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Reverse Mortgage.

Superfly said:
I don't have one, so my experience is relative to what I've read and seen about them.

That being said, in my opinion, they just look like a way to cheat elderly people out of their homes for pennies on the dollar.

Again, that is my unprofessional opinion, so I could be wrong. I'm quite sure that if I am, someone here will be sure to let me know. :lol:
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I agree with you.
 
Checkerboard Strangler said:
By $8M I assume you meant eight THOUSAND?
Wow, that is a huge fee.
You couldn't possibly mean eight MILLION...which is what I thought "M" stands for.
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in the finance industry, at least in my experience, writing "$M" is thousand, "$MM", million
 
Felis Leo said:
Speaking solely from my experience as a California bankruptcy lawyer, and though I am generally loath to do this, I would issue the blanket advice of never getting a reverse mortgage. Not unless your life literally depends on it. Because here in California, if you fail to maintain homeowners insurance or if you fail to maintain your property taxes, you will instantly be in default and the reverse mortgage lender can move to foreclose upon the property. That is to say nothing of other vagaries of other state's reverse mortgage lenders who may be even more rapacious and predatory. The only way to win a bargain with the Devil is to not sign your soul away. The only way to profit from a reverse mortgage is to never take one out against your home.
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I wouldn't ever want to move back to Dallas, normally.
However, the home we owned back there was purchased for $172K.
In 2014 we purchased our Whittier home for $475K.
Today it is worth close to $700K (appx $670-690K) which means that if we sold the home right now, we would be able to theoretically purchase that home all over again for cash and have some left over.
And that's just within a four year period, so imagine if it was ten years from now and the market continues as it is now.
The point I am making is, Felis Leo has some good points. We do not have a ton of equity in this home yet but the market value is damn good.
If this home were already paid off or we did have a ton of equity in it, it would still be a better idea to sell the home instead of getting a reverse mortgage.

A friend of mine had a mother who owned a paid off home in the Venice historic area which was nothing short of iconic.
She had secured a RM without her daughter knowing it and when she took gravely ill her daughter finally found out that she would never inherit her mother's beautiful home.
It was a heartbreak, as she was, at that time, in a position where she could have taken it over.

She did not get much back either, the RM proved to be a bad idea.
I don't know much about real estate but it was a tragedy watching this dear friend losing her mother and then being forced from this breathtakingly beautiful home shortly thereafter.
 
Checkerboard Strangler said:
I wouldn't ever want to move back to Dallas, normally.
However, the home we owned back there was purchased for $172K.
In 2014 we purchased our Whittier home for $475K.
Today it is worth close to $700K (appx $670-690K) which means that if we sold the home right now, we would be able to theoretically purchase that home all over again for cash and have some left over.
And that's just within a four year period, so imagine if it was ten years from now and the market continues as it is now.
The point I am making is, Felis Leo has some good points. We do not have a ton of equity in this home yet but the market value is damn good.
If this home were already paid off or we did have a ton of equity in it, it would still be a better idea to sell the home instead of getting a reverse mortgage.

A friend of mine had a mother who owned a paid off home in the Venice historic area which was nothing short of iconic.
She had secured a RM without her daughter knowing it and when she took gravely ill her daughter finally found out that she would never inherit her mother's beautiful home.
It was a heartbreak, as she was, at that time, in a position where she could have taken it over.

She did not get much back either, the RM proved to be a bad idea.
I don't know much about real estate but it was a tragedy watching this dear friend losing her mother and then being forced from this breathtakingly beautiful home shortly thereafter.
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what was not tragic was that the home owner was not forced live hand to mouth in her final days because she had access to additional income from the proceeds of the reverse mortgage

if her daughter actually did have the means to cover the outstanding reverse mortgage, then she could have simply paid off that note and become the heir to the now unencumbered residence. that she did not tells me she was either without the means and/or the real property was not worth the balance due, to said heir
 
justabubba said:
what was not tragic was that the home owner was not forced live hand to mouth in her final days because she had access to additional income from the proceeds of the reverse mortgage

if her daughter actually did have the means to cover the outstanding reverse mortgage, then she could have simply paid off that note and become the heir to the now unencumbered residence. that she did not tells me she was either without the means and/or the real property was not worth the balance due, to said heir
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You didn't understand what I was saying.
I meant that she was in a position to take over the house had it NOT been encumbered with a RM.
And her mother was not living "hand to mouth"...it wasn't THAT BAD...and the one sin the daughter committed was simple youthful naivete, not realizing that Mom was having a grand old time on money that came from the RM.
Daughter grew up in a damn hurry, I'll just say that much.

When she finally learned what was happening, she made a valiant effort to do just as you mentioned but it wasn't enough.
She never dreamed that she would wind up in that position, that's all, she had no idea because Mom never mentioned until right before the end.
 
justabubba said:
that only makes sense if your home is massively overbuilt for your current needs AND if the closing costs of two transactions (first selling, then buying), is not significant ... which for most seniors needing the income from a reverse mortgage is unlikely
otherwise, those transaction costs will eat into the gains of downsizing. and that is before the pain and expense of moving into a new, smaller home
if your desire in retirement is to reside in a tiny home, then consider the above advice. if not, such advice is only worth what you paid for it
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Or, alternatively, one can simply keep the home they have managed to pay off or inherit, do their best to live within their means and pay their basic living expenses, and not have to worry about losing the roof over their head.

justabubba said:
now compare that with the retiree staying in their paid-for home, and realizing about 80% of its value in cash. paying NO mortgage on said large income. that (estimated - depends on age) 80% of the home value will likely exceed what one would realize from downsizing. and those funds can then be invested, in a way suggested above, or in a more prudent fashion
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A minor irritant, but I must point out: A reverse mortgage is not income, either for purposes of the United States Internal Revenue Code or the Bankruptcy Code. It is a loan advance. It is no more income than incurring a hard money loan is income.

justabubba said:
absolutely bull****. but prove me wrong with data supporting your allegation. i will speak to why below
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I literally just said that my opinion arises from my experience as a bankruptcy attorney, dealing with everyday elderly people who were advised or encouraged to use their home as a credit card. I have not run some form of actuarial analysis on the matter to determine the number of people who lost their homes versus the number who kept them due to defaulting on the terms of the reverse mortgages. Perhaps the vast majority of the people you know who have mortgaged their homes have walked away and led happy lives, no harm no foul. Bully for you, and bully even more for them. Those are not the people who have come into my office needing to file Chapter 13 reorganizations to cure the default on a reverse mortgage.

justabubba said:
there are instances when a reverse mortgage makes little sense, but for a homeowner who needs a greater income than what is available from present social security, and possibly retirement/savings, a reverse mortgage probably makes a lot of sense. remain in your home at no cost and realize about 80% of its value in cash, WITHOUT HAVING TO PAY THAT INCOME BACK. where else can one realize 80% of the value of a home in cash and never have to repay those monies
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By all means, I should be happier if more people took your advice and are led down the primrose path. The more retirees who take out reverse mortgages against their homes means more people likely to default on the terms of the reverse mortgage, which means, ultimately, more clientele for bankruptcy attorneys like me who can file their Chapter 13 reorganizations and cure their defaults. I should be cheering you on in your encouragement (or at least maintain my silence), as their misfortune would be my gain. Except I prefer not to artificially generate business by encouraging others to engage in endeavors that dramatically increase the likelihood of their stumbling into ill fortune.
 
justabubba said:
i would revise that to say if continuing your present LIFESTYLE depends on it, then a reverse mortgage is often the best option available to the senior homeowner
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My advice is geared towards making sure people are most able to remain homeowners (presuming they want to be homeowners), not maintain a certain "lifestyles" by borrowing against their homes under the belief that the piper shall never have to be paid.

justabubba said:
i would have thought an attorney would recognize that any mortgagor would be obligated by the mortgagee to maintain insurance on the collateral securing the loan. why would the senior home owner, likely beyond the age to resume a career, not want to be insured against the loss of their residence. and as to unpaid ad valorem taxes, the tax collector will foreclose for nonpayment just as would a lender. the point being, the potential fears addressed by this "bankruptcy lawyer" are illegitimate since those taxes and insurance obligations would be borne by any rational homeowner. but significantly, the senior homeowner who has realized 80% of the value in cash on the home they are still living in, will certainly have the means to pay both taxes and insurance premiums from said reverse mortgage windfall
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Again, payments upon a reverse mortgage are not income and they are not a windfall, any more than a home equity line of credit is income or a windfall, or a cash advance on a credit card is income for that matter. It is a loan secured by collateral, i.e., the person's house. Let us at least deal with the truth of first principles before we go on to deal with what is advisable under any given person's particular circumstances. As far as the insurance and property taxes being borne by a "rational homeowners," can you not concede to the fact that perhaps in some instances, some elderly retiree might not be fully rational (or remain fully rational) while the terms of the reverse mortgage remain in full force and effect? That some elderly people might either be taken advantage of, or might lose the fullness of their faculties over time?

justabubba said:
the licensing restrictions on reverse mortgage brokers are more rigid than those brokers who write conventional mortgages. possibly causing them to be more skilled, on average. and no rational person would close a mortgage, even a reverse mortgage, without the advice of counsel.
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Perhaps the elderly people of your state are some of the most rational, clear-minded, sharp-witted people on earth, and your state's attorneys are the cheapest when it comes to reviewing lending contracts for people who feel that they need the extra money. But the people here in my area who have taken out reverse mortgages and then came in to see me later did not have the foresight or the full grasp of what they were being offered when they signed for the reverse mortgage. They saw the advertisements, or were given offers of these reverse mortgages, and trusted the smiling loan brokers proffering them what was characterized as a massive amount of "income" to them. But of course, since the only people who would default on the terms are, as you imply, not rational, perhaps they deserved to lose their homes?

justabubba said:
in my state that counsel's signature is required at closing, as is the mortgagee's execution showing that they have been fully informed about the unique aspects of the closing reverse mortgage
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Bully for your state's legislature for passing sensible lending laws. But that is not the case in California. We are the wild west apparently.

justabubba said:
again, bull****
if a senior homeowner is being strained financially due to the reduced income of retirement, the reverse mortgage is likely going to prove a very adequate solution to their problem
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Perhaps. I try not to make assumptions. But were I asked for my advice as to whether one should take out a reverse mortgage, based on my experience, I would advise one against it.


justabubba said:
the persons who have something to lose from reverse mortgages are the heirs. that reverse mortgage provides the value of the home to the seniors to spend on themselves, thereby depriving the heirs of that home equity upon the demise of the seniors residing in that home
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Yes. Certainly. And sometimes it is the children who not only stand to inherit no real estate, but instead they inherit their now-homeless dotty mother or father who lost their home when the reverse mortgage foreclosed and they didn't realize they had to continue paying for homeowner's insurance.
 
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Felis Leo said:
Or, alternatively, one can simply keep the home they have managed to pay off or inherit, do their best to live within their means and pay their basic living expenses, and not have to worry about losing the roof over their head.
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https://www.cnbc.com/2017/06/19/heres-how-many-americans-have-nothing-at-all-in-savings.html
Most people in the U.S. are living in financially precarious circumstances. Half of all Americans have nothing put away for retirement and the vast majority of them have under $1,000 saved, total.

According to a 2016 GOBankingRates survey, 35 percent of all adults in the U.S. have only several hundred dollars in their savings accounts and 34 percent have zero. Only 15 percent have over $10,000 stashed away.
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so, 69% of Americans have between zero and a few hundred dollars put away. expanding that to 84% tells us that range is now between $0 and $10,000
people tend to spend for today with little thought about tomorrow. so, when the seniors retire, their obligations have become established while their income is typically reduced
and now you tell them to reduce their spending to match their reduced income. however, for many, if not most, their obligations are already set
and then there is death. something which cannot be controlled by one's surviving spouse. two incomes from social security and possibility retirement (and defined retirement plans are in steep decline) suddenly become one income
in my experience, THIS is what most often presents the need for the surviving senior to seek a reverse mortgage. it provides them with a massive nest egg that they would not realize elsewhere. and it constitutes money they will not have to repay

A minor irritant, but I must point out: A reverse mortgage is not income, either for purposes of the United States Internal Revenue Code or the Bankruptcy Code. It is a loan advance. It is no more income than incurring a hard money loan is income.
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and you are accurate in that semantic clarification. however the loan proceeds the senior does not have to repay can and should be the monies realized from the reverse mortgage to generate an additional income stream which would not be possible but for the proceeds of the reverse mortgage. my use of the term "income" was applied in this sense

I literally just said that my opinion arises from my experience as a bankruptcy attorney, dealing with everyday elderly people who were advised or encouraged to use their home as a credit card. I have not run some form of actuarial analysis on the matter to determine the number of people who lost their homes versus the number who kept them due to defaulting on the terms of the reverse mortgages. Perhaps the vast majority of the people you know who have mortgaged their homes have walked away and led happy lives, no harm no foul. Bully for you, and bully even more for them. Those are not the people who have come into my office needing to file Chapter 13 reorganizations to cure the default on a reverse mortgage.
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no doubt your experience is valid; there must be those awful money managers who squander their nest egg realized from the reverse mortgage proceeds, who then have nothing left to then pay for the requisite hazard insurance premiums and ad valorem taxes due on their homes. but i would submit, such poor money management issues are not caused by a reverse mortgage. if anything, access to such monies only delays their visit to your office

By all means, I should be happier if more people took your advice and are led down the primrose path. The more retirees who take out reverse mortgages against their homes means more people likely to default on the terms of the reverse mortgage, which means, ultimately, more clientele for bankruptcy attorneys like me who can file their Chapter 13 reorganizations and cure their defaults. I should be cheering you on in your encouragement (or at least maintain my silence), as their misfortune would be my gain. Except I prefer not to artificially generate business by encouraging others to engage in endeavors that dramatically increase the likelihood of their stumbling into ill fortune.
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from the quote above, revealing that only 16% of our nation's population can put their hands on more than $10,000, 69% on a few hundred dollars or less, tells me that a C13 practice should earn you a good living for however long you choose to represent that cohort not found financially astute
 
Reverse mortgages are a scam designed to screw the elderly out of their most valuable asset for a pittance. The actors who peddle them to the gullible should be ashamed.
 
Helix said:
Reverse mortgages are a scam designed to screw the elderly out of their most valuable asset for a pittance. The actors who peddle them to the gullible should be ashamed.
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absolute bull****
it is actually a loan of home equity to seniors without a payment obligation to them
it is a way for seniors to use their home equity to offset their lack of income

now, heirs do not like it, because they assume they are going to inherit the home. but now it is a home with a mortgage attached. a mortgage the heirs will have to pay if they want the home. just the way it should be
 
Felis Leo said:
My advice is geared towards making sure people are most able to remain homeowners (presuming they want to be homeowners), not maintain a certain "lifestyles" by borrowing against their homes under the belief that the piper shall never have to be paid.
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and it is true for the prudent homeowners that the piper will never have to be paid - BY THEM

instead, to realize the home, the heirs will have to pay off the reverse mortgage balance
and that is as it should be. the seniors should not have to reduce their standard of living because they are house poor
using a reverse mortgage, they can now cash in on their equity and enjoy it to live out their last days

Again, payments upon a reverse mortgage are not income and they are not a windfall, any more than a home equity line of credit is income or a windfall, or a cash advance on a credit card is income for that matter. It is a loan secured by collateral, i.e., the person's house. Let us at least deal with the truth of first principles before we go on to deal with what is advisable under any given person's particular circumstances.
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we have already addressed the semantics of this. the "income", the proceeds of the reverse mortgage, can and should be used by the seniors to generate an income stream to supplement their social security and whatever other resources they may have. since the seniors will not be around to pay in full that reverse mortgage, it is the equivalent of a "windfall". 80% of the value of the house one lives in paid over to the residents in cash from a loan they will not have to pay back would be found a windfall to most of us

As far as the insurance and property taxes being borne by a "rational homeowners," can you not concede to the fact that perhaps in some instances, some elderly retiree might not be fully rational (or remain fully rational) while the terms of the reverse mortgage remain in full force and effect? That some elderly people might either be taken advantage of, or might lose the fullness of their faculties over time?
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having been the primary caregiver of my mother and mother-in-law, both of whom suffered from dementia, i can certainly recognize that prospect. which reality should advise the family that someone needs to step in and help out the infirm senior with their financial and physical needs. that they do not is not caused by the reverse mortgage

Perhaps the elderly people of your state are some of the most rational, clear-minded, sharp-witted people on earth, and your state's attorneys are the cheapest when it comes to reviewing lending contracts for people who feel that they need the extra money. But the people here in my area who have taken out reverse mortgages and then came in to see me later did not have the foresight or the full grasp of what they were being offered when they signed for the reverse mortgage. They saw the advertisements, or were given offers of these reverse mortgages, and trusted the smiling loan brokers proffering them what was characterized as a massive amount of "income" to them. But of course, since the only people who would default on the terms are, as you imply, not rational, perhaps they deserved to lose their homes?



Bully for your state's legislature for passing sensible lending laws. But that is not the case in California. We are the wild west apparently.
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again, the reverse mortgage should never be seen as a panacea which will cure dementia and/or weak financial acumen
if the senior suffers from dementia or has not shown a history of being good handling their money, then why would anyone expect them to be prudent with their money realized from a reverse mortgage or to handle their other obligations in a responsible manner

Perhaps. I try not to make assumptions. But were I asked for my advice as to whether one should take out a reverse mortgage, based on my experience, I would advise one against it.
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that sounds like poor lawyering. while the reverse mortgage is not appropriate in every instance, neither is it something to refuse to consider in others. the solution should fit the clients needs and problems. as a lawyer to your clients, do you not have a fiduciary responsibility to advise what is best for their interests?

Yes. Certainly. And sometimes it is the children who not only stand to inherit no real estate, but instead they inherit their now-homeless dotty mother or father who lost their home when the reverse mortgage foreclosed and they didn't realize they had to continue paying for homeowner's insurance.
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and by not looking after their parents, who needed someone to timely evaluate their circumstance, they have brought an ever larger problem upon themselves. sorry?
 
justabubba said:
absolute bull****
it is actually a loan of home equity to seniors without a payment obligation to them
it is a way for seniors to use their home equity to offset their lack of income

now, heirs do not like it, because they assume they are going to inherit the home. but now it is a home with a mortgage attached. a mortgage the heirs will have to pay if they want the home. just the way it should be
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It isn't bull****, and I suspect that on some level, you know it.
 
Helix said:
It isn't bull****, and I suspect that on some level, you know it.
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not at all
for persons who would realize little equity from pledging their home, it is probably not a worthwhile pursuit
for seniors with adequate incomes to maintain their standard of living, no point pledging the home for the unnecessary funding
but for the retiree whose income is not close to what is needed to maintain a lifestyle, then the reverse mortgage makes a lot of sense
that home equity does the senior little good, other than providing a home in which to reside
that senior now still gets to stay in that home without being subjected to mortgage payments, but then also gets to realize most of the equity in the home in cash. cash that the senior does not have to repay as long as they live in the home. and if they can no longer live in that home, why do they care if it must be sold to pay that reverse mortgage. they have both lived in it while they were able and also got most of the cash value of the home out of it
it's usually a great deal - except for the heirs
 
justabubba said:
not at all
for persons who would realize little equity from pledging their home, it is probably not a worthwhile pursuit
for seniors with adequate incomes to maintain their standard of living, no point pledging the home for the unnecessary funding
but for the retiree whose income is not close to what is needed to maintain a lifestyle, then the reverse mortgage makes a lot of sense
that home equity does the senior little good, other than providing a home in which to reside
that senior now still gets to stay in that home without being subjected to mortgage payments, but then also gets to realize most of the equity in the home in cash. cash that the senior does not have to repay as long as they live in the home. and if they can no longer live in that home, why do they care if it must be sold to pay that reverse mortgage. they have both lived in it while they were able and also got most of the cash value of the home out of it
it's usually a great deal - except for the heirs
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I don't support anyone getting taken advantage of, but I have a special level of contempt when it's done to struggling elderly people.
 
Helix said:
I don't support anyone getting taken advantage of, but I have a special level of contempt when it's done to struggling elderly people.
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i missed how they are being abused when they are given 80% of the equity in there home in cash, without a payment obligation, all the time they continue to reside in the home that yielded them such a substantial nest egg. a nest egg which allows them to enjoy a continued standard of living that would not have been otherwise available to them in their final years
if that is being abused and taken advantage of i would like to see what you consider being taken care of
 
justabubba said:
i missed how they are being abused when they are given 80% of the equity in there home in cash, without a payment obligation, all the time they continue to reside in the home that yielded them such a substantial nest egg. a nest egg which allows them to enjoy a continued standard of living that would not have been otherwise available to them in their final years
if that is being abused and taken advantage of i would like to see what you consider being taken care of
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Not tricking the vulnerable into selling their houses for a pittance using out of work actors would be a good start.
 
Helix said:
Not tricking the vulnerable into selling their houses for a pittance using out of work actors would be a good start.
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they are not tricking them into selling their houses
instead they are giving them 4/5 the value of the home in cash and tell them 'don't pay us back', instead live in this home as long as you are able
if that is "abuse" then please abuse me
 
justabubba said:
they are not tricking them into selling their houses
instead they are giving them 4/5 the value of the home in cash and tell them 'don't pay us back', instead live in this home as long as you are able
if that is "abuse" then please abuse me
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I'm getting the impression that you make money off of this practice. Granted, slimy corporate practices are ubiquitous. Defending them is a bit sktchy, but whatever gets you through the night, I guess.
 
Helix said:
I'm getting the impression that you make money off of this practice. Granted, slimy corporate practices are ubiquitous. Defending them is a bit sktchy, but whatever gets you through the night, I guess.
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you remain confused
seniors do not sell their homes - instead, they live in them while given 4/5 the value of that home to live on - without having to pay those minies back during their lifetimes
you still have not been able to identify the "abuse" that those seniors sustained
 
justabubba said:
you remain confused
seniors do not sell their homes - instead, they live in them while given 4/5 the value of that home to live on - without having to pay those minies back during their lifetimes
you still have not been able to identify the "abuse" that those seniors sustained
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It's already been thoroughly explained to you. Shall I link you to the first page of the thread?
 
So people do this to get an extra money stream to "supplement" their social security? I thought SS was in itself supposed to be supplemental to a benefit paid for in part by the employer, OR, going further back in history, a self funded savings account, OR owning rental property?.

This change was not created overnight by forward thinking individuals but by legions of "financial advisors" whose primary goal has been to garner for themselves a portion of the wealth of others....
 
Helix said:
It's already been thoroughly explained to you. Shall I link you to the first page of the thread?
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there is nothing there that explains the "abuse" heaped upon seniors due to a reverse mortgage
you have been unable to point to any form of "abuse" incurred by those who opt for a reverse mortgage
 
justabubba said:
there is nothing there that explains the "abuse" heaped upon seniors due to a reverse mortgage
you have been unable to point to any form of "abuse" incurred by those who opt for a reverse mortgage
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The abuse is that the reverse mortgage lenders are preying on desparate old people to put them in a situation in which they essentially forfeit their houses for much less than the property is worth. That's slimy, IMO.
 
Rich123 said:
Love your Chomsky Quote. Thanks for your input. I'm very cautious. Love to get a lot of opinions about important decisions. Love your Caricature . The bar is soooooo low.
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Yeah, so what I know about them, not having one, is that, you sign over your deed, and you receive what is in effect a fixed annuity based on your equity or what you may negotiate if your house is paid off. I'm sure that people don't get what they're worth, but businesses are kind of like that anyway. Both names have to be on the deed as far and I know, because one old lady got evicted after her husband passed and I'm sure it was because she either didn't sign, or was not on the deed...

Personally, if I was going to go that route I'd: run company names through consumer reports and the BBB, research the heck out of different types of reverses, get as much together as I could so that I'd know the language (very important) and THEN talk to a lawyer: you'll get better results having a full deck before you walk in.

Good luck
 
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