Forward in Reverse

The Reverse Mortgage has shifted into a new gear. The loan program that allows people to tap their home’s equity for income can now be used to either buy or refinance a home.

The Reverse Mortgage is backed by FHA, and was created for people over 62 years old to refinance the equity in their home, eliminate monthly payments, and use the money as a cash advance or monthly income, with the guarantee that they will never owe more than their house is worth.

The program now also allows for people over 62 to buy a home and finance the debt as a Reverse Mortgage so they have no monthly payments, and receive money instead.

“The Reverse Mortgage completely changed my life,” says Carol Hennison. “After my husband passed, I couldn’t keep our home. The payments and upkeep were too much. ”

 Carol sold her home and with the proceeds made a down payment on her newer, smaller place. She financed the purchase with a Reverse Mortgage, which allows her the choice of taking cash advances or receiving monthly payments. Carol chose to receive the monthly payments.

“I have no loan payment and I receive monthly income,” she said. “I can’t believe it!”

The catch is that Carol’s loan balance grows over time, as she receives payments, and the loan balance could eventually exceed the value of Carol’s home. If that were to occur, though, the lender can never pursue her or her heirs for anything. The Reverse Mortgage program is designed to keep people like Carol in their homes and the payments she receives will continue until she moves or dies. If there aren’t enough proceeds from the sale of the house to pay off the loan, the lender takes the loss.

John Baxton was behind on taxes and insurance for his house, and late on his mortgage payments. “The last thing I wanted to do was sell my house, but it looked inevitable,” he says. “Then my son heard about this program and I was saved.” Baxton refinanced into a Reverse Mortgage which ended his house payments and gave him monthly income, as well as cash to bring his taxes and insurance current.

“Now I can stay here and live very comfortably.” he said. “It’s quite a reversal!”

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Doug Love is Sales Manager at Century 21 Jeffries Lydon. Email escrowgo@aol.com or call 530-680-0817.

Muted Market

“Man, the Stock Market has been going up and down like a yo-yo,” said my friend JP. “Now it’s down and just hanging there, like a yo-yo unwound. And when it’s down, my blood pressure is up.”

JP poured his fourth cup of coffee. His hand shook as he pointed at me and said, “We’ll see the Real Estate market go down, too. My blood pressure is going up as we speak.” He lifted his coffee cup and gulped.

“You think it might be because of all that coffee?” I asked.

“No. Coffee futures are pretty stable. It’s the big corporate stocks taking down the market.”

I called the Finance Guy and put the phone on “speakerphone”.

“Will the Real Estate market be affected by the Stock Market?” I asked.

“Traditionally, the fibrillation frequencies in housing do not synchronize with the radical fluctuations seen in commodities,” said the Finance Guy. “The obligation elements inherent in the purchase and maintenance of real property discourage extreme speculative behavior such as one might witness inside the hallowed confines of the Stock Exchange.”

“Huh?” said JP. I pushed the “mute” button to screen out JP’s comments.

“However,” continued the Finance Guy, “at times, Real Estate markets do go through periods of irrational exuberance, wherein price points may indeed display such aforementioned fluctuations.”

JP rolled his eyes. “Irrational exuberance?” he whispered.

I said to JP, “The phone is on ‘mute’ so you can talk.”

“Good,” said JP. “This guy’s a real egg-head.”

“I heard that,” said the Finance Guy.

“Oops.” I pushed the ‘mute’ button again.

The Finance Guy went on. “Considering the binary nature of investments with Real Estate and stocks we find a certain commonality in cause and effect.”

JP leaned back, closed his eyes, and patted his mouth with the palm of his hand, as if stifling a yawn.

On went the Finance Guy. “Your question, I assume, is promulgated by the current Stock Market downturn. One cause is the recent pattern of storms, snow, and ice that have stalled economic activity, affecting the Stock Market, and in turn Real Estate, but I assure you, for the very short term.”

“What did he say?” said JP.

“I think he said the Real Estate market and Stock Market are affected by the weather,” I said.

“The egg-head is also a weatherman?” queried JP.

“I heard that.”

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Got a question or comment? I’d like to hear from you. Email escrowgo@aol.com or call 530-680-0817. Doug Love is Sales Manager at Century 21 Jeffries Lydon.

 

In Reverse

“I’m tired,” said my old friend Carlene. “I just want to stay in this house and die here.”

Carlene and I had been driving around town checking out apartments for her to rent. She couldn’t afford the loan payment on her house anymore and she had decided to sell to acquire funds to live on.

“Let’s have a drink,” she said, as she collapsed into her easy chair and fired up a cigarette. It had been a rough afternoon. Carlene was arthritic and weak.

“I’d rather be back on the ranch digging ditches and skinning rabbits than dragging my old carcass around town with the likes of you,” she said.

“Thanks a lot,” I said.

“Ha! I’m just gettin’ your goat,” she said. She cackled and blew smoke.

“And I am gonna list my house with you. You don’t have to kill me first.”

She hurled a folded-up newspaper at me. “What do you think about this?”

An advertisement was circled: “Reverse Mortgage. Over 62 years old? Let your home’s equity pay you income! Stay in your home with no payments! Free consultation!”

This was back in the early 1990’s, and I had never heard of a Reverse Mortgage.

“Sounds fishy,” I said.

“I called the 800 number,” she said, “and some loan guy is coming here tomorrow. You want to be here?” In other words, she expected me to be there.

The loan guy drove 90 miles to meet Carlene. He laid out the Reverse Mortgage plan, and it seemed too good to be true, so I called a local loan person I knew.

“It’s a new product,” she said. “We don’t have it here yet, but my understanding is that it’s perfect for older people who want to stay in their home. It’s a cash flow tool, drawn from the equity in their home.”

Carlene signed up for that Reverse Mortgage and it fit her situation like a glove. No more house payments for her. In fact, she now received a check every month.

“Pour us a drink and let’s celebrate,” said Carlene. She fired up a cigarette. “Well sir, I know you’re sad you have to wait till I die to list my house now.”

“What? No….!”

“Ha! Got your goat again, kid!”

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Doug Love is Sales Manager at Century 21 Jeffries Lydon. Email escrowgo@aol.com or call 530-680-0817.