Tag: Virginia Reverse Mortgage

Don’t tell the kids

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 © 2020

When she called Saturday I was pretty sure I knew what the conversation would involve.

“We’re both in our 80’s, my husband is four years into an Alzheimer’s diagnosis, and our kids live in Nevada. The biggest thing is our investments are getting low.” And then there was this: “But we don’t want our kids to know.”

We don’t want our kids to know. It’s one of the worst statements I hear in the course of my job.

A couple things about this. First, I’m a parent. I understand about not wanting to worry kids, adults though they may be. But I’m also a lender who frequently talks to adult kids worried about their parents.

Would you like to hear how that side of the conversation goes? It’s something like this: “My wife and I live in Nevada but my aging parents are in Virginia. We’re worried about their finances – but they won’t talk about money.”

The risk to adult kids is this: if you do not help parents with the solution, it may get to the point where you are the solution. And odds are good you’re not really the best solution. I have seen adult children quit their job to become a caregiver. I have seen tension in marriages, finances under strain, 401(k)s prematurely tapped. The risk to aging parents is that if your finances are deeply stressed by the time you involve your kids, it’s almost guaranteed they’re going to have to help.

Nobody is going to say the money conversation is anything other than awkward for many people. Talking about money is not fun. But talking about overdue bills is even less fun.

These are anxious times for many, and times may well continue to be anxious for many months to come. There is little we can do to eliminate stress caused by world events. However, there are steps you can take that may greatly reduce hardship, whether you’re an aging parent or the adult child of aging parents.

Three recommendations I often make are the following: first, awkward as it may be, talk to family. These conversations do not get easier over time, so just do it.

Second, pre-crisis, the homeowner should speak with a qualified financial planner, accountant, or elder law attorney who can help put together long-range plans.

Third, the homeowner should consider using the home as a source of retirement funding. Several options exist here, including selling the home and downsizing, renting out a portion of the home, or doing a reverse mortgage.

If you have questions about how you or one you love may benefit from a reverse mortgage, or if you would like contact information for an elder law attorney, accountant, or wealth manager, give me a call. I always love hearing from you.

 

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I did a reverse mortgage a couple years back. Remind me of the details?

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Laurie MacNaughton, Laurie McNaughton, Property Tax, Reverse Mortgage
Laurie MacNaughton [NMLS ID# 506562] © 2020

Most people, whether they have a so-called “forward” mortgage or a reverse mortgage, can only retain so much about the nitty-gritty details. Factor in the aging process, and certain specifics may get foggier over time. As adult children move into caregiving roles, they often need servicing details regarding a parent’s reverse mortgage.

Here, in a nutshell, are some important things to remember:

  1. Each year the homeowner will receive by mail an Occupancy Certificate, which must be signed, dated, and returned within the time period specified on the certificate. This is federally-mandated, and it’s FHA’s way of making sure the homeowner is still living in the home.
  2. You MUST keep your property taxes paid and your homeowner’s insurance up to date. Many counties offer property tax waiver programs for older homeowners, and you can find out details by calling your county’s Commissioner of the Revenue. With any home – even if you don’t have a mortgage – when it comes to property taxes, “if you pay, you stay; if you don’t, you won’t.” Don’t let the taxes become delinquent before you reach out for help.
  3. Reverse mortgages are not assumable, which means the loan comes due when the last homeowner permanently leaves the home. This includes cases in which the homeowner has moved to alternate housing. If you are the heir, DO NOT run down the clock following the homeowner’s departure from the home. The servicer is required by federal law to give you 10 weeks to reach out regarding your plans for the property; thereafter they must start the process of selling the home.

Here are a few more details on questions I answer at least weekly:

Q: I get a lot of junk mail. How do I know the Annual Occupancy Certificate is legitimate?

A: The Annual Occupancy Certificate will clearly state on its header the following:

  • “Annual Occupancy Certificate” or “Annual Occupancy Certification Form”
  • Your servicer’s logo and contact information
  • The borrower’s (or borrowers’) name/s

Generally speaking, the certificate will be mailed to you on or near the anniversary of your closing.

If you have questions about the form, contact your servicer as soon as possible.

Q: My loved one was healthy when s/he did a reverse mortgage, but now is completely incapacitated. Can I sign the Annual Occupancy Certificate?

A: Yes, if certain conditions are met. Some of the conditions include the following:

  • The homeowner must still live in the home;
  • You must have a Power of Attorney that was signed when the homeowner had capacity to do so;
  • You must be named Agent in the Power of Attorney;
  • You must provide the servicer a copy of your photo ID, such as a state-issued driver’s license;
  • You must have a letter from the homeowner’s doctor, on physician letterhead. This letter must state the following information:
    • When the homeowner signed the Power of Attorney, s/he had capacity to do so;
    • The homeowner no longer has capacity;
    • The nature of the homeowner’s incapacity;
    • The date of diagnosis;
    • The homeowner is not expected to regain capacity.

Contact your servicer as soon as possible for further guidance on this matter.

Q: My spouse and I married after s/he had done a reverse mortgage on the home. Now my spouse has died. Can I stay in the home?

A: It may be possible to stay in the home. HOWEVER, time is of the essence, and you must contact your servicer as soon as possible for further guidance. Per federal guidelines, the servicer must follow a strict timeline following a borrower’s death or permanent departure from the home.

Following are potential options if you wish to stay in the home:

  • You may repay the loan balance;
  • You may refinance the loan using a new traditional loan;
  • You may refinance the loan using a new reverse mortgage, based upon your own age and eligibility.

Again – contact your servicer as soon as possible. Every day you wait to contact the servicer, the fewer options you eventually may have.

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

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Wait…what? Line of credit growth and reverse mortgage

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 | © 2018

There is was again, that same question: “Should we do a reverse mortgage now, or should we wait until our investments are gone?”

Turns out there is research on this – lots, in fact, some sponsored by retirement groups and some by academic institutions.

Regardless of the source, conclusions are consistent: homeowners who do a reverse mortgage early in retirement, while they still have healthy savings, benefit more than do those who wait until their finances are under stress.

This is largely due to two factors.

First is asset preservation during market downturns. Needless to say, the past few months have been a bumpy ride in the investment realm, and paper losses turn into real losses when you have to draw upon a 401(k) or other investments during a downtick. If you’re able to ride out a downturn you benefit financially in the long run.

Second is on account of what may be the most under-reported aspect of a reverse mortgage line of credit, namely the growth added to the unused funds in a reverse mortgage line of credit. If this causes you to say, “Wait…what?” it should, as this is something that does not exist with other types of home loans.

Here’s what this feature of an FHA-insured reverse mortgage means to you: each month a small amount gets added to the funds in your line of credit. This growth compounds over time, and it’s there for you to use when you need it. The growth is not based upon home appreciation, but rather upon prevailing interest rates. It’s counterintuitive, but if rates go up the line of credit actually grows more quickly.

What this tax-free growth may look like over time can be astounding. For illustration purposes let’s consider a husband and wife, both of whom are 68 years old, and whose paid-off home appraises for $400,000. If their line of credit at the time of closing contains about $168,000, in five years’ time it may have grown to over $206,000 – assuming interest rates remain steady. Again, growth is pegged to prevailing interest rates, and the line of credit grows more quickly if rates go up.

This line of credit can create a valuable hedge against having to sell investments in a down market. It can also create a safety net that forestalls the need to apply for Social Security before full retirement age.

Optimally, a reverse mortgage provides just one part of a long-range financial plan for retirement, because as life expectancies continue to increase, retirement is going to take more than your monthly Social Security check. It’s going to take more than a well-funded 401(k). In fact, it’s likely to take more than a pension, an annuity, an IRA, or a bank account – or a reverse mortgage – can provide. But when added together, these can combine to create a long-term means of maintaining financial wellbeing in retirement.

If you would like to discuss how a reverse mortgage might help your retirement plans, give me a call. I always love hearing from you.

 

The cost of bankrolling 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 MacNaughton [NMLS ID #506562]

The topic under discussion was the cost of aging in America.

“How many here want to leave their kids an inheritance?” Nearly every hand went up.

“How many here are likely to have an inheritance to leave?” Not as many hands went up. In fact, not many hands went up, period.

The speaker, a Virginia Circuit Court judge, wasn’t asking these two questions of just any group; this was an assembly of some 200 attorneys, presumably a demographic with greater-than-average net worth.

As a reverse mortgage specialist, I would make this observation: not leaving kids an inheritance is one thing; having adult children bankroll parents as they age is another thing altogether. Zero inheritance looks great compared to adult children prematurely tapping their 401(k) so they can cover a parent’s medical bills. I know firsthand – I’ve been there.

According to a Pew Research study, more than forty percent of adult children with a parent aged 65 or older helped that parent financially within the past year. If percentages remain constant, the number of adult children bankrolling parents is likely to get worse, a lot worse, because by 2030 one in five Americans will be 65 or older.

This statistic becomes important when talking about reverse mortgage because, for many people, the go-to objection to is that the homeowner might not have equity left to leave the kids. But this is very flawed reasoning…on many counts. I’m going to point out just a couple.

First, current federal guidelines make it all but impossible for new reverse mortgages to deplete a home’s equity. But even if a homeowner were to use all available funds, this likely means there were no other funds to draw from – and that the reverse mortgage was a lifeline.

Second, an alternate scenario is that the parent does indeed have other funds but does not want to consume those funds, which presumably will go to the kids. Under either scenario the kids are the big beneficiaries. After all, every dollar of her own money mom can use to meet her financial needs is a dollar the adult kids do not pay out.

Of course, negative equity is by no means a foregone conclusion. There very well may be equity left for the kids. But is it true there might not be equity left for the kids? Yes. The pertinent issue is that the parent relieved the adult children from draining their own financial reserves – or at very least, the parent delayed the time the kids had to step in to help financially.

The critical nature of an aging parent’s financial decisions are likely to become ever more conspicuous as Gen X’ers themselves edge toward retirement and the solvency of Social Security runs low. Anything a parent can do to remain “self pay” throughout the retirement years is a blessing and gift to their heirs. And, thirty years’ worth of data shows that homeowners with reverse mortgages tend to enjoy significantly greater odds of financial survivability in retirement.

If you have questions about how a reverse mortgage may benefit your loved one, give me a call. I always love hearing from you.

 

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And…It’s Good News!

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

Laurie MacNaughton © 2016

So, first the technical mumbo-jumbo (and it’s good news): FHA just announced the Reverse Mortgage loan limit will go up to $636,150, effective January 1, 2017.

Why You Care

Starting January 1, homeowners aged 62 or older who have higher-value homes (i.e. homes that appraise for $636,150 or more) will have access to more equity – potentially meaning a bigger line of credit or a larger monthly stipend.

Reverse for Purchase

For those looking to purchase a home using Reverse for Purchase, this new lending limit means homebuyers may be able to consider extra aging-in-place amenities or other upgrades.

Rates Are Low, Housing Values Are Strong

If you are considering a Reverse Mortgage, now is a really great time to move forward, as you may qualify for more than ever before. So give me a call – I always love hearing from you!

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FHA Reverse Mortgage: Rumors Of Its Death Have Been Greatly Exaggerated

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

Well, well, well – one thing certainly can be said of those of us living in the Washington, DC area: we read our news.

Yesterday, MetLife unexpectedly announced it was exiting the Reverse Mortgage field, catching even its own employees off guard. Met had already sold its bank and closed its home mortgage division months earlier.

Within 10 minutes of the announcement my phone began to ring. And ring…and RING. Colleagues, clients, and co-workers wanted to know if Met’s exit meant my employer, Middleburg Bank, was going to be negatively impacted.

So what does this mean for you, for your clients, and for those of us privileged enough to live here in the greater Baltimore-Washington corridor?

NOTHING. It means nothing.

And WHY? Because the FHA HECM only works when there is equity in the home sufficient to extinguish “forward” loans on the property. Put a home in Tucson or Tulsa, Denver, or Dubuque and chances are the HECM just isn’t going to work.

Put that same home in Bethesda or Brandywine, Arlington or Alexandria, Middleburg or Marshall, and it’s a different story altogether.

The Blessed Are…Well, Blessed: Using Home Equity to Supplement Retirement Income

There are no two ways about it: we here in the shadow of D.C.are blessed in many ways. History books are filled with reasons why those with options have more options still, and those with few options have still fewer.

As one nationwide lender after another exits the HECM market, the product becomes a regional offering. And it makes sense: why would a national lender maintain a workforce of hundreds – or thousands – if the product only works in a handful of regions across the country. We have always had good options – and now we still have good options.

I am grateful to live in a region in which our senior clients, adult children caring for parents, and our family and friends still have available to them the FHA HECM as a planning tool to see them safely through retirement.

Give me a call with any questions or concerns you may have. I am always delighted to hear from you. And, as always, I am privileged to work with you to find solutions to the financial needs of the seniors in your life.

Laurie

Laurie MacNaughton [NMLS# 506562]
Reverse Mortgage Consultant
Middleburg Mortgage
20937 Ashburn Road, Ste 115
Ashburn, Virginia 20147
703-477-1183 Direct
703-995-4870 Fax
LMacNaughton@MiddleburgBank.com
www.MiddleburgMortgage.com/LaurieM