I discuss reverse mortgages briefly in seminars and use the topic as a hook in mailings.
The company I use for reverse mortgages basically gives me estimates on what a senior can get based on age, value of the home, and the home's location (zip code).
There is no commission of any type. Basically, the idea is that once a senior has cash freed up, they might use you for investment advice as to where the cash should be parked.
In every case I have run, the results stink. Typically, someone close to 70 is lucky to get around 50% of stated equity and the interest rates are about 1.5 points higher than a standard mortgage. Once I sit down with someone and show them the figures, I cannot in good conscience recommend a reverse mortgage --at least with the cases I have seen so far.
Here's the question: Senior American Funding is running ads talking about making $15,000 in commissions monthly through them with "no license required in most states." Anyone have any experience either with this particular company or with reverse mortgages in general?
Not specifically. Here's how it likely works - you will perform certain acts that are under the line with respect to RESPA, so you wouldn't need a license. Thinks like taking financial information, getting their information, those are okay. Most mortgage brokerages will offer anywhere from 25% to 35% (I believe) of the commission payable, that's probably where they're coming up with the $15,000 per month.
I have to agree with you about "reverse mortgages suck" - for probably 99% of the people out there. They are completely oversold, and the "consultation" is worthless. The upfront fees are despicable!
I discuss reverse mortgages briefly in seminars and use the topic as a hook in mailings.
The company I use for reverse mortgages basically gives me estimates on what a senior can get based on age, value of the home, and the home's location (zip code).
There is no commission of any type. Basically, the idea is that once a senior has cash freed up, they might use you for investment advice as to where the cash should be parked.
In every case I have run, the results stink. Typically, someone close to 70 is lucky to get around 50% of stated equity and the interest rates are about 1.5 points higher than a standard mortgage. Once I sit down with someone and show them the figures, I cannot in good conscience recommend a reverse mortgage --at least with the cases I have seen so far.
Here's the question: Senior American Funding is running ads talking about making $15,000 in commissions monthly through them with "no license required in most states." Anyone have any experience either with this particular company or with reverse mortgages in general?
I'm not sure where you are getting your info from but today's interest rate for a HECM 125 is 2.91 and it goes as high as 3.85 for other HECM loans. I'm pretty sure the 15 year and 30 yr "forward" mortgages are higher.
As far as how much they get it's never less than 50% of the appraised value (within the area's lending limit).
Someone who is 72 in Waterbury CT with a home valued at $200,000 could get $141,200 in a lump sump or monthly payments or left in a line of credit where it can grow.
Part of the problem with the reverse mortgage industry is people are uniformed and try to tell seniors how it works. Especially the media.
OK, here's a big part of the problem, and it is probably (no, definitely) zip code related. My zip codes are generally going to show Gulf coast locations. Need I say more?
The last figures I ran for someone at 70 came back with not much over 50% of the equity, large up front fees deducted from the net to the client, and interest at 7%.
It didn't look good, obviously.
This is why I'm interested in other companies, although deep down I think the answers are going to be the same since the rates are pretty much controlled by federal agencies.
And yes, I do realize that most of the free lunch seminars push life insurance as the logical place to put some of the reverse mortgage proceeds. This gives heirs a way to buy out the mortgage if they want the house. Still, I have to go with the 99% suck factor Mr.Bill states (maybe more like 85%).
The only sound selling point for reverse mortgages I can think of is the 80 year-old client who wants in-home care but is faced with the nursing home unless home equity is freed up.
But I'm very open to other possibilities if others here have more favorable experience with RMs.
OK, here's a big part of the problem, and it is probably (no, definitely) zip code related. My zip codes are generally going to show Gulf coast locations. Need I say more?
The last figures I ran for someone at 70 came back with not much over 50% of the equity, large up front fees deducted from the net to the client, and interest at 7%.
It didn't look good, obviously.
This is why I'm interested in other companies, although deep down I think the answers are going to be the same since the rates are pretty much controlled by federal agencies.
And yes, I do realize that most of the free lunch seminars push life insurance as the logical place to put some of the reverse mortgage proceeds. This gives heirs a way to buy out the mortgage if they want the house. Still, I have to go with the 99% suck factor Mr.Bill states (maybe more like 85%).
The only sound selling point for reverse mortgages I can think of is the 80 year-old client who wants in-home care but is faced with the nursing home unless home equity is freed up.
But I'm very open to other possibilities if others here have more favorable experience with RMs.
Again you have the wrong software or information. The percentages are the same all over the country and it is based on age. The lending limit amounts are based on zip codes.
So my 72 year would get the same percentage on his house no matter where he lives. The amount would probably be different becase lending limits are based on zip codes.
There is a fixed product that virtually nobody uses and it's at about 6.8% today. Again that is rarely used.
Before you make assumptions about whether it sucks or not, do your homework. A reverse mortgage is not for everyone but let me tell you this. The reason the closing costs are so high is because of the government mandated MIP (mortgage insurance premium). It is 2% of the appraised value of the home, up to the lending limit.
Even with that for someone who bought a home for $20,000 or even less to pay $10,000 in order to get $140,000 and never have to pay it back it's a no brainer.
Think about it. Their home went up in value 1,000% and they are giving up 5% of the home equity to change their lives dramatically.
The programs are exactly the same no matter where you get them so you obviously have been misinformed.
Funny to see insurance agents knocking another industry. Glass houses my friend.
Watch statements like "never" pay it back. There are scenarios when the home owner may have to pay it back:
1) Maintenance on the house is not kept up properly
2) Home becomes devalued
The home can be worth $0 and you don't have to pay it back while you are living in the home. When you die and your estate gets $10 for the home sale the bank takes the $10 and calls it even. That is what the insurance is for...it is a non recourse loan.
The people I've been doing it for have been doing reverse mortgages for over 5 years and never heard of anyone losing their home for not fixing it up. If your wall falls in or your roof blows off...you better fix it but other than that they aren't keeping an eye on you. Not sure how they'd even know this happened.
1) pay your taxes
2) live in the home 1 day more than 6 months a year
3) fix the roof or walls if they fall in
4) keep homeowners insurance
All things people do anyways.
You do these things and there is nothing to worry about.
For those of you sending me PMs: thanks, but please understand this formum's software does not allow me to respond until I have more posts.
I started this thread not to knock reverse mortgages but to see if others are having better experiences than I am having.
I would like this to work and I would like to be able to offer reverse mortgages as a viable option to clients.
I have been using Financial Freedom (the company endorsed by James Garner) which basically just takes some basic information and presents an illustration in 3 columns: FHA/HUD monthly advantage, FHA/HUD annual adj, and Advantage Combo.
The house presented was worth $600,000 and the age of husband is 74 while wife is 68. I realize that wife's age is the key number.
The amount available as a "lending limit" in the first 2 columns is $200,000. The finance fees in the first 2 columns is $10,625 and $3,900 for the third. The "net available to you" is $118,122, $79,524, and $206,086 respectively for each column.
The request was for cash settlement, not a credit line or stream of income. That is the choice I would guess 90% of clients would want.
So, what's wrong with this picture? Would you take out a mortgage that looked like this?
It gets better. The illustration show that at 8.8% interest the $210,000 "loan" has a balance of $600,000 in 14 years.
Nothing like a really good illustration to be able to sell someone a product.
I think as waves of people enter retirement and come to find they have grossly miscalculated their expenses we'll be seeing a lot more reverse mortgages.
For those of you sending me PMs: thanks, but please understand this formum's software does not allow me to respond until I have more posts.
I started this thread not to knock reverse mortgages but to see if others are having better experiences than I am having.
I would like this to work and I would like to be able to offer reverse mortgages as a viable option to clients.
I have been using Financial Freedom (the company endorsed by James Garner) which basically just takes some basic information and presents an illustration in 3 columns: FHA/HUD monthly advantage, FHA/HUD annual adj, and Advantage Combo.
The house presented was worth $600,000 and the age of husband is 74 while wife is 68. I realize that wife's age is the key number.
The amount available as a "lending limit" in the first 2 columns is $200,000. The finance fees in the first 2 columns is $10,625 and $3,900 for the third. The "net available to you" is $118,122, $79,524, and $206,086 respectively for each column.
The request was for cash settlement, not a credit line or stream of income. That is the choice I would guess 90% of clients would want.
So, what's wrong with this picture? Would you take out a mortgage that looked like this?
It gets better. The illustration show that at 8.8% interest the $210,000 "loan" has a balance of $600,000 in 14 years.
Nothing like a really good illustration to be able to sell someone a product.
I am amazed that you keep throwing out numbers that are so far off. The expected interest rate for the cash account (non government insured) is 6.28. After 14 years the amount owed is 444,000, not 600,000. Where you get the 8.8 percent from I do not know. I am using Financial Freedom software. Depending on which part of the country you are in most people don't use the cash account loan. I believe 92% of the reverse mortgage loans out there are the HECM, government insured loans. Again the HECM 125 has an interest rate today of 2.91%.
More often than not people leave money in the credit line as it grows equal to what the interest is on the portion of the use right out of the gate.
In 14 years you can expect the home to have gone up in value as well. (not alwys going to be this type of market)
The reason I keep responding to this thread is this. It's hard enough to battle the very misinformed media. To have people throwing out numbers that are flat out wrong just compounds the marketplace even further. If you care to have a conversation to help clear up any misinformation you have I'll be glad to speak with you.
Misinformed? This is a Financial Freedom illustration from their Affinity Business Unit, not my numbers.
It is from a year ago when interest rates were higher, sure. But the point is nobody would buy into any part of this particular reverse mortgage.
If you want me to post the illustration, I sure will. The major point is you have a $600,000 house with an offer to free up $206,086.00 for the client. Believe me, I wish the numbers had been better because it was almost embarrassing to show this.
As for the 8.8%, I'm sure it is lower now. But this was THEIR illustration and it was based on the "expected interest rate" for the Advantage Combo 75. Interest rates for conventional mortgages at that time were well under 7%. So, just try to sell someone a reverse mortgage that frees up 1/3 of their equity and charges 2% above market as well.
But back to the point of this thread: I would like the numbers to work and I would like to offer reverse mortgages. After this particular case and several others equally bad from nine to twelve months ago, I stopped even suggesting that people have me look into reverse mortgages for them.
Having looked very hard at RM's a few years back, I think for alot of cash poor, asset rich (a relative term) they are a great idea. AARP has a very good website with alot of information. For the consumer, they are a good deal. Now if you're asking what's your slice and are unhappy about it, that's different.. isn't it?
I did find it is a heavily regulated field with limits on costs. I also found some guys are smart and just took less to handle the paperwork and make it up in volume. It is very similar to selling a home and the largest cost is the HUD insurance garantee. You also don't have to take the max value out either.
I think it is an excellent product for many seniors who don't have cash flow. You can take a chunk and buy an annuity. When the senior either passes or moves to assisted living.. the home is sold and all that has to be repaid is the balance withdrawn. OR if the value of the home is less than the balance owed, the slate is wiped clean. That is what the insurance upfront pays for.
Would I want to sell reverse mortgages? not so much, I don't like that kind of paperwork, plus the feds look for a separation between who sells the RM and who sells the annuities...
Are they for everybody? No, but very few products are for "everybody".
I did one for my mom and it works just fine. If the day comes and the loan value is greater than the home value.. no worries. Actually, I am more worried that the home value will be greater and I will be the one son who has to do all the &&*&^ work to prep and sell it so it can be an "equal" share amongst my sibs.... "who'll cut the wheat..etc, etc. but I'll eat the bread" (sorry a kids tale from the old days)
The RM is a perfect solution for a Sandwich generation family. Now with Mom taken care of, the kids college costs can be dealt with.
Misinformed? This is a Financial Freedom illustration from their Affinity Business Unit, not my numbers.
It is from a year ago when interest rates were higher, sure. But the point is nobody would buy into any part of this particular reverse mortgage.
If you want me to post the illustration, I sure will. The major point is you have a $600,000 house with an offer to free up $206,086.00 for the client. Believe me, I wish the numbers had been better because it was almost embarrassing to show this.
As for the 8.8%, I'm sure it is lower now. But this was THEIR illustration and it was based on the "expected interest rate" for the Advantage Combo 75. Interest rates for conventional mortgages at that time were well under 7%. So, just try to sell someone a reverse mortgage that frees up 1/3 of their equity and charges 2% above market as well.
But back to the point of this thread: I would like the numbers to work and I would like to offer reverse mortgages. After this particular case and several others equally bad from nine to twelve months ago, I stopped even suggesting that people have me look into reverse mortgages for them.
So you use interest rates from a year ago and use an example from a product that's less than 8% of what the markets uses. So instead of the 60+% of the home value that many get (92% of the market uses this product) from the HECM with a now updated 3.10 interest rate you use....nevermind. Try and keep up to date before you knock something.
I think it is an excellent product for many seniors who don't have cash flow. You can take a chunk and buy an annuity. When the senior either passes or moves to assisted living.. the home is sold and all that has to be repaid is the balance withdrawn. OR if the value of the home is less than the balance owed, the slate is wiped clean. That is what the insurance upfront pays for..
[COLOR=red]The Lender has a form that the client must sign stating that we are not recommending they take a reverse mortgage to put in an Annuity. There are a few circumstances this might be appropriate but few for sure. [/COLOR]
[COLOR=red]Financial Freedom and I think many others give you up to a year to sell the home so at least there's no pressure[/COLOR]
[COLOR=#ff0000]The Lender has a form that the client must sign stating that we are not recommending they take a reverse mortgage to put in an Annuity. There are a few circumstances this might be appropriate but few for sure.
Financial Freedom and I think many others give you up to a year to sell the home so at least there's no pressure[/COLOR]
[COLOR=black]Yup, that is why I said the feds look at that relationship between the RM entity and who is selling an annuity. In that particular situation I cited... It works fine. But I agree, in not every situation is it the desired choice. As it is with any finanical product or products.. [/COLOR]
So you use interest rates from a year ago and use an example from a product that's less than 8% of what the markets uses.
I figured that would be your response. Yeah, things are so much different now. The "product" was one of three choices these folks were given by Freedom Financial based on what they knew of the prospects. The other choices, instead of giving them $210,000 gave them $134,707 (FHA/HUD Advantage)and $94,275 (FHA/HUD Annual Adj). If someone wants a reverse mortgage to buy insurance, an annuity, or put in other investments, they are going to want the most cash possible. THAT IS THE SELLING POINT ALL THESE COMPANIES USE. The other company with the washed-up actor (not James Garner) has a TV ad with an older couple with big smiles on their faces, new car in front of the house, and shows them off on a cruise.
Why don't you run the numbers yourself with Freedom Financial for a man born 11/10/1934 and wife born 1/1/1940 with a zip code 70471 and $600,000 house with no mortgages to see what the current numbers are. I would be interested to see what you come up with.
One more time: I'm not trying to knock reverse mortgages and I don't have a particular mindset against them. I am just relating my own experience and am open to any changes for the better that may have come down the road in the last nine months.
I figured that would be your response. Yeah, things are so much different now. The "product" was one of three choices these folks were given by Freedom Financial based on what they knew of the prospects. The other choices, instead of giving them $210,000 gave them $134,707 (FHA/HUD Advantage)and $94,275 (FHA/HUD Annual Adj). If someone wants a reverse mortgage to buy insurance, an annuity, or put in other investments, they are going to want the most cash possible. THAT IS THE SELLING POINT ALL THESE COMPANIES USE. The other company with the washed-up actor (not James Garner) has a TV ad with an older couple with big smiles on their faces, new car in front of the house, and shows them off on a cruise.
Why don't you run the numbers yourself with Freedom Financial for a man born 11/10/1934 and wife born 1/1/1940 with a zip code 70471 and $600,000 house with no mortgages to see what the current numbers are. I would be interested to see what you come up with.
One more time: I'm not trying to knock reverse mortgages and I don't have a particular mindset against them. I am just relating my own experience and am open to any changes for the better that may have come down the road in the last nine months.
When you want to discuss the 2 very least used products, the HECM annual and the cash account (advantage) and want to have a reasonable discussion about reverse mortgages it doesn't work.
When you want to discuss what 93% of the population uses, get back to me.
I would like to discuss this further. If there is a more reasonable presentation of reverse mortgages that I can make, I would like to do so.
I assume by 93% you mean the great majority want guaranteed lifetime income rather than a cash payment. Obviously that is going to show better in any illustration since the company is paying out over time and betting on life expectancy.
I don't know if I agree that 93% want lifetime payout, but I certainly concede that maybe I do not present the alternative to a cash settlement strongly enough. The people who have approached me about reverse mortgages have stated they wanted the most cash possible as soon as possible. I went back and looked at illustrations I have done. The last illustration I did was about 4 months ago and was just as bad as the illustrations I did nine and twelve months ago.
So, if you are saying that proposing a lifetime stream of income works better as far as the equity somebody can tap into, then I am very interested. The sticking point for me has not been interest rates, it has been the look of disappointment on people's faces when they see they are not ever close to getting half the equity value of the home out. If that figure changes, then that is what I would like to present.
I do know that local seminars must be pushing cash settlements since their pitch is that you put half of the settlement into paid up life insurance to "buy back" the home. Maybe they are also doing it as annual premiums from an income stream. In general terms, as told to me by a client that attended one of these seminars, you get the income or cash from a reverse mortgage and the kids get the insurance proceeds to pay off the mortgage.
So, who can resist a pitch like that? You get something for nothing.
I would like to discuss this further. If there is a more reasonable presentation of reverse mortgages that I can make, I would like to do so.
I assume by 93% you mean the great majority want guaranteed lifetime income rather than a cash payment. Obviously that is going to show better in any illustration since the company is paying out over time and betting on life expectancy.
I don't know if I agree that 93% want lifetime payout, but I certainly concede that maybe I do not present the alternative to a cash settlement strongly enough. The people who have approached me about reverse mortgages have stated they wanted the most cash possible as soon as possible. I went back and looked at illustrations I have done. The last illustration I did was about 4 months ago and was just as bad as the illustrations I did nine and twelve months ago.
So, if you are saying that proposing a lifetime stream of income works better as far as the equity somebody can tap into, then I am very interested. The sticking point for me has not been interest rates, it has been the look of disappointment on people's faces when they see they are not ever close to getting half the equity value of the home out. If that figure changes, then that is what I would like to present.
I do know that local seminars must be pushing cash settlements since their pitch is that you put half of the settlement into paid up life insurance to "buy back" the home. Maybe they are also doing it as annual premiums from an income stream. In general terms, as told to me by a client that attended one of these seminars, you get the income or cash from a reverse mortgage and the kids get the insurance proceeds to pay off the mortgage.
So, who can resist a pitch like that? You get something for nothing.
I think we should put this thread to rest.
The 93% I am speaking of is the percentage of people who choose the HECM government reverse mortgage. The cash account is not one of these but the annual you spoke of is. The annual is rarely used as well.
Of the 93% of people who choose the HECM the vast majority use the monthly adjusting, not the annual.
As far as people pushing life insurance as a way to pay for the home for their kids I'd be surprised this is happening on a wide spread basis. The media loves a good (bad) story and seeing I follow all the misguided reports by the media (that I can find) I have yet to see that angle reported. The average age of someone getting a reverse mortgage is about 70 so it would be pretty expensive to get a 2nd to die policy and have money left over.
People who have million dollar plus homes who use the cash account may do something like that because they can get more from the cash account than the HECM. But again they are in the vast minority.
There are scammers in every business industry and I have no doubt there are those people in the reverse mortgage industry as well.
But if anyone you know gets approached to do a reverse mortgage for the sole purpose of buying insurance or an annuity tell them to run the other way. While in some circumstances it may be appropriate, they are rare overall.
Again let's put this thread to rest. If you are interested in truly learning more accurate and up to date info call me at 860-501-1380 anytime from 9AM-8PM EST.
I tried running through the original figures on the AARP reverse mortgage calculator. With a $600,000 home, the results were the same as the illustration from last year. So I tried again, but with a $300,000 home with these results:
[COLOR=#990000]YOU COULD GET[/COLOR]
[COLOR=#990000]HECM [/COLOR]
[COLOR=#990000]HomeKeeper[/COLOR]
[COLOR=black]1) A single lump sum advance of[/COLOR]
[COLOR=black]$130,009 [/COLOR]
[COLOR=black]$52,203 [/COLOR]
[COLOR=black]2) OR a creditline account of[/COLOR]
[COLOR=black]$130,009 [/COLOR]
[COLOR=black]$52,203 [/COLOR]
[COLOR=black]that grows larger each year by[/COLOR]
[COLOR=black]3.58% [/COLOR]
[COLOR=black]0%[/COLOR]
[COLOR=black]so, if unused, available credit[/COLOR]
[COLOR=black]in 5 years would be[/COLOR]
[COLOR=black]$154,988 [/COLOR]
[COLOR=black]$52,203 [/COLOR]
[COLOR=black]in 10 years would be[/COLOR]
[COLOR=black]$184,766 [/COLOR]
[COLOR=black]$52,203 [/COLOR]
[COLOR=black]3) OR a monthly loan advance for[/COLOR]
[COLOR=black]as long as you live in your home[/COLOR]
[COLOR=black]$718 [/COLOR]
[COLOR=black]$409 [/COLOR]
[COLOR=black]4) OR any combination of lump sum at closing, creditline[/COLOR]
[COLOR=black]account, and monthly advance[/COLOR]
[COLOR=#990000]YOU COULD GET[/COLOR]
[COLOR=#990000]HECM [/COLOR]
[COLOR=#990000]HomeKeeper[/COLOR]
[COLOR=black]1) A single lump sum advance of[/COLOR]
[COLOR=black]$182,233 [/COLOR]
[COLOR=black]$52,331 [/COLOR]
[COLOR=black]2) OR a creditline account of[/COLOR]
[COLOR=black]$182,233 [/COLOR]
[COLOR=black]$52,331 [/COLOR]
[COLOR=black]that grows larger each year by[/COLOR]
[COLOR=black]3.58% [/COLOR]
[COLOR=black]0%[/COLOR]
[COLOR=black]so, if unused, available credit[/COLOR]
[COLOR=black]in 5 years would be[/COLOR]
[COLOR=black]$217,245 [/COLOR]
[COLOR=black]$52,331 [/COLOR]
[COLOR=black]in 10 years would be[/COLOR]
[COLOR=black]$258,985 [/COLOR]
[COLOR=black]$52,331 [/COLOR]
[COLOR=black]3) OR a monthly loan advance for[/COLOR]
[COLOR=black]as long as you live in your home[/COLOR]
[COLOR=black]$1,006 [/COLOR]
[COLOR=black]$410 [/COLOR]
[COLOR=black]4) OR any combination of lump sum at closing, creditline[/COLOR]
[COLOR=black]account, and monthly advance[/COLOR]
Now, you may ask, what is the difference between these two calculated results, other than the $50,000.00 difference in the lump sum advance or the 50% increase in the monthly loan advance? The first one is a Gulf coast zip code and the second is the California zip code where Freedom Financial is located. I don't know whether AARP is using HECM 125 or 150.
The point is, my figures or AARP figures or whatever figures, the zip code makes a huge difference. In the first zip code the owner is not even getting 50%. I could probably cherry pick zip codes to make the difference even bigger. When I made it a $600,000 house instead of a $300,000 house the figures did not change in the Gulf coast zip. It went up to $1,225 monthly in the CA zip code. I assume they must cut off the maximum value your house can be worth according to your zip code since CA went up some and the Gulf coast stayed the same. So, someone in the Gulf coast is screwed several different ways on reverse mortgages and I was not "throwing around" baseless figures. Maybe you need to "keep up to date" on the impact zip codes have before making your own statements of fact.
Last edited by Charpress : 03-17-2008 at 07:17 PM.
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