THE Cambridge Connection - Episode 39

I wait. I see he calls it. Then he yells at me again, says, ref, you’ve got to call the push. I turn around to him very cordially and say, sir, I don’t know what you’re talking about. We got it.

Right. It’s been called. He says, but you’ve got to call that push. I said, sir, I don’t know what you’re talking about. We called it.

Right. He says it one more time, and then the parent next to him goes, sir, they got the call. Right. And he goes, oh, well, then good call then. So, he’s not even paying attention to what’s going on in the field.

And it’s funny, because this dynamic, coach, ref, parent, it will probably never change. We hope it gets better, but you have to be a little crazy like myself to be involved and want to get yelled at and screamed at all day. I was a coach, youth soccer for years, so I’ve yelled at a few referees. Sure. And Millie, we met through bowling, what, 20 some odd years ago?

Gosh, I don’t know how many years ago. And that even exists. Donations. That’s right. Absolutely.

That’s right. That’s right. Sometimes people have arguments. So, in sports, people are competitive. This is what we deal with.

And I also recruit officials for our organization, so I think I’m going to change the application where the first bullet is, must love to be yelled at all game long. So, just wanted to tell you, we’ve got Father’s Day coming up. I want to wish all the fathers out there a happy Father’s Day. Yes, I did too. So, Gordon, what are your plans?

I’m going to the Met game. Oh. So, I got 10 of my family members going to the Met game in the Bronx in New York. Oh. So, I’ve got two boys.

Happy Father’s Day. Wonderful young men. Yep. So, looking forward to it. I’ll be with my dad, and my sister, and my brother-in-law, and my nieces and nephews.

Introducing reverse mortgages and market conditions

Generations. Yeah, absolutely. Wonderful. All right. So, I think what we’ll do here is we’re going to take a quick break, and we’ll come right back with our special guest, Millie Potter, and we’re going to talk reverse mortgage loan.

Reverse mortgages deal with senior citizens taking equity out of their home and trying to do it strategically and properly. And this is going to be a great conversation for us because it’s a humongously important topic even in good markets. People need to know what they’re doing. So, we’re really, really grateful to have you on the show. Great.

Looking forward to it. Absolutely. This is Gordon Oliver with The Cambridge Connection. We’ll be right back. Spring is here, and it’s a great time to clean up your debts with a debt management plan from Cambridge Credit Counseling.

Reduce your credit card interest rates and lower your monthly payments. Call Cambridge Credit Counseling today. 1-800-CAMBRIDGE. Welcome back, everyone. This is The Cambridge Connection.

I’m your host, Gordon Oliver, here with my co-pilot, Tina Marie, and our special guest, Millie Potter, CMPS CMA, Reverse Mortgage Loan Originator with HomeBridge Financial Services. Welcome to the show, Millie. Thank you, Gordon. This is not your first rodeo. No, it’s not.

We’re glad to have you back. And I think before we get into all of the information regarding reverse mortgage loan origination, can you give our listeners your bio and tell a little bit about your history and how you got to the position you’re at today? Sure. So, I’ve been in the mortgage industry for over 30 years, primarily focused on first-time buyers, those people that struggle the most to buy that first home. And as the markets have changed, a lot of those people, unfortunately, have been priced out of the market right now, so looking for ways to help people that really need the help right now.

And I see that in the people aged 55 and older who may be trying to retire sooner or living on fixed income, and things are getting more expensive. Sure. And a year ago or so, we were at a point where home inventory was high, realtors were bananas, and originators, brokers, et cetera, were bananas. And now with everything happening with inflation, that has shifted and everything seems, I hear realtors all the time say, there’s no inventory, we’re looking for sellers. Exactly.

Reverse mortgage basics and required counseling

There’s no houses on the market to buy, especially in the lower price ranges. The people who own homes right now, a good percentage of people aged 55 and over either have a ton of equity or have no mortgage at all. And with the higher values right now, it’s a great time to consider a reverse as a financial planning tool. Let’s start there, okay? Let’s talk about who qualifies for a reverse mortgage.

So the HECM, the Home Equity Conversion Mortgage offered through FHA, starts at age 62. But there are some lenders, proprietary, that will go as low as 55. There’s no credit score requirement. They can’t have any foreclosures in the last three years. That’s it for the credit side.

And there’s no debt ratio, so they don’t have to qualify to make payments, because there’s no payments. And the only thing we make sure is that the income they have supports the taxes, insurance, and standard household expenses. Right. If we could just back up, could you actually explain exactly what a reverse mortgage is? So a reverse mortgage is taking equity, and it’s the opposite of putting a mortgage on your house where every month the balance goes down.

With a reverse, you’re coming out with little cash or some cash, and each month something is added to that balance. So you may start with a balance of $60,000, 10 years from now with interest charges and so forth, it’ll be higher. But there’s also appreciation built into the loan. So each year, 4% value is added to what your appraised value was when you did the mortgage. Okay, so I know the sponsor of the show, Cambridge Credit Counseling, does reverse mortgage counseling.

And I know in our conversations, you had gone through the process as if you were taking a reverse mortgage out so that as a mortgage loan officer, you knew what that side was. And just for our listeners, if someone takes a reverse mortgage, they have to seek counseling from an independent HUD-certified counseling agency to be able to go through the pros and cons from someone outside the transaction, is that right? That’s correct. So generally, I get a phone call, a referral, whoever, I go over a scenario and say, okay, if your house is worth X, and your age is this, and the interest rate is in this range, your available funds that you could access is X amount. But before I can go any further, before I can give them anything in writing, they need to consult and go through the...

I can actually give them that particular thing, and there’s disclosures all the way through it saying nothing is cast in stone here, it’s all scenario. Once they go through the counseling and they want to proceed, then we solidify the numbers for them. And the counseling is to ensure that the consumer is fully aware of exactly how a reverse mortgage works? That’s correct. They understand the entire thing.

They actually can access, they get a code from my quote that the reverse counselor can access through the HUD website to see exactly where the fees are and so forth. They don’t have to get a copy of the printout, they just need that code. And then they’re talking to the consumer while they’re looking at the same thing. So they understand each stage, this is what the fees are, this is what this means, this is what that means. I think it’s a good process to get a consultant outside of the actual transaction, especially we had Gina Barry from Bacon & Wilson on last week, and one of the key parts of the conversation is this estate planning is not always the easiest conversation.

And you’ve got families that, if a senior citizen has children, there’s people involved in the estate planning, a lot of times the conversation hasn’t even been had. So a protective measure to make sure that someone that’s going to take this vehicle, this engine to put some cash into their portfolio, they need to know what the pros are and what the cons are. Exactly. And that’s what the consultant does for them. And again, until they decide they want to go forward, there’s no responsibility, there’s no expense, there’s nothing.

So all the counseling that they’re required to go through is free counseling? No, there is a fee for the counseling. Each agency has a similar but different fee. But we have to get a certificate from the counseling agency stated they’ve completed it before they can even proceed. It’s a great protective measure.

Just like bankruptcy, before you file, you have to go through counseling and get certified because the goal is, in bankruptcy, to prevent you from going down that road again. Education. Education, right. So what got you into the situation? How do we prevent it from happening again?

And then post-discharge, they have to go through post-counseling to make sure now you’re past this, now what’s the road ahead? How do you plan? How do you budget? How do you do what you need to do? Right.

Estate planning and family considerations

And Cambridge Credit also supplies bankruptcy counseling as well. Absolutely. So I know we’re going to get into some reverse mortgage informational and even a comparison of a traditional mortgage versus a HECM reverse mortgage. In the estate planning side of things, I’m sure you come up with these situations that there’s a piece of that that has to be figured out for either the borrower or the family, et cetera. Correct.

So generally, when it comes to an estate, one of their biggest assets is usually their house. And so they like to include the children in the conversation with a consultation so that the children understand the parameters as well as the parents. And they’re aware of what they need to do if something happens where the parent can no longer live in the house as their primary residence. So you have to be sure that the children are on board and they notify the lender so that the house is taken care of the way it needs to be. I’m sure, just like Gina, with home family dynamics, you have probably seen some situations where everyone’s not on the same page.

Of course. But the way I look at it is the children are involved. And if they don’t have the will or the resources to support their loved one while they still live in that house, then this is the option they can use to get around having to supply money or other resources to that person living in that house. And I would think, if it’s estate planning, everyone should be involved in the counseling, in the transaction, just so they know what are we doing here, what’s going on. And I’m also sure that that could also get ugly.

We’ve had these conversations before as far as when a parent or a loved one is deceased and there’s no will involved or the estate isn’t appointed. Just the arguments and it can really tear a family apart, which is unfortunate. And that’s why having this conversation before a tragedy happens, getting everybody on the same page and understanding it, even if they don’t necessarily agree with all of it, knowing what to do and what can happen. I think, again, for this show, and we’re going to take a quick break, but I think for this show I want to try to find some people as guests that have been on the wrong side of this, not had the financial plan to really talk about the dark side. Because again, this is one of the things that it comes up fast.

Life goes quickly and you keep thinking about it, but maybe you don’t act. And again, the conversation isn’t always the easiest, right? Because you’re talking about what are we going to do with assets when you pass on, right? That’s the conversation. And it’s not the greatest conversation to have, but it’s even worse.

Like I told my mom and dad, I don’t care what you do, you can donate all of our assets if you want to. That’s what you do. Don’t give it to the state because we made mistakes not planning properly. Correct. And, you know, the sad part is, you know, some people believe, well, once we put it in reverse, we’re never going to get anything from it.

But that’s not true. If they’re not using it as income for the rest of their life, there will likely be equity that can be inherited. And some parents, you know, the elderly say, well, I don’t want, I want to leave the house to my kids. Well, what does that mean? Yeah.

Wouldn’t it be better that you weren’t a burden on them now? Right. And these are the different, there’s different situations as to how and why. So I think what we’ll do is we’re going to take a quick break. And then when we come back, we’ll talk traditional mortgages versus the heck of reverse mortgages.

Station break and podcast reminder

This is Gordon Oliver with The Cambridge Connection. We’ll be right back. Well, Tina Marie, here we are already in our mid-30s. Have you checked your license lately? You’re a far cry from being in your mid-30s.

No, no, not me. Welcome to our show, The Cambridge Connection. We’re already more than halfway through our first year of great guests and need-to-know topics. Oh, I thought you were talking about your age. Well, that would take a lot longer than we have in this message.

But what only takes a moment to share is that if you miss any of our shows on Saturdays on WHMP, don’t worry. com, click on podcasts, and all of our shows are listed there. Listeners can find us on all the podcast sites where they listen to their favorite podcast. Well, when I get home, I’m going to listen to my favorite episode. And what’s that?

You know, the one with me in it. Ha! Welcome back, everyone. This is The Cambridge Connection. I’m your host, Gordon Oliver, here with my co-pilot, Tina Marie, and Millie Potter, reverse mortgage loan originator from Homebridge Financial Services.

Comparing traditional and reverse mortgages

Now, just a quick note, the Homebridge vision is to make the dream of home ownership a reality for every customer every day. And, again, we’re in a potential recession. Inflation, everything, the cost of goods, energy, gas has gone up. This show, we’ve invited guests on to try to deal with this and talk to this. And even in regular times, the basic principle is having a budget, knowing what income and expenses are.

And Millie, you’ve been in the mortgage business for over 30 years. And you’ve seen, I’m sure, over time, the ups, downs, lefts, rights of where this can all go. But the foundation and principles are still the same. You have money coming in. You have money coming out.

And when it comes to elderly people, the opportunity to create more income comes to a halt a lot of times, either by choice or by circumstance, health, job loss, whatever that is. So this information on when someone 55 or older, depending on the situation, is going to be able to take money out of their home, them knowing this information is critical. For the name on title deed, can you explain that? Yes. So with a traditional mortgage, if you’re buying a home, you’re buying it in your own name.

You’re on the title deed. Title, you’re on the deed. It’s the same with a home equity conversion mortgage. You still own the house. And even if your name is not on the deed because you have a life estate or the house was put into the trust, that can still be accomplished using this program.

So either one of those, the same thing can happen. Correct. How about the lien home collateral? So there’s a lien on the home, whether it’s traditional or a home equity conversion mortgage. There’s a lien that has to be satisfied when the house is sold.

With that lien, that’s the same rules either way, whether it’s a HECM or a traditional? The difference is with a traditional mortgage, the balance is decreasing. With a home equity conversion mortgage, the balance is increasing. Isn’t that where people kind of get stuck? Because it feels like the stigma is you want to have equity in your home, right?

However, if you’re taking the reverse mortgage to live more comfortably, to maybe make improvements to age in place, or you’re just doing it so you have an extra couple hundred dollars a month to pay taxes and insurance, whatever the purpose, you’re getting money from it. So therefore it does have to be paid back at some point. Yeah. So in counseling people, one of the times where you have to kind of start looking at a bankruptcy situation is when the only real solution, if you can’t back up and you can’t cut expenses and you’re stuck paying what you pay, if you’re upside down, meaning you have more going out than you have coming in and you can’t fix it, then really the route is to now just try to go get some help from an attorney to talk about bankruptcy. Obviously, we hope people don’t do that.

And the core principle, whether you’re 18 in your first job, 28, 38, 48, 78, income and expenses, got to be tracking it, got to look at it. And this is why this infusion through this product is to your point, if there’s not enough money then either the family has to help out or one way or another money has to get infused to help that person live in their lifestyle. That’s correct. So if you’ve acquired monthly mortgage payments in a traditional, you have to make them. How does it work with a HECM?

So with a HECM, you do not have to make the principal and interest payments, but you can if you want to. There’s an option. You can pay it back. So maybe it’s a situation where you need cash now for something, a new roof, whatever. You don’t qualify for a regular mortgage.

You don’t qualify for a home equity loan. Use the reverse for that vehicle to get you to that point. And then you’ll, you have enough income to make monthly payments. You just don’t have money to shell out for a new roof. All right, Millie, what about the interest paid on, what’s the difference between the two?

So interest paid on a regular mortgage is, you know, obviously it’s the interest rate based on the principal and so forth. And in some cases, if you’re in a bracket, an income bracket where you can write off some of those expenses, it decreases your tax burden. With a reverse mortgage, the interest paid is at the end because you’re not paying anything. So it’s a lump sum basically because it’s not a monthly charge to you. It appears on your amortization, how it’s going to progress.

But you’re not paying it. So you couldn’t claim it as a tax deduction if you fit in that scenario. As you would a regular mortgage. Correct. All right.

So I want to summarize a couple. So home value appreciates on both. Is that correct? Well, home value on average appreciates in real estate 3% per year. Some years, like this past year, it’s a little crazier than that, a lot crazier.

And in other years, it decreases, but on average, over a 10-year period, it’s almost always between 3% and 4%. And built into the amortization schedule for a reverse is a 4% increase. So you start with a balance of 100 and there’s interest added. There’s also appreciation added. So the line of credit is greater as it grows if you’re not taking regular disbursement.

And equity in the home is available to use now for both traditional and HECM if it’s available. A couple that I see that stand out, a huge one right here, is heirs responsible for the shortfall. On a traditional, they would be. And on a reverse, they’re not. So part of the HECM program is an insurance fund.

They’re paying mortgage insurance on a monthly basis factored into what is growing in that balance. If the house, say somebody bought this year using a reverse, 10 years from now, maybe the value is $20,000 less. They’re not responsible. The insurance fund pays the shortfall. Okay.

Foreclosure risk and home maintenance rules

And so I want to just talk about the pandemic a little bit. So risk of foreclosure through the pandemic, there were some protection measures for people to be not evicted or foreclosed on. Obviously that’s since long gone and passed. But just in general foreclosure, in a traditional, you are at risk if you don’t make your payments. And with a HECM, it shows that you’re not necessarily at risk.

You’re not at risk because you don’t have to make payments. As long as you are paying your taxes, your real estate taxes, your homeowner’s insurance, and maintaining the property so that it isn’t losing value. Maintaining the property. Right. So your normal upkeep.

Yep. You know, if the roof needs replacing, you’re going to replace it or repair it. You know, things like that. Your normal upkeep that you would do as long as you’re living there. And is the mortgage company, do they pay attention to that stuff?

Do they actually, will they do a site visit? So insurance companies make site visits all the time. And insurance companies report back to us for deficiencies that are obvious. Got it. So it’s not, you have to still take care of the home, make sure that it’s viable in every way, shape and form.

So that when it comes time to be sold, whether by the heirs or the bank, it’s in standard condition. And I would assume though, with those updates, you’re adding even, obviously adding even more equity to the home. So it’s going to count. To a point, I always explain to my people trying to refinance, well, I put a new roof on and all I say is, but every other house has a roof too. Right.

Well, not all. You best have one. Right. Isn’t that the saying is, put a roof over your head, right? Right.

All right. And lastly, I think we talked about the age requirement, but for a traditional, it’s 18 and over. And for a HECM, it is 62 plus. In some cases it could be 55. Correct.

So the program sponsored by FHA is 62 plus and there are some proprietary lenders. We have a few of them on board that will go as low as age 55. Okay. And with that said, and we’re not giving legal advice on the show, what about if it’s a home in trust? So a trust, same thing.

There is different paperwork, a little bit different that has to be signed and accommodated. We need a copy of the trust to make sure that it’s the right type of trust. But if you’ve got a 62 year old, a 48 year old and a 25 year old as all members of the trust, it’s still a possibility to do that? So we always go by the age of the youngest person noted in the document and it’s their life expectancy that determines how much equity is actually available. Got it.

Okay. But it’s still doable. It’s doable. Okay. So as long as one of the borrowers meets the age requirement, they don’t all have to.

Closing advice and contact information

That’s huge to know. So Millie, first things first, we’d love to have you back again to continue this conversation because I feel like economically more and more people are going to need to hear this and just get a kind of a information based understanding before they even stick their toe in the water and how this works. They’ve got to get their head around the idea and mull it over, which is why when I get a referral, it could be months before they come back because they go through counseling. They think about it. They talk to family.

They think about it. Sure. I’m actually wondering how many people are even aware that something like this is an option. I mean, there are ads on TV all the time. I’m local.

I live in Western Mass. I’ve lived here all of my life. The licenses in the other states are mainly because of location. I was, you know, I’m not that far away. Understood.

Before we let you go, a couple of things. One solid piece of advice that you could give to people listening. Gather knowledge, do the counseling, understand the program, and then give me a call. Okay. Speaking of that, where can people find you?

So Millie Potter, NMLS number 29841. My phone number is 413-374-8255. com. And for all of our listeners, obviously, that are listening right now, or will listen to the podcast, this is a national show, so if you are looking for information, you can still contact Millie, and she can help you, and then guide you to the proper source that will help you with the transaction that you’re looking for. We’re going to take a quick break.

This is Gordon Oliver with The Cambridge Connection. We’ll be right back. This is Millie Potter, NMLS 29841, your local reverse mortgage specialist with Homebridge Financial Services. If you are 55 or older and are looking to pay off debt, rebalance your budget, age in place, or purchase a home to better suit your needs, a reverse mortgage may be your solution. Contact me today at 413-374-8124 to discuss your options.

Closing remarks and Father’s Day sign off

That’s Millie at 413-374-8124. Welcome back, everyone. This is The Cambridge Connection. I’m your host, Gordon Oliver, here with my co-pilot, Tina Marie, and Millie Potter from Homebridge Mortgage. Millie, again, love to have you back on the show.

This is such important information. There are many people that are facing financial challenges right now. Thanks for joining us. Is there anything else that you’d like to add before we close the show down? Sure, Gordon.

Sometimes, maybe staying in the home that they’re in isn’t the wisest thing for them. It’s a big house, a lot of maintenance. Maybe it makes more sense to sell it and buy something else. They can use a reverse mortgage to purchase. So if they’re selling the big house and it’s worth $500 and they want to buy something in the $300 to $350 range, and they don’t want to use up all of the proceeds, they can use a reverse, put on a reverse of $100,000, $150,000, and preserve some of that cash for income going forward or investment.

So everyone listening here, that’s 30-plus years of experience in the mortgage industry and obviously a lot of information to know. So please reach out to Millie. This last piece that you added is so important because I know you know this, Tina, counseling people, and in my history of counseling people, one of the difficult discussions is telling people that they have to back up. Some people don’t want to let go of the house if it’s an heirloom. It’s been in the family for years and years and years.

But really, when it comes down to it, you only have some choices and sometimes you have to move. It’s a realistic. Yeah. You’ve got to move backwards and cut down expenses. And that’s not an easy conversation.

Right. Again, in all of this planning, your financial future, financial wisdom, financial empowerment, it’s important to look at these things and have these conversations and talk to knowledgeable people like Millie when you’re trying to make these decisions. And I think the word you used, the financial future, everybody’s comfortable or wants to be comfortable where they are, but look at yourself five, 10 years from now. How comfortable are you going to be? Life is just simply better without debt.

So as you know, I do a quote every week, and obviously this show has been dedicated about taking care of people that are 55 in some cases and mostly 62 and over. We must not just be recipients, but givers. We must not just be keepers, but donors. Giving brings relief and sharing enlightens the heart. Caring joins and showing love is life.

It is never enough to acquire all acquisition. It is never enough to have all of our ambitions. We must endeavor to give for giving out of a true heart is true love and true love is life. Ernest Yeboah. Gordon, that was more like a poem.

Well, I liked it. You know, I have always had in my heart to take care of our elderly people. So maybe this is a conversation you might need to have on Father’s Day. I don’t know. People are getting together, enjoying themselves.

It might not be something that they want to necessarily discuss, but at the same time, maybe it’s just an opportunity to get together and have the whole family together and kind of bring it up. Who knows? Again, another 28 minutes have gone by. I’d like to give a huge thank you to our producers, Leah and Lisa. We always have great experts like Millie on the horizon.

m. com, click on podcasts and you can listen to any of our past episodes or you can find our show where you listen to your favorite podcasts. Once again, be part of the conversation. Happy Father’s Day, everyone out there. Happy Father’s Day, everyone.

org or feel free to call 1-800-CAMBRIDGE.