Tag: Aging In Place

What to do about Mom?

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse Mortgage

Laurie Denker MacNaughton [506562]

The respirator’s soft “chhhh…pffff” sounded in the background as Susan and I sat at the kitchen table. “Years ago,” Susan told me, “I promised Mom, come hell or high-water, I would let her die at home – and I plan to do whatever it takes to keep my promise.”

It’s one thing to say that. But what do you do when you’re overseeing care and medical needs outpace your ability to foot the bill?

Susan’s parents had not gone into retirement financially unprepared: they retired with federal pensions, Social Security and Medicare, substantial savings, little debt and no mortgage. But four years back, on Thanksgiving, Susan’s mother had a massive hemorrhagic stroke. She spent 3 weeks in the hospital, and another 30 days in rehab. But when she failed to progress in her recovery, she was discharged – and Susan, true to her word, brought her mother home.

First they utilized their long-term care benefits until the benefits ran out. Then they used their savings. When those were gone, Susan began tapping her own retirement savings to help cover her mother’s in-home medical care. This was clearly unsustainable, so Susan made an appointment with an elder law attorney, who suggested she look into a reverse mortgage for her mother.

In this case, due to the value of the home and the homeowners’ ages, the reverse mortgage will provide funds enough to cover another 4½ years of care, and the attorney is working to put in place additional benefits that will further stretch the reverse mortgage funds.

Increasingly, boomers face this same challenge: helping mom and dad finance care, even as they themselves labor to save for retirement. Reverse mortgage can play a significant role in helping balance this equation.

Is a reverse mortgage a fit for everyone? Of course not. No one financial product is.

But as we Americans age, nearly all of us will need every financial tool available, either as we fund our own retirement, or help mom and dad fund theirs.

If you have questions, give me a call. I always love hearing from you.

E-Signature-LaurieMacNaughton - Doctored 2

The long journey: from end-of-the-line to mainline

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse Mortgage

Laurie MacNaughton [506562] ©2016

What a change a few years make. In this week’s FinancialPlanning online magazine, a publication for financial professionals, author Dave Lindorff writes in a piece entitled “Reversal of fortune: Home equity makes a comeback for retirees”:

…[A]dvisers…are starting to view reverse mortgages as an important part of the retirement planning process, particularly since a set of reforms were imposed by the Federal Housing Administration and the Department of Housing and Urban Development in 2013.

The reforms he refers to are a tightening of guidelines surrounding qualifying for a reverse mortgage. Though many homeowners aged 62 or better still qualify, those with severe property tax default issues may have a harder time – or, in certain circumstances, may not qualify at all.

Lindorff goes on to cite FINRA, the Financial Industry Regulatory Authority, as an example of the financial planning industry’s change of heart toward reverse mortgages:

In the past, [FINRA] warned that reverse mortgages should only be recommended as a “last resort” for clients with no other sources of support besides the equity in their homes.

This past year, though…FINRA changed its recommendation.

The regulator now says only that reverse mortgages should be “used prudently.”

Not to pick on FINRA, but that is a little like saying, “Water can be beneficial to life, but only when used prudently.” I’m pretty sure any bona fide financial planner gets the fact that any financial tool should be used prudently.

Financial planners routinely recommend that their clients establish a line of credit to hedge against life’s unexpected events. But here’s the thing: the later in retirement an unexpected event occurs, the less able most people are to meet the month’s end payment that greets them once they’ve drawn on their line.

A reverse mortgage line of credit is not repaid on a monthly basis. Rather, the amount borrowed is repaid once the last person on title permanently leaves the home. The remaining equity goes to the homeowner or the heirs. And the difference between having a monthly payment and not having a monthly payment? It can mean the difference between staying in the home and having to leave the home.

Few government-insured financial products have ever been subjected to a beating like the FHA-insured reverse mortgage program has been over the 30 years since its creation. Nearly pronounced dead in 2012 when the last mega-bank stopped offering reverse mortgages, Tennessee Senator Bob Corker said to then-HUD Secretary Shaun Donovan, “I do not understand why you do not shut the program down.”

And why did HUD not shut down the reverse mortgage program?

Because HUD saw what those us of who don’t share Senator Corker’s $89.7 million in net worth saw: mainstream Americans whose savings simply were not sufficient to meet their financial needs in an ever-lengthening retirement.

Lindorff concludes his piece by quoting Steven Sass, program director at the Boston College Center for Retirement Research:

Reverse mortgages make sense not just for low-income people who want to stay in their homes but also for wealthier retirees who have considerable equity but want to goose their income streams.

You can say reverse mortgages need to be part of the retirement plan discussion.

Indeed. As we Americans age, nearly all of us will need every financial tool available to get through retirement with as much independence and dignity as possible.

Give me a call and let’s talk. I always love hearing from you.

E-Signature-LaurieMacNaughton - Doctored 2

The Breathtaking Irony

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage

Laurie MacNaughton ©2016

It wasn’t yet noon, but already I had had the same conversation with two separate homeowners:

“It’s not that you have insufficient income; it’s that the first fruits of your income are going right back out the door to pay your home mortgage.”

“It’s like you know me,” the caller said.

Know you? No.

Intimately know your situation? Absolutely. I see it every day.

It boils down to this: retirement + mortgage payment = not a good combo for many older homeowners.

Nationally, most homeowners of retirement age owe nothing on their home by the time they retire. In the greater Washington, D.C. area, however, that is less likely to be true because many homeowners moved to the area as consultants after spending much of their successful career elsewhere. This means many homeowners go into retirement with years yet to go on their mortgage. An alternative – but common – scenario is that homeowners paid cash for their home, and now have much of their net worth tied up in a pricy, illiquid asset.

And the breathtaking irony is this: the same gifts and skill packages that enable homeowners to work into later life can also set them up to falter financially if health fails abruptly and catastrophically, or if any one of life’s many other vagaries ensue.

Back to this morning’s conversation: this homeowner, indeed a consultant, has a home conservatively valued at $1,000,000. He and his wife are in their mid-70’s, but still have 15 years to go on their mortgage. His health is still robust, but his wife was recently diagnosed with cancer. Their fear is they will encounter uncovered medical costs that will consume their investments. It was their financial advisor who suggested they look into a reverse mortgage in order to free themselves of their monthly mortgage payment.

Is a reverse mortgage a fit for everyone? Of course not. No financial product is.

Is a reverse mortgage going to play a part in the long-term financial wellbeing of many retiring – or retired – homeowners? Absolutely.

If you have a family member, client, or colleague who would benefit from knowing more about an FHA-insured reverse mortgage, give me a call.

I always love hearing from you.

And…

Check out my various YouTube videos. Just click the link, or google Laurie MacNaughton YouTube.

E-Signature-LaurieMacNaughton - Doctored 2

 

 

Harvard Report Points to Dramatic Senior Housing Shortage

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, Retirement Planning, Reverse Mortgage

Laurie MacNaughton ©2016

Ok, so we’re not exactly dealing with breaking news when we see Harvard’s housing research team reporting a shortage of senior-appropriate housing.

In fact, everywhere we look we see evidence of the shortage in senior-appropriate housing: Warrenton, Leesburg, Middleburg, Reston, Oakton, Arlington – pretty much everywhere you look in the greater D.C. Area you see new construction. But many of the new homes are multilevel “starter castles”…as I call them.

Harvard’s Center for Housing Policy study, titled “Housing an Aging Population,” backs up observations with numbers, and they’re a bummer.

Among other things, the report documents:

Within the next couple decades the population aged 65 and older will increase 120 percent. Over the same period the number of our oldest Americans, those aged 85 and older, will increase more than 200 percent.

Wowzers, right? But here’s where the report gets really scary:

  • The need for appropriate housing will radically outpace the availability of appropriate homes.
  • One in four households aged 85 and older spend at least half their income on housing.
  • Housing challenges are particularly severe for older adults with very low incomes – and most household incomes decline after the age of 85.

The takeaway? Pretty straightforward:

The number of older adults is rising. The need for affordable senior-appropriate housing is rising. But affordable options are not rising.

Not everyone can age in place. That’s just the hard truth. However, for those whose can age in place, everyone involved benefits. But we need to urge our communities to support construction of appropriate housing.

We can do this.

It’s just a matter of doing it.

Laurie

LaurieMacNaughton - 2

 

Yes, you CAN buy a home with a Reverse Mortgage

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story
Laurie MacNaughton © 2019

I got a call from a darling client who, a number of months back, purchased a home using a Reverse for Purchase mortgage.

I’ll call my client Marie  – and I need to mention she long ago immigrated to the U.S. and speaks in lightly accented English.

Here’s what Marie told me: When she tells people she bought her home using a Reverse for Purchase mortgage and that she’ll never have a monthly mortgage payment, they tell her she didn’t really understand the transaction. Never mind that Marie’s adult daughter, American born and raised – and a highly successful realtor in Northern Virginia – walked through every step of the transaction with Marie. Never mind that Marie has a PhD in applied physics. Because Marie’s friends don’t know about Reverse for Purchase, Marie must be wrong.

Well, Marie isn’t wrong. But it is true that many people don’t know Reverse for Purchase even exists.

If you are 62 or older and have questions on how Reverse for Purchase may help with your home purchase needs, give me a call. I always love hearing from you!

 

Laurie

Laurie MacNaughton [506562] is a freelance writer and a Reverse Mortgage Consultant at Atlantic Coast Mortgage. She can be reached at: 703-477-1183 Direct, or Laurie@MiddleburgReverse.com

Sasquatch, Martians, and…”The Bank Gets the House”

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story

The law office fills the building’s entire top floor, and lining the reception room walls are newspaper and magazine articles enumerating the firm’s many accomplishments. I knew going into the meeting the attorney was movie-star handsome – I had seen his social media page.

What I didn’t know was his sentiment toward reverse mortgages.

After a brief introduction he got right to the point: “I think I should let you know I don’t like reverse mortgages. I think they’re obscenely expensive, I don’t like the fact the bank gets the house, and I don’t like the fact my client can’t move from the property if she needs managed care later in life.”

Wowzers. This was like a scripted encounter: if he had tried, the attorney couldn’t have come up with three more classic misconceptions about reverse mortgages.

But rather than jumping into an apologetic, I asked the attorney why he thought reverse mortgages were “obscenely” expensive, why he thought the bank got the house, and why he thought his client couldn’t move. He sat silent for fully 20 seconds, and then said, “Are you implying this isn’t true?”

Yup – pretty much.

So for the record, here are some facts about reverse mortgage:

  1. The home still belongs to the homeowner. Title doesn’t change, and ownership doesn’t change.
  2. A new FHA fee structure means homeowners with a small existing mortgage will see much lower fees than they would have just a couple years ago.
  3. The homeowner can move whenever he or she wants. There is no early termination fee, and there are no restrictions placed on how long one must live in the home after doing a reverse mortgage. However, the home must be the primary residence of at least one title holder. If homeowners are absent from the home for more than one full year, for the purposes of the reverse mortgage the home is no longer a primary residence and the loan becomes due.

But back to the attorney: despite initially being an outspoken critic, he was far from being either closed-minded or unteachable, and after we reviewed his client’s numbers he did indeed counsel her to proceed with a reverse mortgage.

But I was left with this thought: I cannot think of any other federally-insured loan that has swirling around it persistent misconceptions. You don’t hear weird things about VA loans or USDA loans. But here’s a loan that literally can change long-term financial survivability in retirement, and some still view it as suspect.

And that’s too bad, because a reverse mortgage can be a financial lifesaver.

So if you have doubts, fears, or just plain-old questions about reverse mortgage, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] is a freelance writer and a Reverse Mortgage Consultant at Southern Trust Mortgage. She can be reached at: 703-477-1183, or Laurie@MiddleburgReverse.com

Southern Trust Mortgage, LLC is proud to be an equal housing lender [NMLS 2921]

Remember When? Mortgage Debt and the Older Homeowner

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story
Laurie MacNaughton – July 7, 2015

Remember when paying off your mortgage before retirement was a thing? Remember? Now, barely 40% of homeowners aged 60-65 live in a paid-off home.

But remember when seventy was old? Today I know seventy-year-olds who have started second careers, who run marathons, or who take ten days off work to volunteer in health clinics in Kibera.

It’s just a different world we live in – different opportunities, different expectations, different needs.

But there are attendant challenges in this new world.

No matter how gifted, how fit, how determined, at some point most people either have to slow down or just plain want to. But here’s the thing: if you’re still paying on your home, the first fruits of your monthly income go right back out the door to pay the mortgage. Also, like everyone else, most people in their 60’s or 70’s saw steep investment losses during the recession, losses that are harder to recover the older you are.

Added to the mix are these facts: boomers, in general, had babies later, and many are still footing kids’ college tuitions in the years when previous generations were saving for retirement. People also relocate more often, and later in life, so by the time they retire many people haven’t lived in their home 30 years.

If we had a magic wand, most of us would get rid of our mortgage debt. If granted three wishes, we’d gain back what our 401k lost – and add to it a mound of gold. If we had a genie, we’d have her undo that adverse health event. But needless to say, most people will have to look to other solutions.

Last week I met with a retired medical doctor. In addition to running a thriving medical practice, he had taught at one of the nation’s preeminent universities – until he suffered a stroke three years ago. “I never thought I’d be in a position of worrying about money,” he said to me.

“I have a substantial amount of equity in my home, so I tried to get a line of credit to help with cash flow. But I was told I couldn’t qualify because I’m no longer working. I really didn’t see this coming.”

Fortunately, the loan officer at his bank understood reverse mortgages. She gave the retired doctor my name – and it looks like he’ll be able both to get rid of his monthly mortgage payment and establish a line of credit for use in the future.

“When [the loan officer] first said ‘reverse mortgage’ I just about had another stroke,” the doctor told me. “I really thought she was nuts, because I was under the impression the bank owned the house with a reverse mortgage.”

His comment was one I hear so often it made me want to print up a cue card. It would say the following:

No – the bank doesn’t own the house.                                                                                                                                No – you don’t have to move if you use up your line of credit.                                                                                             No – the kids don’t have to pay back the reverse mortgage.                                                                                              Yes – you can sell the home and move if you want to.                                                                                                      Yes – you can always call me even after your loan closes.

A reverse mortgage is a home equity loan for the years when having a monthly mortgage payment can be a back-breaker. It can be a miracle for adult children struggling to bankroll their parents’ longevity. It can make aging in place possible.

A reverse mortgage is not a fit for everyone – just as homeownership is not a fit for everyone.

But as I’ve said many times, no one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.

If you would like to explore how an FHA-insured reverse mortgage might help during retirement, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] is a freelance writer and a Reverse Mortgage Consultant at Southern Trust Mortgage. She can be reached at: 703-477-1183, or Laurie@MiddleburgReverse.com

By A Country Mile

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story

I spoke with two homeowners yesterday, and both had the same question.

This made me realize it’s not even close: by a country mile the most common question I’m asked regarding Reverse Mortgage is, “When the homeowner dies, how does the Reverse Mortgage get repaid?”

How does any loan get repaid?

For the moment, let’s forget we’re talking about a Reverse Mortgage. How does any home loan get repaid when the last person on title dies?

Let’s make up a bank – we’ll call it First Community Bank – and let’s say it holds the mortgage. When the executor sells the home, First Community Bank gets repaid and the family or heirs get the rest. This is a concept we all grew up with. If we put it into an equation, it would be:

Sales price of the home – Amount due on the mortgage = What you pocket

If the family wants to keep the home, they would either pay off First Community Bank, or refinance the home by getting a new loan.

Same thing with Reverse Mortgage

The same holds true with a Reverse Mortgage: when the last homeowner permanently leaves the home, the family can sell the home. The lender gets repaid at closing, and the family gets the rest. The same equation holds, namely:

Sales price of the home – Amount due on the mortgage = What you pocket

If the family wants to keep the home, they repay what’s due on the loan and keep the house, or they refinance the home by getting a new loan.

Rocket Science

My dad was a rocket scientist – literally. He worked on some of the Cold War era’s biggest defense projects, and I grew up in a home where pocket protectors and slide rules, mechanical pencils and graph paper were part of the landscape.

Reverse Mortgages are not rocket science. They are a home equity loan for the years when having a monthly mortgage payment can be a back-breaker. They can be a miracle for adult children struggling to bankroll their parents’ longevity. They can make aging in place possible.

A Reverse Mortgage is not a fit for everyone. But as I’ve said many times, no one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their Reverse Mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.

If you would like to explore how an FHA-insured Reverse Mortgage might help during retirement, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] is a freelance writer and a Reverse Mortgage Consultant at Southern Trust Mortgage. She can be reached at: 703-477-1183, or Laurie@MiddleburgReverse.com

Don’t panic – but be prepared: changes a’comin’

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage

Don’t panic – but do be prepared.

Changes, the biggest in its history, are just around the corner for FHA’s reverse mortgage program.

Starting April 27 all homeowners applying for an FHA reverse mortgage should anticipate providing more documentation than has been required previously.

FHA’s new Financial Assessment mandate requires lenders to analyze homeowners’ financial resources and credit history. Under the new rules, homeowners must meet a certain “residual income” level. This means homeowners must have a certain monthly dollar amount left over after typical living expenses have been paid.

If the residual income level is met, no further documentation is required. However, if the residual income level falls short, more information will be necessary. All income sources can be counted, including Social Security, IRAs, pensions, 401-Ks, bank accounts, spousal support, and others.

Though many older homeowners are still expected to qualify, those with blemished credit histories or very low income and asset levels may not.

A second big program change is in the form of tax and insurance set-asides. If the lender determines paying property taxes and homeowners insurance may prove a challenge for the homeowner in the future, there will be a mandatory set-aside for this purpose. The amount set aside will come out of the available line-of-credit funds. This will result in a smaller available line of credit for those who meet the mandatory set-aside requirement.

Some homeowners may actually opt to set aside tax and insurance funds. This is perfectly acceptable, though one cannot later opt out – if you start off with a set aside, it’s a permanent feature of your loan.

The intent of the changes is to identify those homeowners who may fall into tax or insurance default down the road.

Time will tell if the new guidelines are too stringent. However, one thing is certain: if you have, or someone you know has, been thinking about a reverse mortgage, now may be the time you want to move forward.

If you have questions, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [506562] is a freelance writer and Reverse Mortgage Consultant with Southern Trust Mortgage.

She can be reached at 703-477-1183 Direct or LMacNaughton@SouthernTrust.com

The Twelve-Month Rule

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage

He’s not young. He’s not well. He needs a financial buffer. But for another six months he cannot move forward with a reverse mortgage.

And why not?

Because in a move that hit everyone by surprise, in December FHA enacted guidelines stating homeowners must now wait a full calendar year from the date of their most recent property lien before doing a reverse mortgage, if more than $500 was received from the transaction. This waiting period is called “seasoning.”

What does this mean?

In many cases it means that if homeowners have refinanced, or have established a home equity line of credit, they must wait a full 12 months before applying for a HECM.

The gentleman mentioned above is a perfect example of why it’s enormously important to know this. Six months ago, as his wife lay dying of Alzheimer’s, he refinanced his home in order to lower his interest rate and to reduce his monthly payment. In the process he took out $2,700 to pay down medical debt.

But here’s the thing: he doesn’t need a lower monthly payment. He needs NO monthly payment – and access to liquidity to cover unexpected expenses. A reverse mortgage is the only mainstream financial product available that accomplishes both. And now he’s in the unfortunate position of having to tread water until he can qualify.

Nearly every one of us is working to help family, friends, neighbors, or clients age with independence and dignity. And a reverse mortgage is going to play an important financial role for many.

Some new guidelines have already kicked in. More are on the way. And some changes, like the twelve-month Seasoning rule, are big.

Give me a call and let’s get caught up – I always love hearing from you.

 Laurie

Laurie MacNaughton [506562] is a freelance writer and Reverse Mortgage Consultant with Southern Trust Mortgage.

She can be reached at 703-477-1183 Direct or LMacNaughton@SouthernTrust.com