“We never expected to live this long”

Laurie Denker MacNaughton © 2023

Most of us get very judgy when it comes to money. I don’t know why.

Yesterday I had a closing with a very old, very dear couple, both of whom were groundbreaking professionals in their respective fields.

Both have pensions, both have Social Security—and both had significant savings.

Those savings are now long gone, and the guaranteed income is just not enough to meet their care needs.

At the closing table the husband said to me, “We don’t want our friends to know we’re doing a reverse mortgage—but we need money. We never expected to live this long.”

Yup, I hear you. When you were born, dear one, your life expectancy was more than three decades shorter.

But why the stigma? YOU put money into this house, and now you’re taking some of it out.

A reverse mortgage is just home equity mortgage. But it’s a mortgage that has no required monthly payment. The loan will be repaid—but it’s repaid on the back end, in reverse, when the homeowners no longer reside in the home. The rest of the equity belongs to the heirs.

Punto.

That’s it. End of story.

I could go on about the needless financial stress our aging endure… but I won’t.

This I will say: a reverse mortgage won’t be a fit for everyone. But if an aging loved one in your life is struggling financially, call me. Let’s see whether a reverse mortgage might be part of the solution.

Blessings to you and yours in this season.

Laurie

Rarely is a problem too large

Laurie MacNaughton © 2021

It looked like it was heading for a bad outcome: Robert sold his mother’s home and placed her in a care facility.

The problem? Mom was on Medicaid, and her formerly exempt asset was now quite a large countable asset, which spelled big trouble for her care options.

Fortunately, Robert picked up the phone and called an elder law attorney, who listed buying another home among potential cures.

Because Reverse for Purchase has notably easier qualification guidelines, Robert’s mother qualified even on her limited income. And…yesterday she closed on a lovely new home. She is scheduled to move in shortly before Christmas.

Rarely in life is a problem too large. More often, solution sets are too small. In this case, Reverse for Purchase was the perfect fit for a problem that had few other solutions.

If someone you know is in need of options, give me a call. I always love hearing from you!

I feel I’ve lived a miracle

Laurie MacNaughton © 2021

Margaret was 75 when she inherited her mother’s ranch-style home. Because the home had a perfect aging-in-place layout, Margaret and her husband decided to sell their current home and move into the smaller, single-level property. Their current home sold quickly, and they began packing for the move.

But then one tragedy after another struck: Margaret’s husband died suddenly. Margaret lost her job when her employer closed his doors. And then, just days later, the inherited home burned to the ground. And, as fate would have it, the home was uninsured at the time.

Margaret moved in with family while she had the home rebuilt, and funded the construction with proceeds from the home she and her late husband had sold. However, the funds didn’t cover the full cost, so she tried to get a loan to cover the remainder. In the meantime, the contractor finished the work and placed a mechanic’s lien against the property.

She tried lender after lender – but the loan amounts fell far short of what she needed. After all, she was living on just Social Security and a state pension. Though her income was by no means meager, she could not qualify for a loan large enough to pay the contractor.

Months went by, and finally Margaret consulted an attorney regarding her options.

His recommendation? Look into a reverse mortgage.

With a reverse mortgage there is no requirement to prove the homeowner can make a monthly mortgage payment, and consequently Margaret qualified for a far larger amount than she had with a “forward” mortgage. The reason? A reverse mortgage has no required monthly mortgage payment.

The lender must verify the homeowner can cover property charges, including property taxes, homeowner’s insurance, routine upkeep, and condo or homeowner’s association dues, if applicable.

Today Margaret is living in her lovely new home. She has paid all her debts and has no required monthly mortgage payment. When I spoke with her recently she said, “I feel like I have lived a miracle.”

A reverse mortgage is not a miracle – it’s a mortgage. It’s a mortgage that’s repaid on the back-end, in reverse. However, it’s a mortgage that can accomplish results other mortgages often simply cannot.

If you are – or someone you know is – in need of options, give me a call. I always love hearing from you!

Forbearance-to-Foreclosure Pipeline

Laurie MacNaughton © 2021

She’s 78 years old.

She’s 78 years old and heading into foreclosure.

How did she get here? How the HELL did she get here?

A year ago, as allowed for under the CARES Act, she put her home into forbearance. Now one year on she’s newly widowed, meaning she’s got half the income and all the debt, and her home is coming out of forbearance in just a few weeks.

According to correspondence from her mortgage company, she also has a $69,000 lump sum due on her existing mortgage come September 1. If she cannot come up with that amount, per her mortgage company, her home is headed toward foreclosure. She has tried to refinance both with her current lender and with several other lenders.

But here’s the thing: it can be very difficult to refinance if you are not currently making payments. This means many thousands of our seniors may soon be in dire distress.

So back to our 78-year-old.

This past week her banker mentioned the possibility of refinancing using a reverse mortgage.

To answer your question: yes.

Yes I can qualify her.

Here’s why: with a reverse mortgage she does not have to have income enough to make monthly mortgage payments…because with a reverse mortgage there is never a monthly mortgage payment required. Rather, the mortgage will be repaid on the back end – in reverse – when the home is sold. All remaining equity belongs to the homeowner, the heirs, or the estate.

Because homeowners still own their home, they continue to pay homeowner’s insurance, property taxes (unless tax-exempt), and HOA or condo dues, if applicable.

We may well be in the calm before the storm. But our older homeowners currently in forbearance do not have to lose their homes if they can refinance using a reverse mortgage.

Please, please be proactive in asking the hard questions of your loved ones currently in forbearance. You know, as do I, that many older homeowners are not comfortable asking for help – until they’re out of all options they know to pursue.

Do please pass this message on to lenders, bankers, planners, attorneys – anyone in your life who deals with older homeowners.

And do call at any time if you have a client, friend, or family member aged 62 or older who wants to talk. I’m always available.

When Ill-Conceived Rules Go Bad

Laurie MacNaughton ©2016

For nearly thirty years FHA’s reverse mortgage program has enjoyed tremendous success in making a way forward for aging homeowners to remain in their own homes. But just like any other loan program, over time guidelines needed to change to reflect evolving realties. In the case of reverse mortgages this included cutting back on available funds to accommodate ever-lengthening life expectancies.

After the housing crisis additional major changes were made to the program, including requiring that every reverse mortgage applicant pass a federal “financial assessment.” This was done to protect the FHA mortgage insurance fund, and to ensure the program’s long-term viability.

Nationally, numbers reflect the fact that some borrowers have indeed failed to qualify under the assessment guidelines – and that may have been necessary.

But now another round of changes is being considered. In addition to raising the bar yet higher, the proposed rules appear plain ill-conceived.

The most problematic of the proposed new rules may be including utilities in the financial assessment, “if failure to pay…utilities would result in a lien on the property.”

A couple things here.

First, what unpaid bill doesn’t run the risk of becoming a lien? I have seen hospital liens. I have seen homeowner association liens. I have seen eye-doctor liens. Why doesn’t FHA just say, “If you’re an aging homeowner and could potentially fall behind on future bills, start packing now”?

Second, there are many, many housing-assistance programs. A quick Google search returns references to hundreds of programs, some federal, some state-run, some private, and many which combine several funding sources.

But most of them have maximum income restrictions, and many, including some of HUD’s own affordable housing programs, don’t kick in until income is 60% below the regional average.

By contrast, as guidelines currently stand, to qualify for a reverse mortgage that enables homeowners to remain in their own home, combined homeowner’s insurance and property taxes are not supposed to exceed 10% of the homeowners’ income (HECM Financial Assessment and Property Charge Guide, §3.98).

So what happens if utilities are now included in that 10%?

Here’s what could happen: fewer homeowners could qualify. And here’s the thing: there is a really big gap between 10% of one’s income going to property taxes and insurance, and financially being in the bottom 30% of one’s region. So where are our aging who fall into the donut hole supposed to go?

I honestly don’t think HUD is trying to turn homeownership into a perk available just to the “welderly,” the wealthiest of our aging homeowners.

But advertently or inadvertently, that certainly looks like what they’re proposing.

Harvard Report Points to Dramatic Senior Housing Shortage

Laurie MacNaughton ©2016

Ok, so we’re not exactly dealing with breaking news when we see Harvard’s housing research team reporting a shortage of senior-appropriate housing.

In fact, everywhere we look we see evidence of the shortage in senior-appropriate housing: Warrenton, Leesburg, Middleburg, Reston, Oakton, Arlington – pretty much everywhere you look in the greater D.C. Area you see new construction. But many of the new homes are multilevel “starter castles”…as I call them.

Harvard’s Center for Housing Policy study, titled “Housing an Aging Population,” backs up observations with numbers, and they’re a bummer.

Among other things, the report documents:

Within the next couple decades the population aged 65 and older will increase 120 percent. Over the same period the number of our oldest Americans, those aged 85 and older, will increase more than 200 percent.

Wowzers, right? But here’s where the report gets really scary:

• The need for appropriate housing will radically outpace the availability of appropriate homes.
• One in four households aged 85 and older spend at least half their income on housing.
• Housing challenges are particularly severe for older adults with very low incomes – and most household incomes decline after the age of 85.

The takeaway? Pretty straightforward:

The number of older adults is rising. The need for affordable senior-appropriate housing is rising. But affordable options are not rising.

Not everyone can age in place. That’s just the hard truth. However, for those whose can age in place, everyone involved benefits. But we need to urge our communities to support construction of appropriate housing.

We can do this.

It’s just a matter of doing it.

Laurie

 

Retired and Can’t Refi? You’re In Good Company

Name Ben Bernanke ring a bell? As in the former chair of the Federal Reserve?

According to his own account when speaking to the moderator of a financial conference this past week in Chicago, Bernanke said, “Just between the two of us…I recently tried to refinance my mortgage and I was unsuccessful in doing so.”

“I’m not making that up,” he added when the audience laughed, his comment sounding vaguely like an homage to humorist Dave Barry.

And what was the conference Bernanke was addressing? None other than the National Investment Center for Seniors Housing and Care.

So that was October 2; fast-forward one day to October 3, 2014. I met with an aging homeowner and her adult son. The mother suffered an adverse health event and has had to quit her job. She is now struggling to make her monthly mortgage payment, and does not want to deplete her savings…only to be back in the same boat once savings are gone. Like Bernanke, she tried to refinance but was unsuccessful in doing so.

She considered selling her home, until she did the math and realized proceeds from the sale would not last as long as she’s hoping to.

A relative told her to look into reverse mortgage.

What does this accomplish?

• One – never again does she have a monthly mortgage payment.
• Two – she now has a cash buffer, in addition to other savings, as a rainy-day fund.
• Three – she never has to move, unless she wants to.

Property taxes, if applicable, are still due, as is homeowners insurance, and routine home maintenance remains the homeowner’s responsibility – in other words, it’s still her home.

And even though the program has now been around decades, it still bears mentioning that the bank does not own the home. Title remains in the homeowner’s name. Or, to repeat myself – it’s still her home.

A reverse mortgage cannot fix all the challenges associated with aging. But a reverse mortgage can often fix one of the most vexing issues, namely financial insecurity as it relates to seniors’ housing.

As I’ve said many times, in retirement 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 or those of your loved ones, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [506562] is a freelance writer and Reverse Mortgage Consultant with Atlantic Coast Mortgage.

She can be reached at 703-477-1183 Direct or Laurie@MiddleburgReverse.com

Low Interest Rates, Low Inventory, and a Slow Market? Huh?

Laurie MacNaughton [NMLS# 506562]

Low interest rates, low housing inventory, and a slow housing market? In what kind of crazy world do these three conditions exist simultaneously?

At last week’s 2014 Finance Summit, hosted by Northern Virginia Association of Realtors (NVAR), Joseph Minarik, research director for the Office of Management and Budget, explained how we got where we are.

According to Minarik, interest rates have been so very low for so very long most people who were going to refinance have done so. Additionally, some buyers moved up their home purchase to take advantage of historically low rates. So in effect, very low rates caused the market to borrow homebuyers from the future. Now rates have edged up slightly, and homeowners are loath to purchase a new home and forfeit their low rate. This not only impacts the sale of previously owned homes, but since fewer people are willing to move, it also impacts new home starts.

And how has this impacted the housing market? Basically since the middle of 2013, the pace of home purchases has been stalled. This includes new home starts.

But there was good news out this week: for the first time all year, April’s home sales were up.

Several factors have come together to create a better housing market, according to Steve Farbstein, Chairman of the Mortgage Executives Committee of Virginia Bankers Association. One such factor is the loosening of lending standards by some lenders. Additionally, certain loan products that had been unavailable have started to reappear, giving borrowers with unusual circumstances a better chance of qualifying.

Though a loosening of lending standards may help homebuyers who are in their working years, many senior homebuyers still cannot qualify for a traditional loan. Often this is not because they have adverse credit issues. Rather, it can be next to impossible to get a loan if the applicant is not actively employed.

But here’s the thing: it’s not that seniors are unemployed. They’re retired. But either way, in many cases they’re still not getting that loan – and as a reverse mortgage specialist, it’s the retired, or those who are planning to retire soon, I’m concerned about.

There actually is a purchase loan just for seniors. It’s called the HECM for Purchase loan, and it was designed specifically with seniors’ needs in mind. With the FHA HECM for Purchase there is a down payment, but there is never a monthly mortgage payment due. And, though guidelines will soon tighten, as of right now qualifying for a HECM for Purchase loan is based upon the borrower’s age and the purchase price of the home. Also, in many cases it’s ok if there is still an “exit” home that has not yet sold. This gives seniors time to make any necessary repairs or upgrades to the “exit” property after they have moved into their new home.

The housing market is starting to budge, and there is no reason seniors should be left behind. Now while rates are low it’s a great time for seniors to get into a home configured to suit their needs in retirement.

Give me a call and let’s talk. I always love hearing from you.

Laurie

Laurie MacNaughton[NMLS# 506562] 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

 

 

 

So…Is the Sun Setting on Reverse Mortgage? Mortgage Reform and What it Means for Seniors

The last call I took last night and the first call I took this morning were basically this: What do upcoming changes to the reverse mortgage program mean for senior homeowners?

First, let me hasten to say no one yet knows exactly what the changes will look like – but, we do have a general idea. Following is a rundown on proposed changes and a brief explanation as to why Congress deems changes necessary.

Change: Financial Assessment

What: It has always been required that homeowners pay their homeowners insurance and property taxes, and maintain routine upkeep on their home. With the proposed changes, lenders will be required to perform a financial assessment to determine if potential borrowers can meet these obligations.

Why: Only a minority of reverse mortgages get into trouble. But, on the ones that do, tax and insurance defaults are the number one reason.

Change: Limits on Initial Draws

What: An initial draw is the amount the homeowner requests when the loan closes. Currently, the upfront draw can be up to the full amount homeowners qualify for, as determined by their age, the value of the home, and the prevailing interest rate. Changes will likely limit the amount homeowners can take upfront.

Why: The assumption is that limiting the upfront draw will help with long-term financial planning.

Change: Inclusion of Younger Spouse

What: Currently, only homeowners aged 62 and older can be on a reverse mortgage loan. Under the proposed changes, both spouses would be on the loan, even if one is under the age of 62.

Why: This change would give the younger spouse more options regarding staying in the home if the older spouse passes away.

Both Congress and the largest senior advocacy groups remain highly supportive of the FHA-insured reverse mortgage program. Additionally, Congress has specifically said it views reverse mortgage as an important component of long-term financial planning for the retirement years.

Proposed changes appear to be well thought-out, and designed to safeguard the long-term availability of reverse mortgages.

Give me a call with your questions or concerns. I always love hearing from you.

Laurie

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

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

Hop on the “Aging in Place” Bandwagon

By Jacqueline D. Byrd , Esq.

Used By Permission

He who every morning plans the transaction of the day and follows out that plan, carries a thread that will guide him through the maze of the most busy life. But where no plan is laid, where the disposal of time is surrendered merely to the chance of incidence, chaos will soon reign. — Victor Hugo, French poet and novelist (1802-1885)

The aging in place concept and planning for aging in place is a bandwagon that all seniors should hop on quickly. Just about 100 percent of older adults, if they could have their choice, would choose to grow old and die in their own home.

These days, we are faced with sequestration that looks like it has no end. As government help grows more and more scarce, we need to work together to find other sources of help and to make aging in place the most practical and affordable way to care for a growing population of older Americans.

Aging in place means remaining in one’s home safely, independently and comfortably, regardless of age, income or ability level. It is a concept that is exciting for many reasons, not the least of which is that it can mean the pleasure of living in a familiar environment throughout our lifetime.

The Aging in Place Council, www.ageinplace.org, provides links to organizations collaborating on accomplishment of aging in place goals. The National Association of Home Builders offers courses and certification for aging in place building specialists. This program teaches the technical, business management and customer service skills essential for completing home modifications for the aging in place concept. Sometimes seniors can remain in their own homes with just a few simple modifications such as barrier-free bathrooms, wider halls, grab bars and better lighting. These can be less expensive over the years than an assisted living apartment. A web-based directory, www.nahb.org, lists Certified Aging in Place Specialists who have been trained in the unique needs of the older adult population.

Another industry important to the aging in place concept is the reverse mortgage industry. These programs are largely controlled by the government, and loan applicants must meet with an independent FHA-approved housing counselor to be certain that they understand the reverse mortgage program.

Briefly, a reverse mortgage is a financial tool designed to help you remain in your home and retain full ownership. It allows you to convert the money you have built up as home equity into income that you can use however you choose. Unlike a traditional mortgage, there is no repayment until you permanently leave your home. There are no income or credit requirements to qualify, and because the funds are considered to be a loan rather than income, they are tax free and do not affect regular Social Security or Medicare benefits.

To take advantage of this program, you must be age 62 or older and the home must be your primary residence. If you have a deep desire to leave your home to your children or other heirs, it’s important to discuss the possibility of that with the reverse mortgage people. Sometimes a reverse mortgage and the wish to leave your home to your heirs do not go together well. Make sure you understand that issue completely before signing on the dotted line.

Those who sell long-term care insurance find the aging in place idea a perfect complement to their business. The idea of staying at home comfortably is a consumer hot button, says Nancy Morith, president of N.P. Morith Inc. in New Jersey. “People really want to stay on their own turf. They have created their own nest and want to continue to surround it with family and friends.” Most long-term care policies sold today include care at home options.

Geriatric Care Managers, www.caremanager.org, provide extremely important and helpful resources when seniors wish to stay at home. When care is needed, a professional care manager, often a nurse, will make informed judgments to stretch the senior’s funds. They help you decide such questions as whether you need a full-time or part-time aide, or what equipment or home modifications you may need. To find a care manager in this area, you can check with the Mid-Atlantic Association of Geriatric Care Managers, www.gcmonline.org.

In the rapidly growing senior housing industry, aging in place is a term used in marketing by Continuing Care Retirement Communities. These residences do offer the chance to age in place, but they prefer you first move independently to their community to begin aging. They have independent living, assisted living and perhaps Alzheimer’s care and skilled nursing in one location. In most CCRCs, you must also move from one wing of the campus to another to receive the increased services.

To age in place successfully requires planning. We must think carefully about how to accommodate the physical, mental and psychological changes that often accompany aging and provide for those changes in our own homes. Some communities get together with interested volunteers and work out aging in place in their own neighborhoods. Maybe this could somehow work for Bowie. Please email, call or write if you have ideas.

Thank you for reading. Stay well. See you next week.

The writer, a longtime resident of Bowie, is secretary of the Maryland/D.C. chapter of the National Academy of Elder Law Attorneys and a member of the Elder Law Section of the Maryland State Bar Association. You may email her at seniormoments@byrdandbyrd.com.

© 2013 CapitalGazette.com