You’re not as pretty as you used to be

Laurie MacNaughton ©2022

My client sat down, looked at my business card, looked at me and said, “You’re not as pretty as you used to be.”

Yup. That happened.

I laughed and said, “You’re right – that’s an older picture. I need to get new cards.”

After his comment, for the millionth time I had to reflect on the weirdness of aging.

Because aging is weird. Aging is confusing. And, frankly, aging can be kind of scary. Add money concerns to the mix and aging can be…really scary.

Many clients tell me they’re concerned – or even outright scared – about money. This concern, of course, is why they’re exploring a reverse mortgage in the first place.

This said, it would be a misconception to paint all my clients with one broad brush. Truth is there are many reasons homeowners look into a reverse mortgage – but there are roughly three categories of enquirers.

The first is a group I call the “pre-need planners.” People realize their income, savings, and investments are likely not to be sufficient as they age, and they’re looking for a tax-free source of liquidity for future use.

The second reason is debt. Often this debt was driven by a health emergency, and uncovered expenses were paid with credit cards. Now the crisis is past, and they’re left struggling with high-interest payments.

The third reason is in-home healthcare. These costs can be breathtakingly high, and it’s not unusual to see couples paying $22,000 per month for care. $22,000. Per month. Many of these clients went into retirement with hundreds of thousands in savings, but have simply outlived their money.

Many past clients have called to say their reverse mortgage has been a “miracle.” As blessed as I am to hear this, a reverse mortgage is not a miracle. A reverse mortgage is… well… a mortgage. As such, it will be repaid.

But rather than being repaid on a monthly basis, the loan is repaid on the back end, in reverse. This means homeowners can use their equity without picking up a monthly mortgage payment. The impact of having a tax-free “bucket” to draw on can be truly profound.

If your client, friend, or loved one would like to explore how a reverse mortgage may contribute to their financial wellbeing in retirement, give me a call. I always love hearing from you.

Oh, and that old business card? There’s a new one in the works.

I know a lady

Laurie MacNaughton © 2022

There it was again today.

You do reverse mortgages? I know a lady who had a reverse mortgage and lost her home.”

“I know a lady….” If I have heard this once, I have heard it a hundred times.

And you know what? Never do I ever doubt these stories. Never.

But you know what else? Two things can be true at the same time. The lady had a reverse mortgage? The lady lost her home? Both things may very well have been true. However, that does not mean the one caused the other.

Odds are high–in fact very high–that the lady in question forgot to pay her property taxes. But no one is going to ask that, right? It’s rude.

But you know who does ask? The FHA. In fact, the FHA keeps minute tabs on reverse mortgages, including data on the small number of homeowners who have lost a home. Top of the list? Homeowners who default on their property taxes.

Property taxes are not a function of a reverse mortgage. Nor are they a function of a traditional mortgage. Rather, property taxes are simply a responsibility of homeownership. Punto.

But that’s not an interesting story. “Elderly homeowner forgot to pay property taxes and lost her home.” No clickbait there.

“Elderly homeowner with reverse mortgage loses her home,” on the other hand, stirs righteous anger in our hearts. It smells of elder financial abuse, shysterism, and shameless exploitation.

But here’s where the true shame lies: most tax jurisdictions offer tax reductions–or even full tax waivers–for the elderly. Why is this information not made more widely available to our aging?

For those still paying taxes, most jurisdictions allow taxes to be set up as automatic, recurring payments. For some of our oldest homeowners, this may mean they need a helping hand setting up recurring payments. My own father, a truly brilliant aerospace engineer, never did master the personal computer. My mother was quite good on the computer, but she wasn’t in charge of finances.

If you have aging loved ones in your life, ask them if they would appreciate help setting up recurring property tax payments. Be mindful that the ability to keep track of dates, deadlines, and requirements may diminish as loved ones age, and that the “money talk” may be one you need to have on a regular basis.

If you would like more information on the role a reverse mortgage can play in your long-range financial planning, or in the life of one you love, give me a call. I always love hearing from you.

Funding the space between end of health and end of life

Laurie MacNaughton © 2022

It’s called health span – and though I only recently became aware of the term, turns out…not a new idea.

This odd-sounding term refers to how long one’s impairment-free health lasts. Some experts refer to this as “healthy life years,” and it is a concept separate from lifespan. What makes this topic significant is that for many older adults there is a years’-long gap between the end of health and the end of life.

Though there isn’t (yet?) a succinct term for it, for many there is another gap – a “finance gap.” It can be summed up simply as the years of life left once the money has run out – and often this chapter of life is accompanied by ever-increasing care costs.

So how do you fund that gap, the gap between the end of health and the end of life? Where does one turn for money once health is declining and finances are depleted?

If you’re very lucky, your adult kids can help. However, rarely is this the best option as that means the kids are using dollars they should be saving for their own retirement. Also, monies gifted to parents typically are not tax deductible by the gifter, and in some circumstances gift money may imperil a parent’s benefits.  

Though it’s an easy default position to judge those whose finances have grown thin, it’s not fair: when today’s retirees started working, lifespans were notably shorter. While it’s entirely possible to work 40 years and save enough for 5 years of retirement, it’s a whole other proposition to save enough for 25 or 30 years of retirement. And, people now routinely live for years with complex medical conditions that once were quickly fatal.

Standard recommendations to improve finances include sticking to a budget, taking a part-time job, and by becoming a “life-long saver,” meaning putting a small amount by each month. But these measures often are impossible once a serious health condition arises.

This is where a reverse mortgage can be a true lifesaver. A reverse mortgage is a seniors’-only home equity line of credit that is repaid when the last titleholder permanently leaves the home; all remaining equity goes to the homeowner, the heirs, or the estate.

Rarely will a reverse mortgage be the whole solution. However, a reverse mortgage can be a significant part of the solution.

This much is certain: none of us is likely to get by on just our Social Security. Few will survive on just an IRA, a 401(k), a pension, or savings – or a reverse mortgage. But when added together, all these can contribute to financial longevity.

If you would like to discuss your financial needs, or those of a loved one, give me a call. I always love hearing from you.

Rarely is a problem too large

Laurie MacNaughton © 2021

It looked like it was heading for a bad outcome: Robert sold his mother’s home and placed her in a care facility.

The problem? Mom was on Medicaid, and her formerly exempt asset was now quite a large countable asset, which spelled big trouble for her care options.

Fortunately, Robert picked up the phone and called an elder law attorney, who listed buying another home among potential cures.

Because Reverse for Purchase has notably easier qualification guidelines, Robert’s mother qualified even on her limited income. And…yesterday she closed on a lovely new home. She is scheduled to move in shortly before Christmas.

Rarely in life is a problem too large. More often, solution sets are too small. In this case, Reverse for Purchase was the perfect fit for a problem that had few other solutions.

If someone you know is in need of options, give me a call. I always love hearing from you!

I feel I’ve lived a miracle

Laurie MacNaughton © 2021

Margaret was 75 when she inherited her mother’s ranch-style home. Because the home had a perfect aging-in-place layout, Margaret and her husband decided to sell their current home and move into the smaller, single-level property. Their current home sold quickly, and they began packing for the move.

But then one tragedy after another struck: Margaret’s husband died suddenly. Margaret lost her job when her employer closed his doors. And then, just days later, the inherited home burned to the ground. And, as fate would have it, the home was uninsured at the time.

Margaret moved in with family while she had the home rebuilt, and funded the construction with proceeds from the home she and her late husband had sold. However, the funds didn’t cover the full cost, so she tried to get a loan to cover the remainder. In the meantime, the contractor finished the work and placed a mechanic’s lien against the property.

She tried lender after lender – but the loan amounts fell far short of what she needed. After all, she was living on just Social Security and a state pension. Though her income was by no means meager, she could not qualify for a loan large enough to pay the contractor.

Months went by, and finally Margaret consulted an attorney regarding her options.

His recommendation? Look into a reverse mortgage.

With a reverse mortgage there is no requirement to prove the homeowner can make a monthly mortgage payment, and consequently Margaret qualified for a far larger amount than she had with a “forward” mortgage. The reason? A reverse mortgage has no required monthly mortgage payment.

The lender must verify the homeowner can cover property charges, including property taxes, homeowner’s insurance, routine upkeep, and condo or homeowner’s association dues, if applicable.

Today Margaret is living in her lovely new home. She has paid all her debts and has no required monthly mortgage payment. When I spoke with her recently she said, “I feel like I have lived a miracle.”

A reverse mortgage is not a miracle – it’s a mortgage. It’s a mortgage that’s repaid on the back-end, in reverse. However, it’s a mortgage that can accomplish results other mortgages often simply cannot.

If you are – or someone you know is – in need of options, give me a call. I always love hearing from you!

Forbearance-to-Foreclosure Pipeline

Laurie MacNaughton © 2021

She’s 78 years old.

She’s 78 years old and heading into foreclosure.

How did she get here? How the HELL did she get here?

A year ago, as allowed for under the CARES Act, she put her home into forbearance. Now one year on she’s newly widowed, meaning she’s got half the income and all the debt, and her home is coming out of forbearance in just a few weeks.

According to correspondence from her mortgage company, she also has a $69,000 lump sum due on her existing mortgage come September 1. If she cannot come up with that amount, per her mortgage company, her home is headed toward foreclosure. She has tried to refinance both with her current lender and with several other lenders.

But here’s the thing: it can be very difficult to refinance if you are not currently making payments. This means many thousands of our seniors may soon be in dire distress.

So back to our 78-year-old.

This past week her banker mentioned the possibility of refinancing using a reverse mortgage.

To answer your question: yes.

Yes I can qualify her.

Here’s why: with a reverse mortgage she does not have to have income enough to make monthly mortgage payments…because with a reverse mortgage there is never a monthly mortgage payment required. Rather, the mortgage will be repaid on the back end – in reverse – when the home is sold. All remaining equity belongs to the homeowner, the heirs, or the estate.

Because homeowners still own their home, they continue to pay homeowner’s insurance, property taxes (unless tax-exempt), and HOA or condo dues, if applicable.

We may well be in the calm before the storm. But our older homeowners currently in forbearance do not have to lose their homes if they can refinance using a reverse mortgage.

Please, please be proactive in asking the hard questions of your loved ones currently in forbearance. You know, as do I, that many older homeowners are not comfortable asking for help – until they’re out of all options they know to pursue.

Do please pass this message on to lenders, bankers, planners, attorneys – anyone in your life who deals with older homeowners.

And do call at any time if you have a client, friend, or family member aged 62 or older who wants to talk. I’m always available.

Bob and the stinky advice

Laurie Denker MacNaughton ©2021

I’ll call him Bob.

Bob is an advisor with a mainstream financial services firm, and he and I have a mutual client.

I will call her Ellen.

Ellen is 78, widowed, and is selling her current home and purchasing a new home closer to friends and family. Initially she thought she would purchase using a traditional mortgage, but she couldn’t qualify due to insufficient income.

Her “forward” loan officer sent her over to my office, where I easily qualified her for a reverse for purchase home loan.

Enter Bob.

Without making the effort to acquaint himself with details of reverse for purchase, he proceeded to pick up the phone and call Ellen. For fully fifteen minutes he spewed dire warnings that she would lose all her money; that it was a terrible “investment”; that she would end up with nothing. In other words, he scared the daylights out of her.

And here’s the thing: if fifty people tell you the skittles are good, and one person tells you there could be a poisoned skittle, you’re probably not touching the skittles.

But suppose the person warning you about the skittles doesn’t have any data about whether one skittle was poisoned. It’s just something he heard. And he won’t revisit his hunch – but he’s pretty sure he’s heard of a guy who knew a guy who met a guy who got sick on a skittle.

I’m the first to say there is no one right financial product for everyone. There simply isn’t. But for many aging homebuyers, reverse for purchase is a fantastic option: they can get into an appropriate aging-in-place home without picking up a monthly mortgage payment. Or, like Ellen, it can make possible the purchase of an appropriate home when it otherwise was not.

In my many years as a reverse mortgage specialist I can honestly say I have run into not more than a couple Bobs. Financial advisors are well known for paying scrupulous attention to hard data, education, and their clients’ needs. And this is a darn good thing – because one advisor’s stinky advice can cause an awful lot of emotional upheaval, anxiety, and deep distress.

No one knows everything. Everyone needs input.

But fallacious input can be hard – very, very hard indeed – to un-hear.

If you have – or someone you know has – questions regarding reverse mortgage, give me a call. I am always available to answer questions, and I always love hearing from you.

LIBOR, Schmibor – who cares?

Laurie MacNaughton © 2020

In September Ginnie Mae announced home mortgages, including reverse mortgages, would switch over to the Constant Maturity Treasury, or CMT, from the current LIBOR index. The move came fully one year earlier than anticipated.

So first, who cares?

Turns out, lots of people care. Indeed, global markets have been preparing for the transition for a number of years.

But also turns out…not a lot of consensus exists on exactly what the migration will mean for the average household.

Why the move?

The intent to move away from the LIBOR was announced after the index was found susceptible to manipulation. In fact, depending upon who you talk to, a small group of insiders almost brought about an end to civilization as we know it. Hyperbole notwithstanding, it’s widely acknowledged that manipulation of the LIBOR contributed significantly, almost catastrophically, to the 2008 worldwide credit crisis and global recession.

A few alternative indices were in the running as LIBOR replacements. Most explanations regarding the choice of the CMT are excruciatingly technical – I unsuccessfully tried to find a truly good Cliff’s Notes version – but here’s the Federal Reserve Board’s stab at it:

“Yields on Treasury securities at constant maturity are determined by the U.S. Treasury from the daily yield curve. That is based on the closing market-bid yields on actively traded Treasury securities in the over-the-counter market.”

The general idea is that the CMT accurately reflects the “actual” cost of money; furthermore, the CMT can respond quickly to economic conditions.

What does this mean for you, and for your clients?

If your clients have a loan in process – depending upon the closing date – they may be asked to sign another loan application. We all may well see credit card companies and mortgage servicers contacting us with new disclosures. According to some analysts, there could be short-term market turbulence.

I readily acknowledge I am not an economist. I am not investment advisor. Nor am I an expert on global markets, an investment banker, a possessor of a crystal ball; I am a loan officer. But I am also an avid consumer of financial bulletins, articles, and newsletters, and I believe this much is certain: the markets ultimately will determine whether the CMT index is the best index for the years to come.

But as clients’ increasingly frequent questions have forced me to seriously research the topic, I have grown ever more confident of this: you, and I, and all our clients will weather this transition just fine.

And…I will close with this: if you have questions regarding how a reverse mortgage might improve your client’s financial outlook in these unsettled times, give me a call. I always love hearing from you.

Foreclosure: the gathering storm

Laurie MacNaughton © 2020

Let’s have a go at Jeopardy. The answer is: “Ten million.” The question? “How many Americans lost their home in the Great Recession?” Ding, ding, ding – you’re right. Ten million.

During the Great Recession it took nearly two years before the US saw the first 1.6 million homeowners fall delinquent on their mortgage. That many homeowners fell delinquent on their mortgage in April 2020 alone. On top of that, some 4.7 million homeowners are currently in forbearance, representing some $1 trillion in unpaid principal balances, according to Black Knight, a mortgage analytics aggregator. Out of that number, less than 30% report having funds on hand to catch up. That ten million from the Great Recession? By early next year it potentially could look like child’s play.

Just like in any crisis, the most vulnerable are hit first, hit hardest, and suffer longest. Included in this group are our youngest homeowners, our communities of color, and our hourly wage-earners, all of whom are likely to have little in savings. And then there are our aging homeowners. Homeowners who worked their entire lives. Homeowners whose largest asset may well be their home. Homeowners who were planning to retire in the next year or two. These homeowners – these are those for whom losing a home may well mean a rewrite of the whole retirement chapter.

We’ve already watched how this scenario rolls. We already know this pre-retirement demographic may not ever fully financially recover if the US drops into an extended recession.

Here’s the classic scenario: husband, wife, or both lose a job, and finances get tight. Rather than falling behind on the mortgage they begin to tap into their savings, and then into their investments, to meet their monthly mortgage payment. By the time they reach out for professional help, their options are severely limited.

So what are realistic options?

If they’re lucky, adult kids can help. However, rarely is this the best option, as bankrolling mom and dad means the kids are using dollars they should be saving for their own retirement. On top of that, adult kids may also be scrambling right now, as many professional positions have been hard hit.

A second option is to sell the home and rent, so long as there are no illusions it’s truly going to be cheaper in the long run. A recent analysis put out by Trulia, the online real estate consolidator, states that after six years buying is cheaper than renting. Additionally, rents in many metro area currently are quite high, and doubtless will climb higher still as foreclosures limit supply. Nonetheless, there are those for whom renting may be the strongest option.

Another option to consider: “Golden Girl” style communal living. This has been a trend among aging women for the better part of two decades, and these arrangements can meet both financial and social needs. In fact, in happiness quotient studies, communal housing generally scores very well.

For some, a reverse mortgage will be their saving grace. If homeowners have income enough to pay property taxes and homeowner’s insurance for the long run, not only is reverse mortgage a strong option, but it may be the ideal option. For the three people left on the globe not familiar with reverse mortgage, here it is in a nutshell: it’s a home equity loan. Punto. It’s a home equity loan that’s repaid on the backend, in reverse, and it is this feature that typically makes it an ideal fit. If there is 50% equity or greater, and if at least one spouse is 62 or older, a reverse mortgage can mean the difference between losing a home and retaining the home.

In one way or another, everyone in has been affected by this pandemic – and it ain’t over yet. In fact, when it comes to the economy in general, and housing in particular, the worst may be yet to come. We’re all going to find ourselves helping others, even if that just means passing on information.

A reverse mortgage is not a fit for everyone. And it’s not going to help everyone. But it’s going to be the solution for many homeowners, aged 62 or older, who otherwise might lose their home.

If you would like more information for a client, friend, or family member, give me a call. I always love hearing from you.

 

Reverse mortgage and later-in-life divorce

Laurie Denker MacNaughton © 2020

According to the US Census Bureau, the rate of divorce has been falling for the past 25 years across all demographics – except for adults over the age of 60. Among this age group, the divorce rate has nearly doubled in the same time period.

Though the reasons for divorce remain fairly consistent across all age groups, those going through a “silver divorce” may face issues specific to aging.

Typically, the greatest challenge facing long-married couples is division of assets. This can become very involved at any time, but there may be additional considerations later in life, in part because there simply has been more time to accrue…well…stuff.

For most couples, the single most valuable asset is the marital home. In a divorce, typically the marital home is sold and the proceeds divided per the Property Settlement Agreement. However, a job, proximity to specialists, or failing health may suggest moving is not the best option for one party.

If one spouse is intent upon – or is in need of – staying in the home, one way to accomplish this can be by means of a reverse mortgage.

Older homeowners are likely to have equity enough in the home for the proceeds from a reverse mortgage to pay the departing spouse’s portion of the marital share. This often makes retention of the home possible, without saddling the spouse remaining in the home with a monthly mortgage payment.

A reverse mortgage will not work in every “silver divorce.” But in many divorces involving homeowners in which at least one party is aged 62 or older, it’s one of the few ways a Property Settlement Agreement’s financial mandates can be met without selling the home, depleting financial reserves, or acquiring a monthly mortgage payment in the retirement years.

Divorce is no one’s “Plan A.” But as the classic line goes, life is what happens while you’re busy making other plans.

If you would like more information on how a reverse mortgage might help you or someone you know, give me a call. I always love hearing from you.

Business card for media