Now into our second month of 2010 and with the never ending negative press and new legislation changes, we must continue to combat the misguided individuals and organizations who want to deprive the senior community of this wonderful product. For those of us in the reverse mortgage industry it is truly a numbers game to offset and discredit those against us. The more correct reverse mortgages we produce the more the word spreads. The best lead by far has always been the plain vanilla non-sugar coated referral.

 

Case and point, this is a referral that came through the other day and as I spoke with the client I was informed that she, Martha is 63 and her husband Ted is 80; their property is valued at $420,000 with a 1st. mortgage of $235,000. The client went on to inform me that she was planning on selling in 5 years or sooner and that Ted receives $1,400.00 per month through as income through social security and refinancing was not an option because Martha’s income is based on 1099 commission only. Their mortgage payment is $885.00 per month principal and interest and their taxes are $250.00 monthly along with Homeowners at $265.00 per month for a total of $1,400.00 PITI per month. “Wow” Ted’s social security check just covered the mortgage not to mention any unforeseen expenses that as a homeowner are always on the horizon. Martha mentioned they lost 68 % of their retirement funds and hence her reason to go back into the work force.

 

Now it was a real game of survival and the floodwaters were rising. Martha mentioned that they have very little disposable income to do anything, even a matinee movie at the seniors price of $4.50 per ticket. During the conversation she mentioned that they would be inheriting her father’s home free and clear when he passes and this bit of information was the key to fully understanding what took place next. Running the loan program on a HECM fixed they were going to be short to close in the amount of $15,388.04 due to the qualification based on the youngest borrower of 62 years of age. Remember that they are truly in dire straights and in need of much help.

 

The only way to stop the bleeding was for Martha to come off the loan and qualify under Ted, which would net them additional cash out of approximately $37,000. Now without the principal and interest mortgage payment of $885.00 creating a monthly cash flow and leaving Martha and Ted in a much needed better situation.

 

Under normal circumstance I would never advise her to remover herself from the title and loan, especially with Ted in his eighties, but the key is that Martha and Ted are planning to sell in 5 years or less and as long as Martha remained the beneficiary on the current home. In this case she would inherit the home back and sell the home at that time providing there was equity or sign it back over to the lender in the case there is no equity. Keep in mind with the HECM fixed most likely there would not be much equity if any at all. Based on the probability that they stay in their residence for 5 years, they will have saved $53,100 in mortgage payments and $37,000 cash out and most of all piece of mind. In the case that Martha’s father out lived her husband Ted, than Martha would take possession of her father’s home upon sale of her deceased husbands home leaving her so that she would not be homeless. [The highlighted sentence may need to be rewritten for clarity.] Vice versa, in the event that Martha would pass before Ted and providing Ted was able to maintain his current life style he would not be homeless either. I have also put them in touch with an elder attorney in the case that Ted would need assistance through Medi-Cal and the understanding associated with a situation that could arise.

 

Solution, this is a prime example of the exceptional benefits that a reverse mortgage helps seniors in the day-to-day unstable financial world we currently live. She has already started thinking about the day a reverse mortgage may benefit her regarding her father’s property upon her inheritance.

 

So as we continue down the road into 2010, let’s remember why we do what we do as reverse mortgage originators and break the bank in a record year and props to The Reverse Review for another year of dedication to our cause and keeping us posted with a viable avenue of expression and a network of people working together to have the Last Word.

 

Have a great year!