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: Part III 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 Medicaid? 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 programs? 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 regulations. 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].