February 28, 2025 • 36 mins
🚨 The Truth About Reverse Mortgages – What They Don't Tell You! 🏡💰
Summary:
In this episode of The Generations of Wealth Show, host Derek Dombeck sits down with Laura Phillips, a 30-year mortgage industry veteran specializing in reverse mortgages. They dive deep into the myths, benefits, and potential pitfalls of reverse mortgages, breaking down how they work, who they’re for, and why they may (or may not) be a good financial tool. Whether you're a homeowner, real estate investor, or planning for retirement, this is a must-watch conversation that could change how you view home equity forever!
Key Takeaways:
✅ What is a Reverse Mortgage? (And how it’s NOT what you think!)
✅ Myth-Busting: Does the bank take your home?
✅ Who Should Consider a Reverse Mortgage? (And who should avoid it?)
✅ How to Use Reverse Mortgages to Build Wealth & Fund Retirement
✅ The Role of Reverse Mortgages in Estate Planning
✅ Common Mistakes & How to Avoid Foreclosure Risks
Time Stamps:
⏳ 00:00 – Welcome & Introduction
⏳ 02:15 – Who is Laura Phillips?
⏳ 05:30 – What Exactly is a Reverse Mortgage?
⏳ 08:45 – Biggest Myths About Reverse Mortgages
⏳ 13:20 – How to Qualify & Who Can Benefit
⏳ 18:50 – Real-Life Examples of Reverse Mortgages in Action
⏳ 25:10 – What Happens to Your Home & Heirs After You Pass Away?
⏳ 30:45 – How to Avoid Reverse Mortgage Pitfalls
⏳ 38:00 – Using Reverse Mortgages for Retirement & Wealth Strategy
Why Should You Listen?
🔹 Reverse mortgages are misunderstood! Learn the facts and separate truth from fiction.
🔹 Find out if this financial tool is right for you or your loved ones.
🔹 Discover how smart investors and retirees use reverse mortgages to their advantage.
🔹 Get expert insights from a 30-year industry veteran!
🔹 Avoid common mistakes that could cost you thousands!
#ReverseMortgage #ReverseMortgage #W
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
any other loan out there in the world that willallow you to decide, today I'm going to give
you some money, Mr. Bank, Mrs. Bank, but tomorrowI'm going to keep it in my account. So that's
exactly what a reverse mortgage allows you todo.
(00:26):
Welcome to the Generations of Wealth Show. I'mDerek Dombk, your host. And today we're talking
about something that I don't think ever getstalked about. I don't really ever hear about
it on investor type podcasts, but it's reversemortgages and how do they actually work? Are
they good? Are they bad? We're going to findout before that. I really want to appreciate
all of you that are regular followers of theshow. Anybody that's just finding us. Thanks
(00:51):
for being here and anything you can do to helpus grow. We appreciate. with all the likes,
the shares, all of that stuff, and anythingwe can do for you. Don't hesitate to reach
out to theg and I'll help you any way I can.So with that said, let's get on with the show.
And here is Laura Phillips. And here we arewith no further ado, Laura Phillips. Thank
(01:15):
you, Laura, for spending some time with us atthe Generations of Wealth Show. Thank you so
much for having me on. I'm really looking forwardto it. Well, I would love for you to just tell
the audience a little bit about yourself. Andthen we're going to dive into a topic that
is very seldom talked about, reverse mortgages,but first, yeah, what's, what's your background?
(01:36):
Well, I have been in the mortgage business fora long time. Um, like 30, I stopped counting.
Let's stop at 30, 30 years. So I actually startedout. Wait, you're only 29 years old. How is
it possible? You've been in the mortgage industryfor 30 years. You know, um, Good jeans. Okay,
(01:58):
keep going. My smart ass will come out occasionally.I love it. Thank you. Thank you. I actually
moved from Texas to Colorado. And Texas hadwas sort of boomtown back in 82. But we hit
Colorado and there was no jobs at all. Not evenone page worth of jobs. And I thought, what
am I going to do with myself? We newly married?Are we going to go? So I got involved with
(02:20):
real estate and realized that I didn't understandhow to convince somebody to buy a house, but
they just need to paint the kitchen yellow,that wasn't gonna work. But I figured out the
mortgage side, the lending side, the numbers,and they just clicked with me. So I went down
that path of real estate and just dove intomortgages, anything about mortgages. I have
(02:41):
worked at almost every aspect of doing mortgages.I've been a processor, a closer, a level one.
underwriter, which kind of allowed me to actuallyapprove the file if the good credit and things
of that sort. Um, backend was selling the loansto secondary market. And then I got involved
with reverse mortgages about six years ago.And I, they, I love them. I don't do anything
(03:04):
else unless my daughter comes and says, pleasehelp my friend buy a house. Yeah. Really a
reverse mortgage lady. Well, we'll have to startat the beginning because many people don't
even know how a reverse mortgage works. Andso, uh, I think there's a lot of misinformation
out there that I would love to have you getrid of because there is definitely a place
(03:27):
for them. So maybe start at the baby steps.What is a reverse mortgage? How does it work?
And we'll keep going from there. Absolutely.So reverse mortgage is designed, came back
out, actually was designed in the early Reaganyears. And the very first reverse mortgage
was for a woman. whose husband died and thelocal bank called Nutter, I don't remember
(03:53):
the initials before it, anyway decided thatthey wanted to help her out. She had young
kids, they actually figured out how to do areverse mortgage on that home. That allowed
her to tap into the equity that she had in thehome, be able to live in it without paying
any mortgage payments and raise her childrenwhile they were young and she could work on
raising those children. From there, PresidentReagan, set into play putting reverse mortgages
(04:19):
into our FHA programs and HUD programs and they'vebeen out ever since then so I say that the
new reverse mortgage that we're talking aboutnow is not your grandmother's reverse so those
mortgages in the early days didn't do a theydidn't think a lot about the ramifications
of some of their rules um have to be 62 yearsold to be able to get a reverse mortgage so
(04:40):
that's not really a problem that's still outthere are some exceptions to that with portfolio
loans where you can actually get a reverse mortgageif you're 50. What else can I tell you about
them? Let's talk about some of the myths becauseI think if we eliminate the myths then the
understanding of what a reverse mortgage isbetter. So probably one of the worst things
(05:00):
that people think is the reverse mortgage isthe banks going to take them your home away
from you. You're not going to be entitled. Theyown your loan. So reverse mortgage is a loan.
It's just like any other loan you've ever doneon your home. The only difference is that you're
not making a mortgage payment on it if you don'twant to. So I don't know any other loan out
there in the world that will allow you to decide,today I'm gonna give you some money, Mr. Bank,
(05:23):
Mrs. Bank, but tomorrow I'm gonna keep it inmy account. So that's exactly what a reverse
mortgage allows you to do. You're allowed tostay entitled the entire time you own your
home untitled, just like you did all along.So that's probably one of the biggest myths
that are out there that I'd love people to realizedoesn't exist. Well, after that, how does it
(05:43):
work? Three years with a reverse mortgage. Oneof them is age, one of them is the value of
your home, and the last one is the interestrate. So your age is, the younger you are,
basically the less money you're allowed to have.The value of your home is the value of your
home less any mortgages against it. Now anothermethod that's out there is that you have to
(06:07):
have your home be free and clear. but that'snot the case. You can actually use a reverse
mortgage to pay off your current mortgage andthus freeing up funds for your own household
needs. The last one of course is interest ratesand that's a moving target any day. So interest
rates are involved. So all three of those cometogether to be able to figure out how much
(06:28):
equity you can actually tap on your home touse for your needs. So. Let's put a hypothetical
out there. You've got a half million dollarhouse and it's free and clear. You're 65 years
old life expectancy. What is it? 87, 85 to 87for women and like 33 for men, something like
(06:55):
that. Um, see you missed that joke. Um, do youknow why women live longer than men? Theoretically,
we have less stress, but I'm not sure that'strue. The women drive us nuts. We're just trying.
Aha, I see. Anyways, nevermind. I'm not editingthat out either. Okay. No, so what is the life
(07:18):
expectancy? If you're 65 and you've got a halfmillion dollar house, I imagine there's some
actuary tables out there that tell them exactlybased off of, do they check health records
as well or not? No health records. There areactuated tables. If you are 65 years old, that
loan's going to go out 30 years. So you're goingto see those numbers go out until your 90s
(07:40):
easily. My oldest person I've done a reversemortgage for was 92. And he only went out until
he hit 100. So actuary tables is a good wayto think about how much you have. So I'd say
at 65. you would be able to, without me openingup the book and looking at the logarithm table,
you'd be able to tap about 45% of the equityin your home. The reason for that is, is they
(08:05):
want the house to remain right side up. So again,because it's a reverse mortgage, the house
is gonna be paying your mortgage payment foryou. So that balance is going up. We call it
a negative amortization loan that can have anegative feeling when you hear it. But in this
particular case, it's good, because I thinkif you're over 65 years old, you're living
(08:28):
on a fixed income, then paying that mortgageevery year is taking away from your money to
help fund yourself and your lifestyle and yourhealth as you get older. So at 65, about a
45% value of being able to use it, the restof the house is paying for it. And the idea
HUD wanted to decide, or actually did decidein previous, President Trump's administration,
(08:56):
that they lowered how much you could have sothat the houses didn't go upside down, so that
the house wasn't, you know, they don't wantthe home. HUD doesn't want the house. They
would rather have value still at the home, maybenot as great as if it was totally free and
clear when you were 90 years old, but that theheirs would still have some funds available.
So that's interesting because a lot of peoplehave that myth that if you pass away, the bank
(09:21):
automatically gets the house. but it still ispart of your estate. It is. And so explain
that because I know people ask me that questionand they just don't know the answer. It is,
it's still part of your estate. You can closein a trust, so it could be in a trust or you
can close it in your name. You would set itup in your will or your plans for the future
(09:48):
for your heirs. Now, if the house is ultimatelyupside down, And if you lived to be in the
90s and you started at 65, I'm going to tellyou, you're probably going to see that be upside
down. I'm not going to lie. It's that's probablya reality. But at that point, the mortgage
insurance that you pay on that loan upfrontwill protect you and your heirs from anybody
(10:10):
ever coming and knocking on the door and saying,you owe us money on mom and dad's house because
that mortgage insurance clears that. That'sprobably an additional myth that we can talk
about. is that the mortgage insurance doesn'tbenefit you. It always just benefited the lender.
And that was true if you bought a home underthe original FHA programs where you get 3%
(10:31):
down. And that's still out there. Those programsare still out there. Mortgage insurance is
the same, but now it protects the owner of thehome, the borrower and their heirs. So that
nobody is gonna come and like I said, knockon the door and say that it's owed. So we call
it a non-recourse loan, which is great. Absolutely.So if you had a 30 year loan and the borrower
(10:57):
passed away at year 20, the heirs can stillcontinue carrying that loan for 10 more years?
Not carry it, but they would have to sell it.They have about three months to six months
to sell the house. And they're going to reachout with the death certificates and let the,
and this would be true on either side of a mortgage.then you would let the servicer know that the
(11:20):
borrowers had passed. Once they do that, theygo, okay, do you want to sell it? Well, if
there's a value in it, then the answer to theerror should be, yes, I do want to sell it.
I'm going to recoup what funds are availableleft to us. And that's what mom and dad wanted
for us in the home. So they have the first sixmonths, if it doesn't sell in the first six
months, you reach back out to your lender oractually to the servicer and they will say,
(11:42):
what are you doing? Is the house prized properly?Here in Colorado, we may be in blizzard season
and nobody's looking at homes. So, you know,there's a seasonal issue So they just look
at it and they'll give you an extension basedon reading that criteria But you will have
some time to sell it and recoup the funds thatare available So that's good when you sell
it. It's going to pay off the reverse mortgageWhich would be the same in any other cell of
(12:09):
a home you're paying off the existing loan onthe home What's left is the funds that come
to the heirs? Right. And as long as they werestructured properly, the heirs should have
got a step up in tax basis. So they hopefullyare not going to pay any capital gains on the
remaining balance of the equity after they payoff the reverse mortgage. Or, or in the event
(12:32):
they just want to pay off the reverse mortgageand not sell a home, they just have to bring
money from a different source or, or essentiallyrefinance the house. Correct, they could refinance
it. There is a clause within the HUD program,which is an FHA program, this loan is an FHA
program, that would allow family members topurchase at 95%. Now, some of that has to do
(12:55):
with structuring how you set up the title atthe beginning with the owner, the original
owner of the home, but they could purchase itat 95% of the loan. I've only seen that happen
once. Mom got it and had it for a while. Herdisabled son was living with her. And when
she passed away, the loan was $200,000. Well,he was able to buy that house with the help
(13:21):
of his siblings doing cosigning for considerablyless than the 200,000 and continue to live
there. That's great. Yeah. So as property valueskeep going up, prices keep going up, I'm in
Midwest, so it doesn't affect us as much, butpeople on the West Coast, East Coast, Colorado
(13:41):
as well, there's jumbo loans out there for large,you know, expensive homes. Is there jumbo reverse
loans as well? There absolutely are, we callit proprietary loans. And the market's tight
right now for that particular loan. And oncewe had COVID in the twenties, it came that
(14:03):
most of the lenders shut down that particularloan. One of the ways they shut it down was
that they made that interest rate really high.So my jumbo rates right now are not super attractive
compared to what you can get with a traditionalHUD program. Right now that limit, and boy,
you're gonna test my memory, is 1.12,
(14:24):
$1,125,000. And that's not a strong quote becauseI always have to look it up because it changes
from year to year, but that's across the nationas to what the maximum amount you can get on
a HUD product. So anything over that would bea jumbo. So I have jumbos that go up as high
as $4 million in loans. So that works for peoplethat have houses that are several hundred million
(14:50):
dollars. Well, and I would say to compare this,if somebody had a standard mortgage that they
had to make payments on, and I don't know howthese numbers work out, but let's go back to
that half million dollar property. And theycould do at the 65 age range, they could use
(15:11):
45% of their equity. They could go and potentiallyleverage that house at 80% of the value, but
then have payments. Correct. So if you wereto take a calculator and figure it out, Laura,
If you had payments on a $400,000 loan againstthe, of a $500,000 property at today's current
(15:37):
rates is we'll just say 6.75 ish versus borrowing45% of that, which would be now I'm trying
to do math in my head. I'm trying to figureout how many years it would take before they
kind of equaled out. So. Oh, you know, I haven'tactually had anybody ask me that. That's a
(16:01):
good thing to think about. You know, if youset aside enough money to cover the payments,
you borrowed 400,000. How many months or yearswould you make that payment? Now this again
is assuming that a lender would give you a loanat age 65, probably retired, so they're going
(16:21):
to look at your income and your DPI and everythingelse. But yeah, I'd be curious to see where
those two cross paths. If you could afford thepayments, because remember we're going to do
PTI, principal taxes and interest, plus yourdebt, so any other debt you have is going to
qualify you for getting that forward loan. That'swhat we would call it. I believe that's what
(16:44):
you're talking about is a forward loan. It'sgoing to a local bank or lender, going to get
that. Those interest rates are on the high sideof the sixes right now. We have not seen them
come down. So qualifying for that could be tough,to be honest with you. is going to come out
every month. So I'm going to guess that payment'sprobably going to be without pulling out calculators
(17:08):
and looking up an interest rate for somebody.I would say we're probably, with taxes and
insurance, probably $3,000 a month. That's probablynot a bad guess. Versus if you did a reverse
mortgage, you would not take out $450,000 onyour half a million dollar house. But you might
be able to get out, where is it? 65%. 300,000now we do math in our head. So I'm gonna say
(17:32):
they're gonna get out without doing any mathwith a calculator, $250,000 in cash. Who knows
if that's an accurate number, but that's a numberwe'll work with. And that's actually cash that
can come to them. They, there is a limit onhow much they get the first year. They can
have 65% of the $250,000 if they refinanced.The reason HUD came in and said that was they
(17:56):
did some studies on how come people were goinginto foreclosure. And we'll address that in
just a minute. And they found out that if wegave everybody that $250,000 in cash and one
lump sum, not necessarily were there great decisionsbeing made. It was like they won the lottery.
Kind of, exactly. And they forgot that theyhad to make their property taxes. Taxes and
(18:16):
insurance are on them, no longer an escrow.So that leads us to how do you get into a foreclosure?
I said I wanted to address that. And I'm kindof popcorning around, but let's address that
issue because it's definitely out there. Theonly way you can go into a foreclosure on a
reverse mortgage is there are two ways. Well,I guess there are ultimately are three ways.
One is you don't pay your property taxes. Youdon't pay your property taxes, then that becomes
(18:41):
a tax lien and lenders hate tax liens. Doesit matter if you're forward or reverse? They
don't like them. And that's exactly why youpay escrows on a forward loan. Now, can you
get escrows on a reverse mortgage? Absolutely.If you don't want to worry about it and think
about it and you just want to go on with yourlife, you can actually get an escrow that will
take care of your taxes and insurance for youfor the rest of your life on a reverse loan.
(19:03):
We call it a LISA. We can't use the same namefor some silly reason. So it's called a LISA,
which is Loan Escrow Set-Aside, LISA. Now theother way you can end up in a foreclosure or
a reverse mortgage is if you don't live in thehome. So you end up in a nursing home and you've
had some situation that is gonna force you tolive there now permanently. First mortgage
(19:27):
has to be your primary home. It has to be aplace where you live. So now that could, if
you don't tell them your service or about that,then that's gonna force a foreclosure. And
the last one is if you don't maintain it. Sothere are health and safety issues. on all
loans with the government. So if you, gosh,I don't know, fell in, you didn't take care
(19:49):
of it, something of those sorts, then they couldcome in and look at a forced closure. Well,
and most people don't realize, because we allknow most people don't read their documents.
Right. Yeah, when you are not taking care ofyour property, regardless if it's a forward
loan or a reverse mortgage, That's the collateralto the, to the loan. And you are obligated
(20:13):
to take care of that property in at least asgood a condition as it was when the loan was
issued. And as a former hard money lender for10 years, we had people that, you know, in
our space, our most dangerous time when we issuea loan was, was demo day, right? They buy the
house and now they're flipping the house. They'regoing to come in and tear out walls. There's
(20:36):
a certain period of time where they've devaluedthat property, um, not below what they borrowed,
but you know, it is dangerous. So, uh, yeah,you definitely, well, and I've seen just as
a house flipper and, you know, buying thousandsof properties over the years, I've bought foreclosures,
(20:56):
I've bought, I've bought the foreclosures thatwere reverse mortgages. Um, and, and I always
shift my head is when people go in and theydestroy the house. because they are, that's
actually in most areas, it can be a federalcrime, but it's certainly a state crime because
(21:17):
you are ripping out fixtures, you're doing damageto the collateral for that loan and they can
absolutely go after you. It is sad, particularlywhen we had the collapse of the mortgages industry,
the pictures that were out there on the internet.of what happened was sad to see. People were
angry. It doesn't justify it, it doesn't makeit right at all. And I don't know how you can
(21:43):
prevent that ultimately. I don't, there's notlike mortgage police that are going to come
and check your house every year to make surethat it looks like a health and safety issues
are okay. But they do check the servicer forthe reverse mortgage does check every year
and sends you a questionnaire, which they'rehoping you will answer and you are legally
bound to answer correctly. Are you still consideringthis your primary home? Now, you could go to
(22:08):
Africa for six months, and it's still your primaryhome. It's where you live. You could go and
have, we call them snowbirds in Arizona. Youcould go to Arizona. I don't think, probably
don't wanna hear that. We call them that, butyou could go live there for- We are snowbirds
in Wisconsin when we go south. So it's a commonterm, not a big deal. So you can go and do
(22:28):
that. And again, the reverse mortgage lenderis not gonna be unhappy with you. They would
like to know that you are, again, a courtesycall. Communication is huge. It's huge in all
aspects of our life, but it's huge when you'retalking with your lenders, that they know what's
going on. You can just say, hey, I'm here, mymail's being forwarded, or here is the forwarding
(22:50):
address, one of the two, and we'll be back onthis date, you know? And that's really all
they want to hear. Some people have asked mewhat happens with the fires. This is an interesting
situation since we're witnessing fires happeningin California right now. I can guarantee you
California is where the most progressive reversemortgage thoughts are happening. That's where
(23:12):
the jumbos started, where the proprietary loanswere tested. Reaching out to your lender and
letting them know that your home has been damagedbecause of a hurricane, because of a flood,
because of a tornado, because of a fire, becauseof whatever natural disaster happened. to be
the best thing that.
(23:37):
Yeah. And I think so many people are afraidto talk to their lender. And again, as a former
lender, there's nothing worse than somebodyhiding from reality. And we were much more
inclined to work with somebody that was beinghonest and forthright than somebody was being
(23:57):
underhanded and hiding from us. And the otherthing is you mentioned snowbirds. So many people
don't realize that if you read your insurancepolicies on your property, if it's vacant for
more than 30 days, oftentimes they don't haveto cover it. So if you do go somewhere for
(24:17):
the winter, you should be contacting your insurancecompany as well. Now, are they going to increase
your rates? Yeah, they are because you havea vacant property. But when you live in the,
you know, our areas where things can freeze,It stands the reason the insurance rate should
be higher because they're taking more risk ifit's, if there's not somebody there every day
(24:39):
to make sure. Um, which actually that leadsme to another question. Is there any way a
reverse mortgage can be used to purchase a homeor you have to have owned this home for a period
of time? You can, you can definitely use itto put it. Remember it has to be a primary
home. So I had a good friend, true story. Shejust, she was in Rotary with me. She just left
(25:02):
to go move into Arizona to be closer to herbrother. They were 80, she's 82. So she sold
her house here in Colorado and her net proceedswere about a half a million dollars, 500,000
after she paid off everything, which she hada reverse mortgage on her home here in Colorado.
So she was familiar with the product and wetalked before she left about her purchasing
(25:23):
in Arizona and doing the exact same thing. Soshe went to. live in her brother's house and
they came very quickly a reality that she neededto find her own home pretty quickly. So she
did. And it was about $325,000. So we used thisreverse to buy that home. At her age of 82,
she came to the closing table with about $275,000,not $325,000. So what was left of her $500,000
(25:51):
that she sold is now in her pocket to fund somemore of her retirement. So you bet you can
use it. Absolutely. You do come to the tablewith a lot of money, but you are replacing
one primary home for a new primary home. Andthat's how it works. It's a great product.
Yeah. In fact, currently, I personally pay amortgage on our house right now. People ask
(26:15):
me why I don't have a reverse. At some point,living in Colorado in a two-story house and
very few ranches were built in Colorado. wewill have to move to a ranch home. The reality
of stairs is gonna, it's gonna happen to usat some point. We're saving that reverse mortgage
for that purchase because it makes so much sense.Absolutely, absolutely. So I'm sure you get
(26:39):
asked this all the time. And as do I, what'syour crystal ball tell you about rates throughout
2024? And I will preface it with saying, I don'texpect rates to come down. at all. But what
do you think? Well, I would have to say on forwardsrates have not come down, even though the feds
(27:04):
have lowered prime several times, actually thewhole point. I have seen reverse mortgages
mirror that prime loss on their line of creditproducts. So they have three loan types out
there. One of them is a line of credit whichfollows and mirrors whatever is happening with
prime. There is a fixed rate. And then of course,there's the proprietary. So what I see what
(27:25):
the fixed rate is that interest rate is up thereRight with everybody else trying to buy a house.
So it's in the high sixes. Okay, the Line ofcredit being tied to prime is a margin plus
the index So the index right now with reversemortgages is the constant maturity? Trevor
treasuries the CMT to that we add a margin andRight now is that margin drops? those people's
(27:52):
loans are going to be less. Same if you havea HELOC, a home equity line of credit. So people
ask me, why wouldn't I just do a home equityline of credit on my house and put a second
on instead of doing a reverse mortgage at theage of 62 or older? Well, the reason that you
wouldn't want to do that is, well, it's notthat you wouldn't want to do it, but maybe
(28:15):
you would consider redoing it if you weren'table to make those payments. And or if you
didn't want to make those payments so the reversemortgage would allow you to put a Heloc on
your house and in this sense. That's how youget the funds out There's actually even a jumbo
reverse. You lock out there. Well, if you havean interest rate at Three percent and I guarantee
(28:40):
you there are a lot of us out there that dohave that and we have a house value That's
close to a million dollars or higher, but wedon't have a very high loan balance on our
three percent loan You could look at a jumbosecond as a reverse mortgage. And it's a very
interesting product. That's been out for abouta year. Really? Mm-hmm. Well, in general, if
(29:05):
rates don't come down, and I don't believe theywill because they don't, honestly, I don't
think they should. And that's not a popularanswer. But. I'm a realist and the reality
is we need to get inflation in check and givingaway cheap money or free money is not going
(29:29):
to do that. But with the way the mortgage industryworks, and maybe you can explain this because
you've been in it for so many years, peoplethink that the banks make more or less money
depending what the rates are. And the realityis banks have to pay for the use of money,
(29:55):
just like everybody else pays for use of money.So might you be able to explain that a little
bit to the audience or, or am I going in a directionwe shouldn't go? I know a little bit. I it's,
um, my, in my years of being in this business,I've learned a lot. And so I know a little
bit to be dangerous. And so that's exactly it.I I'm not an expert in this, but I understand
(30:15):
the banks have to go to a lending window toget money. and they pay an interest rate. Now
it's not the same interest rate that we payas the public. And the difference is how the
bank makes money. Banks are in the businessto make money. That is their prime core objective.
They don't want the house. They don't want yourboat. They don't want your car. They want to
(30:38):
make money. And that's how they do it is throughinterest rates. So yeah, I don't think that.
Banks don't pay 7% on that money that you'repaying on it, but they might pay, I don't know,
five, four, five. I don't know what that windowcharges them, but they do pay for it. Well,
and are the reverse mortgage companies doingthe same thing as a typical bank where these
(31:05):
loans are getting sold over and over again,or are they held longer term? The proprietary
loans are held in by the owners of those industries.So it's like the guy behind the curtain in
the Wizard of Oz. I don't know who those banksare, but they are there and they are willing
(31:25):
to put out loans or give money to people whohave $2 million houses and want a reverse mortgage.
And they keep those on their books. The restof them, the typical HUD products are sold
on the secondary market. They're packaged togetherand put on a secondary market. Most of them
are done through, they're handled to a servicer.And again, I'm not sure who buys those. That's
(31:50):
a piece that when I put files together for sellingon the secondary market, they were all forward
loans. And we sold them in Jenny Mae and FannieMae bundles. But who bought those? People who
had enough funds to do that. I would, if I wereto guess, I would guess large insurance companies
are buying them up. Hedge funds are buying themup. Right. You know, things of that nature.
(32:14):
So, well Laura, what is one question I shouldhave asked you that I didn't? What is that?
Anything on the top of your mind. What do youthink I should have asked you that I did not?
Oh, okay. What I should have asked me. That'sa good question. We've covered a lot, and hopefully
I guess I popcorned around a lot. I think Iexplained how a reverse mortgage worked fairly
(32:37):
well. Yeah, it's been great. And we went overhow you could... go into being in a foreclosure.
We talked about some of the myths that werebig that just don't exist any longer. So I
would say people should, people if they're consideringit should look into it. Look into it. It doesn't
hurt to ask what would a reverse mortgage dofor me in my situation? And consider that.
(33:04):
It's timing. What is the timing in your lifeat this point? Are you okay to make the payments?
Do you need extra money? What are the needs?Do you need to make the house? Do you want
to age out in the house? Do you want to makeit so that you've got grab bars everywhere
and are making it easier to live in? What areyour needs and how are you going to address
(33:25):
them? I think the money that you put in savingsaccounts and assets of stocks are hard earned
money and there might be. I'm not a financialadvisor by any stretch of the imagination,
but there might be a better way than sellingthose stocks and paying capital gains and using
the equity in your home, which is kind of likethis silent asset that nobody ever thinks about,
(33:49):
and we'll get that reverse mortgage to helpyou out. I just came up with another question,
and I believe I know the answer to, but so youput a reverse mortgage in place, I'm assuming
they would not allow a second mortgage behindthem, correct? That is correct. There would
not be. I mean, theoretically, you could, butI can't imagine a lender that would in their
(34:10):
right mind do it. Right. Correct. Well, I knowyou've got a little giveaway for people that
kind of want to know a little bit more aboutreverse mortgages, which will be available
at the generations of wealth.com slash reverse.But what is that white paper that you have?
I put together a white paper and it says 10surprising benefits of a reverse mortgage.
(34:35):
Because most people think of it as a last resort.I only need it because I'm desperate. But there
are so many ways that a senior, which is whatis a senior, a senior can consider looking
at making it a wealth building product for themselvesto leave more money to their heirs, to pay
(34:56):
for a grandchild's education or life insuranceat a grandchild. so that they can help set
them up in life by protecting their assets.They're not paying theoretically more taxes.
Again, I'm not a tax person either. I'm goingto stay in my little narrow lane of mortgages,
but I believe that those things are probablypretty accurate. And I put together Mike and
(35:18):
Mary and here's their scenario and here's somethings they could do. Well, that's awesome.
And again, you can get that at theg slash reverse.Laura, I just really want to thank you again
for your time and your knowledge. Um, it's amazinghow much you know for only being 29 years old,
being in industry for 30 years. So thank youvery much. Thank you. It has been a pleasure
(35:43):
to visit with you. I appreciate it. Of course.Well, until the next episode, um, thank you
for being here. Everybody that follows us ona regular basis, if it's your first time, thanks
for finding us and help us expand and, you know,spread the message. of the generations of wealth.
So until the next show, go live your visionand love your life. See ya.
any other loan out there in the world that willallow you to decide, today I'm going to give
you some money, Mr. Bank, Mrs. Bank, but tomorrowI'm going to keep it in my account. So that's
exactly what a reverse mortgage allows you todo.
(00:26):
Welcome to the Generations of Wealth Show. I'mDerek Dombk, your host. And today we're talking
about something that I don't think ever getstalked about. I don't really ever hear about
it on investor type podcasts, but it's reversemortgages and how do they actually work? Are
they good? Are they bad? We're going to findout before that. I really want to appreciate
all of you that are regular followers of theshow. Anybody that's just finding us. Thanks
(00:51):
for being here and anything you can do to helpus grow. We appreciate. with all the likes,
the shares, all of that stuff, and anythingwe can do for you. Don't hesitate to reach
out to theg and I'll help you any way I can.So with that said, let's get on with the show.
And here is Laura Phillips. And here we arewith no further ado, Laura Phillips. Thank
(01:15):
you, Laura, for spending some time with us atthe Generations of Wealth Show. Thank you so
much for having me on. I'm really looking forwardto it. Well, I would love for you to just tell
the audience a little bit about yourself. Andthen we're going to dive into a topic that
is very seldom talked about, reverse mortgages,but first, yeah, what's, what's your background?
(01:36):
Well, I have been in the mortgage business fora long time. Um, like 30, I stopped counting.
Let's stop at 30, 30 years. So I actually startedout. Wait, you're only 29 years old. How is
it possible? You've been in the mortgage industryfor 30 years. You know, um, Good jeans. Okay,
(01:58):
keep going. My smart ass will come out occasionally.I love it. Thank you. Thank you. I actually
moved from Texas to Colorado. And Texas hadwas sort of boomtown back in 82. But we hit
Colorado and there was no jobs at all. Not evenone page worth of jobs. And I thought, what
am I going to do with myself? We newly married?Are we going to go? So I got involved with
(02:20):
real estate and realized that I didn't understandhow to convince somebody to buy a house, but
they just need to paint the kitchen yellow,that wasn't gonna work. But I figured out the
mortgage side, the lending side, the numbers,and they just clicked with me. So I went down
that path of real estate and just dove intomortgages, anything about mortgages. I have
(02:41):
worked at almost every aspect of doing mortgages.I've been a processor, a closer, a level one.
underwriter, which kind of allowed me to actuallyapprove the file if the good credit and things
of that sort. Um, backend was selling the loansto secondary market. And then I got involved
with reverse mortgages about six years ago.And I, they, I love them. I don't do anything
(03:04):
else unless my daughter comes and says, pleasehelp my friend buy a house. Yeah. Really a
reverse mortgage lady. Well, we'll have to startat the beginning because many people don't
even know how a reverse mortgage works. Andso, uh, I think there's a lot of misinformation
out there that I would love to have you getrid of because there is definitely a place
(03:27):
for them. So maybe start at the baby steps.What is a reverse mortgage? How does it work?
And we'll keep going from there. Absolutely.So reverse mortgage is designed, came back
out, actually was designed in the early Reaganyears. And the very first reverse mortgage
was for a woman. whose husband died and thelocal bank called Nutter, I don't remember
(03:53):
the initials before it, anyway decided thatthey wanted to help her out. She had young
kids, they actually figured out how to do areverse mortgage on that home. That allowed
her to tap into the equity that she had in thehome, be able to live in it without paying
any mortgage payments and raise her childrenwhile they were young and she could work on
raising those children. From there, PresidentReagan, set into play putting reverse mortgages
(04:19):
into our FHA programs and HUD programs and they'vebeen out ever since then so I say that the
new reverse mortgage that we're talking aboutnow is not your grandmother's reverse so those
mortgages in the early days didn't do a theydidn't think a lot about the ramifications
of some of their rules um have to be 62 yearsold to be able to get a reverse mortgage so
(04:40):
that's not really a problem that's still outthere are some exceptions to that with portfolio
loans where you can actually get a reverse mortgageif you're 50. What else can I tell you about
them? Let's talk about some of the myths becauseI think if we eliminate the myths then the
understanding of what a reverse mortgage isbetter. So probably one of the worst things
(05:00):
that people think is the reverse mortgage isthe banks going to take them your home away
from you. You're not going to be entitled. Theyown your loan. So reverse mortgage is a loan.
It's just like any other loan you've ever doneon your home. The only difference is that you're
not making a mortgage payment on it if you don'twant to. So I don't know any other loan out
there in the world that will allow you to decide,today I'm gonna give you some money, Mr. Bank,
(05:23):
Mrs. Bank, but tomorrow I'm gonna keep it inmy account. So that's exactly what a reverse
mortgage allows you to do. You're allowed tostay entitled the entire time you own your
home untitled, just like you did all along.So that's probably one of the biggest myths
that are out there that I'd love people to realizedoesn't exist. Well, after that, how does it
(05:43):
work? Three years with a reverse mortgage. Oneof them is age, one of them is the value of
your home, and the last one is the interestrate. So your age is, the younger you are,
basically the less money you're allowed to have.The value of your home is the value of your
home less any mortgages against it. Now anothermethod that's out there is that you have to
(06:07):
have your home be free and clear. but that'snot the case. You can actually use a reverse
mortgage to pay off your current mortgage andthus freeing up funds for your own household
needs. The last one of course is interest ratesand that's a moving target any day. So interest
rates are involved. So all three of those cometogether to be able to figure out how much
(06:28):
equity you can actually tap on your home touse for your needs. So. Let's put a hypothetical
out there. You've got a half million dollarhouse and it's free and clear. You're 65 years
old life expectancy. What is it? 87, 85 to 87for women and like 33 for men, something like
(06:55):
that. Um, see you missed that joke. Um, do youknow why women live longer than men? Theoretically,
we have less stress, but I'm not sure that'strue. The women drive us nuts. We're just trying.
Aha, I see. Anyways, nevermind. I'm not editingthat out either. Okay. No, so what is the life
(07:18):
expectancy? If you're 65 and you've got a halfmillion dollar house, I imagine there's some
actuary tables out there that tell them exactlybased off of, do they check health records
as well or not? No health records. There areactuated tables. If you are 65 years old, that
loan's going to go out 30 years. So you're goingto see those numbers go out until your 90s
(07:40):
easily. My oldest person I've done a reversemortgage for was 92. And he only went out until
he hit 100. So actuary tables is a good wayto think about how much you have. So I'd say
at 65. you would be able to, without me openingup the book and looking at the logarithm table,
you'd be able to tap about 45% of the equityin your home. The reason for that is, is they
(08:05):
want the house to remain right side up. So again,because it's a reverse mortgage, the house
is gonna be paying your mortgage payment foryou. So that balance is going up. We call it
a negative amortization loan that can have anegative feeling when you hear it. But in this
particular case, it's good, because I thinkif you're over 65 years old, you're living
(08:28):
on a fixed income, then paying that mortgageevery year is taking away from your money to
help fund yourself and your lifestyle and yourhealth as you get older. So at 65, about a
45% value of being able to use it, the restof the house is paying for it. And the idea
HUD wanted to decide, or actually did decidein previous, President Trump's administration,
(08:56):
that they lowered how much you could have sothat the houses didn't go upside down, so that
the house wasn't, you know, they don't wantthe home. HUD doesn't want the house. They
would rather have value still at the home, maybenot as great as if it was totally free and
clear when you were 90 years old, but that theheirs would still have some funds available.
So that's interesting because a lot of peoplehave that myth that if you pass away, the bank
(09:21):
automatically gets the house. but it still ispart of your estate. It is. And so explain
that because I know people ask me that questionand they just don't know the answer. It is,
it's still part of your estate. You can closein a trust, so it could be in a trust or you
can close it in your name. You would set itup in your will or your plans for the future
(09:48):
for your heirs. Now, if the house is ultimatelyupside down, And if you lived to be in the
90s and you started at 65, I'm going to tellyou, you're probably going to see that be upside
down. I'm not going to lie. It's that's probablya reality. But at that point, the mortgage
insurance that you pay on that loan upfrontwill protect you and your heirs from anybody
(10:10):
ever coming and knocking on the door and saying,you owe us money on mom and dad's house because
that mortgage insurance clears that. That'sprobably an additional myth that we can talk
about. is that the mortgage insurance doesn'tbenefit you. It always just benefited the lender.
And that was true if you bought a home underthe original FHA programs where you get 3%
(10:31):
down. And that's still out there. Those programsare still out there. Mortgage insurance is
the same, but now it protects the owner of thehome, the borrower and their heirs. So that
nobody is gonna come and like I said, knockon the door and say that it's owed. So we call
it a non-recourse loan, which is great. Absolutely.So if you had a 30 year loan and the borrower
(10:57):
passed away at year 20, the heirs can stillcontinue carrying that loan for 10 more years?
Not carry it, but they would have to sell it.They have about three months to six months
to sell the house. And they're going to reachout with the death certificates and let the,
and this would be true on either side of a mortgage.then you would let the servicer know that the
(11:20):
borrowers had passed. Once they do that, theygo, okay, do you want to sell it? Well, if
there's a value in it, then the answer to theerror should be, yes, I do want to sell it.
I'm going to recoup what funds are availableleft to us. And that's what mom and dad wanted
for us in the home. So they have the first sixmonths, if it doesn't sell in the first six
months, you reach back out to your lender oractually to the servicer and they will say,
(11:42):
what are you doing? Is the house prized properly?Here in Colorado, we may be in blizzard season
and nobody's looking at homes. So, you know,there's a seasonal issue So they just look
at it and they'll give you an extension basedon reading that criteria But you will have
some time to sell it and recoup the funds thatare available So that's good when you sell
it. It's going to pay off the reverse mortgageWhich would be the same in any other cell of
(12:09):
a home you're paying off the existing loan onthe home What's left is the funds that come
to the heirs? Right. And as long as they werestructured properly, the heirs should have
got a step up in tax basis. So they hopefullyare not going to pay any capital gains on the
remaining balance of the equity after they payoff the reverse mortgage. Or, or in the event
(12:32):
they just want to pay off the reverse mortgageand not sell a home, they just have to bring
money from a different source or, or essentiallyrefinance the house. Correct, they could refinance
it. There is a clause within the HUD program,which is an FHA program, this loan is an FHA
program, that would allow family members topurchase at 95%. Now, some of that has to do
(12:55):
with structuring how you set up the title atthe beginning with the owner, the original
owner of the home, but they could purchase itat 95% of the loan. I've only seen that happen
once. Mom got it and had it for a while. Herdisabled son was living with her. And when
she passed away, the loan was $200,000. Well,he was able to buy that house with the help
(13:21):
of his siblings doing cosigning for considerablyless than the 200,000 and continue to live
there. That's great. Yeah. So as property valueskeep going up, prices keep going up, I'm in
Midwest, so it doesn't affect us as much, butpeople on the West Coast, East Coast, Colorado
(13:41):
as well, there's jumbo loans out there for large,you know, expensive homes. Is there jumbo reverse
loans as well? There absolutely are, we callit proprietary loans. And the market's tight
right now for that particular loan. And oncewe had COVID in the twenties, it came that
(14:03):
most of the lenders shut down that particularloan. One of the ways they shut it down was
that they made that interest rate really high.So my jumbo rates right now are not super attractive
compared to what you can get with a traditionalHUD program. Right now that limit, and boy,
you're gonna test my memory, is 1.12,
(14:24):
$1,125,000. And that's not a strong quote becauseI always have to look it up because it changes
from year to year, but that's across the nationas to what the maximum amount you can get on
a HUD product. So anything over that would bea jumbo. So I have jumbos that go up as high
as $4 million in loans. So that works for peoplethat have houses that are several hundred million
(14:50):
dollars. Well, and I would say to compare this,if somebody had a standard mortgage that they
had to make payments on, and I don't know howthese numbers work out, but let's go back to
that half million dollar property. And theycould do at the 65 age range, they could use
(15:11):
45% of their equity. They could go and potentiallyleverage that house at 80% of the value, but
then have payments. Correct. So if you wereto take a calculator and figure it out, Laura,
If you had payments on a $400,000 loan againstthe, of a $500,000 property at today's current
(15:37):
rates is we'll just say 6.75 ish versus borrowing45% of that, which would be now I'm trying
to do math in my head. I'm trying to figureout how many years it would take before they
kind of equaled out. So. Oh, you know, I haven'tactually had anybody ask me that. That's a
(16:01):
good thing to think about. You know, if youset aside enough money to cover the payments,
you borrowed 400,000. How many months or yearswould you make that payment? Now this again
is assuming that a lender would give you a loanat age 65, probably retired, so they're going
(16:21):
to look at your income and your DPI and everythingelse. But yeah, I'd be curious to see where
those two cross paths. If you could afford thepayments, because remember we're going to do
PTI, principal taxes and interest, plus yourdebt, so any other debt you have is going to
qualify you for getting that forward loan. That'swhat we would call it. I believe that's what
(16:44):
you're talking about is a forward loan. It'sgoing to a local bank or lender, going to get
that. Those interest rates are on the high sideof the sixes right now. We have not seen them
come down. So qualifying for that could be tough,to be honest with you. is going to come out
every month. So I'm going to guess that payment'sprobably going to be without pulling out calculators
(17:08):
and looking up an interest rate for somebody.I would say we're probably, with taxes and
insurance, probably $3,000 a month. That's probablynot a bad guess. Versus if you did a reverse
mortgage, you would not take out $450,000 onyour half a million dollar house. But you might
be able to get out, where is it? 65%. 300,000now we do math in our head. So I'm gonna say
(17:32):
they're gonna get out without doing any mathwith a calculator, $250,000 in cash. Who knows
if that's an accurate number, but that's a numberwe'll work with. And that's actually cash that
can come to them. They, there is a limit onhow much they get the first year. They can
have 65% of the $250,000 if they refinanced.The reason HUD came in and said that was they
(17:56):
did some studies on how come people were goinginto foreclosure. And we'll address that in
just a minute. And they found out that if wegave everybody that $250,000 in cash and one
lump sum, not necessarily were there great decisionsbeing made. It was like they won the lottery.
Kind of, exactly. And they forgot that theyhad to make their property taxes. Taxes and
(18:16):
insurance are on them, no longer an escrow.So that leads us to how do you get into a foreclosure?
I said I wanted to address that. And I'm kindof popcorning around, but let's address that
issue because it's definitely out there. Theonly way you can go into a foreclosure on a
reverse mortgage is there are two ways. Well,I guess there are ultimately are three ways.
One is you don't pay your property taxes. Youdon't pay your property taxes, then that becomes
(18:41):
a tax lien and lenders hate tax liens. Doesit matter if you're forward or reverse? They
don't like them. And that's exactly why youpay escrows on a forward loan. Now, can you
get escrows on a reverse mortgage? Absolutely.If you don't want to worry about it and think
about it and you just want to go on with yourlife, you can actually get an escrow that will
take care of your taxes and insurance for youfor the rest of your life on a reverse loan.
(19:03):
We call it a LISA. We can't use the same namefor some silly reason. So it's called a LISA,
which is Loan Escrow Set-Aside, LISA. Now theother way you can end up in a foreclosure or
a reverse mortgage is if you don't live in thehome. So you end up in a nursing home and you've
had some situation that is gonna force you tolive there now permanently. First mortgage
(19:27):
has to be your primary home. It has to be aplace where you live. So now that could, if
you don't tell them your service or about that,then that's gonna force a foreclosure. And
the last one is if you don't maintain it. Sothere are health and safety issues. on all
loans with the government. So if you, gosh,I don't know, fell in, you didn't take care
(19:49):
of it, something of those sorts, then they couldcome in and look at a forced closure. Well,
and most people don't realize, because we allknow most people don't read their documents.
Right. Yeah, when you are not taking care ofyour property, regardless if it's a forward
loan or a reverse mortgage, That's the collateralto the, to the loan. And you are obligated
(20:13):
to take care of that property in at least asgood a condition as it was when the loan was
issued. And as a former hard money lender for10 years, we had people that, you know, in
our space, our most dangerous time when we issuea loan was, was demo day, right? They buy the
house and now they're flipping the house. They'regoing to come in and tear out walls. There's
(20:36):
a certain period of time where they've devaluedthat property, um, not below what they borrowed,
but you know, it is dangerous. So, uh, yeah,you definitely, well, and I've seen just as
a house flipper and, you know, buying thousandsof properties over the years, I've bought foreclosures,
(20:56):
I've bought, I've bought the foreclosures thatwere reverse mortgages. Um, and, and I always
shift my head is when people go in and theydestroy the house. because they are, that's
actually in most areas, it can be a federalcrime, but it's certainly a state crime because
(21:17):
you are ripping out fixtures, you're doing damageto the collateral for that loan and they can
absolutely go after you. It is sad, particularlywhen we had the collapse of the mortgages industry,
the pictures that were out there on the internet.of what happened was sad to see. People were
angry. It doesn't justify it, it doesn't makeit right at all. And I don't know how you can
(21:43):
prevent that ultimately. I don't, there's notlike mortgage police that are going to come
and check your house every year to make surethat it looks like a health and safety issues
are okay. But they do check the servicer forthe reverse mortgage does check every year
and sends you a questionnaire, which they'rehoping you will answer and you are legally
bound to answer correctly. Are you still consideringthis your primary home? Now, you could go to
(22:08):
Africa for six months, and it's still your primaryhome. It's where you live. You could go and
have, we call them snowbirds in Arizona. Youcould go to Arizona. I don't think, probably
don't wanna hear that. We call them that, butyou could go live there for- We are snowbirds
in Wisconsin when we go south. So it's a commonterm, not a big deal. So you can go and do
(22:28):
that. And again, the reverse mortgage lenderis not gonna be unhappy with you. They would
like to know that you are, again, a courtesycall. Communication is huge. It's huge in all
aspects of our life, but it's huge when you'retalking with your lenders, that they know what's
going on. You can just say, hey, I'm here, mymail's being forwarded, or here is the forwarding
(22:50):
address, one of the two, and we'll be back onthis date, you know? And that's really all
they want to hear. Some people have asked mewhat happens with the fires. This is an interesting
situation since we're witnessing fires happeningin California right now. I can guarantee you
California is where the most progressive reversemortgage thoughts are happening. That's where
(23:12):
the jumbos started, where the proprietary loanswere tested. Reaching out to your lender and
letting them know that your home has been damagedbecause of a hurricane, because of a flood,
because of a tornado, because of a fire, becauseof whatever natural disaster happened. to be
the best thing that.
(23:37):
Yeah. And I think so many people are afraidto talk to their lender. And again, as a former
lender, there's nothing worse than somebodyhiding from reality. And we were much more
inclined to work with somebody that was beinghonest and forthright than somebody was being
(23:57):
underhanded and hiding from us. And the otherthing is you mentioned snowbirds. So many people
don't realize that if you read your insurancepolicies on your property, if it's vacant for
more than 30 days, oftentimes they don't haveto cover it. So if you do go somewhere for
(24:17):
the winter, you should be contacting your insurancecompany as well. Now, are they going to increase
your rates? Yeah, they are because you havea vacant property. But when you live in the,
you know, our areas where things can freeze,It stands the reason the insurance rate should
be higher because they're taking more risk ifit's, if there's not somebody there every day
(24:39):
to make sure. Um, which actually that leadsme to another question. Is there any way a
reverse mortgage can be used to purchase a homeor you have to have owned this home for a period
of time? You can, you can definitely use itto put it. Remember it has to be a primary
home. So I had a good friend, true story. Shejust, she was in Rotary with me. She just left
(25:02):
to go move into Arizona to be closer to herbrother. They were 80, she's 82. So she sold
her house here in Colorado and her net proceedswere about a half a million dollars, 500,000
after she paid off everything, which she hada reverse mortgage on her home here in Colorado.
So she was familiar with the product and wetalked before she left about her purchasing
(25:23):
in Arizona and doing the exact same thing. Soshe went to. live in her brother's house and
they came very quickly a reality that she neededto find her own home pretty quickly. So she
did. And it was about $325,000. So we used thisreverse to buy that home. At her age of 82,
she came to the closing table with about $275,000,not $325,000. So what was left of her $500,000
(25:51):
that she sold is now in her pocket to fund somemore of her retirement. So you bet you can
use it. Absolutely. You do come to the tablewith a lot of money, but you are replacing
one primary home for a new primary home. Andthat's how it works. It's a great product.
Yeah. In fact, currently, I personally pay amortgage on our house right now. People ask
(26:15):
me why I don't have a reverse. At some point,living in Colorado in a two-story house and
very few ranches were built in Colorado. wewill have to move to a ranch home. The reality
of stairs is gonna, it's gonna happen to usat some point. We're saving that reverse mortgage
for that purchase because it makes so much sense.Absolutely, absolutely. So I'm sure you get
(26:39):
asked this all the time. And as do I, what'syour crystal ball tell you about rates throughout
2024? And I will preface it with saying, I don'texpect rates to come down. at all. But what
do you think? Well, I would have to say on forwardsrates have not come down, even though the feds
(27:04):
have lowered prime several times, actually thewhole point. I have seen reverse mortgages
mirror that prime loss on their line of creditproducts. So they have three loan types out
there. One of them is a line of credit whichfollows and mirrors whatever is happening with
prime. There is a fixed rate. And then of course,there's the proprietary. So what I see what
(27:25):
the fixed rate is that interest rate is up thereRight with everybody else trying to buy a house.
So it's in the high sixes. Okay, the Line ofcredit being tied to prime is a margin plus
the index So the index right now with reversemortgages is the constant maturity? Trevor
treasuries the CMT to that we add a margin andRight now is that margin drops? those people's
(27:52):
loans are going to be less. Same if you havea HELOC, a home equity line of credit. So people
ask me, why wouldn't I just do a home equityline of credit on my house and put a second
on instead of doing a reverse mortgage at theage of 62 or older? Well, the reason that you
wouldn't want to do that is, well, it's notthat you wouldn't want to do it, but maybe
(28:15):
you would consider redoing it if you weren'table to make those payments. And or if you
didn't want to make those payments so the reversemortgage would allow you to put a Heloc on
your house and in this sense. That's how youget the funds out There's actually even a jumbo
reverse. You lock out there. Well, if you havean interest rate at Three percent and I guarantee
(28:40):
you there are a lot of us out there that dohave that and we have a house value That's
close to a million dollars or higher, but wedon't have a very high loan balance on our
three percent loan You could look at a jumbosecond as a reverse mortgage. And it's a very
interesting product. That's been out for abouta year. Really? Mm-hmm. Well, in general, if
(29:05):
rates don't come down, and I don't believe theywill because they don't, honestly, I don't
think they should. And that's not a popularanswer. But. I'm a realist and the reality
is we need to get inflation in check and givingaway cheap money or free money is not going
(29:29):
to do that. But with the way the mortgage industryworks, and maybe you can explain this because
you've been in it for so many years, peoplethink that the banks make more or less money
depending what the rates are. And the realityis banks have to pay for the use of money,
(29:55):
just like everybody else pays for use of money.So might you be able to explain that a little
bit to the audience or, or am I going in a directionwe shouldn't go? I know a little bit. I it's,
um, my, in my years of being in this business,I've learned a lot. And so I know a little
bit to be dangerous. And so that's exactly it.I I'm not an expert in this, but I understand
(30:15):
the banks have to go to a lending window toget money. and they pay an interest rate. Now
it's not the same interest rate that we payas the public. And the difference is how the
bank makes money. Banks are in the businessto make money. That is their prime core objective.
They don't want the house. They don't want yourboat. They don't want your car. They want to
(30:38):
make money. And that's how they do it is throughinterest rates. So yeah, I don't think that.
Banks don't pay 7% on that money that you'repaying on it, but they might pay, I don't know,
five, four, five. I don't know what that windowcharges them, but they do pay for it. Well,
and are the reverse mortgage companies doingthe same thing as a typical bank where these
(31:05):
loans are getting sold over and over again,or are they held longer term? The proprietary
loans are held in by the owners of those industries.So it's like the guy behind the curtain in
the Wizard of Oz. I don't know who those banksare, but they are there and they are willing
(31:25):
to put out loans or give money to people whohave $2 million houses and want a reverse mortgage.
And they keep those on their books. The restof them, the typical HUD products are sold
on the secondary market. They're packaged togetherand put on a secondary market. Most of them
are done through, they're handled to a servicer.And again, I'm not sure who buys those. That's
(31:50):
a piece that when I put files together for sellingon the secondary market, they were all forward
loans. And we sold them in Jenny Mae and FannieMae bundles. But who bought those? People who
had enough funds to do that. I would, if I wereto guess, I would guess large insurance companies
are buying them up. Hedge funds are buying themup. Right. You know, things of that nature.
(32:14):
So, well Laura, what is one question I shouldhave asked you that I didn't? What is that?
Anything on the top of your mind. What do youthink I should have asked you that I did not?
Oh, okay. What I should have asked me. That'sa good question. We've covered a lot, and hopefully
I guess I popcorned around a lot. I think Iexplained how a reverse mortgage worked fairly
(32:37):
well. Yeah, it's been great. And we went overhow you could... go into being in a foreclosure.
We talked about some of the myths that werebig that just don't exist any longer. So I
would say people should, people if they're consideringit should look into it. Look into it. It doesn't
hurt to ask what would a reverse mortgage dofor me in my situation? And consider that.
(33:04):
It's timing. What is the timing in your lifeat this point? Are you okay to make the payments?
Do you need extra money? What are the needs?Do you need to make the house? Do you want
to age out in the house? Do you want to makeit so that you've got grab bars everywhere
and are making it easier to live in? What areyour needs and how are you going to address
(33:25):
them? I think the money that you put in savingsaccounts and assets of stocks are hard earned
money and there might be. I'm not a financialadvisor by any stretch of the imagination,
but there might be a better way than sellingthose stocks and paying capital gains and using
the equity in your home, which is kind of likethis silent asset that nobody ever thinks about,
(33:49):
and we'll get that reverse mortgage to helpyou out. I just came up with another question,
and I believe I know the answer to, but so youput a reverse mortgage in place, I'm assuming
they would not allow a second mortgage behindthem, correct? That is correct. There would
not be. I mean, theoretically, you could, butI can't imagine a lender that would in their
(34:10):
right mind do it. Right. Correct. Well, I knowyou've got a little giveaway for people that
kind of want to know a little bit more aboutreverse mortgages, which will be available
at the generations of wealth.com slash reverse.But what is that white paper that you have?
I put together a white paper and it says 10surprising benefits of a reverse mortgage.
(34:35):
Because most people think of it as a last resort.I only need it because I'm desperate. But there
are so many ways that a senior, which is whatis a senior, a senior can consider looking
at making it a wealth building product for themselvesto leave more money to their heirs, to pay
(34:56):
for a grandchild's education or life insuranceat a grandchild. so that they can help set
them up in life by protecting their assets.They're not paying theoretically more taxes.
Again, I'm not a tax person either. I'm goingto stay in my little narrow lane of mortgages,
but I believe that those things are probablypretty accurate. And I put together Mike and
(35:18):
Mary and here's their scenario and here's somethings they could do. Well, that's awesome.
And again, you can get that at theg slash reverse.Laura, I just really want to thank you again
for your time and your knowledge. Um, it's amazinghow much you know for only being 29 years old,
being in industry for 30 years. So thank youvery much. Thank you. It has been a pleasure
(35:43):
to visit with you. I appreciate it. Of course.Well, until the next episode, um, thank you
for being here. Everybody that follows us ona regular basis, if it's your first time, thanks
for finding us and help us expand and, you know,spread the message. of the generations of wealth.
So until the next show, go live your visionand love your life. See ya.
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