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I cannot find any information regarding Reverse Mortgages under the government programs for seniors. Does anyone have experience with this?

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Reverse Mortgages work for those younger retirees who have a lot of money in the bank and in stocks.... the Reverse Mortgage is then used to purchase more stock to build up the estate.... or remodel their home, when the retiree doesn't want to touch their portfolio.   It's more like a line of credit.

If an elder feels that a Reverse Mortgage would work to "age at home" they will be in for a huge surprise once they need to hire caregivers to come in to help them.   I remember my Dad paying $20k per month, that's not a typo, yes per month for 3 shifts of professional caregivers.   There is no RM that would give an elder $20k per month, or even $10k per month.

As someone had mentioned before, no one in their 80's or 90's should still have a mortgage.   If they cannot afford to maintain the house, time to downsize into something more manageable.
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Sorry for the duplicate
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Here is a link for information on HECM FHA Insured Reverse Mortgages:

https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmhome

Also you may note; for all practical purposes; the VAST majority of reverse mortgages done in today's market are FHA Insured HECM mortgages.
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I wish I would have been more stern with my mom regarding reverse mortgages. My advice would be not to do it. Sell the house and put the money away for long term care. Downsize. I know its hard to move but look into a long term solution. My mom didnt and now I am in a pickle.
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Jessie, as yes TheBoogs. Poor gal was so surprised that she would need to refinance the house if she wanted to stay in the family home.
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Reed - regarding your 3 examples of folks you have helped in getting RMs.... So there's a 82 yr old with an outstanding mortgage, an 81 yr old also with an oustanding mortgage and another no age given but l'm going to venture a guess is also her 80's and too has a mortgage.

Just wtf type of bad financial planning or lack of understanding of borrowing basics places one in their 80's to still have a mortgage? Just what lender underwrote a mortgage that places them still owing on a home at 80 or 90 or possibly 100??? These are folks probably gullible & likely taken advantage of by predatory lenders. And the pattern then continues imho by the latest band-aid to fix their finances which is a RM.

Your statement as to the old issue with RMs was about the "non-borrowing spouses" not being protected when the older RM signature spouse died is just not accurate to the whole story as to why the exit of many lenders for RMs. Yes that was and still is an issue. But the bigger reason why Wells, BoA type of RM players got out of the market was that the houses were going negative equity. All that paper underwritten on RM at values on the go-go years of Real estate till maybe 2008 - 2011 were overall appraised...over valued. And unlike newer builds which can be foreclosed on with ability to sell, those elderly owners homes are older housing stock; often without current codes for utilities; filled with old people stuff; likely with years if not decades of delayed maintenance; if the borrower has dementia or are related decline add that for extra Fun.

If $$$ were to be made from RMs, the big players would still be doing them. Their not. What I see is guys who worked once sub-prime lending and since that's grounded out, now have moved onto RMs.

So Reed on a 100k appraised house what's the highest HECM RM payout?
50%? Less like maybe 43%? $ 43,000.
What insurance increases will be needed and for what coverages?
The RMs you do, I'm going to guess that the lenders you represent all can provide whatever insurance (homeowners, Wind, flood, earthquake) needed through affiliates? What would that add onto the RM for a home in Dade county or Orleans parish? Also now needing newly placed Mortgage insurance? & what cost? What's your commission on the RM? and all add-on's? What % of the initial RMs get sold to a secondary & do you get a fee on that paper too?
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I'm unclear on a few issues:

Reed wrote:

" It turns out that we were able to pay off her mortgage which freed up $1,800 per month in cash flow for her, got her the funds for the much needed repairs (new roof and remodel her bathroom to make it handicap accessible) and she was still able to put away $90,000 in a line of credit that has a guaranteed 6.2% growth rate (also compounded interest). "

How was money freed up from payoff of the first mortgage? Was this b/c of a higher credit line?

I've never heard of a credit line that increases in availability of funds. More information on this would be helpful, especially the guaranteed growth rate. Is this availability of funds to drawn on, or growth rate of the outstanding balance?

You wrote also that you credited 100% of the closing costs. Was this done by crediting them at closing and adding them to the outstanding principal balance?
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FreqFlyer, what you wrote reminded me of the caregiver who came onto the group. She stayed with her mother for a long time and had no money of her own. She was to inherit the house, which she would have been able to do under the rules of Medicaid. But the house had a RM that she couldn't afford to pay off. So the house was going to be lost to this woman who had dedicated years of her life to caregiving. Stories like this are what make me dread RMs.
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A better option if she only had $15K left in her account would be to sell the home and adjust life. Reverse mortgages sound like such a great solution until the reality of them hit home.
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Too many people don't think far enough ahead... there will be a time when they need 24 hour care, and that can cost $15k-$25k per month, yes per month.

It would be better to downsize... sell the house... put the equity into investments that will grow... and move into a smaller home or senior living.

My boss had a Reverse Mortgage, he wished it he had never signed up. When his wife passed many years later, he had to either refinance or sell. And that call was within 30 days of his wife passing, he thought he had one year to do this. Nope. Turned out the house value went up so high that he was unable to refinance the house he and wife had owned for 40 years. He had to sell the house, quickly find a new place to live, and have an auction house take more than half his household goods as he had no room for all the cherished things he and his wife bought. All within 60 days, while he was still grieving.
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The other closing from yesterday was a referral from an Elder Law Attorney (who happens to have a reverse mortgage himself and a net worth of over $2,000,000). He simply felt at 81 years old "why the heck am I continuing to pay on this 30 year note I'll never payoff"?

Anyway, he referred me a client and long time friend who was struggling to make ends meet. She is a retired teacher and collects a reasonable pension and social security, but simply wasn't enough to cover her monthly medical and mortgage expenses. She has only $15K left in her retirement account and was drawing it down to the tune of $850 per month so it would have been exhausted completely in the next 2 years. The reverse mortgage paid off both her notes and frees up about $1,680 in monthly cash flow for her, plus put an additional $7,700 cash into her savings account in case some unforeseen expenses with her home pop up in the future and they always do. She is extremely pleased and has tremendous peace of mine knowing she can comfortably remain in her home where she built a lifetime of memories and remain independent and save what little savings she has left.

Remember, it's a trade off. You are going to pay interest either way. The purpose of the reverse mortgage is to "defer" the interest till you pass away or sell the home so that you can have a much better quality of life in your own home while you are still alive to enjoy it. The last time I checked... none of us are taking anything with us when we go". I credited all of her costs as well so she did the reverse mortgage for no closing costs. :-)
There are so many more examples and every one's situation is unique. I have done reverses for multi millionaires and I have saved people from foreclosure with this remarkable loan. The reasons for doing a reverse mortgage are as varied as the wonderful people I have been able to help over the years with this incredible product.

Is a reverse mortgage right for everyone? No. That is for each individual and their families and trusted advisors to determine. But, it is a wonderful product and has helped changed the lives of many borrowers and I am proud to help folks and their families through the process. :-)
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Hi again,
It is true that there is interest associated with a FHA Reverse Mortgage. It is also true that over time that interest is compounded. I would just like to say that there are two different sets of lenses one tends to look through while voicing an opinion on a reverse mortgage. The HECM (lets stress the FHA government insured reverse mortgage instead of a proprietary one) may not be right for every senior homeowner. I am not suggesting it is. If you have plenty of money in retirement accounts and other investments and are well positioned for your retirement than I would agree that the reverse mortgage might not make sense for you. The upfront fees (which in the past were quite expensive for some folks depending on the value of the home) as well as the compounded interest over time doesn't make sense for a person that doesn't have cash flow problems and has a sound retirement portfolio. Unfortunately, that is not the case with a large number of senior homeowners in this country who have very little liquid assets other than their home. We also have an aging population that is living longer due to the advancements in Health Care and the HECM is just one of the many products that will help serve the needs of our seniors.

The reverse mortgage was designed to allow senior homeowners to age in place more comfortably and remain independent. All of the loans are insured by the Federal Housing Administration and regulated by HUD. The insurance provides a lot of protection to the borrower and it is also the single most expensive part of the closing costs associated with HECM's.

Most of the bad press associated with the HECM was due to non borrowing spouses who came off title and later the borrower died and they were not able to keep the home because of a lack of equity due to the financial crisis of 2007-2008 where residential real estate lost value for the first time since the Great Depression. This resulted in a law suit from the AARP and HUD has since passed regulations correcting the issue so that it can no longer happen. In fact, they also passed something in April 2015 called "Financial Assessment" which brought sweeping changes to the product all in the interest of protecting the homeowner. In fact the FHA HECM (Home Equity Conversion Mortgage) is the most heavily regulated mortgage product in existence today. All borrowers have to go through a mandatory counseling session with a disinterested HUD approved counseling agency to make sure that they fully understand the reverse mortgage, it's implications and other alternatives.

I was able to help two of my borrowers just yesterday close on a reverse mortgage and I think it may be helpful to give some background on her
situation to help illustrate why this product was beneficial to her and so many others.

My borrower is an 84 old recently widowed women who has lived in her home in Washington, DC for the past 60 years. She is no longer to fully care for herself and has part-time in-home care needs. She receives a modest pension and Social Security, but not nearly enough to cover her mortgage payment and her care and on top of that her home needed some improvements. Her daughter, who is an accomplished lawyer reached out to me to see if I could help. It turns out that we were able to pay off her mortgage which freed up $1,800 per month in cash flow for her, got her the funds for the much needed repairs (new roof and remodel her bathroom to make it handicap accessible) and she was still able to put away $90,000 in a line of credit that has a guaranteed 6.2% growth rate (also compounded interest). The Line of Credit feature of the HECM is something you can't find anywhere else and I will be happy to go into more detail about it on another post, but the available funds that can be borrowed on the line increase by the credit line growth rate and can be drawn at a later period of time. The funds are not taxable and the proceeds from the HECM do not effect Social Security or Medicare. (Seniors on SSI and Medicaid need to use the Line of credit payout option so as to not disqualify themselves for that benefit). Most importantly I closed her loan and credited 100% of her closing costs. She paid $0. When we first sat down to discuss her situation I met with the borrower, her daughter and son-in-law and her friend that I did a reverse mortgage for 5 years earlier and just raves about the positive impact it has had on her life.
One side note... I conduct many educational seminars for the public and for professionals who refer me business. Elder law attorneys, accountants, financial advisors, etc. and I always ask one question. "I am sure you have heard a lot of bad things about a reverse mortgage, but let me ask you this... Have you ever heard anything negative about them from someone who actually has one"? To this day I haven't had a yes.That is because when used responsibly this product is an absolute life changer.
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I looked at a few articles by Wade Pfau and am still not convinced that they are a good idea in general, though there MAY be specific circumstances where they are an option that they reasonably could be considered.
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What constitutes "proper use" of an RM? I've never seen anything positive, so I'm wondering if there's some information that isn't readily available to the public? I still question how a RM which unless you contradict me keeps increasing b/c of compounded interest can be an "incredible retirement tool", for you or asset managers perhaps, but how exactly can it benefit individuals such as us?

Just Googled Retirement Research Institute and found a number of various retirement organizations but none with the RRI name. I did find some bios on Pfau though.

Regardless, each person is entitled to make his or her own decision on how to invest money, and perhaps allowing a company like Pfau's McLean Asset Management, which "help(s) to build retirement income solutions for clients" is not what the OP might choose.

BTW, I wonder what his asset management fee is?
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Ah, inevitably someone who supports the RM concept comes along and blasts those of us who are legitimately trying the help the poster. And of course that support happens to be someone in the industry, who profits from RMs.

So, tell me, Reed, do YOU have an RM on your real estate?

And are you saying that the concept of adding interest to an advance and compounding the interest is an "absurd" interpretation? Please, enlighten me. If I've made a mistake in reading the terms, I'd like to know.
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I disagree with all of the above responses. I am in the industry and have helped hundreds of seniors with an FHA Reverse Mortgage. I often am able to credit most if not all the closing costs back to the borrowers. In fact some of the responses above are absurd. HUD has recently implemented "Financial Assessment" guidelines. Making it more challenging for some folks to qualify for a reverse mortgage and eliminating it as a product of "last resort". If you would like to learn more about the product I encourage you to read what Wade Pfau has to say about it. He is the president of the Retirement Research Institute and would disagree with just about every negative comment posted above. Most negative comments come from an uneducated public that fundamentally doesn't understand the product and how it works. If used properly the HECM reverse mortgage is an incredible retirement tool.
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I took a brief look at reverse mortgages a few years ago and decided that the only ones who really benefited, except the mortgagee temporarily, were the ones holding the mortgage. My house would have been theirs in too few years, and then where would I have been? If I ever needed to enter a full-time care facility, the loan would become due if I left my home for a year or more, which means they would have my home and I would have no more income from it nor likely any equity in it.

As GA writes, there is a circumstance where a mortgagee might benefit, but even then no one can predict their future.


Consumer Reports puts it bluntly: "Reverse mortgage should only be a last resort for seniors who want to stay in their homes and have no other alternatives.

There s an alternative called a caregiver mortgage. "A caregiver mortgage (aka intra-family loan) is basically comparable to a private reverse mortgage with much more favorable terms, according to The New York Times. For $2,500, National Family Mortgage does all the legal work, including recording the promissory note, the joint lender agreement and the mortgage. No appraisal or inspection required. Interest rates are set at arm's length, and the Times reports most are under 3%.
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Most banks will not handle reverse mortgages anymore because of the problems associated with them. I have only one thought about reverse mortgages -- the only people who need them are the people who cannot afford them. They are high cost and high interest. They can be full of surprises. There is no way I would ever consider one.
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I have some limited experience in reviewing the mortgage and some ancillary documents for someone who wanted to get one. I was shocked at the amortization schedules and the terms, much more stringent than conventional mortgages.

I assume you're aware that they're unlike traditional mortgages which are amortized and eventually paid down and paid off. Based on what I read when I reviewed the documents, with an RM, it's the reverse.

Every draw, every advance begins collecting interest which is added to the principal and thus compounded. The following month's payments are principal plus interest, and the interest is continually recalculated monthly to include not only the principal, but interest from the preceding months.
Thus the balance is continuingly increasing.

So you can see that the compounding keeps increasing the outstanding (combined) principal balance, raising the amount of the indebtedness.

Over time, the interest is significant, as is the balance, and paying off the RM becomes very difficult w/o a financial windfall - unlikely for someone who needed an RM in the first place.

If you need cash, you might want to consider a HELOC, a mortgage on the equity in the home. You can draw down on it for a period of years (sometimes 10 years) during which interest is paid on the amount outstanding, but is NOT compounded as with an RM. After 10 years, you may need to pay down the balance, but that depends on the specific bank.

You pay interest with either kind of mortgage but with a HELOC, the interest is NOT compounded. That's a significant difference.

There are other terms too, such as that the owner must continue to live in the house. If someone moves to a long term care facility, the mortgage becomes due and payable.

Would you mind sharing what your concerns are, and why you might want an RM? I'm not prying, just wondering what alternative solutions might be appropriate for you and/or your family.

The only situation I can think of that would lend itself to an RM is if the individuals are elderly, need money for care, couldn't possibly pay it back, have no heirs to inherit the house and have no objection if the RM mortgagee acquires the house after their death. If the house needs a lot of work, it's also a way of avoiding expenditures to repair a house when funds might be needed more urgently for care out of the home.

Otherwise, this is a bad deal for homeowners.
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