks advance planning with a loan officer prior to submitting a purchase contract on a replacement home is advisable.

 Shawna McDonald, Loan Officer has specialized in reverse mortgages loans for 10 years and is available by confirmed appointment; her local office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main St. Suite N, Grass Valley, (530) 497-3010. NMLS#271335 BRE #00585530 Borba Investments, Auburn, CA Company NMLS #76801 BRE# #01386892 As with all loans, it is required that property taxes and fire/casualty insurance be kept current.

 

Advertisements

Wall Street Journal: Reverse Mortgages Can Help Buffer Against Market Swings

golf swingNo No I’m not writing about that kind of swing, (but wow, look at all that green grass, in our drought stricken dog days of August, this looks inviting.)

Seniors on a Swing  No, No, I’m not writing about THAT kind of Swing……

I’m writing about a trend I see with my reverse mortgage clients and that was echoed in the recent WSJ article below:          The reverse mortgage credit line being utilized as a valuable tool in an overall retirement plan strategy: to have it on standby when the stock market takes wild swings like it has the last few weeks, to supplant monthly income from the credit line and halt  portfolio draws when it makes sense to halt portfolio draws for a period of time while the market has time to stabilize and recover. This use of the RM credit line as a safety net buffer keeps clients’ retirement life style uninterrupted with a sudden reduction in stream of income.

Once thought of as a “loan of last resort”, increasing numbers of savvy financial planners are encouraging seniors to establish a standby reverse mortgage line of credit as a hedge against the market swings such as we saw last week. Reverse Mortgage Daily expanded upon the WSJ article and I’ve included it here for your review:

(If you would like to skip the article and go directly to information on my Grass Valley, CA reverse mortgage office, and services I offer here locally to Nevada County please click on this link: http://www.SierraFoothillsReverse.com. As Nevada County’s ONLY office specializing exclusively in reverse mortgages, I bring to the table 7 years of RM experience and over 400 successfully navigated and closed reverse mortgage loans)

WSJ: Reverse Mortgages Can Help Buffer Against Market Swings

Reverse mortgages have a place in the conversation about retirement and market swings, prompted by the recent global selloff resulting from Chinese currency pressures. At least, that’s the message presented by Prof. Wade Pfau, of American College of Financial Services in Bryn Mawr, Pa., who was interviewed by the Wall Street Journal this week.

Buying into market dips may be prudent for young investors, WSJ’s Money Beat blog notes, but for those approaching—or already in—retirement, the same rules do not apply.

“That’s not merely because stocks can take years to recover from losses and you have fewer years left as you age,” columnist Jason Zweig writes. “The problem is what retirement researchers call ‘sequence risk.’ The order in which stocks earn good or bad returns can matter—a lot.”

If they rely solely on stock withdrawals, retirees can be forced to sell their investments during market downturns, which can take a toll on the value of their assets.

That’s where a reverse mortgage could come in for some, Pfau tells the WSJ.

“Another possibility, [he says], is to consider taking out a line of credit under the Home Equity Conversion Mortgage program guaranteed by the federal government, using it only during periods when the value of your stock portfolio is declining,” the article writes.

The strategy is one that some financial planners have recommended as a “standby” strategy to weather market swings.

“This way, you reserve the right to borrow against your home at reasonably competitive rates,” WSJ writes. “But you would draw on the money only at times when you would otherwise have to lock in losses on your stock portfolio.”

Written by Elizabeth Ecker http://www.reversemortgagedaily.com

Comments by Shawna McDonald, Loan Officer, NMLS 271335 Sierra Foothills Reverse Mortgage of Beautiful downtown Grass Valley: 412 E. Main Street, Grass Valley, 530-497-3010

Reverse Mortgage Mid-Year Round Up ~ 2015

Seniors at the fair 1 It’s been a great week, the Nevada County Fair rocks !

seniors at the fair 2  Ok, back to business:

If you’d like more information about my local bricks and mortar reverse mortgage loan office serving Nevada County, Grass Valley, Nevada City and Penn Valley, click on this link: http://www.SierraFoothillsReverse.com.

      I’m always available with a same day return phone call: (530) 497-3010.

Here’s my newest blog post which will appear shortly in the local Union newspaper:

Reverse Mortgage Mid-Year Round Up ~ 2015

It’s true, today marks more than “mid-year”, but time flies so fast. I thought it a good time to discuss what the reverse mortgage landscape looks like after the new financial assessment requirement had been in place for a few months and discuss a recurring question I hear from clients:

The new Financial Assessment Requirement: Prior to April of this year a senior’s continuing ability to pay property taxes, insurance and (HOA dues if applicable) post completion of a reverse mortgage was not in question with the lender or HUD. (Housing and Urban Development sets the rules for reverse mortgages, FHA insures the loan). Starting in late April of this year all loan officers beginning a reverse mortgage loan application, be it for purposes of establishing a credit line, paying off an existing loan, or a purchase reverse, are required to document income and on-going household debt obligations to determine if the borrower(s) have sufficient monthly residual funds to budget for payment of property taxes and insurance. If not, we would, as part of the loan, need to set up a lifetime set aside for taxes and insurance, an “escrow” type of account.

I’m happy to report that none of my borrowers coming in to initiate a reverse mortgage and falling under the “new rule” have been required to set up such an account, I was able to document that they had were sufficient retirement income and history of on time payment for taxes and insurance. The new rule requires more work on my part, a bit of financial records digging for borrowers, but all in all, not a big deal.

Living Trusts, Revocable or Non-Revocable: Having just lugged a large trust binder into my office for me to scan, my borrowers were curious as to why a reverse mortgage lender needs to review a complete copy of their trust. The lender needs to determine if the trust is revocable, as in, can a change be made to the trust? If the trust is revocable the borrower(s) will sign a document at loan closing that states their trust recognizes the reverse mortgage obligation to be paid off upon the passing of the borrower(s). If the trust is non-revocable a reverse mortgage cannot be done, most trusts however are revocable.

Shawna McDonald Loan Officer, has successfully completed 100’s of reverse mortgages and is approved with 8 reverse mortgage lenders, ensuring clients receive low fees and great rates. Her full service office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main Street Suite N, Grass Valley, (530) 497-3010. Her website is www.SierraFoothillsReverse.com.

The opinions expressed here are solely those of Shawna McDonald, Loan Officer/Real Estate Broker. Copyright © 2015. NMLS #271335 BRE # 00585530 DBA Sierra Foothills Reverse Mortgage and Borba Investments Inc, DBA MLS Reverse Mortgage Auburn, CA NMLS #76801 BRE #01456165 ~ HUD approved lender.