NOW is the time

My background is in teaching. Not sales.

Perhaps this explains why I freak when someone describes reverse mortgage lending in terms of a “sales position.” A reverse mortgage is either a fit or it’s not. It’s part of a long-term solution to financial challenges of increasing longevity – not a product that creates dreamy strolls down sandy beaches.

I seem to have a pretty standard response to salesmen – namely “yuck.” I associate pushiness, perhaps a poor match between the need of the client and the item being sold, and scare tactics – or at least a sense of urgency: “AND…if you order before midnight tonight….” Like I said, “yuck.”

THIS BEING SAID…

Tuesday HUD announced changes to the FHA Reverse Mortgage Program. There will be many changes, with perhaps more yet to come. But basically, it boils down to this: if you, or someone you know – or someone you’re working with – has been considering a reverse mortgage, now is the time to move forward.

WHY?

Because on September 30, 2013 the program is going to change dramatically.

And before that deadline, the prospective borrower must get their mandatory counseling, fill out an application, and have an FHA case number assigned. Under normal conditions this takes about ten days. With a last minute rush, there is going to be a shortage of available counselors.

Let me be clear: reverse mortgage is not going away. In fact, both Congress and the FHA have reasserted their support for reverse mortgages. However, the amount the homeowner can receive is being cut back significantly.

SOOO…As weird as this sounds coming from me, now is the time. If your client, colleague, neighbor, your relative or your friend has ever considered a reverse mortgage, the window on the Standard reverse mortgage – the product that creates the largest cash reserve – is rapidly closing.

Give me a call and let’s talk.

Laurie

703-477-1183 Direct

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com

 
Licensed in: Maryland (MD), Washington, DC, Virginia (VA), Pennsylvania (PA), Delaware (DE), North Carolina (NC), South Carolina (SC), Georgia (GA), Tennessee (TN).
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55+ Housing Market Posts Strong Gains

The National Association of Home Builders (NAHB) reported Thursday that the 55+ single-family Housing Market Index (HMI) showed the strongest gains since 2008, the first year numbers for this specific market were tracked. This represents the sixth consecutive quarter of improvement in this sector.

According to Robert Karen, Chairman of the National Association of Home Builders, the strong upward trend demonstrates continuing demand for homes that meet the needs of the senior homebuyer.

David Crowe, chief economist with NAHB, says builders’ confidence in the 55+ market corresponds with an overall recovery in the housing market. He goes on to say, however, “While demand for new 55+ housing has improved due to a reduced inventory of homes on the market and low interest rates, builders’ ability to respond to the demand is being limited by a shortage of labor with basic construction skills and rising prices for some building materials.”

Read more about builder confidence in 55+ communities at  http://www.homechannelnews.com/article/builder-confidence-55-housing-market-grows-q1.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

So What is the “Fiscal Cliff,” Anyway?

You’re wondering what the Fiscal Cliff is all about? Here are the main issues:

In 2013, tax cuts for individuals will expire, along with long-standing tax breaks for businesses. Taxes for President Obama’s health care law will kick in, as will spending cuts enacted by Congress as part of the debt-ceiling deal. Long-term jobless benefits will also expire.

So What?

Here’s what: The Congressional Budget Office (CBO) estimates that if all these items occur, an estimated $600 billion will disappear from the U.S. economy in 2013, and push the country into a double-dip recession. Given that Europe is officially in a recession for the second time in four years, if our leaders don’t act now our economy is going to fall headlong over the same cliff.

And keep your head on a swivel regarding inflation. While the latest Producer Price Index and Consumer Price Index reports show inflation remained tame at the wholesale and consumer levels in October, inflation can quickly get out of hand.

What does this mean for home loan rates?

Inflation is the arch enemy of mortgage rates. However, home loan rates should continue to benefit from the uncertainty in Europe. This is because investors will likely continue to see our bond market – including mortgage bonds – as a safe haven for their money. But inflation is a very real threat to home loan rates: if inflation hits, look for mortgage rates to go up.

The bottom line is this:

Home loan rates remain near historic lows, making now the best time ever to talk with the seniors in your life about extinguishing their “forward” mortgage with a HECM Refinance. Also, there has never been a better time to use a HECM for Purchase to get into a home appropriate for aging in place. It’s hard to say how much longer rates will stay this low.

Call me with questions you or your clients might have – I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 · Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

America’s Self-Designed Anti-Poverty Program

During the Arab Spring we learned the term “waithood,” and following the prolonged economic stagnation in Japan, “parasaito shinguru.” In the US we have long heard much about baby-boomerangs. But from the ever-droll UK comes my personal favorite: “KIPPERS,” or “Kids in Parents’ Pockets Eroding Retirement Savings.”

As you’ve doubtless guessed, these are terms for adult children who have moved in with older parents due to economic pressures and a poor job market. And though many groan at the very thought, data suggest in many cases the trend is anything but toxic.

World-Wide Trends

Around the world pressures are much the same: too many job seekers, too few jobs, and a rising cost of living. In the United States, adult kids are moving home in huge numbers – numbers so large, in fact, that they are setting all-time records. Add to this a rapid rise in life expectancy, and you get dynamics that begin to actually change social order and long-term behavior.

Though this trend presents a big, fat target for negative press, there are interesting things to note:

  •  When two adult generations of the same family live under the same roof, the older adult is the head of the household in about three-quarters of all cases (ibid);

And despite the derogatory – but admittedly funny – term “KIPPERS,” evidence points in a largely different financial direction.

Self-Designed Anti-Poverty Program

In their study entitled Fighting Poverty in a Bad Economy, Americans Move in with Relatives, Rakesh Kochhar and D’Vera Cohn write, “Without public debate or fanfare, large numbers of Americans enacted their own anti-poverty program in the depths of the Great Recession: They moved in with relatives.” The authors go on to say, “…the rise of multi-generational households in the recession could be viewed as the American public’s self-designed anti-poverty program.”

This combined-household trend is not lost on the nation’s builders. In a PulteGroup study released October 2012, Deborah Wahl Meyer, Pulte chief marketing officer, says many new homes now offer an upstairs and a downstairs master suite to accommodate multi-generational families (http://www.prnewswire.com/news-releases/pultegroup-survey-mom-and-dad-anticipate-future-roommates-174552451.html).

At some point, however, there are only so many ways to cut costs and combine expenses.

We’re Not Getting Younger – And Things Aren’t Getting Cheaper

In Six Major Drains On Boomers’ Bank Accounts, Pamela Villarreal of the National Center for Policy Analysis says, “Housing…is typically the largest monthly consumer expenditure” (Financial Planning online journal (http://alturl.com/ionsj).

Villarreal goes on to say that for homeowners between the ages of 55 and 64, “…expenditures on principal, mortgage interest, taxes, maintenance and insurance rose 25%. The portion of income they spend on mortgage interest increased 47%, from 4.3% to 6.3%” over the past two decades (ibid).

The FHA-Insured HECM

With 10,000 baby boomers a day turning 62, and the cost of managed care skyrocketing, the trend toward multigenerational living arrangements is not likely to change in the foreseeable future. Costs are going up, wages are not, and as in other times of uncertainty, families rally together to meet needs.

Many issues surrounding aging do not go away over time. However, for the senior homeowner aged 62 or older, the concern surrounding meeting a monthly mortgage payment is one issue that can be addressed through the FHA-insured HECM. And, if there is sufficient equity in the home, the homeowner can improve cash flow by establishing a non-cancellable – and non-taxable – line of credit.

Incidentally, rates have never been lower. So if you, or someone you know, would like to look into the potential benefits of a reverse mortgage, give me a call. I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

Potato Skins and Emerging Trends: Aging In America

Charles, Jr., always preferred the name Chuck. But in his years as a scrappy street-fighter in Providence, Rhode Island, he was simply called “Bull Dog.” The aptness of that description I will leave unaddressed.

Chuck was the only son of Charles, Sr. and Elizabeth, New England socialites who came into fast money when Charles, Sr., a chemist, patented a durable fabric blend for Pullman sleeper cars. Wanting nothing to do with his parents’ new-found wealth, Chuck dropped out of high school to run bets for an off-track gambling ring. Not yet out of his teens, he was a heavy drinker, ruthless fighter, and on several occasions narrowly escaped police sweeps.

Around 2:30 Sunday afternoon, December 7th, Chuck and a friend were walking to join a game of nine-pin. One street over they heard yelling, and thinking a fight had broken out, ran to join the fray. What they found changed their lives, their nation, and indeed the whole world. What they found, of course, was news of Pearl Harbor.

Chuck’s particular journey led him into the U.S. Eighth Army Air Corps, proudly referred to as “The Mighty Eighth.” On its twenty-second mission his B-24 was shot down, and Chuck and the one other surviving crew member spent the remainder of the war in Stammlager Luftwaffe #17b, otherwise known as the infamous Stalag 17.

Hunger, cold, vermin, illness, and despair defined life for the 4000 men in the camp. Chuck, wanting documentation of the men’s lives, worked alongside two other corpsmen to create photosensitive paper, done by coating scraps of paper with a potato skin emulsion. The paper was then placed into a light-tight box, with only the smallest of holes carefully punched in one end. These photos exist to this day in a book called Kriege Memories, self-published after the war by Chuck and one of his fellow corpsmen.

Chuck, now gone, told me his story several years ago. As the daughter of an aerospace engineer, I gathered details of his story the way others collect baseball memorabilia, Indian head nickels, or teacups. I have Chuck’s photos, several Western Union telegrams, Red Cross communications, and his letters home that were never posted.

For me in some ways this account has grown richer over the years. Some of the power comes from the photos themselves, arrestingly clear despite their fundamentally unstable original medium, and their having been stored for years before being preserved.

But part of the elemental power is simply this: this was a generation that did what it took, with what was at hand, to get the job done. And though we are losing this generation, these qualities still persist.

This week past I met with…a “family.” My client, the homeowner, is well past 80, widowed, and in need of companionship, light housekeeping, transportation, and help with medications. Living with her is a male companion, a long-time friend, who is several years her junior. Also in the home is a pre-teen boy and his mother, who lost her own home when she was laid off from her HR job. She is now back to work, and well on her way toward regaining financial stability.

Messy, right?

Oddly, no.

In fact, I have been in households composed of blood relatives that were far less functional, far less kind, and in far greater distress.

Life is really just stitched-together stories, so I asked my client to tell me the story of her household. The simplicity, elegance, and bald-faced honesty were arresting: she said, in effect, “I have a house, they needed a home. I need help, they have youth.”

Even now this is a generation that does what it takes, with what is at hand, to get the job done.

And, as it turns out, my client and her new, blended family are far from being an isolated phenomenon. In fact, it is one of the fastest-growing household trends…

And more on that in my next post.

Let me know what you’re seeing – I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

You Can’t BUY a Home With A Reverse Mortgage…You Dummy

Every once in a while something so odd happens that you spend the next few days…or weeks…or MONTHS – if it’s odd enough – processing the details.

Exactly a year ago I was in the middle of a complex HECM for Purchase transaction. It involved a knotty situation in which a builder had declared bankruptcy before completing construction on a condo, and another builder had finished the project. However, the new guy had never put some of the completed phases to record. I will sum up the details of the situation simply by saying Uncle Sam does not smile upon this business model.

After a couple weeks mucking about for resolution utilizing the obvious channels, such as the homeowners association attorney – whose job description, incidentally, does include this type of thing – I decided to go to the top of the food chain and contact my client’s US Congressman.

Imagine my surprise when I received a mini-lecture from a congressional aide, who stated with great conviction, “You can’t BUY a home with a reverse mortgage. Reverse mortgage is a refi product. So put that in your pipe and smoke it, you dumb Reverse Mortgage Specialist.”

Ok, so maybe he didn’t say this last part. But it was implied.

Well, well, well, Mr. Aide, thank you for THAT helpful input.

So, is that to say you CAN you buy a home with a reverse mortgage?

In a word, yes!

So how does Reverse for Purchase – also known as HECM for Purchase – work? And why do so few people know about it?

The concept of HECM for Purchase could not be more straightforward: the home buyer provides a down payment, the size of which is determined by the home buyer’s age. The HECM loan provides the rest.

That’s it. End of story. You are in your home for the rest of your life – or as long as you want to live in the home as your primary residence – and never make a monthly mortgage payment.

This smells fishy. How can I live in a home and not make payments?

Answer: Not making payments is very different from saying the loan is never repaid. The loan is always repaid – it’s just that you don’t repay it. When you are finished with the home, the home itself repays the debt.

But when is the loan repaid?

Answer: The loan is repaid when the last person on title moves, sells, or dies. In other words, the loan is repaid BY THE HOME once the senior no longer needs the home.

But where does the money come from to repay the loan?

Answer: The home is either sold, and the proceeds from the sale repay the loan, or the family secures new financing and buys the home.

But what if the home has gone down in value and the proceeds from the sale can’t repay the loan?

Answer: The home repays what it can. Any shortfall is made up by the mandatory Mortgage Insurance Premium (MIP).

But what if I want to leave the house to the kids?

Answer: You can still leave the house to the kids: it’s still your house. The kids will need to: 1) line up their own financing, and buy the home, or 2) sell the house. However, they would have to do this anyway if you had a “forward” mortgage…AND they would have to make your mortgage payment every month after you were gone, or risk losing the house.

How long can I stay in my home?

Answer: As long as you want to. As long as you pay your property taxes, keep current on your homeowner’s insurance, and maintain the home, you never have to move. You can, however, move whenever you wish.

Ok, So Let’s Be Blunt: If this program is so great, why don’t more people know about it?

Answer: First, it has not been around all that long: FHA rolled it out just over three years ago. Second, despite a lot of money spent on financial education for seniors, there are still far too many people – like the congressional aide mentioned above – who are very bold in speaking very forcefully about topics they know very little about. And that is very unfortunate.

If you or someone you know needs to move into a home better suited to aging in place, the FHA-insured HECM for Purchase may very well make this possible.

I love answering questions about the financial health and the long-term well-being of our seniors. Give me a call – I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

The Pickle and the Pickle Jar

Today I met with two typical Washington, D.C. couples: well-educated, highly-sophisticated, both have traveled broadly and lived internationally. Both live in charming, high-end D.C. neighborhoods. And in what I can only call a rapidly emerging scenario, though well past the traditional age of retirement, both couples still work – and both have one advanced-elderly parent living with them.

What has transpired that the HECM now finds itself squarely within the retirement plans of a demographic who heretofore would not so much as have entertained the idea.

The answer?

Life expectancy.

The Pickle

We have prolonged life to a remarkable degree – but we cannot stop aging. We’re in a pickle: the old go on for decades, until the children of the advanced elderly are themselves deep into their own retirement years.

Many adult children will eventually be called upon to support their parents. The parents, no matter how independent they wish to be, cannot be left unsupervised. They need, at very least, an in-home companion, but as needs go up, costs go up. And here’s the tough part: the adult kids themselves need every penny they have to make it through retirement.

The Pickle Jar 

The graphic I often use when speaking on the HECM is one of an old fashioned pickle jar. Not the little kind where you can reach bottom with an iced tea spoon – no, the jar I’m talking about is one of the BIG ones, the kind you had to reach your whole arm down into to grab the big, fat pickle at the bottom. So that big jar, into which for 30 years homeowners have been piling pennies, is the home. Now the mortgage is paid off, the jar is full – or mostly so – but the jar lid is screwed on.

The FHA-insured HECM, when set up as a line of credit, allows seniors to reach into the jar and take out pennies – one at a time, ten at a time, or a fistful at a time – according to their need. It is a non-cancellable line of credit, waiting in reserve to be used as needs arise.

How does this help in the case of the families I met today.

As they labor to meet the needs of their advanced elderly family member, the “burn-through” rate of their income and savings is too rapid. They have done the math: if expenditures continue apace, there will be nothing left for them when they are that age.

In today’s Journal of Financial Planning, authors Dr. John Salter and Harold Evensky write, “…[t]he FHA HECM Saver offers unique and attractive features,” and then go on to say:

We find this risk management strategy improves portfolio survival rates by a significant amount. The improvement in survival rates is attributable to the mitigation of the volatility drain – the risk of having to sell investments when depreciated.

The Journal article is spot-on. Current trends suggest that within a few years, rare indeed will be the person whose older relative does not depend upon a reverse mortgage for income, for a financial safety net – and for the very preservation of dignity itself.

Give me a call. I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/