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Let’s Reverse Your Thinking About Reverse Mortgages.
Why Are Many People Fearful of Reverse Mortgages?
Mathius Marc Gertz MBA, AFC®, CAPS
Since the 1930s, when President Roosevelt was in office, Congress has passed a never-ending series of social legislation. These laws benefited the middle and lower economic classes. The one piece of legislation passed back then that most people remember was the Social Security Act of 1935. At that time, they promised that social security would “solve senior poverty.”
By 1955, Congress knew that Social Security was in financial trouble to accomplish that goal. So working with the IRS, they passed laws to help induce Americans to save for retirement and supplement what little they would get from Social Security. That is where IRA, Keogh, SEP, and 401k plans come from, which have a favorable impression in most Americans' minds.
Home Equity Conversion Mortgage (HECM) programs were another part of that ongoing federal social legislation. But the HECM program suffers from a mixed reputation. Why?
Some mortgage companies in the 1960s came up with an idea for a new type of loan they called a reverse mortgage.
Under their plan, you signed over the title to your home to the lender. The lender would allow you to live in your home for the rest of your life. While they would make your mortgage payments for you and pay you an income per month for your life. Then, when you and your spouse passed away, the lender owned the house. This program was a good solution for some people with not enough income to live on; however, there was a problem.
Starting in the mid-1970s, these reverse mortgage homeowners began to pass away, and that’s when many of their grown children found out for the first time that they weren’t going to inherit the home.
There were several newspaper articles about the turmoil. Mistreatment of seniors, or elder abuse, was the subject of many articles by columnists like Ann Landers. There were several lawsuits, investigations, congressional hearings, and lots of bad press. By the early 1980s, these so-called “reverse loans” had all but vanished.
However, an entire generation, the Baby Boomers and their children, now believed that anything called a reverse mortgage was terrible. But the only thing those programs from the 1960s have in common with the current programs, which didn't become permanent until 1998, is the same nickname, reverse mortgage. Otherwise, they have nothing in common with one another.
It is important to remember that HECM loans are a piece of federal social legislation like IRA, Keogh, and 401k plans that private companies administer. HECMS were signed into law in 1988 and became permanent in 1998. They are just another tool to help in retirement planning.
By 1955, Congress knew that Social Security was in financial trouble to accomplish that goal. So working with the IRS, they passed laws to help induce Americans to save for retirement and supplement what little they would get from Social Security. That is where IRA, Keogh, SEP, and 401k plans come from, which have a favorable impression in most Americans' minds.
Home Equity Conversion Mortgage (HECM) programs were another part of that ongoing federal social legislation. But the HECM program suffers from a mixed reputation. Why?
Some mortgage companies in the 1960s came up with an idea for a new type of loan they called a reverse mortgage.
Under their plan, you signed over the title to your home to the lender. The lender would allow you to live in your home for the rest of your life. While they would make your mortgage payments for you and pay you an income per month for your life. Then, when you and your spouse passed away, the lender owned the house. This program was a good solution for some people with not enough income to live on; however, there was a problem.
Starting in the mid-1970s, these reverse mortgage homeowners began to pass away, and that’s when many of their grown children found out for the first time that they weren’t going to inherit the home.
There were several newspaper articles about the turmoil. Mistreatment of seniors, or elder abuse, was the subject of many articles by columnists like Ann Landers. There were several lawsuits, investigations, congressional hearings, and lots of bad press. By the early 1980s, these so-called “reverse loans” had all but vanished.
However, an entire generation, the Baby Boomers and their children, now believed that anything called a reverse mortgage was terrible. But the only thing those programs from the 1960s have in common with the current programs, which didn't become permanent until 1998, is the same nickname, reverse mortgage. Otherwise, they have nothing in common with one another.
It is important to remember that HECM loans are a piece of federal social legislation like IRA, Keogh, and 401k plans that private companies administer. HECMS were signed into law in 1988 and became permanent in 1998. They are just another tool to help in retirement planning.
Just The Facts...
Many people who remember the 1970s articles about reverse mortgages think that the current HECM program is the same. That couldn't be further from the truth. Because the private mortgage product from the 1960s and the current federal government-designed program that became permanent in 1998 have the same nickname, the facts and differences are frequently confused. So what do we do? How do reverse mortgages work?
Well… some of you may remember that before the television show LAW AND ORDER, there was the TV show DRAGNET. The Sergeant, Joe Friday, frequently implored female informants to provide "Just the facts, ma'am." So, before you read any further, let's separate the facts from the fiction about reverse mortgages?
Well… some of you may remember that before the television show LAW AND ORDER, there was the TV show DRAGNET. The Sergeant, Joe Friday, frequently implored female informants to provide "Just the facts, ma'am." So, before you read any further, let's separate the facts from the fiction about reverse mortgages?
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Fiction: With a reverse mortgage, you are selling your house to the bank, and the house has to be free and clear to qualify.
FACT: Homeowners never give up title or ownership of their homes, and most homeowners use loan proceeds to pay off an existing loan on their primary residence. Fiction: Reverse mortgages are costly and have high closing and origination fees.
FACT: Interest rates are comparable to conventional Federal Housing Administration (FHA) rates, and fees vary by lender. Sometimes there are virtually no closing costs, with one exception. There is an insurance fee that is unique to a HECM that guarantees that this is a non-recourse loan, when the loan must be repaid. There are different types of reverse mortgages. Ranging from traditional HECM loans to proprietary reverse mortgages like jumbo reverse. Our company works with twelve different reverse companies with fifteen different reverse style programs to design the best programs to solve your problems. Fiction: If the home loan balance grows bigger than the home value, the borrower is on the hook for the difference.
FACT: All reverse mortgages are non-recourse loans, and a borrower, the estate, the children, or the trust will never owe the lender more than the current value of the home. The current design of these loans is that there are substantial assets for inheritance from the family home after the homeowners die or if they decide to sell the home while still alive and downsize. Fiction: All reverse mortgage funds you receive need to be explained, justified, and approved for use by the lender, the Federal Housing Administration (FHA), and the Department of Housing and Urban Development (HUD).
FACT: There are no restrictions, approvals, explanations, or reporting required. Funds may be used for any purpose, at will, without justification from any government agency. Currently, all types of reverse loan proceeds are received tax-free and do not need to be claimed on your tax returns. After you receive your funds, you can consult with a trusted advisor and make any decisions you wish about how you spend, preserve or invest your loan proceeds. |
Fiction: I will lose my government assistance if I get a reverse mortgage.
FACT: A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid or Supplemental Security Income (SSI), any reverse mortgage funds you receive must be used immediately. For example, everything is fine if you request $4,000 in a lump sum for home repairs and spend it all in the same calendar month. A HECM line of credit can be a good solution. Fiction: Reverse mortgages are a loan of last resort. They are only for people in desperate financial conditions.
FACT: Many people use a HECM Line of Credit as a safety net to draw on in an emergency. In addition, getting a Portfolio reverse mortgage of up to six million dollars is now possible. They use this money to invest, create retirement income, and use the HECM to pay for property taxes and homeowners insurance along with home repairs. Reverse loans are now used in sophisticated retirement planning and asset protection programs. They are a hedge against portfolio drops due to a Bear Stock Market, housing market crash or used to delay taking Social Security benefits till age 70. Even used for asset protection to help make your home impervious to slip-and-fall lawsuits. Call us to discuss the particulars of your situation. Fiction: There are few differences between a HECMLOC (Home Equity Conversion Mortgage Line Of Credit) and a HELOC (Home Equity Line of Credit).
FACT: They are entirely different except that they are both lines of credit that use your home as collateral for the loan. Most importantly, once in place, a reverse line of credit is no longer tied to the value of your home. Therefore the lender cannot call, cancel or reduce the line of credit, even if the value of your home decrease. Let us separate fact from fiction and Reverse Your Thinking® about reverse mortgages! |
Speak to the Specialist:
Mathius Marc Gertz MBA, AFC®, CAPS
Mathius Marc Gertz is a Mortgage Broker with Reverse Your Thinking® Mortgage, located in Los Angeles County. The Principal of parent company SayWhyNot, Inc., Marc holds a Masters in Business Administration (MBA), is an Accredited Financial Counselor (AFC®). He is also a Certified Aging in Place Specialist (CAPS) and a Certified Divorce Lending Professional (CDLP).
Marc represents a complete spectrum of reverse mortgages and limited equity share programs through his mortgage practice. He collaborates with trusted advisors to design and implement programs that satisfy their clients' legal and financial planning needs. As an AFC®, he offers both lender-sponsored programs to his clients and fee-based counseling.
Marc maintains a holistic, collaborative approach to the reverse financial planning process. This includes educating trusted advisors and keeping them current on financial strategies to help protect the quality of their client's lives. Marc believes open communication and proactivity are keys to a successful long-term retirement plan. Additionally, Marc works closely with each client to develop a plan that is specific to their unique needs and goals.
The three watch-words of his practice are: collaborate, educate, problem-solve.
Marc has earned a reputation for explaining complex subjects in an easily understood style. A specialist in reverse financial retirement plans and their history, Marc is frequently invited to present training and educational workshops for trusted advisors. Like attorneys, financial planners, fiduciaries, accountants, and bankers, to name a few.
He also collaborates with schools, colleges, and community & fraternal groups. He also gives educational workshops covering many topics like wealth creation, money and emotions, aging in place, and financial literacy.
Marc represents a complete spectrum of reverse mortgages and limited equity share programs through his mortgage practice. He collaborates with trusted advisors to design and implement programs that satisfy their clients' legal and financial planning needs. As an AFC®, he offers both lender-sponsored programs to his clients and fee-based counseling.
Marc maintains a holistic, collaborative approach to the reverse financial planning process. This includes educating trusted advisors and keeping them current on financial strategies to help protect the quality of their client's lives. Marc believes open communication and proactivity are keys to a successful long-term retirement plan. Additionally, Marc works closely with each client to develop a plan that is specific to their unique needs and goals.
The three watch-words of his practice are: collaborate, educate, problem-solve.
Marc has earned a reputation for explaining complex subjects in an easily understood style. A specialist in reverse financial retirement plans and their history, Marc is frequently invited to present training and educational workshops for trusted advisors. Like attorneys, financial planners, fiduciaries, accountants, and bankers, to name a few.
He also collaborates with schools, colleges, and community & fraternal groups. He also gives educational workshops covering many topics like wealth creation, money and emotions, aging in place, and financial literacy.
Collaborate. Educate. Problem-Solve.
Call Us: 310-447-5266 or Make An Appointment!
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What Other People Have to Say...
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Marc came to my rescue. He structured the Jumbo-Reverse loan so I was able to set aside $1,000,000 towards monthly income.
He made sure my appraisal came in at full value. Now I will be able to stay here for the rest of my life. He is the best at what he does. Call him! – David H, Beverly Hills, CA Marc did a great job getting me qualified so I could use a reverse mortgage-for- purchase to buy my retirement home. He overcame many financial obstacles on my behalf and succeeded where others would have failed. I’ve actually come to think of him as a loyal friend.
– Gloria L, Tucson, AZ |
Marc did a financial analysis for me and showed me how I was going to run out of money in 6 months. He was honest and he structured a reverse mortgage for me that not only cleaned up my bills, but also fixed up my house and gave me time to sell my business. Today I am debt free, my stress is down and my health and quality of life is better thanks to him.
– Paul Z, Lake Arrowhead, CA Marc got me a reverse mortgage on my mobile home. My taxes are paid, my bills are paid off, and I have a car that is reliable and money in the bank. He did a great job and he is a nice guy.
– Johnny P. Camarillo, CA |
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