2017 Reverse Mortgage News and Trends

seniors-holiday-new-year

Happy Holidays and the new year of 2017 is right around the corner.  Here are a few things to summarize about 2016 and look forward to in 2017 within the reverse mortgage world:

 
It’s been an active year for revere mortgages, in addition the government insured RM program reached a milestone: In 2016 1 million reverse mortgage loans completed since the program’s inception in the late 1980’s.

 
Changes and trends for 2017:  Financial planners in greater numbers are looking with favor upon the RM for clients to set up a credit line safety net rather than dip into investments for extra living expenses or they are recommending clients utilize the RM to pay off an existing mortgage. In paying off an existing mortgage the client becomes monthly mortgage payment free increasing monthly household liquidity, thus advances from investments to sustain living expenses may be either reduced or halted altogether. (Borrowers must continue to pay and keep current property taxes and homeowners insurance, as well as HOA dues if applicable.) No changes are anticipated in this fundamental tenant of the program: the borrower(s) remain on title as the owner(s) of the property when they do a RM loan.

 

The home price maximum recognized has been increased for 2017 from the current $625,500 to $636,100:  This does not mean that homeowners with homes valued above this amount cannot utilize the program; for example: a home valued at a million dollars would be limited to borrowing only as much as the $636,100 limit allows.
A new Harvard University report entitled “Projections & Implications for Housing a Growing Population, Older Households 2015-2035” issued putting forth that a RM can be a financially realistic option to help older homeowners alleviate cost burdens and comfortably age in place.**

The Financial Assessment process of a RM application became more streamlined this year: standardization of proof of income to demonstrate continued ability to pay ability ongoing mandatory obligations such as a car payment property taxes, and homeowners insurance, and HOA dues if applicable has made the process uniform. The good news: the income requirements are NOT as stringent as with a conventional loan.
Long term care insurance: Seniors without long term care insurance are looking towards the RM credit line as a source of funds for future in-home care or home modifications for aging in place: ramps, handrails, or step in showers are a few examples.

Long term care insurance:  Seniors without long term care insurance are looking towards the RM credit line more commonly as a source of funds for future in-home care or home modifications for aging in place: ramps, handrails, or step in showers are a few examples.
**http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/harvard_jchs_housing_growing_population_2016.pdf

Reverse Mortgages & Long Term Care Insurance

beach What does this picture of the beach have to do with reverse mortgages and long term care? Nothing, but I have to get out of this heat and to a beach soon, just so you know…..

Ok, onward. I recently wrote an article for The Union, our general circulation newspaper here in Grass Valley, California exploring the topic of seniors’ potential long term care needs, long term care insurance, and reverse mortgages, written from the prospective of how my client expressed to me her thoughts on taking out a reverse mortgage credit line for her “maybe” future need of in home care vs. taking out a long term care insurance policy:

Recently a client reinforced the trend I’m seeing for clients’ to use a reverse mortgage credit line as not only a source of income as needed, a standby source of emergency funds, but also as an alternative to long term care insurance premiums.

It is estimated that approximately 70% of people turning 65 will need long-term care at some point in their lives. It is an uncertain expense, no life crystal ball. There are various methods to fund the cost: long term care insurance, Medicaid, self funding through savings, liquidation of personal assets, and/or a reverse mortgage credit line.

Genworth Financial, a long term care insurer, estimates approximately $45,750 annually for in home health aide, $80,300 annually for shared nursing home rooms, while assisted living costs vary dependent on the level of care.

Long term care insurance did not appeal to her: paying premiums for an insurance she was not sure she would ever need, coupled with the risk of rising premiums.

Medicaid would require her to liquidate nearly all her assets to qualify, wanting assets for heirs, she ruled out this option.

She owns her home outright, has retirement income and IRA assets, yet she decided to obtain a RM credit line loan as a standby in the event she needs in home care. The growth feature of the RM credit line was an added bonus: on amortization charts she was able to see how her reverse mortgage credit line borrowing ability grew over time. What was also appealing to her: she did not have to use her reverse mortgage credit line unless in home care was required, and if it was, then she controls the decisions and spending for care, thus eliminating having to negotiate with an insurer, and that she will only accrue an interest charge on funds actually borrowed.

Should she not need in home care, her untapped RM credit line will revert to inheritable equity for her heirs upon the home’s sale. As with all reverse mortgage loans she retains ownership and control of her home.

Shawna McDonald, Loan Officer, has successfully completed hundreds of reverse mortgages and is approved with 9 reverse mortgage lenders, ensuring clients receive low fees and great rates. Her 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 Associate. Copyright © 2016. Shawna McDonald NMLS #271335 CA-BRE # 00585530 DBA Sierra Foothills Reverse Mortgage, Borba Investments Inc, DBA MLS Reverse Mortgage Auburn, CA NMLS #76801 BRE #01456165 ~ Company MLS #76801

 

 

Purchase Reverse Mortgages Grow in Popularity

Senior in a new home

BUYING A HOME IN RETIREMENT ~ But I Thought I’d Have to Pay all Cash !

 

This real estate season of 2016 I am seeing home buyers 62 years of age and older utilizing in greater numbers the Reverse Mortgage Purchase Loan; a loan that expands home buying power and conserves a nest egg from the sale of an existing home. Here’s an example:

Wanting to downsize, Karen and Jim are retired 76 year olds whose home sold for $550,000.Their replacement home costs $400,000, however their retirement income does not qualify for a conventional loan, they thought their only option was to pay cash, doing so leaves them $150,000 from their home sale, not as large a nest egg as hoped for.

Enter the RM Purchase Loan:  income qualifying is to prove ability to meet on-going property taxes, home insurance, (and HOA) obligations; thus qualifying for a RM Purchase Loan is less stringent than for a conventional loan. On a home valued at $400,000, Karen and Jim’s down payment is $171,000 (43% of the purchase price), a far cry from paying all cash of $400,000. The balance of the purchase price plus fees is their RM mortgage. Just as with all reverse mortgages, they will be monthly mortgage payment free.

 THE BIG NEWS: instead of having a nest egg of $150,000 from the sale of their original home had they paid all cash for the replacement home, the RM Purchase Loan allowed them a residual nest egg of $379,000. Could a RM Purchase Loan have been used to buy a higher priced home than their original home of $550,000? Generally speaking yes; folks I have worked with have obtained their dream home with a RM Purchase Loan.

A RM Purchase Loan is titled with Karen and Jim as owners of the home, (they do NOT give up ownership of the home, a common RM misconception). The home can be sold by them or heirs, the reverse mortgage paid off, and they or heirs keep the remaining equity. As with any home loan, it is required that property tax, maintenance, and home insurance obligations be kept current.

This is an exciting program opening up more possibilities for seniors, give me a call if you would like to see your personalized loan scenario and obtain program details.

Shawna McDonald, Loan Officer has successfully completed hundreds of reverse mortgages. Approved with 8 of the largest reverse mortgage lenders in the nation, she is available by appointment; her local office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main St. Suite N, Grass Valley, (530) 497-3010. The website is www.SierraFoothillsReverse.com.

INMLS #271335 BRE 00585530 Borba Investments, Auburn, CA Company NMLS #76801 Company BRE #01456165

Clearing Up Common Misconceptions About Reverse Mortgages

SPRING IS HERE !

Misconceptions: The Lender Owns My Home

False. You remain on title as the owner of your home. You can decide to sell at any time. You are responsible for maintaining the home, paying property taxes and insurance, and HOA dues if applicable, all of which are standard clauses in any home loan.

 Misconceptions: My Kids Will Have To Repay My Loan out of Their Own Funds

False. Reverse mortgages are non-recourse loans. Which means that when the home is sold to repay the RM debt any remaining equity after the sale of the home goes to the original owner(s) or if they have passed away, the remaining equity goes to the designated heir(s). If the loan balance exceeds the sale price, there is no debt liability to the heirs, FHA insurance pays the remaining debt liability.

 Misconceptions: You Can’t Get A Reverse Mortgage If You Have a Mortgage

False. A Reverse Mortgage must be in first lien position, which means your existing mortgage will be repaid out of the proceeds of the RM loan, with the difference going to you as either a lump sum or set up as a residual line of credit to be drawn and spent over time at your discretion. If there is no mortgage on the home just a RM credit line is set up.

 Misconceptions: If You Are Not Low Income, You Do Not QualifyFalse. In fact an increasing number of Americans, upon advice of their financial planners, are obtaining Reverse Mortgage lines of credit to safeguard their retirement investments from excessive draws and the tax liability these draws may incur. Reverse mortgage proceeds are not taxable.

Misconceptions: If I Live Too Long I Can Get Evicted

False. You, the homeowner, cannot get evicted regardless of your age, this is a lifetime loan, provided you adhere to the rules of your loan: pay property taxes and insurance, maintenance and HOA dues; these are all requirements of real estate loans in general.

Misconceptions: I Can’t Use the Money at my Discretion

False. It’s your money. Whether you want to remodel or pay for upkeep of your home, pay for your child’s wedding, go on vacation, or leave some or all of the credit line funds untapped and available for emergencies, there are no restrictions on what you can do with your funds.

 

Shawna McDonald Loan Officer, has successfully completed hundreds 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 © 2016. All Rights Reserved. Shawna McDonald NMLS #271335 CA-BRE # 00585530 DBA Sierra Foothills Reverse Mortgage and Borba Investments Inc, DBA MLS Reverse Mortgage Auburn, CA NMLS #76801 BRE #01456165 ~ HUD approved lender.

Who Really Has a Reverse Mortgage Office in Grass Valley, CA? Sierra Foothills Reverse Mortgage Does!

Sierra Foot Hills Reverse Mortgage Grass Valley Office Bricks and Mortar Here, Invested in the Community

The internet is a wonderful place for doing research, connecting with old friends, but it can be deceptive. I am a reverse mortgage specialist who has completed over 400 reverse mortgages earned partially by being licensed for many years in 9 states and working in a call center, tough work, but I gained a wealth of experience in those years of toil.

I came to Grass Valley in 2013 and opened Sierra Foothills Reverse Mortgage in downtown Grass Valley because I could see this was an area whose seniors were not being served by a specialty reverse mortgage loan company who could give them personal, one on one attention and expertise, while at the same time provide great loan pricing. Once I had opened Sierra Foothills Reverse Mortgage I immediately became a part of non-profit groups serving Nevada County seniors and became an ambassador to the Grass Valley Chamber of Commerce. It is important to me to live and work where I meet clients, in short, it is also important to me to invest in my community.

I now notice a few reverse mortgage “specialists” who are advertising on the internet as Grass Valley specialists, but live and have their offices in the Bay Area or Los Angeles. We are the real deal, I live in Grass Valley and have an actual office location in downtown Grass Valley, and offer the public a real deal. We are authorized representatives with 8 of the largest reverse mortgage companies in the nation, yep, even the ones on T.V., but what makes us unique is we shop for YOU for the best rates and fee deals that fit your retirement goals. You don’t have to call 8 distant call centers, or work with someone who only represents one or two lenders and perhaps can only offer you higher fees or rates, you can select between 8 lenders right here in Grass Valley, Ca. and come in and see your lender representative, me, in your home town location. Many of my clients are not only from Grass Valley but from Nevada City and Penn Valley, and yet they feel that comfort level of knowing I’m in a real office office just moments away from them.

Don’t be fooled by out of town “posers”, we at Sierra Foothills Reverse Mortgage of Grass Valley, are here for you, locally, in an office, not an out of town loan officer  insisting to come into your home to do a reverse mortgage, because, well, they don’t really live or have an office here so your home has to become their office.

Shawna McDonald, Loan Officer has completed hundreds of reverse mortgages. She is approved with 8 of the largest reverse mortgage lenders in the nation allowing the consumer 1 stop comparative fee and rate shopping. Her local office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main Street Suite N, Grass Valley, by appointment: (530) 497-3010. The website is www.SierraFoothillsReverse.com.

NMLS#271335 CA-BRE #00585530

Brand New Reverse Mortgage Loan Type, the HYBRID Reverse Mortgage is Here ~ We Have It!

 

NGS Picture ID:1168078       www.SierraFoothillsReverse.com

 

 

 

 

 

First New Reverse Mortgage Product in 5 years Introduced  For a long time we industry specialists have been asking for this product: the Hybrid Reverse Mortgage. Before getting into the details of this new HUD approved and FHA insured reverse mortgage product, let’s remember existing products: the fixed rate reverse mortgage, typically used to pay off an existing mortgage and the adjustable rate, typically used to establish a reverse mortgage credit line.

A concern expressed by some clients, regarding the current reverse mortgage credit line product, depending on their age, is that while the interest rate on what is spent is currently in the 2% start range, the rate could increase over the life of the loan to the cap of 10 % over the start rate. The interest rate adjusts up/down monthly and is tied to a stable index, the Libor. Over the last 15 years the Libor index has gone to a high of approximately 9% and hovered in the 3-7% range predominately.

Reverse mortgage borrowers NEVER accrue interest charges on their unspent credit line funds, and they are NOT making monthly payments on money they have spent, thus there is no possibility of a fluctuating house payment, however, interest is accruing on spent funds, and the higher the rate, the higher the loan balance will be at the time of home sale. Some of my clients are unconcerned about rate fluctuations: there are no heirs who are waiting to inherit house equity; some clients are less concerned because they are already in their 80’s, and some younger clients express concern.

The introduction of the new and already popular “Hybrid” reverse mortgage credit line addresses the rate concerns. The KEY feature of this product: the interest rate on spent funds can NEVER rise more than 5% over the start rate during the entire life of the loan. Thus, with the current start interest rates in the 2% range, the rate on what has been spent from the reverse mortgage credit line will never go above the 7% range. The starting loan rate is expressed in your loan application and locked during the loan process. As space is limited here, for any questions please feel free to give me a call.

Shawna McDonald, Loan Officer has completed hundreds of reverse mortgages. She is approved with 8 of the largest reverse mortgage lenders in the nation allowing the consumer 1 stop fee shopping. Her local office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main Street Suite N, Grass Valley, (530) 497-3010. The website is www.SierraFoothillsReverse.com.

 

NMLS #271335 BRE 00585530 Borba Investments, Auburn, CA NMLS #76801 HUD approved

 

Shawna McDonald Opines: Reverse Mortgage Changes Part 2: Safety Net for Seniors in Retirement is Still Here and Going Strong for 2014!

skating 3

“River” Joni Mitchell

“It’s coming on Christmas

They’re cutting down trees

They’re putting up reindeer

And singing songs of joy and peace

Oh I wish I could find a river I could skate away on….”

I don’t know about you, but I always get a bit melancholy around the holidays, (fire up Joni Mitchell’s “River” from her 1971 album “Blue” and I can get a serious melancholy on).  Call it the cost of getting older if you will, I’m newly minted as 61, many of us may have experienced the loss of a loved one during the holidays, (a special person in my life perished in a plane crash), and yet every year we also can chose to adjust the “sight prisms” we see things through so that we see ways to give back to our communities to those less fortunate, celebrate the loved ones and dear friends who surround us in the here and now,  and look to the new year for a promise of re-newed hope and beginnings.

This year has been a challenging one for the HUD supervised and FHA insured reverse mortgage program, and yet what we have to celebrate is that the program still here, viable, and raring to go for 2014, albeit with some changes, and yet still providing an important, I repeat, important, safety net for seniors to allow them to age in place and enhance their retirement experience.

I have completed close to 400 reverse mortgages in my 5 year career in the industry and the feedback I consistently hear from clients is:  “Before we did the reverse mortgage we had more month than money, now that our mortgage is paid off we can go out to eat in a nice restaurant once and awhile and even travel  to see our grandchildren more often”, or for the more affluent, “We may never need the line of credit, but we sleep better knowing it is there, set up, and ready to go if we need it.”

No mortgage program, even the government backed reverse mortgage loan program, is invincible to the collapse of home values experienced in many states. As a multi-stated loan officer I worked with borrowers in many states but in particular in California, Florida, Indiana, and Texas:  I struggled to get loans completed for my clients having to work with the devastated home values that appraisals were bringing in.  So it is no surprise to me that this year HUD swooped in and reduced the formula we loan officers work with so that the dollar formula amount borrowers will qualify for is reduced. It had to happen, I knew it was coming.

And yet, the fabulous “no recourse” feature of this loan is, quite frankly, remarkably still in place, even though, as a result of decreased home values in many states, we saw the FHA insurance fund  somewhat depleted out over the last 5 years, it too is still going strong.  For example: a Floridian that passed away in the last few years, may have left a home whose appraised value was now ½ of what it was when the loan had been funded say back in 2006 when home values were at their peak. Heirs, as is their right under the “no recourse” loan provision of a reverse mortgage, would then notify the lender of the “gap” between the ultimate sales price in today’s market and what was owed on the reverse mortgage.  The lender in turn would look to the FHA insurance pool for reimbursement of the “gap” monies for a full payoff on the loan.

This scenario in some states such as Florida, Indiana, Georgia, Alabama, Louisiana, and even “golden” California,  to name a few,  was repeated over and over as lenders asked FHA to make them financially “whole” and fill in the monetary gap for the difference between the final sold price of the home and the reverse mortgage loan payoff amount.  Thus, in my opinion, this year’s HUD formula reduction on what can be borrowed with a reverse mortgage is a GOOD thing because it decreases the mortgage debt to equity ratio, thereby reducing the likelihood in the future that the FHA insurance fund will be frequently tapped. We want this program around for a long time, and the continued health of the FHA insurance fund will help that goal.

If you would like to know how the new reverse mortgage formula changes affect your qualifying numbers, and  how the next change to the program slated for January 2014  will affect you, (and there is one important change coming in the future), please feel free to contact me, I listen with great care to your retirement goals, and as you’ll see, or have seen, I love this program and the positive influence it has towards and improved retirement experience for my clients.

Shawna McDonald,

Loan Officer, Real Estate Broker

NMLS #271335  BRE #00585530

www.SierraFoothillsReverse.com

www.WineCountryReverse.com

or by phone

Sierra Foothills and Sacramento area:  (530) 497-3010

Sonoma, Marin and Napa Counties (707) 634-7070

skating 2

If you need to get a little melancholy on:

Joni and “River”…

http://www.youtube.com/watch?v=GpFudDAYqxY

In the interest of equal opportunity  if you have no need for melancholy and want to go straight to holiday cheer:

Alvin and the Chipmunks (Who remembers Hula Hoops??)

http://www.youtube.com/watch?v=ZiNmVdFlIL4

or

Peanuts and the Holiday Lights Song

http://www.youtube.com/watch?v=czjSTO9YnsA

Enjoy and music links courtesy of :  www.youtube.com

Shawna McDonald, Loan Officer/Real Estate Broker

Specializing in Reverse Mortgages

www.SierraFoothillsReverse.com

office 2

                                                    

    Office Location: 412 East Main Street, Grass Valley

( Take the Highway 80 Idaho Maryland Off Ramp  and carefully go west out of the round about, office is immediate right)

(530) 497-3010

www.SierraFoothillsReverse.com

NMLS #271335 

BRE #00585530

 

The opinions expressed here are solely those of the author. Copyright © 2013 -20014 · All Rights Reserved. NMLS #271335 BRE # 00585530. Borba Investments Inc, DBA MLS Reverse Mortgage Auburn, CA  NMLS #76801  BRE #01456165 HUD approved lender.                                                                                            png hud logo

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