Let’s talk about the “F” word

Laurie MacNaughton [NMLS ID#506562] © 2020

Forbearance. It’s the hot topic of the day. It may also prove catastrophic for some homeowners who haven’t read the fine print – if they can even find fine print to read.

Social media posts state in emphatic terms, “Congress gives free money!” “Mortgage holiday!” “Don’t pay your rent!” In a time of uncertainty it feels good to think those in charge are all-wise and all-knowing, that they are looking out for us, that they have our best interests in mind. But it is well to remember the saying, “Rumor circles the world while truth is still lacing on its shoes.”

From the outset I want to make clear: if it comes down to feeding your family or making your mortgage payment, feed your family. If you truly must, ask your mortgage servicer for forbearance. Just don’t imagine for one moment your mortgage payment was forgiven, that it disappeared, or that there will be no long-term consequences.

Which leads to my second point. To date there has been little guidance regarding penalties for forbearance. But as a federally-licensed lender I can tell you this: it is highly unlikely there will be no credit implications for missed payments. Some credit blemishes last a very long time, and mortgage lates can dog homeowners’ feet for years to come.

The likeliest forbearance scenario is that if you miss three months’ worth of payments, all four payments will be due in month four. Let’s say your mortgage payment is $2,000, and you engage in a “mortgage holiday” all three months. Now you owe $8,000 in one lump sum, and you’ve just gone back to work. This would be nearly impossible for most Americans under the best of circumstances, let alone current circumstances when many have been unpaid for weeks. I fear, I deeply fear, we are going to see a foreclosure crisis that makes 2009 pale in comparison.

The punchline is this: if you can pay your mortgage, pay your mortgage. If you can only make a partial payment, call your loan servicer to see if they will accept a partial payment. If you truly cannot pay, bear in mind there will be consequences.

One last word to homeowners aged 62 or older: this time may be the right time to look more deeply into a reverse mortgage. An FHA-insured reverse mortgage is far different than most people think. You do retain title, and the home remains yours until you or your heirs sell it. The loan is not repaid on a monthly basis, but rather in reverse on the back end when the home is sold. All retained equity belongs to you or to your heirs.

Because there is never a monthly mortgage payment due, there is nothing to fall behind on when finances are tight. The FHA-insured reverse mortgage is not exotic, nor mysterious, nor even complex. It can, however, be a financial safety net when life becomes unpredictable.

Be well, stay safe, and if you have questions, give me a call. I always love hearing from you.

The Twelve-Month Rule

He’s not young. He’s not well. He needs a financial buffer. But for another six months he cannot move forward with a reverse mortgage.

And why not?

Because in a move that hit everyone by surprise, in December FHA enacted guidelines stating homeowners must now wait a full calendar year from the date of their most recent property lien before doing a reverse mortgage, if more than $500 was received from the transaction. This waiting period is called “seasoning.”

What does this mean?

In many cases it means that if homeowners have refinanced, or have established a home equity line of credit, they must wait a full 12 months before applying for a HECM.

The gentleman mentioned above is a perfect example of why it’s enormously important to know this. Six months ago, as his wife lay dying of Alzheimer’s, he refinanced his home in order to lower his interest rate and to reduce his monthly payment. In the process he took out $2,700 to pay down medical debt.

But here’s the thing: he doesn’t need a lower monthly payment. He needs NO monthly payment – and access to liquidity to cover unexpected expenses. A reverse mortgage is the only mainstream financial product available that accomplishes both. And now he’s in the unfortunate position of having to tread water until he can qualify.

Nearly every one of us is working to help family, friends, neighbors, or clients age with independence and dignity. And a reverse mortgage is going to play an important financial role for many.

Some new guidelines have already kicked in. More are on the way. And some changes, like the twelve-month Seasoning rule, are big.

Give me a call and let’s get caught up – I always love hearing from you.


Laurie MacNaughton [506562] is a freelance writer and Reverse Mortgage Consultant with Southern Trust Mortgage.

She can be reached at 703-477-1183 Direct or LMacNaughton@SouthernTrust.com

Reverse Mortgage : A bad idea whose time has come? Hardly.

By all accounts, my dad was a funny guy. Looking every bit the part of the aerospace engineer he was by profession, no one ever expected him to have a piercing sense of humor or the ability to capture just the right turn of phrase – but he had both, and his humor was often profound.

One funny phrase he used occasionally was “a bad idea whose time has come.” He did not say this often, but an example of something fitting into this category might have been the Stuxnet software worm, if he had lived long enough to see it.

So why in the world do I bring this up?

This past week I received a call from a private wealth advisor who referred a client. While on the phone the wealth advisor said, “I always thought a reverse mortgage was a bad option people turned to when they were desperate. But during this month’s advisors’ meeting, reverse mortgage was suggested as a potential element of a well-rounded, long-range retirement plan.”

Bingo, my friend.

And more than ever, right now there are truly profound reasons to consider a reverse mortgage.

First is this: few financial experts anticipate interest rates will stay low. With a reverse mortgage, there is not a monthly mortgage payment, so that’s not how rates figure in. However, interest rates impact how much money the client receives – and even a small rate increase negatively impacts how much money the homeowner can access. In fact, if rates go up to 4.06% – which for much of history would be a modest rate – there would be a 26% drop in funds available to someone aged 68. That’s a hefty reduction.

A second consideration is that a reverse mortgage may enable a senior to delay drawing Social Security until age 70, when benefits are maximized. Most of us have seen the charts and know how much money we walk away from if we start drawing benefits at 62; less well-known are strategies available to help avoid an early draw.

A third thing to consider is this: there is an automatic growth rate associated with a reverse mortgage line of credit. This, in my opinion, is the least-known element of a reverse mortgage – and that’s a darn shame.

Each month, the unused portion of a reverse mortgage credit line grows bigger. This means that if you establish a line of credit now and let it sit until you need it, month over month the credit line will be bigger than it was when you originated.

Right now, more than ever, a reverse mortgage is a good option – whose time has come.

As I’ve said many times, no one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.

If you would like to explore how an FHA-insured reverse mortgage might help with your retirement plans, give me a call. I always love hearing from you.


Laurie MacNaughton [NMLS# 506562] is a freelance writer and a Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183, or Laurie@MiddleburgReverse.com


Weekly Scenario


My wife and I recently looked into doing a reverse mortgage, but were told we don’t qualify for enough to pay off our existing mortgage. Do we have any options?


This situation is called “short to close,” and it refers to the exact scenario you are encountering, namely one in which your current “forward” mortgage is too large to be paid off by the proceeds from the reverse mortgage.

You do still have options. The most common solution is to bring money to closing to cover the shortfall.

Here’s an example in real numbers:

John and Dianne are each 64, and their plan is to retire within the next 6 months. Their home is appraised at $400,000, and they owe $203,000 on their current mortgage.

Assuming current interest rates and average closing costs, the amount they qualify for leaves them about $5,000 short of what they need in order to fully pay off their forward mortgage.

They are allowed to bring that $5,000 to closing in order to make the reverse mortgage work. The funds to cover the shortfall can come from any non-loan source, including savings, sale of an asset, or a gift from adult children.

And what is the benefit of doing this? The obvious benefit is that they have no more monthly mortgage payment. Since most Americans’ largest monthly expense is their mortgage payment, eliminating that expense frees up a significant amount of money on a monthly basis.

But there are side benefits as well, including safeguarding the home in the event one spouse dies and the surviving spouse loses the retirement income generated by the late spouse. Even with the loss of income, no payment on the loan is due until the last person on the home title moves, sells the home, or dies. At that point the heirs have up to one year to decide whether to sell or to refinance the home.

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


Laurie MacNaughton [NMLS# 506562] is freelance writer and Reverse Mortgage Consultant with Middleburg Mortgage. She can be reached at 703-477-1183, Direct, or at Laurie@MiddleburgReverse.com

Middleburg Mortgage ∙ 8190 Stonewall Shops Square ∙ Gainesville, VA ∙ 703-477-1183 Direct Laurie@MiddleburgReverse.com www.MiddleburgReverseLady.com


Approaching High Tide

So here’s a nifty term I learned this week: “Dependency Ratio.”

This term appears in this month’s U.S. Census Report entitled The Baby Boom Cohort in the United States: 2012 to 2060, and it measures the youngest and oldest members of the population relative to the number of those of working age. The smaller the dependency ratio the better. Or, turning the equation the other way around, the larger the dependency ratio, the worse it is for the economy.

And why?

Because workers work – and workers earn. Dependents, on the other hand, depend on earners. That’s why they’re called “dependents.”

And who are these dependents? They are both the young and the old – those who have not yet entered the workforce, and those who have retired from it. In fact, the dependency ratio is split into two segments, the “youth dependency ratio” and the “old-age dependency ratio.”

According to the U.S. Census Bureau, the youth dependency ratio topped out in 1964, when there were 67 children for every 100 working adults. By 1999, when boomers were in their peak earning years, the dependency ratio was under 37, its all-time low.

The Rising Tide

Old-age dependency ratios are also a function of the baby boom. In 1945 there were 12 older Americans for every 100 workers; by 2010 there were 21. By 2030 the combined dependency ratio will hit high tide, when it is projected to top 75.

Need I say it? That’s a lot of dependents.

And here’s the thing about dependency: in 15 years, 15-year-olds will be 30. With any luck at all they will be working, living on their own, furnishing their own homes or apartments, and entering their peak purchasing years. They will also be healthy.

Contrast this with 65-year-olds. In 15 years they will be 80. Typical 80-year-olds are not working, not buying new homes, and not buying new goods at the pace they once did. Furthermore, few 80-year-olds are healthier than they were a decade and a half earlier.

By 2030, the last of the baby boom cohort will have turned 65. In that same year 1 in 5 Americans will be 65 or older. An historically large old-age ratio will increase old-age dependency – and is likely to squeeze government agencies and families alike as they attempt to meet the needs of the elderly.

We’re all making this up as we go: never before have we or our parents, never before has the nation, or indeed the world, faced this dynamic. It’s going to take creative solutions, combined efforts, and flexible options to meet the needs of those we love.


Laurie MacNaughton is a freelance writer and a Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183 Direct or Laurie@MiddleburgReverse.com


Laurie MacNaughton [NMLS# 506562] ∙ Reverse Mortgage Consultant, President’s Club ∙ Middleburg Mortgage ∙ 8190 Stonewall Shops Square ∙ Gainesville, VA 20155 ∙ 703-477-1183 Direct ∙ Laurie@MiddleburgReverse.comwww.MiddleburgReverseLady.com

Contemplations of a Crummy Magician

I stood waving my hands in front of the paper towel dispenser like some feeble magician trying to conjure paper towels, when the thought occurred to me: I frankly can’t remember the last time I heard someone complain about the rigors of pulling a paper towel from its dispenser. Electric paper towel dispensers solve a problem that never was a problem.

This got me to thinking: how many other fixes fix problems that aren’t problems? And if you can believe it, I actually came up with several – but that’s a different commentary altogether. It’s the corollary that hit home.

Finite choices

Remember functions? Those funky f(x) equations in math class? Basically, a function says if I do this, I get that – one solution for each problem.

Fortunately, most day-to-day issues have many solutions. But here’s the thing: the farther one travels into retirement, the more limited options become.

Most of us are going to need additional options if we’re going to enjoy what experts call “financial survival in retirement.” Not a cool term…but a very real problem.

Larger solution sets

In what I consider one of the most encouraging transformations in the history of the reverse mortgage product, I am seeing a regular stream of clients referred from the financial planning community. Seniors seeking informed input are turning to an informed source, namely their financial professional. Of course, I’ll never know how many financial professionals steer their senior clients away from reverse mortgage – but I do know an increasing number tell me they view reverse mortgage as a legitimate financial tool when used in concert with a comprehensive financial plan.

Financial professionals refer clients to me well before catastrophe strikes, before clients’ means have dwindled, before financial limits are reached – before the financial boat plunges over the cliff of desperation.

Planners understand that more financial buckets equal a better outcome – and they understand that a reverse mortgage is simply an additional bucket.

Real solutions for real life

I hear the same stories everyone else in the financial industry hears: seniors unable to return to full-time employment. A spouse lost, and the resulting 50% drop in income. A catastrophic event – or a chronic condition that became financially catastrophic. Or, simply, too much life left at the end of the money.

A real problem meets a real solution

Unlike the motion-detecting paper towel dispenser, reverse mortgage is a real solution to a real problem.  When put in place preemptively, before it’s just a crisis management tool, reverse mortgage can be part of a sound retirement plan.

No one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.

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


Laurie MacNaughton [NMLS 506562] is a freelance writer and Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183 or Laurie@MiddleburgReverse.com.

Adult Children Supporting Aging Parents – The Gift That Keeps on Taking

A question I get asked a lot is whether I run into greedy adult kids who don’t want their parents to do a reverse mortgage.

Answer? Yes. But rarely.

More common by far is the family I met with Sunday – a wonderful, functional extended family which includes two adult sons and their widowed mother. Since their father’s passing three years ago the sons have been supplementing their mother’s meager income. However, each son has children approaching the college years, and the mother’s medical expenses are on the rise. They know they cannot continue supporting their mother at the current pace.

The gift that keeps on taking

We all have heard one thing or another referred to as “a gift that keeps on giving.” I have come to call the financial support of an aging parent by an adult child “the gift that keeps on taking.” Money the adult child should be setting aside for retirement is instead being gifted to an aging parent to augment insufficient income.

A short aside about gifting

Currently you can gift another person $14,000 per year before hitting a tax liability. This is called the annual gift exclusion.

In addition to what you can give per year, there is a lifetime exclusion. In 2013 the lifetime exclusion is set at $5.12 million. Gifts that exceed the annual $14,000 limit count against the lifetime exclusion. Frankly, for most Americans this is not an issue. However, if you do go over this amount, the tax liability packs a wallop.

And just exactly how big a wallop? Up to a cool 35%.

Gifting among family members is often under the table. However, make no mistake: this is not a gray area. The IRS requires you to keep tabs on your gifts – and to report these gifts – so it will know how much of your lifetime exclusion has been used up when you die. If the Internal Revenue Service catches you exceeding the annual amount, you will pay taxes, interest, and penalties.

Meanwhile, back to…

Sunday’s family. Not only are the two sons are supporting their mother with after-tax earnings, but over the past couple years they have found themselves having to watch the annual gift exclusion. This is a pricy fix – and one that has long-term implications.

For the average family, the biggest financial boon an aging parent can give an adult child is financial self-sufficiency. This increases the likelihood adult children will head into their own retirement with savings intact.

Life is long and getting longer. Medical costs are high and getting higher. And few people get 10 years down the road into retirement and find themselves financially better off.

Reverse mortgage is not a fit for everyone. But for many, not only is it a good option – it is an excellent option. It lifts the burden on the upcoming generation and allows seniors to live out their final years in dignity, comfort and independence.

If you are – or someone you know is – considering a reverse mortgage, give me a call. I always love hearing from you.


Laurie 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