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Thursday, 09 September 2010

Reverse Mortgages Part 8: The Closing

category_bug_journal2.gif On Tuesday, at a title company selected by my loan broker, I signed all the papers at the closing of my FHA-insured reverse mortgage, a HECM or Home Equity Conversion Mortgage, a program administered by the federal Department of Housing and Urban Development (HUD).

HUD requires that there be a three-day grace period after signing during which the applicant can back out of the mortgage. Because I signed on Tuesday, my period extends until next Monday, but I am happy with the results and will allow it to go through.

If you decide, during the grace period, to cancel the reverse mortgage, you can be required to pay the appraiser's fee, which is normally rolled into the mortgage, although it is often waived in that circumstance. And if you have been charged a fee for the mandatory counseling, you will need to pay that.

If you have ever bought a home or two or three, you know the closing drill – a big stack of paper to sign. Because I had been given copies before the closing and had read them all, it was a breeze – almost like a social visit with the terrific escrow officer. And new to me this time, instead of coming home with a ream of paper to file, I have it all on a disc.

(By the way, it is a good idea to read all the papers, including the boring-looking boilerplate before the closing. Then, if you have questions or concerns, you broker can answer them before the closing and it will save a lot of time.)

There are many reasons to take out a reverse mortgage. Some do it to pay off forward mortgages and eliminate monthly payments. Others do it to pay off other bills or cover expensive medical costs. For me, it is to provide peace of mind.

Like many readers of Time Goes By, I lost a gut-wrenching amount of savings in the 2008 market crash. That was not daily-living money; it was emergency money for whatever disaster might befall me or to pay for a reasonably good nursing home should I need one.

Although a HECM won't pay for a permanent nursing home (you must be living in your home for the reverse mortgage to continue), it frees up what remains of my savings for that and I now have a reasonable-sized cushion for anything else that might surprise me in the coming years.

I want to publicly thank several people who got me through the stages of educating myself and then obtaining the HECM - all highly professional, patient and good humored.

Jerry Gilmour of Director's Mortgage who is my loan broker. He's smart, knowledgeable and he guided me through every step along the way. Nice guy too who put up with me when the bank drove me nuts demanding a paper trail of what I consider unnecessarily intrusive questions.

Barbara Stucki, vice president of Home Equity Initiatives at the National Council on Aging who answered a lot of basic questions and recommended my NCOA HECM counselor.

Buz Zeman, director of Housing Options Provided for the Elderly (HOPE) in St.. Louis, who was my excellent advisor for the mandatory counseling session. He explained all the requirements, financial details and a whole lot of other considerations with knowledge and clarity.

Chris Crenshaw, senior escrow officer at Pacific Northwest Title of Oregon who was thoroughly prepared for the closing and like the three above, made what one might expect to be a long, tedious paper shuffle, an interesting, informative and fun – yes, fun – exercise.

This is the final installment of the TGB reverse mortgage series and I will leave you with a list of links to the best online resources for information about reverse mortgages.

HUD Reverse Mortgage Center

NCOA Guide to Reverse Mortgagea (pdf)

MetLife Mature Market Institute study of Reverse Mortgage (pdf)

The Essentials of Reverse Mortgages from MetLife (pdf)

Reverse Mortgages: Are They For You? (pdf)
From the U.S. Department of the Treasury

AARP Reverse Mortgage Calculator

• Saul Friedman's Gray Matters: Reverse Mortgage Column

• Saul Friedman's Gray Matters: Safest Reverse Mortgage column

Aside from details related to your personal circumstances that can be gotten only from a mortgage broker and the mandatory counseling, these links will give you a thorough grounding if you are considering a reverse mortgage.

Links to all eight stories in this series have posted under the TGB Features heading in the right sidebar where they will remain indefinitely.


At The Elder Storytelling Place today, Mary B Summerlin: Polly's Present


Posted by Ronni Bennett at 05:31 AM | Permalink | Email this post

Comments

Thank you so much for this final post in the series. Your reasons en re the nursing home vs your savings now come clear to my befuddled mind. I think I will go work out and see if the water helps clarify my thinking.

Thanks, this information is so valuable, and thanks for all your research, writing, and hard work. I've shared it via links to your blog with several people I know who were very interested in reverse mortgages but floundering in the information department, me too.

RB,
Nice series on reverse mortgage. Very helpful. If I ever pursue one, I'll use your information as a primary guide. Thank You.

PS: soon will be time to re-focus on social security and fending off debt commission insanity. Let's do a 2 million senior march on Washington--please organize :)

Thank you for this series of most informative information. I am sure this now gives you great peace of mind. Continued happiness in your new abode and state:-)

An excellent series! Thank you.

Just remember Seniors: When you request "free" information over the internet about Reverse Mortgages, it is never really "free". Someone like me pays from $75
to $150 for your information and the opportunity to contact you. Don't be surprised when a Loan Originator calls. At your age, you should well know there is no free lunch for any of us. Few Lenders provide FHA HRCM with "Free: leads. And, Shills like Fred Thompson (Beautiful aspect of this Company is that the former tout, Peter Graves, was dying proof that none of us live forever), The Fonzie, and Robert Wagner don't read cue cards for nothing. They are paid hundreds of thousands of dollars that come from fees earned from either you are the Lender.
Whoever coined the two words "Free Enterprise" was nuts.

James A. Nelson and other readers:

There is no reason whatsoever to pay for information or get caught with unwanted email from reverse mortgage brokers.

1. Do not request information from loan brokers on the internet. The links I have supplied will thoroughly educate you about HECM reverse mortgages; none requires you to give your name or email address and all are free.

2. Use the AARP calculator and not one from a broker website that requires you to enter your name and email address.

3. Use the HUD website to get a list of HUD-approved brokers in your area and contact them yourself.

4. Use the NCOA website to find a counselor or, once you have selected a HUD-approved broker, he or she is required to give you a list of nine counselors to choose from. Shop for one as you would a broker.

All this is explained in the Reverse Mortgage series.

Yours, Dear Ronni, is just one opinion. You appear to be a
Woman more financially well off than many other Seniors; I've helped many Seniors who were in financially desperate positions who requested FHA HECM information over the internet. You, Ronni, are such a fear monger, I can't believe it. Most Seniors (or their Sons or Daughters or a paid Financial Counselor) are very capable of quickly telling whether a Loan Originator has the Senior's best interest at heart. The internet is quick and easy and informational; it's just not "free". As far as Conselors, once again I repeat: The number data one gives you (based on a guess at home value and actual Mortgage debt, if any (or any known or unknown liens against the property) is bogus: Real numbers will NOT be known until an FHA Certified Appraisal is done and the appraisal value actually accepted by a Lender. More than one Senior has been mistified at the dollar haircut reduction by the Lender. The HUD/FHA required counseling, just like the 50 plus page application process, is what it is. Some sessions are "free" (there is that word again) funded by other Taxpapers with a HUD grant; others cost from $89 to $125. Not all Companies receive the grant for whatever reason. I have found Seniors choose a Counselor based upon their financial pressure.

James A. Nelson:

None of what I wrote above is opinion; it is fact.

NCOA offers counseling free for low-income applicants. Above a certain income amount, applicants are charged $125. I don't know how other counselors operate.

And, of course, the home value brokers work with is a guesstimate until the appraisal. I've made that obvious in the series.

I also made clear in the series that the amount of the reverse mortgage is always less than the appraised value. Any good broker should be able to explain how the amount is arrived at.

All the information I linked to is free. I don't understand why you think that's not good.

And I don't understand what you are objecting to.

One, NCOA is just one option; there are many others: Some Counselors are more knowledgable than others (Just like Orwell's famous pigs). Two, It isn't just what the FHA Certified Appraisal is: The Lender may (and in todays's lending enviroment usually does) reduce that figure, causing a reduction in what the Senior actually gets at closing (if any, sometimes it totally stops the loan). Three, yes, "free" is good; it's just that somewhere along the way either in the form of US Taxpayer or Lender grants, the information given is paid for. Finally, I object to anyone, including the esteemed Ms Ronni,
spreading fear about using the internet; with caution, just like driving a car, it can be a valuable resource. By the way, the Loan Originator you tout has a web site; guess he sees the value of the internet.

Ronni,

Now you know why Mr. Nelson was cut off from using at least one reverse mortgage website. He and his son are great Americans but sometimes he gets a little carried away. However, spice makes life both more interesting and at times much more difficult. I wish Mr. Nelson the best.

Thanks for your series. You have provided a very beneficial, documented history of your experience for seniors to read.

It is interesting that you recommend the MetLife booklet “The Essentials of Reverse Mortgages from MetLife.” On page 15 of that booklet, the following question and answer are presented:

"Q. Is the Interest Accrued on the Reverse Mortgage Tax-Deductible?

A. The interest accrues over time and is deductible only at the time that the loan is repaid. Your tax advisor can provide more specific information."

In Part 5 you state: “… and interest is not deductible.” IRS 2009 Publication 936 and Revenue Ruling 80-248 generally agree with the MetLife answer. It is odd you walked away from counseling with such a contradictory point of view. It seems your broker failed to address this issue with you.

While the MetLife statement regarding deductibility is reasonably accurate (but horribly incomplete), the last sentence in the answer is absolutely and precisely correct in directing readers to their own income tax advisors to “provide more specific information.” I hope those who follow your blog will take that advice and meet with their income tax advisor before getting a reverse mortgage.

Even if some things are not precisely correct in your eight blogs, they provide a wealth of first hand experiential knowledge that as of yet readers cannot find elsewhere. Even if we personally disagree, I greatly appreciate your efforts in keeping and providing such a well written account of your "journey" to your readers.

Thanks, Ronni, for sharing your reverse mtg experience.

Well, I guess your most severe critic here sums up what I intended to compliment you for writing:

"...your eight blogs,...they provide a wealth of first hand experiential knowledge that as of yet readers cannot find elsewhere."

I think most people seeking a reverse mtg who read here will be intelligent enough to follow all your cautions and exercise some common sense judgments of their own.

I have a couple of senior family members who have recently retired and have been wondering about a reverse mortgage. This blog is a valuable resource and I'll be directing them here.

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