Stretching Your Retirement Income: Exploring the Power of Reverse Mortgages

Are you a financial advisor? What are your thoughts on using Home Equity Conversion Mortgages (HECM) as an alternative to selling bonds instead of holding bonds to maturity in a rising interest rate environment?

Malcolm “Mac” Tennant and his wife Pamela Tennant, the Co-Founder and President of Access Reverse Mortgage Corporation, respectively, have joined an elite cadre of mortgage professionals who have achieved the status of being a Certified Reverse Mortgage Professional, or CRMP. National Reverse Mortgage Lenders Association (NRMLA), headquartered in Washington, D.C., bestowed the certification on The Tennant’s after they passed a rigorous exam and background check, thereby demonstrating a competency in the area of reverse mortgages and a dedication to uphold the highest ethical and professional standards. Only 101 individuals nationwide currently have the CRMP credential, including 10 in Florida. In addition to Mac and Pam, one of their employee’s, Eric Christensen, also achieved the CRMP designation this year. “Being one of just 101 people nationwide to have achieved this milestone is a testament to our commitment to reverse mortgages and our clients,” says Tennant. “The process involved to receive this professional designation was long and arduous and adds to the level of expertise maintained by myself and the firm.” To qualify for the designation, applicants must have originated reverse mortgages for two or more years and personally closed at least 50 loans; earned 12 continuing education credits; completed NRMLA’s Ethics Course; passed a comprehensive exam; and a background check. The certification is valid for three years, during which time designees must earn 12 CE credits annually to be re-certified. Applicants who are not loan originators, but nonetheless work in areas vital to the business, such as counseling, processing, underwriting and servicing, must have five or more years of experience. “Mac and Pam are two of 101 designated individuals with the Certified Reverse Mortgage Professional designation. As CRMP’s, they have demonstrated knowledge and competency in the area of reverse mortgage lending, and are dedicated to upholding high standards of ethical and professional practice in the industry.” said Peter Bell, President & CEO of the National Reverse Mortgage Lenders Association. Reverse mortgages are available to homeowners 62 years old and older with significant home equity. They are designed to enable older Americans to borrow against the equity in their homes to help fund retirement needs, without having to make monthly mortgage payments. Borrowers still need to pay their property taxes, insurance, any association fees and ground rents and comply with loan terms. Failure to do so can result in foreclosure. Under a reverse mortgage, funds are advanced to the borrower and interest accrues, but the outstanding balance is not due until the last borrower leaves the home, sells, or passes away. Borrowers may draw down funds as a lump sum at loan origination, establish a line of credit or request fixed monthly payments for as long as they continue to live in the home. To date, more than 900,000 senior households have utilized an FHA-insured reverse mortgage. These materials are not from HUD or FHA and were not approved by HUD or a government agency.

The Many Uses of a Reverse Mortgage The complexion of the Reverse Mortgage industry has changed dramatically over the years. The FHA-Insured Reverse Mortgage is no longer considered a rescue device. Our typical borrower today is in their early 60’s, has excellent credit and upper level income. About half of our clients have a free and clear home and utilize the increasingly popular Reverse Mortgage line of credit. The built in credit line growth rate feature means that the unused portion of the line of credit will grow each year. The other half of our clients are using the Reverse Mortgage to pay off an existing mortgage, freeing up their monthly mortgage payment for other uses. We have closed Reverse Mortgage loans for some of Sarasota’s wealthiest families. From St. Armand’s Circle to Fort Myers, wealthy clients are being advised by their financial planners to look into reverse mortgages as part of their retirement financial planning. The strategy these financial planners suggest is establishing a Reverse Mortgage line of credit to draw on rather than retirement savings in a bear market. One borrower we worked with recently in Carrollwood has very little equity so he is bringing $60,000 to closing in order to pay off an existing mortgage. By doing so, this borrower will not have to make a monthly principal and interest payment for as long as he lives in the home as his primary residence. As always, he will have to continue to pay his property taxes, homeowners insurance, and HOA fees, and maintain the property to FHA standards. This is becoming more and more common; one couple in The Villages recently brought $110,000 to the closing table. This, along with the proceeds from their reverse mortgage paid off a substantial existing mortgage. They said that “even laying out $110,000 we will break even on cash flow in under 5 years, and look forward to another 20 years or more after that with no monthly mortgage payment!” Another client we recently met with owns a $1.5 million home in Palm Beach. He has no existing mortgage and is looking to tap into some of the equity he has in his home without the burden of monthly mortgage payments. This particular customer has the option of using an FHA-Insured Reverse Mortgage, or one of the Jumbo Reverse Mortgage programs we have available. The uses of reverse mortgages are endless! From paying off a home equity line of credit that’s coming due for a customer in Tampa Palms, to closing a loan in 8 days to stop a foreclosure for a customer in Hollywood, to funding a divorce settlement in Venice, the FHA Home Equity Conversion Mortgage, more commonly known as a Reverse Mortgage, is a great financial planning tool to fund the baby boomer retirement! Every borrower has a unique situation that deserves a thorough evaluation and consultation. Call today for more information!  866-258-0377  These materials are not from HUD or FHA and were not approved by HUD or a government agency.

Reverse Mortgage Strategies Many new reverse mortgage strategies are available for your use today than there were in years past. Thanks in large part to these recent changes, the FHA-insured Home Equity Conversion Mortgage (HECM) aka the reverse mortgage, has seen it’s place in the world shift dramatically. Until recently the reverse mortgage was viewed as a product of last resort. The many recent changes have shifted the program into it’s role as a financial planning tool with many reverse mortgage strategies becoming clear. Forbes published an article on May 18, 2015 that discusses three excellent opportunities to use the reverse mortgage.  One of the most thoroughly studied reverse mortgage strategies is known as the Standby Line of Credit strategy. The standby line-of-credit option suggests using a reverse mortgage as an emergency line-of-credit to be tapped for income when the market is down. This can alleviate the strain on your portfolio that might come from withdrawing your usual income, allowing it the opportunity to potentially bounce back. When combining this factor with the credit line growth rate a recent study found this strategic use of a reverse mortgage significantly increased portfolio longevity. The second of the reverse mortgage strategies discussed was using a reverse mortgage to supplement your income in order to delay taking Social Security until your full retirement age. Delaying Social Security can potentially provide significant increases in your monthly income when you do eventually begin receiving it. There is also the flexibility of delaying Social Security to potentially avoid paying increased taxes, depending on your individual situation. When to take your Social Security is a complicated decision that should be discussed with a knowledgeable professional. If you do feel that delaying Social Security might be right for you, a reverse mortgage may provide you the liquidity you need to do just that. The last of the reverse mortgage strategies that the article discusses is the more traditional use of replacing current debt with a reverse mortgage. This is what many people do when taking a reverse mortgage , they use the proceeds to pay off an existing mortgage or home equity loan, or even to repay credit cards or other high interest debt. This can potentially lead to improved cash-flow for you, by eliminating your current monthly payment. It is important to remember that although the reverse mortgage does not require a monthly mortgage payment, you are still required to pay your property taxes, insurance, any applicable association fees or ground rents, and also maintain your home to FHA standards. Failure to do so will result in foreclosure. With that in mind, eliminating your monthly principal and interest payment is the difference between a successful retirement plan and a failed plan for many borrowers. These materials are not from HUD or FHA and were not approved by HUD or a government agency.

The Importance of an Experienced Reverse Mortgage Company The most recent FHA Reverse Mortgage statistics are now available, and highlight a dangerous trend in our industry. In Florida, 160 companies closed at least one Reverse Mortgage in the first quarter of 2015. The vast majority of those companies (primarily “forward mortgage” providers) closed less than one loan per month! What does this mean, and why does it matter to the average borrower? It means that there are very few experienced reverse mortgage companies in Florida when compared to the “part-timers”. Reverse mortgages are a highly specialized loan product with several unique and often surprising features. For example. if you decide to receive equal monthly payments with the available funds from your reverse mortgage, you can maximize your available monthly payment by increasing your interest rate (but only to a certain point). A higher interest rate can also increase your credit line growth rate, potentially allowing you to access more of your home equity in the future if you set up a standby line of credit. Quirks like these, along with constantly changing underwriting guidelines make working with a part-timer a risky proposition. There are also several different ways to structure reverse mortgage loans, each with their own set of advantages and disadvantages. It is vital to have an experienced company and loan originator to talk with before starting the process. They will make sure you understand all of the available loan programs and help you structure structure a reverse mortgage loan that will be beneficial to you over the long-term. We recently encountered a tragic, yet completely avoidable situation involving a Reverse Mortgage for Purchase loan. The borrower had contacted a mortgage company who recently added a “we also do Reverse Mortgages” tagline to their advertising. The borrower went through their “pre-qualification” process and was assured there were no red flags. She found a home, had her offer accepted, and starting the loan process. Everything appeared to be going smoothly, until she received a call on closing day, indicating that there was a problem. The loan officer and processor had missed something during the application process, a “quirk” with Reverse Mortgages regarding the ability to use an out of country power of attorney. The customer was assured everything would go smoothly, yet there they sat, the day they were supposed to have closed on their new home, being told it wasn’t going to happen. We received a frantic call later that day from the buyer’s agent, asking if there was anything we could do to help. Unfortunately, the rules are the rules, and FHA would not insure this particular loan. So what does this have to do with experience and FHA statistics? After this borrower came to our office, we looked at the recent report from FHA…the company that this originator worked for had closed ONE Reverse Mortgage in the first quarter of 2015. They had closed hundreds of “forward mortgages”, but was far from experienced when it came to Reverse Mortgages. An experienced company would have likely encountered this “quirk” in the past, and would have been able to tell the customer it was a problem before she spent a month thinking she was going to be buying a new home with a Reverse Mortgage. We have come across far too many similar situations in the last 11 years. Be sure that you work with a reputable company with years of experience. Find a Certified Reverse Mortgage Professional and don’t settle until you are working with the best company available to you. Find out why we’re consistently one of the leading Florida-based reverse mortgage providers. Talk to one of our experienced CRMP’s today! Note: These materials are not endorsed by HUD, FHA, or any government agency.

Reverse Mortgage Research Important Reverse mortgage research is essential for anyone considering the misunderstood financial product. Many studies have been conducted investigating the uses of a reverse mortgage, as well as the benefits and potential drawbacks. Reverse mortgage research takes time, and it’s important to consider your own personal situation before rushing to a decision. Many people will find the reverse mortgage to be a great fit and good option for their financial plan in retirement. Others will determine they should investigate other options. Take a look at the excellent article written for Reuters last week, “Reverse Mortgages Are Worth a Look, If Approached With Caution.” by Liz Weston. The author points out that even while CFPB and other regulators are criticizing the lack of clarity in advertising, that reverse mortgage research is being done that supports the use of the product. Economics and finance professors from many universities and organizations have examined the reverse mortgage program closely and devised mutliple strategies for their use. Reverse mortgage research suggests that setting up a standby line of credit with the program can improve the odds of your retirement resources lasting throughout your life. The studies published in the well-respected Journal of Financial Planning have supported the use of a reverse mortgage as a financial planning and retirement planning tool. The author’s have suggested everyone consider a reverse mortgage as an essential part of their planning. Recent reverse mortgage research also suggested that people act now to maximize their potential use of the standby line of credit. Financial planner’s are using the reverse mortgage and recommending its use much more often than in past years. The excellent analysis and research done by economists and financial professional’s has improved awareness. This is an important step for reverse mortgages, and research suggests that use of the product will increase in coming years. Be sure to do your reverse mortgage research and find out exactly how they can work for you. Note: These materials are not endorsed by HUD, FHA, or any government agency.

Reverse Mortgage Success Stories Success Stories- Fox News recently aired a report on reverse mortgage success stories. Bob Massi, The Property Man, acts as a guide to making a smart decision and achieving a reverse mortgage success story! Bob visits with two recent reverse mortgage customers that have very different reasons for tapping their home equity. Both couple found their decision to get the reverse mortgage to be a good one. One couple was actually so pleased that they refinanced the reverse mortgage recently to access additional funds. The first of the two reverse mortgage success stories discussed in the program interviewed a couple that had done well planning for their retirement. They had significant assets in the stock market as well as equity in their home. When the time came to sell some of their stock portfolio to increase their monthly income they analyzed their options. In their case they decided to put off pulling money from their stock portfolio. In order to make up for the income gap they had, the reverse mortgage was accessed using a 10-year term. They will receive monthly payments from their loan for 10 years. After that time they may have funds available as a line of credit. This is just one of countless ways that reverse mortgage success stories happen.  The second success story interviews a couple that needed to get out from under their monthly mortgage payment. The reverse mortgage allowed them to improve their cashflow. Without having to pay the monthly mortgage payment (but still paying their taxes, insurance and other obligations), the couple was able to succeed in their retirement plan. They even refinanced their reverse mortgage this year to access additional funds which they used to update their home and take a cruise. The reverse mortgage can’t always be refinanced, it depends on many factors including equity available. In this case, the reverse mortgage and reverse mortgage refinance were success stories! Watch the video from Fox, and then find out how much you may be eligible to borrow by visiting our Reverse Mortgage Calculator . You just may have one of the next reverse mortgage success stories! Note: These materials are not endorsed by HUD, FHA, or any government agency.

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