<< Reverse, continued from page 30
come due until the house is sold or
the owner dies.
If the owner does die, the obligation reverts to the heirs, who can
pay the amount owed and take claim
to the house or walk away from the
loan with no penalty. As easy as
Borrowers protected
Because so much wealth can rest in
many older citizens’ homes, mortgage brokers should consider broaching the subject of a reverse mortgage
even before clients feel like they
might need one. Brokers also can
of credit, which can create a powerful
and tax-free cash reserve.
HECM borrowers who do opt to set
up credit lines can access cash as
needed. They also can return any portion of the requested funds without
prepayment penalties at any time.
The required FHA mortgage insurance protects the borrower by guaranteeing that the balance due will
never exceed the value of the home
when the loan becomes due. This
also protects heirs, who are relieved
of the burden of paying back more
than the property value should the
balance due exceed the home value
at the time the loan matures.
During the review and determination of whether a reverse-mortgage
solution is viable, brokers should
suggest that borrowers discuss
the documents with an attorney, a
trusted adviser, family member or
someone else who has the clients’
best interests at heart. Brokers also
can include these people in conference calls and face-to-face meetings,
if clients wish.
On the Web
U.S. Department of Housing and
Urban Development Home Equity
Conversion Mortgage information:
sctsm.in/HECMmain
“Brokers should consider
broaching the subject of a reverse
mortgage even before clients
feel like they might need one.”
that sounds, this is where reverse-mortgage professionals often face
resistance.
The children of some reverse borrowers see these mortgages not as
means of betterment for their aging
parents but as drains on their own inheritances. This viewpoint serves neither party and can leave their parents
without the cash to live their final
years as productively as possible.
consult with estate planners and
point out the importance of including
a HECM option.
In many ways, it’s best to proceed
with reverse-mortgage discussions
when clients don’t need the money.
This allows them to make important
decisions without duress. Even if clients don’t see an immediate need for
a reverse mortgage, they could see
an advantage in opening a HECM line
Mandatory counseling
Because they’re regulated by the federal government, HECM transactions
are exceedingly transparent. Brokers
must give specific booklets, information and sample loan documents to
clients. Brokers should encourage
clients to familiarize themselves with
product details.
It’s also often worthwhile to suggest that clients consult an attorney
or financial adviser to assist in determining if a reverse-mortgage solution
is prudent for their situation.
Clients who decide to apply for
a HECM must meet with a HUD-ap-proved counseling agency, a precautionary measure in place to ensure
that reverse-mortgage borrowers receive all appropriate information and
understand the product.
While it appears the recovery in
the real estate finance market will
take years, the number of homeowners turning 62 years old continues
to increase. Mortgage brokers who
introduce equity-rich and cash-poor
borrowers to reverse-mortgage options such as the HECM, and who
make it their goal to guide consumers
carefully and methodically through
the process, can help restore faith
to the term “mortgage professional”
and create a better future. •
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