Tag: HECM for Purchase

Did you hear the one about the realtor?

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

It’s not that I was unaware of the fact realtors have a hard job – after all, I dragged my own realtor around for months, six months to be precise, before finding exactly what I was after. But to be honest, it was not until I changed careers and became a lender that I came to truly understand the caliber of our Loudoun area realtors, the skill set necessary to meet homebuyers’ needs, the adaptability it takes to function in our ever-changing housing market, and the daunting amount of knowledge required of today’s realtors.

But mostly I did not know of the unsung acts of selflessness, the dedication to community service, or the deeds of sheer human kindness regularly displayed by our realtors.

By way of background, I am a lender – a reverse mortgage lender. This means all my clients are aged 62 or better. The vast majority of my clients use reverse mortgage for long-range planning purposes in what is called a “reserve reverse.” These clients tend to be younger, healthier, still employed, highly educated, and working with a financial planner – or they’re purchasing a retirement home using a reverse for purchase loan.

But as a reverse mortgage lender it also means a certain percentage of my clients are advanced elderly. Some have very specialized needs and some are working with major life changes: loss of a spouse, major health issues, financial challenges. For many of these clients a reverse mortgage is nothing short of a miracle. And most of these clients are referred to me by realtors.

They are referred by realtors who could have seen a need but moved on without getting involved. Realtors who could have concluded there was no paycheck to be had in helping a senior refinance out of a bad situation. Realtors who could have been unwilling to make that call, go that extra mile, lend that listening ear, extend that helping hand.

So what, exactly, I am talking about?

Early in January I received a call from a realtor working on a potential listing. The older, self-employed homeowner was still feeling the effects of a struggling construction sector, and had also run into some health challenges. He deeply wanted to stay near doctors, adult children, and the community where he had lived his entire life. However, he knew of few choices but to sell: his upper-valued home held much of his net worth, and there were medical debts to pay.

The realtor could have simply tabulated the potential commission, listed the home, and ignored the homeowner’s other concerns. But he didn’t – he recommended that his potential client refinance using a reverse mortgage.

In another instance a realtor visited me at my office. Her homebuyer had a relentless, degenerative disease and needed to get into single-level living, but had been turned down for “forward” financing – a sadly common situation for retirees. A few days later when I met in person with the homebuyer in her current 5-story home, the realtor had stayed an extra hour in order to spare the homeowner a trip down the stairs to answer the door. Small stuff? Maybe. But it wasn’t small stuff for that homeowner.

And, I should mention, that frail homeowner is now safe, sound, and secure in a beautiful new home due to the realtor’s familiarity with FHA reverse for purchase.

I see realtors spend untold hours meeting needs outside the scope of their clients’ home purchase. I have stood shoulder-to-shoulder with realtors on home rehabs; I have watched as year after year realtors collect winter coats, food for food banks, blankets for needy families. I have seen drives for shoes and backpacks, school supplies and household supplies, disaster relief and emergency-housing relief. They give and they give and they give – but I don’t often hear them receiving due credit.

I’m not naïve: I know there are bad realtors, just as I know there are bad members of any other profession. However, unlike many professionals, realtors’ acts of selflessness seem to go unnoticed.

So to the realtors of our community I say this: thank you for your unflagging efforts to meet needs as you encounter them, to fight for local housing issues, and to serve our community in so very many ways.

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 Laurie@MiddleburgReverse.com

 

Low Interest Rates, Low Inventory, and a Slow Market? Huh?

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

Laurie MacNaughton [NMLS# 506562]

Low interest rates, low housing inventory, and a slow housing market? In what kind of crazy world do these three conditions exist simultaneously?

At last week’s 2014 Finance Summit, hosted by Northern Virginia Association of Realtors (NVAR), Joseph Minarik, research director for the Office of Management and Budget, explained how we got where we are.

According to Minarik, interest rates have been so very low for so very long most people who were going to refinance have done so. Additionally, some buyers moved up their home purchase to take advantage of historically low rates. So in effect, very low rates caused the market to borrow homebuyers from the future. Now rates have edged up slightly, and homeowners are loath to purchase a new home and forfeit their low rate. This not only impacts the sale of previously owned homes, but since fewer people are willing to move, it also impacts new home starts.

And how has this impacted the housing market? Basically since the middle of 2013, the pace of home purchases has been stalled. This includes new home starts.

But there was good news out this week: for the first time all year, April’s home sales were up.

Several factors have come together to create a better housing market, according to Steve Farbstein, Chairman of the Mortgage Executives Committee of Virginia Bankers Association. One such factor is the loosening of lending standards by some lenders. Additionally, certain loan products that had been unavailable have started to reappear, giving borrowers with unusual circumstances a better chance of qualifying.

Though a loosening of lending standards may help homebuyers who are in their working years, many senior homebuyers still cannot qualify for a traditional loan. Often this is not because they have adverse credit issues. Rather, it can be next to impossible to get a loan if the applicant is not actively employed.

But here’s the thing: it’s not that seniors are unemployed. They’re retired. But either way, in many cases they’re still not getting that loan – and as a reverse mortgage specialist, it’s the retired, or those who are planning to retire soon, I’m concerned about.

There actually is a purchase loan just for seniors. It’s called the HECM for Purchase loan, and it was designed specifically with seniors’ needs in mind. With the FHA HECM for Purchase there is a down payment, but there is never a monthly mortgage payment due. And, though guidelines will soon tighten, as of right now qualifying for a HECM for Purchase loan is based upon the borrower’s age and the purchase price of the home. Also, in many cases it’s ok if there is still an “exit” home that has not yet sold. This gives seniors time to make any necessary repairs or upgrades to the “exit” property after they have moved into their new home.

The housing market is starting to budge, and there is no reason seniors should be left behind. Now while rates are low it’s a great time for seniors to get into a home configured to suit their needs in retirement.

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

Laurie

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

 

 

 

Weekly Scenario: What Happens to the Home When we Move?

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

Scenario:

My wife and I want to work until we’re both 70, and then move to North Carolina. If we do a reverse mortgage now, what happens to the home when we move?

Answer:

Let’s put aside the concept of reverse mortgage for a moment and just think about a traditional mortgage, also called a “forward” mortgage.

What happens with a forward mortgage when you sell your home?

We all know the answer: your home sells, and when you go to settlement the forward mortgage is paid in full, and you pocket the difference between the sales price and the amount due on the mortgage.

With a reverse mortgage the formula is the same, and looks like this:

Sales Price of the Home – What’s Due on the Loan = What You Pocket

When you meet with your reverse mortgage specialist, one of the mandatory disclosures will be an amortization schedule showing approximately how much you can expect to realize from the sale of your home in any given year.

Just as with a forward mortgage, the sales price of the home will be a major factor in how much you pocket from the sale.

As a side note, when it’s time to buy your new home you can purchase it using a Reverse for Purchase loan, also called a HECM for Purchase. You will make a down payment of approximately 50% of the purchase price, and the Reverse for Purchase loan will make up the difference.

With HECM for Purchase you never have a monthly mortgage payment, which frees up your monthly income for other purposes. It also allows you to retain more cash from the sale of your previous home.

If you have questions either about a reverse mortgage on the home you’re in, or questions about HECM for Purchase, give me a call. I always love hearing from you.

Laurie

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

Laurie MacNaughton ∙ Reverse Mortgage Consultant, President’s Club ∙ Middleburg Mortgage ∙ 8190 Stonewall Shops Square ∙ Gainesville, VA ∙ 703-477-1183 Direct ∙ Laurie@MiddleburgReverse.com ∙ www.MiddleburgReverseLady.com

 

 

 

55+ Housing Market Posts Strong Gains

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

The National Association of Home Builders (NAHB) reported Thursday that the 55+ single-family Housing Market Index (HMI) showed the strongest gains since 2008, the first year numbers for this specific market were tracked. This represents the sixth consecutive quarter of improvement in this sector.

According to Robert Karen, Chairman of the National Association of Home Builders, the strong upward trend demonstrates continuing demand for homes that meet the needs of the senior homebuyer.

David Crowe, chief economist with NAHB, says builders’ confidence in the 55+ market corresponds with an overall recovery in the housing market. He goes on to say, however, “While demand for new 55+ housing has improved due to a reduced inventory of homes on the market and low interest rates, builders’ ability to respond to the demand is being limited by a shortage of labor with basic construction skills and rising prices for some building materials.”

Read more about builder confidence in 55+ communities at  http://www.homechannelnews.com/article/builder-confidence-55-housing-market-grows-q1.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

So What is the “Fiscal Cliff,” Anyway?

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

You’re wondering what the Fiscal Cliff is all about? Here are the main issues:

In 2013, tax cuts for individuals will expire, along with long-standing tax breaks for businesses. Taxes for President Obama’s health care law will kick in, as will spending cuts enacted by Congress as part of the debt-ceiling deal. Long-term jobless benefits will also expire.

So What?

Here’s what: The Congressional Budget Office (CBO) estimates that if all these items occur, an estimated $600 billion will disappear from the U.S. economy in 2013, and push the country into a double-dip recession. Given that Europe is officially in a recession for the second time in four years, if our leaders don’t act now our economy is going to fall headlong over the same cliff.

And keep your head on a swivel regarding inflation. While the latest Producer Price Index and Consumer Price Index reports show inflation remained tame at the wholesale and consumer levels in October, inflation can quickly get out of hand.

What does this mean for home loan rates?

Inflation is the arch enemy of mortgage rates. However, home loan rates should continue to benefit from the uncertainty in Europe. This is because investors will likely continue to see our bond market – including mortgage bonds – as a safe haven for their money. But inflation is a very real threat to home loan rates: if inflation hits, look for mortgage rates to go up.

The bottom line is this:

Home loan rates remain near historic lows, making now the best time ever to talk with the seniors in your life about extinguishing their “forward” mortgage with a HECM Refinance. Also, there has never been a better time to use a HECM for Purchase to get into a home appropriate for aging in place. It’s hard to say how much longer rates will stay this low.

Call me with questions you or your clients might have – I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 · Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

Reversing Years’ Worth of Skepticism

by middleburgreverselady, posted in FHA HECM, Retirement Planning, Reverse Mortgage

Even if they don’t adhere to it, most people have at least heard of the “bucket” strategy of saving for retirement. Basically, it’s a method of asset allocation, a way to diversify investments and save for the day you’re no longer working full time.

But here’s a question you might not know the answer to: for most people, what is the biggest – and best funded – bucket?  Cash equivalents? Fixed-income securities? Pension?

Answer: No, no, and no. For most people, the single biggest “investment bucket” is their home.

You can think about it this way: you might have designated several buckets. But if you didn’t put sufficient money into them during the working years, those buckets are not going to get you through retirement. However, most Americans paid into their home, even during the past few years when times were tough.

But here’s the problem: after spending years pouring the first fruits of one’s income into the home, that money is frozen, tied up in an illiquid asset. It’s an investment, certainly. But it’s not one easily converted into an income stream for retirement.

Increasingly, however, drawing upon that bucket by means of an FHA reverse mortgage is being recommended as a way to meet seniors’ financial needs during retirement.

FHA reverse mortgages have been around since 1988. But until recently, the financial planning community viewed them as the dirty underbelly of financial products.  It was the rare financial planner who saw any legitimate use for them whatsoever, let alone who used them in a strategic way.

However, within the past few years scores of scholarly studies have shown both the near-term and long-term positive impact of reverse on standard of living, financial portfolios, and estates.

In “How Important Is Asset Allocation To Financial Security in Retirement?” authors Munnell, Orlova, and Webb with Center for Retirement Research at Boston College state:

…[F]inancial advice…tends to focus on financial assets, applying tools that give prominence to the asset allocation decision. But most people have little financial wealth, and financial tools are often silent on the levers that will have a much larger effect on retirement security for the majority of Americans. These levers include delaying retirement, tapping housing equity through a reverse mortgage, and controlling spending [emphasis added].

Of particular interest to many financial planners is that, when set up as a monthly payment option, a reverse mortgage basically annuitizes the home – and it’s a considerably bigger annuity than most people would have been able to establish in the years they were supporting their family, helping with college tuitions…and paying their mortgage.

Rick Gow, wealth manager with the independent investment firm Lara, Shull, and May in Falls Church, Virginia, cites the example of a 66-year-old with a house valued at $400,000.

After subtracting closing costs, the retiree could receive a tax-free, monthly check of $1,252 for as long as the home remains the primary residence. By the time the homeowner turns 85, disbursements would total more than $289,100; by age 95, the total payouts would be over $435,600.

If the homeowner were to take a onetime, lump sum payout, he or she would receive approximately $256,800.  A third option would set aside that amount in a line of credit, the balance of which grows over time, tax free.

There is also a newer, reduced fee FHA reverse mortgage, called the HECM Saver. The over-all payout is less with this option, but Gow points out the lower closing costs make it a good option for some.

The majority of Americans fear running out of money in retirement more than they fear death, according to a May, 2012 AARP bulletin. In an America where 10,000 boomers a day turn 62, the FHA reverse mortgage has an increasingly pivotal role to play in retirement planning.

I always love hearing from you. Call me at any time with questions.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

Babies Don’t Have Dumb Ideas

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

When my daughters were teenagers I often said the biggest difference between teens and babies is that babies don’t have dumb ideas yet.

But both teens and babies have this in common: just a couple years later, both are more capable, more independent, and better able to care for themselves.

It’s tough to acknowledge, but I now have to add my mother to the comparison.

My mother is probably the most gifted person I know: brilliant, beautiful, funny, well read, extensively traveled, graceful and poised.

But she is getting old, and her proficiency in daily tasks is falling away at a relentless pace. And, unlike either babies or teens, a couple more years is not going to make the issue any better.

NPR Morning Edition’s Jessica Smith, in “Baby Boomer Money Squeeze Worsens, Multi-Gen Households Rise” (June 6, 2012), writes,

Roughly 78 million baby boomers are moving into their retirement years now. At first, they will be the “young” old. Legions of retired boomers soon will be walking around the mall, volunteering with community groups and taking grandchildren on trips.

At first, that can be good for the economy. But this immense generation, born between 1946 and 1964, will keep aging. Based on current medical outcomes, most of the people who live beyond age 85 will end up with dementia or other disabilities that require costly care.

Here’s how fast the numbers will ratchet up: In 1990, only about 3 million Americans were over the age of 85. Today, the figure is 6 million. By 2050, the United States will be home to about 19 million people older than 85, according to U.S. Census projections.(http://www.npr.org/2012/06/05/154001412/baby-boom-money-squeeze-is-set-to-get-tighter)

Almost 20 percent of advanced elderly Americans now live with their aging adult children, putting tremendous pressure on “leading edge” boomers who are hitting traditional retirement age. Boomers tended to have fewer children, later in life, which in some cases has resulted in their still having dependents at home at a time previous generations would have been saving intensively for retirement. Additionally, many middle-aged parents find themselves helping grown children who have lost jobs, homes, and businesses – the classic “sandwich generation” squeeze, made more intense by a prolonged recession.

We are a becoming a nation of the old and the older, the squeezed and the very squeezed.

Writes Ms. Smith, “For individuals, families, local government officials and federal taxpayers, this demographic shift will drain dollars and attention, and force extremely difficult decisions about living arrangements, as well as end-of-life care.”

When we have these talks about taxes and government, what kind of numbers are we talking about?  The primary number to watch is the national debt: in 1970, when boomers were young, the national debt ran about 28 percent of gross domestic product. It now stands at 70 percent.

And, as in the case of my mother, a couple more years is not going to make this issue any better.

According to Centers for Medicare and Medicaid Services, Medicare will remain solvent until 2024. Starting last year, Social Security already began paying out more than it takes in.

As former U.S. Comptroller General David Walker, a federal spending expert says, “Government has grown too big, promised too much and waited too long to restructure. It is going to spend less over time … which means that individuals will have to plan, save and invest for the future.”

Plan, save, invest…and take out a reverse mortgage, according to research put out by Boston College in May, 2012.

….but more in my next piece about several watershed reverse mortgage articles published this spring by major research institutions.

Laurie

         Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank ·                   20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

FHA Weighs Rule Reversal, Boon for Condo Sales?

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story
Daily Real Estate News | Tuesday, May 22, 2012

The Federal Housing Administration is reportedly considering revising rules that many in the real estate industry have called overly strict and that have left many condo units ineligible for FHA’s low-downpayment mortgages.

For example, one sticking point under the FHA’s rules has been that “individual condo units cannot be sold to buyers using FHA-insured mortgages unless the property as a whole has been approved for financing,” The Wall Street Journal reports. However, condo association boards are increasingly opting not to obtain recertification of their buildings for FHA loans due to its tightened regulations against condo units.

FHA’s regulations “have had an enormous impact on individuals,” says Moe Veissi, president of the National Association of REALTORS®. More condo unit residents are finding they are unable to sell their unit because the condo board hasn’t obtained approval from FHA, Veissi told The Wall Street Journal. This then can have a roll-over affect that negatively impacts the price of condo units in the buildings then.

Half of all condo buyers tend to use FHA mortgages, and it’s an important source of lending for first-time and minority home buyers, Christopher L. Gardner, managing member of FHA Pros, a consulting firm that helps condo boards obtain FHA approvals, told The Wall Street Journal.

FHA officials say they are willing to reconsider some of their rules that have raised such an outcry among condo owners, lenders, and real estate professionals. For example, one rule the FHA is reportedly reconsidering is its stance on non-owner occupancy. As of now, FHA requires that no more than 50 percent of the units in a condo building be non-owner occupies. “This rule alone has made large numbers of condominiums in hard-hit markets ineligible for FHA financing, where investors have purchased units for cash to turn into rentals,” The Wall Street Journal reports.

FHA also is reportedly revisiting its condo rules on how many owners in a building can be delinquent on their fees. As of now, FHA refuses to approve a project if more than 15 percent of the condo units are 30 days or more late on their condo association fees, The Wall Street Journal reports.

Source: “Condo Sales May Become Easier if FHA Revises Rules Governing Mortgages,” The Wall Street Journal (May 18, 2012)

Financial Planners to Reverse Mortgage Lenders: Educate Us

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

by Elizabeth Ecker Published in News, Reverse Mortgage

A panel of financial planning professionals shared insight with attendees of the National Reverse Mortgage Lenders Association conference in Irvine, California last week. By and large their message to reverse mortgage professionals was: education is paramount.

While some financial planners do understand the viability of reverse mortgage products and they ways in which they can work for clients, and even with the help of recent positive financial planning press on the products, there is still work to be done on the education front, they say.

“I was getting a lot of phone calls about reverse mortgages,” said Pat McClain, senior partner and founding principal of Hanson McClain Advisors of his early experience with reverse mortgages. “I initially had a negative attitude toward reverse mortgages. But I realized they weren’t the reverse mortgages of old; they actually help people if used correctly.”

McClain, who became one of the founders of Liberty Reverse, now advises clients on financial planning. While his mind was changed, there are still others who need help understanding how the products can work.

“In terms of clients’ perceptions, there is still a lot of work to be done,” says Jerry Clements, certified financial planner with Ameriprise. “For most there is a negative connotation when I talk to clients.”

But, Clements says, there are ways reverse mortgage professionals can work with financial planners to bring them up to speed. Some are working with reverse mortgage advisors already, others are not.

“A lot of us still have preconceived ideas. …hopefully over time with education [the reverse mortgage] could be something they integrate more as a tool to prevent portfolio failure,” he says.

While real estate professionals focus on location, location, location, McClain says, for financial planners, it’s education that counts.

“For us in the financial planning community, it’s education, education, education,” he says. “You may assume we understand how it works, but some do not have a clue. It’s a process. It may take years to develop the relationship, but if you do and there’s that trust, you will be top of mind. Our clients are asking about it and the more educated we are the more we can help our mutual clients.”

Looking ahead, McClain says, the reverse mortgage could be incorporated into financial planning calculators.

“Figure out as an industry how to bake calculators into financial planning software, so it shows up as a line item. It will make a difference in three to five years, whether they recognize it now, or not.”

Wall Street Journal: Without a Reverse Mortgage, Most Americans Won’t Make it Through Retirement

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

Saturday’s Wall Street Journal article by Tom Lauricella minces no words: “Your financial adviser doesn’t want you to read this column.”

What would cause this venerable financial publication to introduce a piece in such robust terms?

Because, based upon research done by the highly esteemed Center for Retirement Research at Boston College:

Without making any changes to their savings and investment strategies, 74% of households would fall short of their income needs at age 62, and 47% would fall short at age 67, when individuals (born in 1960 and later) become eligible for full Social Security benefits.

By anyone’s standards, these are scary numbers.

This sobering data, fortunately, is not the whole story. The article goes on to state that when certain “levers” are pulled, seniors’ odds improve significantly.

By adding two factors – the aforementioned “levers” – to a retirement portfolio, research demonstrates that odds swing greatly in seniors’ favor.

So what are these two levers?  First is working longer. This cuts down the number of years spent in retirement, and adds savings to the retirement kitty. Demographic studies consistently show people are working significantly longer even compared to just a few years ago, and this trend looks poised to continue.

And the second lever? For many Americans entering retirement, or for those already retired, a Reverse Mortgage makes possible living out their retirement years with dignity and in financial security.

With the FHA-insured Reverse Mortgage, homeowners never give up title, cannot get underwater, never make a payment as long as they remain in the home, and never have to move.

Read the whole article at: http://alturl.com/jiu2o