Forward on reverse: Traps for the wary: Reverse mortgages and healthcare benefitsAtare E. Agbamu, CRMSelder law attorney, Medicaid, Medicare, risk mitigation
A conversation with elder law attorney John Gosselin:
Old age comes with company. It arrives with issues. So are reverse
mortgages and public healthcare benefits.
Public healthcare benefits and reverse mortgages have a deeper
and more complex relationship than most originators and customers
suspect. To protect our customers and our business, we will explore
the link this month through December.
To help us understand the connection and what it means for
originators and customers, I spoke with Boston-based elder law
attorney John T. Gosselin. The managing attorney of his own law
firm, Gosselin &
Associates PC, with offices in Massachusetts and New Hampshire,
Gosselin understands reverse mortgages, particularly how they mix
with other elder law issues.
Besides overseeing a vibrant probate administration and elder
law work, Gosselin runs a thriving real estate practice, acting as
counsel or closing agent in more than 20,000 transactions, advising
clients on purchase and sale agreements, mortgages, and financial
and title disputes.
A member of the National Reverse Mortgage
Lenders Association, his firm has advised and represented
lenders in reverse mortgage situations for more than 10 years.
Nothing in this article should be considered legal advice. Seek
competent counsel for your specific situation. The following is
part three of four of our conversation.
Atare E. Agbamu: What are some of the basic questions
you would suggest reverse loan officers ask a potential borrower on
John Gosselin: I think the simplest question is, "Are you
receiving Medicaid?" Some people won't know. They may not
understand how their healthcare is paid for. It would not be
unusual for someone to say no and not understand that the program
they have with a different name in their state is actually a
Medicaid program or that they are receiving a Medicaid benefit. A
lot of people don't understand that they are on welfare. It sounds
strange, but a lot of them are put on the program at the time of
hospitalization by the hospital or by the nursing facility and they
may not have understood that they were put on the program.
Now other people, because the name Medicaid and the name Medicare
are so close to each other, think that they are on Medicaid when
they are really just over 65 and receiving the insurance benefit to
which they are entitled by law. Virtually all borrowers would say,
"Well, of course they have Medicare," or, "Of course they have
Medicaid." The reality is they all have Medicare if they are over
65 and have paid into the system--well over 90 percent of people
over the age of 65. But people who are on Medicaid are the ones on
welfare. Everyone has Medicare. Even an originator needs to be able
to distinguish with their ear a 'care' or an 'aid' program--care is
insurance, aid is welfare.
I [would] even get to the point where every borrower would take
their wallet out and show you their card because each state would
have a card for the benefit that they can use for their healthcare.
I don't think that is asking too much, but you can't, of course,
make people disclose information unrelated to the extension of
credit. Again, if there is a large reimbursement on the table or if
there is a potential that they are going to be audited in their
annual review and shown that they are over asset, the risk of
losing benefits or being forced to reimburse from their home equity
is far outweighed by any simple inconvenience of the borrower by
the originator to clarify whether they are receiving benefits.
(Again, understand, home equity is a protected asset while you are
on benefit. So they can't lose the equity in their home unless they
convert it to cash. And the reverse industry is in the business of
converting equity to cash. That's really the crux of it all.)
AA: Now, would it be a good idea, as part of the risk
mitigation preparation on the part of lenders, for lenders and
their loan officers to gain some basic knowledge of these
JG: Yes. I think state programs themselves will be willing
to help provide that knowledge. Maybe some of the state mortgage
associations [National Reverse Mortgage Lenders Association doesn't
have state affiliates yet, except maybe for Texas] could partner
with the Medicaid program. The Medicaid program is very open about
getting information out there.
I think that they will be willing to work with the reverse
mortgage associations to run programs for lenders about their state
limits. Every state has different regulations. There will be no
problem getting a state agency to participate in that because they
want people to have accurate information. It is in their interest
to have the system run smoothly, and the system won't run smoothly
if expectations are different from reality.
I think that would be one of the first steps to have lenders
consult with either the states elder law bar or with their state
regulators or both. I can see a panel discussion being established
with an elder law attorney and a member of the state regulatory
authority. I also think a company should have an elder law attorney
available to them for quick sales support consultations. Elder law
attorneys are specially attuned to asset protection and Medicaid
As a rule, they are not anti-reverse mortgage. I think a lender
can give itself an advantage by having a strong relationship with
an elder law attorney.
Atare E. Agbamu, CRMS formed ThinkReverse LLC to help
originators address demographic change via reverse mortgages. A
specialist with Credo
Mortgage and a member of the BusinessWeek Market Advisory
Board, Atare is the first to propose reverse mortgages as
risk-management tools for forward originators. Besides marketing,
originating and researching reverse mortgages since 2001, Atare has
authored more than 80 articles and a book on reverse mortgages. He
may be reached by phone at (612) 203-9434 or e-mail [email protected]