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Being diligent and guarding trust

July 13, 2009
Celebrating 60 years

My Grandparents Celebrating 60 years

When you are working with seniors on a daily basis you hear a lot of stories. Personal stories about their lives and stories about how they lost the money they had planned for retirement. Some stories are about the stock market, some are about unexpected costs, raising grandchildren and even giving Ron Pearlman $200,000 in his Ponzi scheme. Yes, I have a client who was one of his victims.

All of these stories make me think about my own grandparents. They were married a total of 62 years and during most of my life they were very financially stable. They both passed away before the government insured the HECM program, and I am not going to profess that they would have done a reverse mortgage. But they were taken for a large amount of money in a scheme that is equally as fraudulent as a Ponzi scheme. They are an example of how it can happen to anyone, at any time. Even to your own loved ones.

I call this plot the “Substitute Parent” Scheme. This one works extremely well with seniors who are trusting and generous and is perpetrated by sales people who profess that the senior target is “like a parent” to them. I recall this line well. I was in my grandparents kitchen, helping with the dishes when I heard Bill, the salesman, tell my grandfather how deeply he respected him and that he was “like a dad”. Red flags should have gone up and alarms should have rung. But being the perfect salesman, Bill was able to close the deal and took my grandparents for over a quarter of a million of their retirement dollars. To each of their last breaths, I believe they were both stunned as well as hurt. Trust was never an option with them, it was in their souls. They always trusted, they were always generous. They were the perfect mark.

My personal family experience gives me a greater respect for the word, trust. I never want to abuse that trust or take it for granted. My clients aren’t like a parent to me. They are my client, I am their advisor. A reverse mortgage isn’t for everyone, that’s why everyone doesn’t have one. But once a senior receives the funds of a reverse mortgage, they need to be even more diligent in watching their money and in watching out for those people who now profess that they are their new family. People who want to part them from their money. Myadvice in that regard, if you are looking to add to your family, go to an animal shelter and adopt a pet. The reward will be far greater and the adoration will be sincere and endless.

My grandfather had a dog, Timmy, he was devoted to my grandpa. I think if Timmy had ever met Bill, he would have bit him. Dogs have great instinct when it comes to people, Timmy would have known!

A new type of short sale just for seniors

July 11, 2009

Actually the term “short sale” is misleading. More properly it should be called a “short pay”. This is not common in the reverse mortgage origination, but sometimes I encounter clients that desperately need to get out of their conventional mortgage and into a reverse. In most cases it is the only option for them to save their home.

Recently I met Monica. When I went to her home, this very astute and young senior was just coming to face reality. The mortgage broker she had contacted when she first explored doing a reverse mortgage, convinced her to do an interest only mortgage. He promised her she would be put into a reverse the following year. This was despite the fact that the mortgage he originated had a three year prepayment penalty and by the time the three years were up she would not have enough equity to qualify. As it turns out, she already is in that situation. She never understood what her payments would escalate to and I had to break the bad news. When I got done reviewing her documents she stepped outside for a cigarette. I found her in her yard, crying…she didn’t want the granddaughter she was raising, to see her upset. This is the tough part of my job. I am now working with Monica and a firm that has been quite successful in negotiating with lenders to take short pay for the debt that is owed. I am saying a prayer that they will be able to convince her current lender to accept the funds of a reverse mortgage for the debt. The funds will be short of what she owes but this would keep her in the home she loves and enable her to continue to give her granddaughter a stable environment. This this would be a short pay reverse mortgage, not a short sale.

I will update you on Monica’s status from time to time. Wish me luck and say a prayer, she deserves a break. And as for the slimey snake that put her in this situation, he should lose his license and catch the swine flu! Nobody deserves it more!

What most recipients of a Reverse Mortgage receive.

July 10, 2009

In a 2006 National Survey of Reverse Mortgage Shoppers, borrowers provided the following information:
Reverse mortgage recipients were asked, “Overall, would you say that the reverse mortgage has had mostly a positive impact on your life or mostly a negative impact?”

  • 94% stated the reverse mortgage had given them peace of mind
  • 89% said it helped them have a more comfortable lifestyle
  • 87% responded it improved their quality of life
  • 79% gave it credit for helping them remain at home

The respondents to the national survey are similar to the clients I meet daily. My clients share their stories so I can realize the positive impact it makes in their life.

One of the couples I met were Alice and Jim who had been living in a house in Pinellas Park, their home had no mortgage and they had no debt. In January of 2006, they decided to sell their home and move into a senior condominium community. They purchased the condo with cash and immediately moved in, anticipating a quick sale of their house. In February they had a contract on their house, three days before the closing, the buyer died. They had no other offers. They found themselves strapped with property taxes on the house and the condo, maintenance fees on both and rising insurance costs.

Alice and Jim used their credit cards to pay their mounting bills, anticipating that the house would sell and they could pay off the cards. The value of the home fell, they still owned both properties. They continuously lowered the price of the house but finally accepted an offer to rent.

Alice and Jim had no means of paying off the credit card debt. Each month they had a cash shortage. The Realtor who listed their house recommended refinancing the house and/or condo, she referred them me. After a full analysis of their situation, it was obvious that a Reverse Mortgage was their best option. The reverse mortgage gave them all the money they needed to pay off their debts and an equity account for ongoing expenses. The real estate market is no  longer getting them down. Alice and Jim both told me they now have peace of mind. Even though they did not officially participate in the national survey, they validate what the results of that survey showed. I don’t know of any other financial product that has as many satisfied participants. That’s what I like most about my job.