Reverse Mortgage Myths & Facts

Reverse Mortgage Myths & Facts with Boston Connect Real Estate

Speaker 1 (00:01):

Now talk real estate with Sharon McNamara, sponsored by Boston Connect Real Estate Services.

Speaker 2 (00:10):

Hi, I'm Sharon McNamara and you are listening to Talk Real Estate Roundtable. Let me share a little bit about my background before we get started. I am the broker owner of Boston Connect Real Estate, a boutique real estate firm that is home to over 30 real estate sales and marketing consultants who serve as home buyers and home sellers throughout Boston, the South Shore, the South Coast, and Cape Cod. Our firm takes pride in assisting our clients in the next chapter of their lives by taking a holistic approach to their real estate endeavors. We believe that every move should be a moving experience every week. My real estate team member, Mary Baker and I, along with the director of Boston Connect Real Estate, Melissa Wallace, provide you with our unique marketing approach to selling homes and share with you our expertise in navigating the home buying process. We'd like to mix it up sometimes, so not only will you hear our perspective on real estate topics, but you will hear the expert thoughts and opinions of some of our real estate agents at Boston Connect Real Estate and the preferred professionals that we trust be part of our round table.

(01:07):

If you have any questions during the show, please call 7 8 1 8 3 7 4900. We'd love to talk real estate. Follow us on Facebook, Instagram, and wherever you listen to podcasts at Talk Real Estate Round Table. If you would like a one-on-one consultation with me and my team, or one of the dedicated agents at Boston Connect Real Estate to discuss your real estate needs, you can connect with us@bostonconnect.com or 7 8 1 8 2 6 8,000. Now, sit back, relax, take good notes, and let's talk real estate.

Speaker 3 (01:39):

And hello to all my neighbors. You are listening to Tuck Real Estate round table. My name is Melissa Wallace, and I am joined in studio by the one and only Sharon McNamara.

Speaker 2 (01:51):

Good morning.

Speaker 3 (01:51):

Good morning. I think my microphone has to be up higher, but um, but yeah, it's a, it's a beautiful Saturday morning <laugh>. Not really, but very sticky. Yeah, very. It's, it's humid. Yeah. Um, Holly had our back porch like, uh, the door open and it's like all like, you know, like stick and like humid in the hallway now. So

Speaker 4 (02:11):

Forties and fifties from here on out though.

Speaker 3 (02:13):

Oh, yeah. Next week. Well, I saw it was like supposed to get like 70 or 72 today. Yeah. Today I'm like, no, thank you. Can we just have the fall weather, like continuous?

Speaker 4 (02:21):

Yeah. We're, we're in our sweaters now. Yeah. It just

Speaker 3 (02:23):

Doesn't seem right. I know, I know.

Speaker 2 (02:25):

I put my air conditioner on this morning, and I'm not gonna lie, it was so, I hate that sticky, smelly, failing inside the house, you know what I mean? Yeah. And then Mark opened up all the windows upstairs and I was like, all right, so now we're, all we're doing is making it a breezy, humid stickiness in the house. So I was like, I'm putting the AC on. I, I don't, I don't care. You know, it's not winterized yet, so I don't Do you even do anything to winterize it? I don't think so.

Speaker 3 (02:49):

I don't know. You're married to a plumber. <laugh>

Speaker 4 (02:51):

The ac.

Speaker 2 (02:52):

Yeah. I don't think you do anything. Just shut it off and call it a day. Yeah. Just don't put it on. Yeah. So, uh, yeah, so I'm really excited about our show. He has been so gracious to sort of be on call, uh, for us because, uh, you were supposed to be on with us last week and, uh, we just gave, uh, somebody the opportunity to join us last week because we were doing, uh, two of our agents or groups of, it was a team and another agent was doing a, uh, veterans, uh, program for, uh, buyers. So we had a conversation about that last week and timing was good on that. So Happy Veterans Day to all of our veterans. I don't know that you call it happy though, but, you know, thank you for your service and I know we have a lot of agents here and our office who are veterans, so thank you to all of them.

(03:37):

And their spouses. Of course, Papa McNamara, well, he was World War II vet, so, and we have a bunch of others. Chris and Sean, they were Marines and Army. So we love all of them. So thank you for your service. We appreciate you. Um, so David told a lot Yes, we are so happy to have you. Yes. We've had you on before. Thank for having me. Yeah. From Homestead Mortgage. Uh, you are a regular at W A T D, so, uh, I'm sure people just hear your voice now and they know you're sort of like Madonna or something. Oh, geez. Sort

Speaker 3 (04:09):

Of like us. They hear our voices and they know, I mean, how many times have I been at an open house and there's like, are you on the radio? Yes, I am. That happened

Speaker 2 (04:18):

To me last weekend, actually, at my open house. Um,

Speaker 4 (04:21):

I have gotten that a few times. Yeah. Once you were on there for a while, that

Speaker 2 (04:24):

Happens. Yeah, absolutely. So we love our W A T D listeners. So, uh, thank you for joining us today. We are live in studio, so if you have any questions for David, uh, we're gonna be talking about some reverse mortgage things, um, but he also does other types of loans. So, uh, just

Speaker 4 (04:38):

Reverse,

Speaker 2 (04:39):

Just reversed. Just

Speaker 4 (04:40):

Reverse. Okay. Used to do the forward mortgages, but since about 2009, just one thing.

Speaker 2 (04:44):

Oh, okay. Reverse mortgages. My bad. All right. That's right. Well, certainly I'm sure you could refer them to somebody, right? Oh

Speaker 4 (04:49):

Yeah.

Speaker 2 (04:49):

Abso yeah, absolutely. Um, so my bad on that, cuz I thought that maybe you did just still do that type of stuff. So, uh, we're gonna be talking about reverse mortgages, but if you have any questions for us regarding that, uh, we want to clear the air on fallacies when it comes to reverse mortgages. David, no matter how many times I've had you on my show, <laugh>, how many times Michael has had you on his show, why can't you get rid of the stigma?

Speaker 4 (05:14):

It's, it's tough. It's, um, it, it starts from the legacy reverse mortgages from the sixties and seventies, honestly. Mm-hmm. <affirmative>, because those ones were not federally regulated. Mm-hmm. <affirmative>, they were around, but they were bank reverse mortgages, so the guidelines were all over the place. Mm-hmm. <affirmative>. So at the end there was a lot of post death confusion Yep. With the estate mm-hmm. <affirmative>, in some cases the estate didn't even know their parents had a reverse on the home mm-hmm. <affirmative>, so they didn't know what to do. And so there was foreclosures. Yeah. Because the bank needs communication as you know mm-hmm. <affirmative>, the bank needs communication. They don't want the house, but they need communication. So if you take the sixties and seventies, all of the things that were going on back then mm-hmm. <affirmative> and you carry that forward, that's two decades. Yep. It wasn't until the late eighties during the Reagan administration mm-hmm. <affirmative>

(05:58):

That they took the concept and said, Hey, we like that. Mm-hmm. <affirmative>, let's retool it mm-hmm. <affirmative>, we'll federally regulate it mm-hmm. <affirmative>, we'll federally insure it mm-hmm. <affirmative>. And so they formed a committee and they built this new loan called the hack and the home equity conversion mortgage, aka reverse mortgage mm-hmm. <affirmative>, and they built it and then they released mm-hmm. <affirmative> in the nineties to lending institutions. So HU is the regulator, housing and Urban Development. Mm-hmm. <affirmative>, FHA is the insurer. Mm-hmm. <affirmative>, they're the, the, uh, agency that has the money Yep. That pays the lender back if the loan is higher than the homes value mm-hmm. <affirmative>, that means the person lived a long time. So it's really that, Sharon, it's the stigmas that pulled from the sixties and seventies. It in my 17 years. I'll say this though, things have changed. Hopefully that wasn't a carra

Speaker 2 (06:47):

<laugh>. No. Um,

Speaker 4 (06:48):

Things have changed though because back in oh 5, 0 4 0 5 when I got in the business, I think it was for every 12 bad articles, there was one good article mm-hmm. <affirmative>, it's completely reversed Yeah. Because of the internet. So I would say it's really more that, um, I, I had the same stigmas and misconceptions. They were just in my head. I didn't know why mm-hmm. <affirmative>, you know, prior to me getting in the business. So once I did my research, I just uncovered that this is just a mortgage. Yeah. It happened to have been enacted through Congress into law Yeah. In 1988. Yep. So that should tell people something. Right. I don't think we all agree with everything our government does either side. However, I don't believe they're gonna enact a scam and have it still be in place 34 years later.

Speaker 2 (07:29):

Exactly. And the thing is, is too, if we think about, you know, the fallacy and like the people who are going to be doing these reverse mortgages, I, and before the show I was talking to you and I was like, I am working with a lot of boomer generation right now. So the high, like the older boomer and the younger boomer generation. So they're sort of in a twofold right now. And I wonder if it's just the fallacy they had it ingrained in their head from the sixties and seventies. Yeah, it is. And they never took the time to research to know that things have changed.

Speaker 4 (08:01):

That's right. But that's not to say this, this federally regulated reverse mortgage that I would say 98% of reverse mortgages done nationwide is the HUD reverse mortgage. Yeah. There are private labels, but we won't get into that. Yeah. It doesn't mean that unscrupulous humans Yeah. Weren't misusing the federally regulated loan mm-hmm. <affirmative>. So in the nineties it was new. Yep. And there were things going on, like to keep it really simple, you put a reverse mortgage in place for Hazel, her house has no liens on it. You have this, you know, half her home is now set up as a reverse mortgage mm-hmm. <affirmative> and it's really cash. Yep. So you had people cross-selling, going back to Hazel and saying, Hey, let's take some of that money outta your reverse and let's invest it.

Speaker 2 (08:43):

Oh,

Speaker 4 (08:44):

That was going on a lot of cross-selling. Yeah. And so HUD, as years go on, they caught onto that. They put new disclosure in place, new safeguards mm-hmm. <affirmative>. And so here we got 34 years later. Yeah. So there was bad things going on, but the loan wasn't designed as a scam. Yeah. It was misused by scrupulous humans. Like any product. Right. Any industry's gonna have unscrupulous

Speaker 2 (09:06):

People. And that's what happened to us in 2004 or 2004 with just conventional mortgages. Right. I mean, it was happening, so. Right. So let's back up just a little bit. Um, I heard you say that you've been in the industry for 17 years. So tell our w a TD listeners, if they're just tuning in with us a little bit more about you and how you actually got started into this. And I wanna say you're very passionate about it. You're so good at it and it's, you know, you know, you're lane type thing and you know what you're really good at. And I would say without even having you on this show, if anybody is to wonder and think who is the reverse mortgage expert, they would always think of you.

Speaker 4 (09:42):

I hope so. <laugh>

Speaker 3 (09:43):

It literally says reverse mortgage expert out of

Speaker 2 (09:47):

Oh, does it? Oh, good. <laugh>.

Speaker 4 (09:49):

Um, yeah. So I'm a South shore guy, grew up in Pembroke. Yep. Up in North Pembroke as a kid. Mm-hmm. <affirmative> and live in situate now with my wife and daughter. Been there 21 years, got in the mortgage business in early 2003. Mm-hmm. <affirmative> started doing traditional mortgages, Fannie, Fred, va, all the various loans you guys have been involved in. Mm-hmm. <affirmative>, I did my first reverse in oh five mm-hmm. <affirmative> for the same company. And at the time I was approached by this couple in Dorchester mm-hmm. <affirmative>, I didn't know enough about it, so I was inclined to say, ah, I don't know if about those stay away from those things. And so I said, let me just get back to you. So I, I did some research on it and I, I couldn't find anything wrong with it. Mm-hmm. <affirmative> other than it's not for everybody, right? Yeah. It's for specific people. So after that I saw the improvement it made in that couple's life and I said, wow, this is really an amazing product. What is going on out there in the marketplace? Why do people have all these stigmas and preconceived notions? Mm-hmm. <affirmative>, I, I'm like, do I, do I know more than the rest of the country knows?

Speaker 2 (10:49):

Do I know more than the average?

Speaker 3 (10:50):

Like, I would start to question myself like, am I wrong? Am I, am I thinking that this is like the greatest thing ever? Like why isn't everybody see this? Mm-hmm.

Speaker 4 (10:58):

<affirmative>. So the long story short is I don't wanna drag it on, we only got an hour, is I did that reverse and I saw the impact it made on that couple, right? Mm-hmm. <affirmative>. And then I did another one at that closing, the woman was crying. I didn't know why she was crying. I thought maybe something was going on personally a death or something. Yeah. And I said, is everything all right? And she goes, I'm just so happy that it's gonna keep me in my house. Mm-hmm. <affirmative>, I'm out from under this financial pressure. Yeah. I grew up in this house and I drove away from that close and I said, what is going on here? Yeah. Everybody thinks this thing is bad. Mm-hmm. <affirmative>. Mm-hmm <affirmative>. And here I am witnessing and forward mortgages, you know, it's a commodity, right? Mm-hmm. <affirmative>, so I do a loan for you, I do a good job.

(11:34):

It gets closed smoothly. Yeah. But you're gonna check around. Yeah. With others, when you get another mortgage, you're always gonna come back. So this is different. It's more of a niche. You, it's more consultative. So I love the 62 plus demographic mm-hmm. <affirmative> because I just was raised as someone who always was taught, just always do the right thing thing for people mm-hmm. <affirmative>. So it just fit well for me. And so the long story short is I, I kind of slowly got away from forward mortgage lending mm-hmm. <affirmative> and got more into reverses. And since about 2009, I think that was the last forward mortgage I did. Wow. And I just do this.

Speaker 3 (12:07):

Have you seen sort of like a correlation of how many people are doing reverse mortgages when there's like not a lot of inventory? So like, say they might wanna stay in their home, but maybe the number one reason why they wanna stay in their home is because they don't know where they would go. Um, and right now we have very limited inventory. Yeah. So I would think that, you know, anybody who has been in their home for a while and has that equity and sort of is worried about not knowing where they're gonna go, would this be something that they should consider or

Speaker 4 (12:39):

Yeah. Yeah. I mean the good news with a reverse mortgage is you can use one to stay in your home. Mm-hmm. <affirmative>, you can also use one to sell the home you're in. Mm-hmm. <affirmative>, figure out your net proceeds and have Sharon help you find another house to live in. Yeah. And we take a mortgage out on that. It's a reverse mortgage. Mm-hmm. <affirmative> and your money, your down payment money comes from the house you just sold. So you can use a reverse to stay in refinance. Yeah. Or go and purchase your next home. Yeah. So it can be used for a purchase transaction or refinance. So yes, the answer to your question is, but they don't know that. So when I sit down with 'em, I say, are you open to moving? Because if I'm sitting down with a woman who just lost her husband mm-hmm. <affirmative> and I see this four bedroom colonial. Yeah. With a three quarter acre lot, I'd always have to say, you open a selling. Mm-hmm. <affirmative> seems like an awful love for you to manage.

Speaker 2 (13:24):

And it is, it's a lot to manage. Right. I think that that's, and you know what, it's, you know, people who can't do it on their own and now they're, you know, if they do the reverse mortgage, it's almost sad to think that they, now they're paying for someone to do the lawn and to do like all that maintenance and stuff. It's almost like they're doing, they're giving that money away where they could sell it, get into something smaller. We call it right sizing around here, uh, the right size for you right now. Um, that, that's a really good option. And that option is different cuz I know I've heard of people in the past saying that they were gonna get a, you know, home equity loan and use that money to then purchase something. Right. So this is different.

Speaker 4 (14:02):

Yeah. It's different. You just think of it like when you're working with someone who's using a mortgage as part of the house they're buying mm-hmm. <affirmative> through you. Mm-hmm. <affirmative>, it's the same thing. It's just, they might be, if they're selling a house and it's a contingency just using a forward mortgage, mortgage example, so you got a client looking to sell and they're looking to buy another one through you. They have a contingency to sell though, right? Mm-hmm. <affirmative>. So it would, the same would hold true here. Mm-hmm. <affirmative> in most cases, a retiree's gonna need the money from the house they're selling to put down. It's gonna be roughly half on the next house and that other half's gonna come from a reverse mortgage. So it's about a 50% down payment, 50% reverse mortgage.

Speaker 3 (14:40):

So I'm just looking at as like, um, from the seller's perspective, so say you get an offer on your home and that buyer is doing a reverse mortgage to purchase your home. Do you have to, would that be in their like pre-approval or like how does that, because I would think that there might be a little stigma there as well. Mm-hmm.

Speaker 4 (14:58):

Unfortunately there would, right, there is a stigma there. Mm-hmm. <affirmative>, but if someone's pre-qualified for a fanny loan, a Freddie, a VA, or an fha. There is the stigma though. You're right. Because people say they're using a reverse mortgage to buy, forget that off of Sharon.

Speaker 3 (15:11):

Well that's why something's gonna blow up. That's why it's so important for us to be educated on these loans because we're the ones who are relaying the information to, to our sellers or our clients. So it's, we talked about this last week, and I don't mean to interrupt you cuz I did ask you a question's. That's okay. And we talked about this last week with va, um, with VA loans. It, there, there sometime is a stigma around there, but if we just educate our clients about no, these are great loans mm-hmm. <affirmative>, like, you know, if they wouldn't be qualified for it, if like

Speaker 4 (15:41):

I have to prequalify 'em. So if someone's gonna qualify for reverse mortgage, then they're qualified, they're going to get the money. Um, unless something goes sideways, healthwise during the process mm-hmm. <affirmative>, but yes. But the, for a lister looking at several offers, and it depends on the market cuz we just came out of a market that they might say, nah, I'll take the cash off. Mm-hmm. <affirmative>. But if things go back to a balanced market and there are contingencies accepted, it's just a mortgage mm-hmm. <affirmative>, so it doesn't matter if it's Fanny, Freddie, va, fha, they've been pre-qualified for a mortgage mm-hmm. <affirmative>, it doesn't matter what the label is

Speaker 3 (16:13):

Mm-hmm. <affirmative>

Speaker 4 (16:14):

As far as the lister's concerned, it, it's gonna have no effect. They're pre-qualified for it. So it's their money, they're borrowing to buy your house.

Speaker 2 (16:21):

Yeah. The seller shouldn't have to worry. They have the, i, you know, they shouldn't really care where the money's coming from. It's coming. Right.

Speaker 4 (16:27):

And someone's pre-qualified them, whether it's putting 80% down or 3% down. Mm-hmm. <affirmative>, it's a mortgage. Again, they're just getting more money from a bank, but they're pre-qualified to do that. So that letter should reflect that. So it shouldn't have any effect on,

Speaker 3 (16:43):

On how the seller feels.

Speaker 4 (16:44):

Now I get it again, going back to what the market is now mm-hmm. <affirmative>, if I was a lister, I'd be taking cash offers to, it's just the path of least resistance. Yeah. In most cases. But

Speaker 2 (16:53):

Yeah. And we're not seeing so much on the, you know, there isn't, I mean there is a lot of cash that's still out there, but at certain properties that we're sort of seeing that on mm-hmm. <affirmative>, um, but I think we actually said this last week as well is, you know, the, the, the harder part is is educating the listing agents Yes. And making the listing agents aware of what these programs are and how they work. So they're not the ones that are saying, you know, just writing it off like, Hey, if I were you, I wouldn't bother doing this one or that one. Mm-hmm. <affirmative>, you know. Yeah.

Speaker 4 (17:23):

Yeah. I think in years to come, you're gonna see, because my age, we're not gonna be afraid of reverse mortgages. I'm 55, it's just not afraid of it. Mm-hmm. <affirmative>, um, I think in years to come it's gonna become more mainstream. Mm-hmm. <affirmative> where listers are gonna be more familiar with reverse mortgages. Mm-hmm. <affirmative>, it's just been in the market now for 34 years and 10 years, so now it'll be 44 years. Mm-hmm. <affirmative>. So I think as people become more familiar and