Reverse Mortgages

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  • Reverse mortgage

    – Jun 29, 2022
    (6 replies)

    We've reached a point where we are looking at either moving from the Bay Area or obtaining a reverse mortgage. House well off, liquid income pension & ss. Has anyone had a good experience with a RM and if so, can you share the professional you worked with? Thanks...Not wanting to leave the bay

    Jun 29, 2022

    We are dealing with the aftermath of a parent who died with a reverse mortgage. My dad did a RM on his home for 700k. In less than 4 years when he died he owed almost 900k. The interested started accruing at about 4.1k a month but ended at almost 5k a month (but of course would have continued to increase).

    RMs are considered a "last resort" product because they are so darn costly. In dad's case, it was a sibling who pressured him to get it when he didn't need it. It's a lot like taking a loan from your credit card. You don't do that if you have cheaper options because the interest rate is so high. It is suggested to go through your IRA and whatever else you have first (you can line up a reverse mortgage later as you get closer to the end). The primary criteria if a RM is a good option is if you don't have enough income to cover your expenses and have no other options - then maybe take the smallest amount of the RM needed with access to more later. But if you have other options (like increasing IRA distributions) then avoid it at all costs because it is NOT like a regular loan despite lots of the info out there saying it's just like a regular loan. 

    The initial company dad had was AGG but his loan was sold to FOA (Finance of America). Like regular mortgages, one doesn't have control over where you mortgage goes and this DOES make a difference as some companies appear to be much more difficult to deal with than others. We were lucky as FOA actually seems to be a reasonable company whereas AGG seems to have more complaints (see the BBB complaint page to get a feeling for what people are dealing with).

    With a RM one must keep up with certain things having to do with maintenance, occupation, insurance and taxes etc otherwise they can begin foreclosure. Some companies are more aggressive about trumped up causes to start foreclosure. A RM also means your options more limited. For example, maybe later you will be curious to see if you like living in a retirement or Assisted Living place and want to rent your home out for a year to do so - but now you have the occupation of your house requirement to deal with so you must either sell to move or stay so you've been paying the high interest for nothing. 

    Selling a home after death with a RM is also trickier as many RMs require payment in full within 30 days or they begin the foreclosure process! (many run through the equity so hand the home back). So if you get a RM make sure to get in writing the time frame is before the loan has to be paid in full. When I called in to let the company know of dad's death, I was told we'd have to pay it in full within 30 days of his death. Mind you we didn't even have the death certificates for 2 weeks, there was no way I could get a house on the market, sold and closed even in San Mateo within 30 days without selling it at a significant discount. It turned out that info isn't correct for jumbo loans but is correct for federal backed RMs. Now we have longer to sell but not worry free as they re-evaluate it every 30 days.

    Basically if you have anyone you hope to inherit money from your home, a RM will go through the equity of your home far faster, and they will have to deal with the RM at the end in the sale. My dad bitterly regretted his decision and was heart broken by it. But if it is your only way of staying in a location you love, just be cautious about how much you take....

    You might find this upcoming webinar through Legal Assistance for Seniors helpful in understanding the risks, costs, benefits and alternatives of an RM:  https://www.lashicap.org/event/webinar-protecting-your-home-equity-pace-...   

    Reverse mortgages are unbelievably expensive in terms of interest and fees and frankly, if you hope to leave your home or the proceeds from your home for someone to inherit, it's not likely to work out that way.  They do have a time and place, though, especially if the value of the home has increased and there is equity to borrow against for the reverse mortgage. A reverse mortgage, paid out in monthly payments over 10 years, helped my elderly mother stay in her home. By the time she moved to a skilled nursing facility, though, the value of the property had dropped and she owed much more than it was worth.  We decided to hand the property back to the mortgage company -- which was an unbelievably complicated and stressful process, and she was devastated that she could not leave the property to her kids, but I'm glad she was able to live in it as long as she could.   All of that said, if you want to speak to an excellent loan broker about reverse mortgages and all kinds of mortgages, I recommend John Assily at RPM Mortgage, (925) 708-9404.

    The above comments are accurate and parallel my recent experience of getting a Reverse Mortgage from a great resource, Cheryl McCarthy of Mutual of Omaha. 

    I am a trusts and estates attorney, so have researched reversed mortgages in my professional role. i have also seen clients who have obtained them (not on my recommendation), and probated an estate where the only asset was a house "under water" on a reverse mortgage. There are only a few companies offering them, and they are highly regulated. The borrowers are required to meet with a HECUM counselor prior to signing up. The initial fees are high - $10K +.. Sometimes the borrowers are required to make considerable improvements to the home before they can qualify. Please contact Legal Assistance for Seniors in Oakland. They may have more in-depth information.

    My overall conclusion is that reverse mortgages can be useful in many situations, and especially if the borrowers are not overly concerned about their kids inheritance.

    This brochure put out by consumer reports is a nice summary of what to watch out for with a reverse mortgage. https://article.images.consumerreports.org/prod/content/dam/consumerist/2017/08/cfpb_reverse-mortgage-discussion-guide.pdf

    Also be careful about marketing that RM are no longer last resort products. I see there must be some new marketing campaign by the RM industry to dispel that idea as there are articles everywhere in the last 2 years with the same type of title like "reverse mortgage not a last resort product anymore" but our impression is that they are so utterly destructive and so hard to deal with after death that they are completely a last resort product. Don't trust marketing by the banks or reverse mortgage companies! 

    And one last tip, if you do get one, you'll find yourself absolutely inundated with marketing materials and phone calls multiple times a day often of people wanting you to refi your reverse mortgage into a new one so you'll have to deal with them. But worse is you'll get what look like official letters telling you that you are missing important insurance or one of the other requirements and the foreclosure will start if you don't do this or that. No these are fake and the parasite businesses making money off of people with reverse mortgages. But many elderly people get scammed.

  • Reverse Mortgage buy back - any experience, advice or help

    – Dec 14, 2021
    (1 reply)

    Hi my elderly parent own(ed) a home in San Carlos. A sibling pushed them into a reverse mortgage a few years ago when they didn't really need it.

    Parent still lives in home and is now desperate to buy back his home. He took out 500k at 6% interest in the reverse mortgage, paid back the old outstanding mortgage of 300k and my sibling took the rest (they needed the money, that is why the parent was pushed into it). The reverse mortgage company had appraised my dad's home for $1.5 million at the time. At that time that actually seemed high by about 300k but not sure why they would appraise it at an inflated value.

    I am hoping to find someone (disinterested) who could help us determine what is the best course of action. I have read one can buy back the house by paying off the reverse mortgage loan plus fees and accumulated interest owed, so probably way more than 500k now. Since the loan amount was relatively low to the value of them home, I would assume dad could refinance it and just pay a regular mortgage. He should be able to afford a 600k mortgage.

    But I would really like a comparison of what is the best course of action as I am sure there are all sorts of pitfalls we haven't thought of.

    Anyone else buy back their home and experiences or things to consider? Anyone know of a specialist who we could pay to provide us a comparison of options? Or a website that would help us understand best course of action?

    Dec 14, 2021

    You need to talk to an attorney.  And so does your parent.  This sounds like elder abuse to me on the part of the sibling.  You say the sibling "needed the money" and the parent "was pushed into it." These are red flags.  Did parent gift the money.  Was it a "loan"?  Are there documents?  There are bigger issues here than getting out of the reverse mortgage. 

  • Parent wants to do Reverse Mortgage but doesn't seem a good idea

    – Jul 25, 2018
    (6 replies)

    My dad owns a home with very small mortgage in Lafayette that is now worth a good deal.  He's in great health, super active and is 81.  He has a good income that should cover all expenses plus could save - but my sibling milks him for money and has for decades so dad struggles to have enough every month and has gone through all his savings.

    I am very concerned about this reverse mortgage and he is defensive as to why he wants it. The only explanation was that he is worried that at his age things could change quickly so he wants to have the cash for us to be able to afford to pay for in-home care if he needs it.  He's very independent and definitely wants to stay in his home no matter what but he still has a lot in his 401k and IRA (takes mandatory distributions) so I would think it would be better to access those instead. He won't talk to me about this decision which is usually the case when he plans to give more money to the sibling but I don't know for sure.

    From what I see, reverse mortgages are normally for people who can't meet monthly expenses or who have no other assets to access so need to tap into their home but in his case, since he doesn't have difficulty meeting monthly expenses (or shouldn't if not giving all his money away) it wouldn't make sense - and if he wanted to tap into a source to give more money away, won't it be better to close the IRA or 401k and use those funds?  I just can't figure out why a reverse mortgage would be good when he could easily live another 15 years like his father and brother both of whom lived to be almost 100.  I told him think if you had done a reverse mortgage 15 years ago you would have been locked into a value half what it is now. It always feels like the top of the market and I am sure we'll go through another slump in the next few years but I still don't think it makes sense for him.

    Dad is naturally sensitive to making his own decisions so I want to be respectful of that but on the other hand I just can't stand back and not intervene if the decision is financially bad considering it's his one big asset.  (For background, a similar thing happened to my divorced mother, in her case all her savings were gone through until all she had left was her house so she sold it suddenly and I just stood back afraid to step in knowing how unstable my sibling is but I regret that so much).

    I want to approach this logically but who do I turn to?  What sources tell me if it is the best decision for him or not?  He went to his "retirement guys" and they told him it was a good decision and that reverse mortgages are now good, that they have fixed the problems they had before. I tried to tell him of course they would say that but he just won't listen.  I think he feels overwhelmed and doesn't know what to do and I am just worried sick after seeing what happened to mom.  If it is better for dad to tap into his 401k & IRA instead of a reverse mortgage and something were to happen to him, would I as his POA be able to take a home equity loan or come up with more money easily?

    Any advice, contacts, webpages or experiences would be so welcome!

    Jul 25, 2018

    If the plan is to keep the home after your parent passes, make sure he puts it in a trust before getting the reverse mortgage. Probates take so long that the reverse mortgage company is likely to foreclose before probate is completed. 

    It's obvious that you are really emotionally wrapped up in this situation, but I guess reading your post made me wonder if what you were really upset about is the fact that your sibling has drained a lot of money from your dad and that this is his last big asset to take. I'm not judging, I was disinherited by my own dad, and a lot of money was left to one sibling (out of several) and some but not all grandkids, I get it, it sucks. But ultimately, it's his money and assets to do what he wants with, and if he won't listen then there's not much you can or should do. In the meantime, I'd advise that it's better to focus this energy on your own life and family, and try to be a loving support to your dad, who you obviously care about and are lucky to have around, and enjoy the time you have with him. Good luck!

    I think you have a people problem, not a financial problem. You and your father have different opinions. You don't want him to spend money on your sibling, and he does want to spend that money. You really have no control over this. The only thing you have control over is yourself and your own money. You can tell you dad: I am worried about the reverse mortgage and feel it is a bad idea. But it is your house and you can do with it what you want. But if you end up needing more money, I am not bailing you out. 

    I would resent it if my sibling got most or all of the inheritance because of bad money management. And I suppose you resent what is going on. But there is really nothing you can do about it. 

    Complicated situation...financially, you are correct to question a reverse mortgage. The fees are high and this appears unnecessary. Can you offer him a consultation with a fee paid financial advisor ie someone expert, neutral, and without self-interest?
    However you also have the family dynamic with your sibling...it appears to me that unless this is tackled, financial sense alone won't help. A financial advisor could frame the situation as what can he afford to do for his child without damaging his own future. But someone trusted who could explore with him limit setting and enabling (vs genuine disability and need) could be invaluable.

    As an attorney who has done a fair amount of elder financial abuse litigation, I've had a number of clients who got ripped off by people who sold them a reverse mortgage.  They are not as simple as the brokers would have you believe, and my clients ended up losing their homes.  A good starting point for evaluating their suitability for your situation are the fact sheets published on the website for California Advocates for Nursing Home Reform, a non-profit which advocates (in a much broader fashion than its name suggests) for the rights of seniors.  They can be found at:

    http://canhr.org/factsheets/abuse_fs/PDFs/FS_RevMortSuitability.pdf

    http://canhr.org/factsheets/abuse_fs/PDFs/fs_RevMortSuitabilityWorksheet.pdf

     

    A lot of these responses have focused on your response to your sibling, as if you are envious of him, and that seems totally weird and unfair. It's obvious to me that your sibling is committing elder financial abuse, which is also what happened to your mom. I am pressed for time as I type this so I can only provide one website, but armed with this phrase you should be able to google up some more help. I don't know why it is so difficult for people to be empathetic, and I am sorry you have gotten this sort of response. I wish you the best and you should feel welcome to contact me if you want emotional support and help looking for assistance. I work in hospice care and while I'm by no means an expert, I certainly know where to start. Again, I'm so sorry this is happening, and you are a really good son / daughter. 

    http://www.napsa-now.org/policy-advocacy/exploitation/

  • Reverse mortgage?

    – Jun 6, 2018
    (6 replies)

    Hi

    my husband and I are considering getting a reverse mortgage and wondering what others think about them. We are 55 and 65 and would want to rent out a studio in back. Hoping to have money for our daughters too rather than giving House to the bank. Our cash flow is low currently butwe have good equity in the house  

    -need advice ASAP about others experiences with reverse mortgage  

    do we pay a lot of interest? 

    Thx!!!

    Jun 6, 2018

    Reverse mortgages are not as simple as those selling them would have you believe.  Here’s a good resource for evaluating the suitability for you:

    http://canhr.org/factsheets/abuse_fs/PDFs/FS_RevMortSuitability.pdf

    http://canhr.org/factsheets/abuse_fs/PDFs/fs_RevMortSuitabilityWorksheet.pdf

    Please do research the product known as Reverse Mortgages very carefully before you sign up. There are likely other forums with more experience in this area, since BPN members are often younger families. As an estate planning attorney I have observed clients with these products, and sometimes had to probate estates burdened by them. The upfront fees are high. Sites such as Kiplinger, the Motley Fool, and others may be able to give you the pros and cons of this "last resort" option.

    Hopefully someone who knows details can reply, but I’ve always heard “stay far, far away” from reverse mortgages. From your post it sounds like you’ll be renting your studio?  That can bring in pretty good money these days, and since your cash flow is good, it doesn’t seem like you’d have to go the route of a reverse mortgage. If you did, the house wouldn’t be yours to leave to your kids, I don’t think...

    I don't have any personal experience with reverse mortgages. There's a high probability of scams and preying on older people. https://www.fbi.gov/scams-and-safety/common-fraud-schemes/reverse-mortga.... Just be very careful if you decide to go through the process. Also, know that if you are unable to repay the loan, your daughters don't get the house. Can you refinance your mortgage? Current rates are 4.3-5%. There are also other alternatives to reverse mortgage. 

    https://www.investopedia.com/mortgage/reverse-mortgage/5-top-alternative...

    https://www.moneytalksnews.com/looking-reverse-mortgage-explore-these-14...

    I'm puzzled by part of your question. You say you don't want to give the house to the bank. But that's exactly what a reverse mortgage is doing.

    One problem many people who use a reverse mortgage don't realize is that it's a really bad idea if you want to keep the house in the family after you pass away. The mortgage company will want their money and often the amount of equity left on the house makes it impossible for the children to get a new regular mortgage to be able to pay off their parents' reverse mortgage and they have to sell the house.

    I would really talk to a financial advisor (not from the bank you are trying to get a reverse mortgage from) to make sure you understand all the implications of a reverse mortgage.

    A reverse mortgage can be an excellent way to use your home equity to fund your retirement, but it is very expensive, and therefore not the first resource most people should consider.  And if you want to leave money to your daughters, a reverse mortgage is almost certainly not the right strategy.  Renting your studio and using that income to make the payments on a regular mortgage or home equity line is likely to be a better choice, especially given your current ages.  Talk to a mortgage broker and get some specifics on what sort of loans you could qualify for and what the associated costs are.

Archived Q&A and Reviews

Aug 2009

Can anyone please recommend a reverse mortgage broker or consultant in the Berkeley area (or nearby) who is experienced and reliable/trustworthy? If there is someone you have had a bad experience with, we would also appreciate the warning. Trying to help my aging parents Does anyone know of a credit union in the Bay Area that is offering reverse mortgages? We're trying to keep the start-up costs down. Seeking reasonable rate on reverse mortgage

Laura Levy of Holmgren Assoc. 510-521-6265 is both knowledgable and very caring. I wholeheartedly recommend her. Isadora

I have done a couple of reverse mortgages for clients with similar situations as yours and used conventional lenders with some success. There is also a company by the name of Nestworth that offers only reverse mortgages. The advantage is they are a private company so do not have to follow the government guidlines that conventional lenders are required to. That being said, I am slightly skeptical about the program and would suggest you do your due diligence before hand. ie how long is their capital going to last? mathew

I recommend you talk with Laura Levy about reverse mortgages -- she specializes in them. She's very knowledgeable, experienced, and kind. Her office is (510)521-6465 and cell (510) 219-4997. E-mail is laura [at] mortgageholmgren.com I arranged a reverse mortgage for my elderly mother (not through Laura -- my mom is in the Southeast), and it was the only possible way for her to remain in her home. We are realistic though, and don't expect to have any equity left by the time she is no longer able to live there and the loan is due. It's an expensive loan, but you can amortize the costs over time and minimize your risk with mortgage insurance (I believe it's required). Good luck. Anon

Marge Bottari from All California Mortgage has helped a lot of my friends parents. She is fabulous and knows her stuff. 415 464 8209 415 305 3425 mbottari [at] allcalifornia.com rachel

March 2009

Can anyone recommend an experienced, honest, reliable reverse mortgage broker? I am looking to get a mortgage on my parents' house in LA, but I'm having a hard time finding recommendations/reviews/testimonials of reverse mortgage professionals. I want to work with someone with knows exactly what he/she is doing, who can educate me as to the process and outcomes, and who can make it all happen FAST. Please, if you know of anyone, reply with their contact info and let me know WHY you love them! Thanks BPNers - sara

Marge Bottari from All California Mortgage is fabulous- really listens, and will do everything in her power to help. 415 464 8209 (direct) 415 305 3425 (cell) mbottari [at] allcalifornia.com rachel