The art of reverse mortgages
I locked the car and squinted as I looked up at my prospects house, a beautiful home, painted white with black shutters and surrounded by rhododendrons, azaleas and fir trees. On a closer look, weeds were popping up here and there. Dead plants in the planters box hung from the front step.
Picking the newspaper off the slightly worn welcome mat, I rang the doorbell. And just when I was about to ring it a second time, the deadbolt unlocked and the door opened slowly, but only by a little crackjust enough to allow the homeowner to see who was at the door.
"Good morning, Mary Beth. I'm Sarah Hulbert, here to meet with you about a reverse mortgage."
"Welcome, Sarah. Please come in!" Mary Beth said with a wary smile.
With a breathtaking view of Mount Hood, Ore. in the distance, the living room looked bright and sunny. But the early spring sun couldn't hide the feeling that something was wrong in the home. Despite the rich aroma of fresh coffee, the home seemed empty and sad. A box of tissues sat on the coffee table next to the sofa, complete with a blanket and pillow. Someone had been sleeping there.
Mary Beth poured me a cup of coffee, and we sat down at the kitchen table. She told me her husband died of cancer a month ago. With his death, her Social Security income dropped 50 percent, while the medical bills from his illness piled up.
"I do not want to sell this house, but I don't know what else to do," Mary Beth said. "I cannot afford the property taxes and the maintenance on my income!"
It is a common story, but meeting with prospects in these situations breaks my heart. Her late husband, Frank, had always handled the finances and home repairs. She said he thought that owning their home free and clear with no additional debt meant that she would be financially covered after his death. What they didn't plan for was the mountain of debt that came with his prolonged illness.
I explained reverse mortgages to Mary Beth, but when I saw her eyes cloud over, I asked if she understood what I was saying. She indicated she did, but that she would like to have another set of eyes and ears look at the program with her. We chatted for awhile and agreed to meet again when her neighbor, a real estate agent, could sit in with us. In the meantime, Mary Beth agreed to call a local, non-profit housing counselor to get reverse mortgage counseling, a requirement for all reverse mortgage applicants.
A week later, I returned to meet with Mary Beth and her neighbor. During the meeting, I walked them through the program and explained how she might benefit from a reverse mortgage. Mary Beth decided she was ready to complete the application. An hour later, I was on the road back to my office, where we began processing her reverse mortgage application. About six weeks later, I was back at Mary Beth's house with a traveling notary. The notary and I sat down with Mary Beth and her neighbor to explain the closing documents. Once all the documents were properly signed, the neighbor and notary left, leaving just Mary Beth and me alone to chat.
I gave Mary Beth a copy of the closing documents for her records and asked if she had any questions. "Not at this time," was her answer, "but I am sure I will!" she said with a weak smile. I reminded her of the three-day right of rescission, whereby she had time to review the documents again, call me with any questions and, if she chose, opt to cancel the transaction altogether. She was pleased with this, as she knew she could take her time in the next few days to re-read the documents and ask any remaining questions before her reverse mortgage funded and recorded.
"Now that the reverse mortgage is almost final, how do you feel?" I asked her.
"I'm in shock," she said, "because all I have done since I lost my husband is worry about what I was going to do in the future." She explained that she had been up nights worrying about how to pay the bills, how she would pay her property taxes and what she would do if the furnace or refrigerator went out. She had decided to take out a lump sum of cash, with enough money to pay off her husband's medical bills and leave a small safety-net in her checking account. The remaining funds were left in a line of credit which she could draw on as needed. Interest is only charged on the outstanding loan balance, which meant that any equity she left in the line of credit was not subject to interest charges.
Mary Beth took a deep, shaky breath and said, "Now that I don't have to worry about money anymore, it's time to look at my future and what I want to do. It feels strange not to have my husband here, but now that I know I am secure financially, I feel so free!" She smiled brightly and looked at me with a twinkle in her eye that I hadnt seen in the weeks wed known each other. I feel like I have a new lease on life! If only & she paused and looked up at me while she began wringing her hands.
"What's wrong, Mary Beth?" I grew concerned, as I noticed tears gathering in her eyes. She laughed nervously and said, "I don't know how to say this, but even though I feel this sense of relief, there is something else you could help me with."
Thinking she had more questions or maybe needed help with something around the house, I said, "Sure, whatever you need."
"Now that this money is being deposited in my checking account in a few days, there's something I need to learn." She paused and looked up at me. "I've got a confession to make." "What's that"
"I have the money, but I don't know how to write a check!"
Needless to say, I sat down again at the kitchen table and showed her how to write a check and track it in her register, balancing it with her bank statement. We exchanged hugs and I went on my way. We exchanged Christmas cards for several years, and even though we dont correspond any longer, she is still in my thoughts regularly.
Reverse mortgages have received a great deal of attention in the mainstream media recently. I am often saddened by what appears to be a vision that has gone adrift. It is important that we all hold fast to what I call "the art of reverse mortgages." With all the focus on new products, interest rates, Federal Housing Administration (FHA) modernization, etc., its easy to forget the original driving force behind the creation of reverse mortgages: To help senior homeowners.
Undoubtedly, reverse mortgages can be life-changing for senior homeowners, but the experience itself affects everyone involved in the transactionthe loan officer, the counselor, neighbors, children, escrow officers, etc. Thats what makes this program so special. Those of us involved with the program benefit just as much as the borrowers do. We have the pleasure of working with and helping seniors achieve their retirement goals and are able to go home at night with the satisfaction of knowing we have made a difference in someone's life.
That is what reverse mortgages are really all about.
Sarah Hulbert is president of California-based Senior Financial Corporation, a reverse mortgage correspondent currently operating in eight states. With nearly 17 years of reverse mortgage experience in operations, retail and wholesale sales, Hulbert served four terms as co-chair of the National Reverse Mortgage Lenders Association's board of directors. She is a current board member and co-chair of its Standards and Ethics Committee.
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