Reverse Mortgage Radio Show 11-16-17
“A reverse mortgage sounds like it might work for us, but I have a unique situation.” If you find yourself in this situation, your home is in a trust, or in need of repairs, listen to today’s show to learn how a reverse mortgage can work for your specific situation.
How To Work With Unique Situations For Reverse Mortgages
Hello and welcome to Reverse Mortgage Radio, I'm your host Bruce Simmons and I'm so glad that you could join me today. We're going to be talking about unique situations that you might find yourself in and you don't even know it. But that's the theme of the day. You're listening to Reverse Mortgage Radio and you can feel free to call me whenever you want at (303) 467-7821, (303) 467-7821. I am a reverse mortgage specialist, I am the reverse mortgage manager of American Liberty Mortgage right here in Denver, we're triple A rated with the Better Business Bureau and I am a certified reverse mortgage professional.
I believe, I haven't checked recently, but I believe I'm the only one actually located here in Colorado. There are some other ones that might be in California that do business in Colorado through the mail and internet and things of that nature, but you don't ... Well, I shouldn't say that. I don't like to do business that way. I do business old school, I meet with all my customers. Well, most of the time. I've got a loan going on the western slope right now that I haven't met with her, although as often as we've talked on the phone I feel like I know her real well.
So what we're going to talk about today is unique situations. What if your home is in a little bit of disrepair. What do you do about it? Do you still want to get an appraisal when it's kind of beat up looking? Or what if you're in a trust? Can we do a reverse mortgage in a trust? A lot of people ask that. "Well, I don't really want to take my house out of the trust, then do the reverse mortgage, then have it put back in" and all these things. And we'll talk about that because it can be done, definitely. I'm one of the ... I've done a number of loans for people in trust. What if you have a mobile home or a manufactured home? What do you do in that situation? There's rules around that. All kinds of things. What if you have solar panels and you didn't pay for them outright in cash, you financed them. Or what if you're leasing them? Can you still do a reverse mortgage if there's this lease that you're making payments on? What do you do about that? So those are all questions we're going to talk about today.
Before we get into that, though, I always like to start off just giving a quick summary of what reverse mortgages are and how they work. Just in case, for those of you who might be tuning in for the first time or maybe you missed it last time. By the way, too, I have podcasts of all the shows that I've done on my website at reversemortgageradio.net. Feel free to go there any time, listen to the podcasts. You can contact me through there, there's a contact sheet. You can download my reverse mortgage consumers guide on the website as well and it's got all kinds of good information you can see video testimonials from previous customers, actual customers who have agreed to be on video for me. Very, very ... All my customers are nice. Well, I was just telling somebody at a closing last week, I could count on about three fingers the number of people in 15 years, almost 15 years I've been doing this, that I really didn't like, that I should have probably said, "You know what, I think it's best if you go somewhere else."
And it's funny because a lot of times people will be signing all these papers at the closing, and there's a lot of papers, and we get down to the last form, which is typically what they call the right of recision. I tell everybody, when you're signing all the papers for the application I tell them, "You can cancel this application at any time through the process, even after you sign the final papers." Because the loan does not become legally binding until three business days after you sign the application. It's called a right of recision. You can cancel the loan at any time. And so let's say you're signing all the papers on Monday, you have Tuesday, Wednesday, Thursday. Thursday at midnight is when the loan becomes official. If you change your mind anytime in that period, you can cancel the loan.
And people always ask me, "Have you had anybody ever do that?" I say, "Well, actually twice." It's happened twice. One was a lady in Commerce City and
this was back and 2009, property values were terrible in Commerce City. She thought her home was worth about 120,000 and it appraised for like 65,000.
Today that sounds terrible, $65,000 house? Boy. But no, it wasn't a bad house, it's just there were so many foreclosures around and the appraisers
have to factor that in to the value because the look at the other properties that are selling. Well, during recision her house burned down. It caught
fire and burned to the ground during the recision period. She called me and told me that. I said, "You know, you can still keep the loan. We would
just have to-" at that point what happens is the insurance company sends us a check, as the loan holder, and we hang onto the money and help work you
through to rebuild the house. We have to control it because we have to make sure the house gets rebuilt. She said, "You know what, I don't think I'm
going to do that. I'm just going to take the money and move somewhere else and just sell the lot and just take the money." Because she owned the home
free and clear. So she canceled the loan and she took her insurance proceeds, which were more than 65,000. I don't know how much, I don't remember,
but it was more than the value of the home.
Speaker 3: I'm glad that she was okay.
Bruce Simmons: Yeah, she wasn't in the house when it happened.
Speaker 3: That's terrifying, what a weird freak accident.
Bruce Simmons: It was weird, I'd never had that happen. Actually, one time, too, I did a loan for a couple, they were in Brighton I think, and throughout the process the guy I got a bad vibe from him he was not a nice person. I would be talking to the wife on the phone and he would be yelling in the background, cussing, and stuff just going off. He was upset with every step of the process. And I should have told him there, I said, "You know what, I don't think we're a fit. I'm not going to do this for you." That's what I should have said. At the closing he kept saying, throughout, he kept saying, "Where's that recision form? Where's that recision form?" And I should have told them then. I should have said, "You know what, if you're going to cancel why don't we just cancel right now?" But sure enough, a couple days after the closing, I got a call from the title company saying he canceled. And I said, "Okay, that's fine, I figured."
But then two weeks later the wife called me back, he was yelling in the background again, I don't know about these people sometimes, but they're so infrequent. And the cast majority are so great, but this guy was just ... The wife said, "What do we have to do to start that loan application again?" I was like you gotta be kidding me. Well, I told her I said, "You gotta go somewhere else" I said, "I'm not gonna do it again this time." And they did, they went to another lender, a lady that I know and she's in the business. I warned her, but they ended up closing with her and they kept the loan in place. So you have ...
You can cancel at any time and that's where working with me, for example, because I don't collect any money from you up front. Most lenders will make you prepay the appraisal. The appraisal cost now is like $600. Sometimes they'll say we need a deposit of $300 or whatever, but a lot of times they say you have to prepay the appraisal and credit report. Because those are actual costs that the lender puts out up front. I don't do that. I never collect any money from you up front. I shouldn't say never because I did have ... If you tell me, if you say, "I think this home is worth $400,000 and we have to have a $400,000 value" and you're sure that $400,000 because my numbers ... Because my title company and I can look at sales in the neighborhood. If I'm looking and I see a value of 350 and I'm thinking we're going to be short to close and I tell you, "If this praise comes in at 350, do you have the money to make up the difference?" And you say no, or you're not willing to do that, then I might say I would want you to prepay the appraisal because I don't think the value is going to come in what you think it is. That's the only time I've ever collected money from people up front.
But the thing is, if you cancel for any reason I'm not going to come after you for that money. You're not going to be out anything other than a little
bit of time. I would hope before we start signing the papers and I order the appraisal and all that that you're committed to doing the loan. Just last
month I could have swore this house was going to come in at the value that both me and the homeowner thought and it came in about $20,000 lower and
it didn't make sense for the customer to do at that time. So I couldn't help them.
Speaker 3: Is there a way to contest an appraisal if you think it's not accurate?
Bruce Simmons: Yes, there is. I do that. I've done that a few times recently, believe it or not, actually for this lady that's up on the
western slope. Her value came in low at like 325 and we thought it was going to come in at 350, we contested it. Basically what you have to do is talk
to a real estate agent, get what's called a comparative market analysis where they show ... And they'll show all the comparables, the other sales in
the neighborhood. And then I, as a lender, will go through that and pick out ... Say okay this property should have been used instead of the one the
appraiser used. And this property should have been used instead of the one. And then I'll write up a big report and send it in to the appraisal management
company, I never get to talk to the appraisers these days, but I talk to the appraisal management company. And then typically a day or two later the
appraiser comes back says okay, this is why we didn't want to use that property, this is why we didn't use that, but given this we'll change it to
that. And that's kind of what happened with the lady up on the western slope is we got it raised from ... Actually, it appraised at 315 is what it
was and we got it raised to 325 so we got an extra $10,000 in value for her by contesting it.
Speaker 3: Yeah, might as well, right?
Bruce Simmons: Yeah, it just is ... And she had to bring money to the closing. She has the money, but she didn't want to spend it that way. You know what
I mean? And what I'm pointing out, and when I say bring money to the closing, because she has a big mortgage on her house she can't ... We can't loan
her enough to pay off the whole mortgage. She's bringing about $11,000 to closing. So, in other words, I don't remember the numbers specifically for
her but let's say she owes 290,000 on the house and we can only loan ... Well, it's not that much it's like probably 160 or something I don't remember
the numbers. But we can only loan 150 or 149, so she has to bring the rest to pay off the loan, the existing mortgage that's on the home.
Speaker 3: But if you hadn't contested the appraisal, she would have had to bring that much more money to closing, right?
Bruce Simmons: That's right, yes, that's right.
Speaker 3: And it's worth it to her because now she doesn't have a mortgage payment.
Bruce Simmons: That's right, now that is the only benefit but it's a big benefit. So, she's not going to have access to any additional money after the loan closes but we're getting rid of that mortgage payment for her. And she really, really, really does not want to have a mortgage payment. She's in her 70s, she and her sister live in the house together and they're great people, but I'm mainly dealing with the one lady and that's why I just say one person. By anyway, that's a situation.
The way reverse mortgage works, let me back up here to make sure. I may have lost a few people here. A reverse mortgage is an FHA insured loan that's specifically designed for people who are 62 and over that allows you to convert a portion of the value of your home into tax free money that you never have to pay back as long as you live in the home. It is a loan, though, you are still charged interest. And the home stays in your name. So you do have to pay your property taxes and homeowners insurance as well as any HOA dues or maintenance fees that you have on the home. And live there, it's only for primary residences as well.
I got a call from a listener. He heard an ad and he was calling for his dad and he kind of was explaining the situation I said, "Well, your dad has to live in one of the houses" he owns multiple houses. And he said, "Well, what he's doing is he's converting this rental house. He's fixing it up and he's going to move into it." I said, "Once he's moved in and we can verify it, then we can do the loan on that house."
So it has to be your primary residence and you have to pay the taxes and insurance, but by doing a reverse mortgage you could use all the money to pay off an existing mortgage so you don't have any payments, or you could set up a line or credit or a monthly income stream. That's where sometimes hear reverse mortgages where the bank pays you instead of you paying the bank. Well that's us making monthly payments, depositing them into your account. A loan I closed just recently we're depositing $2,000 a month into this guy's account. Great deal. Now, he had to set it up for a short term, it's only like a two or three year period because he had a big mortgage too, but that's going to allow him to delay receiving social security. That's a heck of a deal. He's going to get a lot more form social security once he starts receiving it because he's delayed the time.
There's all kinds od ways to use the money, it's your house. You're still charged interest so the loan balance gets larger on a reverse mortgage. You're going to owe more five years down the road on the reverse mortgage than you do today. Keep that in mind. And I go through all that with you. Last week we talked about how to prepare for a reverse mortgage and one of them is getting informed, making sure you understand it. And one of the steps in that process is meeting with me and I go through that. I have what's called an estimated amortization schedule where I can show you what your loan balance might be five years down the road, what the value might be five years down the road, and how much equity you have. Remember the equity is just the difference between the balance owed and the value of the home. If you owe $200,000 on a mortgage and your house is worth 300,000 you have $100,000 in equity. As your loan balance goes up, if you value didn't go up as well, it's chewing away at your equity slowly but surely.
Those are all things you want to keep in mind, but that's not the topic of today's show. The topic of today's show is mainly we're going to talk about these unique situations that some people find themselves in. A lot of people don't know that if they had a modular home or a manufactured home, you could still get a reverse mortgage. Yeah, it has to have been built, manufactured on or after June 15 of 1976, has to be at least 400 square feet, minimum. Now, most mobile homes or modular homes are well beyond that nowadays. Some of these really nice double wides, boy ... These people up on the western slope they're in a unique situation but they a manufactured home installed on their land, brand new. Beautiful kitchen, granite countertops, tile floors, it's beautiful. Nice porch and deck in the back, it's really a nice place. There's no way you could tell it's a manufactured home looking at it.
Homes, they cannot have been moved. So if you're buying a mobile home it has to be on your land that you own. So if you have land and you have a mobile home put there, it has to be a brand new mobile home, or I should say manufactured. That's the term for it now they don't really call them mobile homes anymore, but manufactured homes. And it has to be a brand new one. You can't move one from another location to your location, that's one of the ... It has to be taxed as real property. And what they do is they purge the title.
You have the home installed on a foundation, it has to have some kind of foundation. It could be aa slab, but it has to be properly attached and meet all FHA guidelines for that foundation so that if a foundation or wind comes up it's not going to roll down the road. Keep that in mind. But then what they do is the tongue has to ... If there's a tongue to tow it with, that has to be removed and they have to purge the title. So in other words what you do is you take the title ... Because manufactured home has a title just like a car, but once it's permanently affixed to the land you can take it to the county and they'll get rid of that title. So it no longer has a title, it becomes part of the real property. It's kind of confusing, but if you're in the situation you understand what I'm talking about.
It has to be permanently installed on sight for at least one year prior to the date of the application. I get a lot of people asking me, "How long do I have to live in the home before I can get a reverse mortgage?" Well there's no time period on a regular house. If you just bought this house and you're only living there for a month, you could come and get a reverse mortgage. You paid cash for it, you can get a reverse mortgage on that house. There's no minimum time that you have to live there. And then, but, with a manufactured home there is. There's that one year time period. So then we have to get all kinds of documentation and things of that nature and the builder of the house and all these things.
Let's see, oh yeah, the site has to have permanent water and sewer facilities. It could be a well and a septic tank, but it has to have permanent facilities in there. A lot of them are on city sewers and public water, but a lot aren't as well.
Those are the main issues with manufactured homes. A modular home, we don't have to mess with that if it's a modular home. A modular home is where it's built in pieces in a factory and then taken out to the site and put together on site. So it might be you see those big trucks going down the road sometimes with wide load because they're carrying half a house and then the other half is behind it or something. They're taking that, the set it on the foundation, they attach it together there at the site. A manufactured home is build in a factory and brought out in one piece and set on a foundation, that's the key differences as far as ... Now, I might not be 100% correct on that because I don't have a ton of experience with these but I've done a number of these loans in the past and that's my understanding of it right now. Subject to change not me.
Okay, but let's say now you've got a house. It's not a manufactured home, but it needs repairs. A number of people you can't afford to keep up, houses are expensive and it's easy to let okay, I haven't painted in about 15 years and it's really in kind of rough shape, this door is really faded here, or the dog chewed it up, or this window is cracked and it's not leaking, but it's cracked. That's an issue. Maybe there's a foundational issue; foundation or roof issues could be major. HUD allows us ... We call the appraiser, the appraiser come in.
When your house is appraised by an FHA appraiser, which is what we use for reverse mortgage, the go into every room, they take pictures of every room. I've even had appraisers take pictures of water running out of the faucet to show that the water is running. They check to make sure your furnace is working, your air conditioning if you have it, the flush the toilets, they do all that. Everything has to be in working order. If something is not right, they're going to notate it on the form, on their appraisal. And then if it's not a health and safety issue ...
Health and safety issue could be, for example, a railing on a stairway. I did a loan for a lady, beautiful home down in Cherry Creek area, but she had a separate entrance into her basement and there were stairs going down the side of her house. It was a brick foundation and it was a really nice little cut out patio that was down below grade level, but there was about five or six stairs and there was no handrail. Well, in order for us to close that loan, because that's a health and safety issue because there's no handrail, she had to have a person come out and install a handrail before we could close the loan.
But things like peeling paint, a lot of people ... Even with brick homes or homes that might have the aluminum siding that's permanent, they might have
trim that's wood. And if that wood is peeling paint, the appraiser is going to notice it and they'll take pictures of it. Or a shed. A lot of people
have sheds that maybe they let go, I've got one myself. I've never painted it and the ceiling in it's all warped and I replaced the door, but it's
all crooked now because I'm not very handy.
Speaker 3: My shed I think could fall over any day.
Bruce Simmons: See that could be be a health and safety issue.
Speaker 3: Right, I'd have to fix that for my reverse mortgage.
Bruce Simmons: Well, actually, a lot of times if it's an outside thing it's not necessarily health and safety issue like that because ... But they would require it to either be removed or fixed. And what we do is we say you have six months ... It depends on the lender, some are six months and some are a year, from the date of the closing to get that fixed.
What we do, the appraiser has to give us an estimate of the cost, or in some cases we have to get a contractor, but usually it's the appraiser. The appraiser says, "It's going to cost $1,000 to paint all the trim around the house and replace that garage door that's not closing properly." Okay, that's fine. So what we do is we have to set aside, at closing, we have to set aside one and a half times the amount that the appraiser put on the appraisal. Keep that in mind. So that money is not going to be available to you if you need it to pay off a mortgage, well that's $1,500 more you're going to have to bring to closing if you're having to bring money to closing. Most people are not. But anyways, that's how that works, but we can still do the loan even if there are issues with the repairs.
What if you're in a trust? My time is running low on me I'm sorry I kind of get a little wordy here. Chatty Cathy. If your house is in a trust you can
do a reverse mortgage. Now it used to be that you had to have a revocable trust, which means that you can cancel it and you have to be named the trustee.
If it's you're house and you're in a trust you have to be the trustee. And these are terms I don't have time to get into all of them, but if you have
a trust you kind of understand what this is about. Call me. Feel free to call me at (303) 467-7821 with any questions or visit me at reversemortgageradio.net,
you can reach me through there as well. Email me and all that.
But we have to have what's called an attorney's opinion review of the trust. That typically adds 150 to 200 dollars to the closing cost because the attorney has to review the trust to make sure that it meets FHA guidelines for the state ... For Colorado. I was going to stay for the state you're in, but we're all in Colorado. That's ... I'm only licensed in Colorado. Well, actually I could do loans in Florida as well.
You do not have to take your name out of the trust to close a loan. There are inexperienced loan officers that handle reverse mortgage who say you have to take your name out of the trust. No you don't. Even if it's a irrevocable trust. If you're in a irrevocable trust that means it cannot be revoked, it's not revocable. But we can still do a reverse mortgage with that kind of trust as well, keep that in mind, okay.
Solar panels. More and more people are getting solar panels on their house. There's a couple of different ways that people finance these solar panels. One is they might pay for them out of pocket where they own them. And if you own the solar panels, that's good. And even if you're making payments we have to factor in those payments into your debt because we factor in ... We do a debt ... Not a debt to income, it's called a residual income thing where we have to subtract from your net income all your expenses and then you have to have a certain amount of money, $589 left over, or $1,000 left over is there's two of you, after you've paid everything. Those are some of the rules. So this payment we have to factor in into all your calculations and we can do it if it's leased as well. There's certain restrictions and we have to get a copy of all the paperwork, but it can be done.
So no matter what your situation is, please keep in mind call somebody with experience who can ... I don't know everything about reverse mortgages, I'll
tell you that right now, but I know where to go to get the answers and I'm not afraid to do a little extra work on your situation just to make sure
that we are as convenient as possible for you. And, also, I like to make things as convenient as possible for the underwriter. I'll go through all
kinds of heck for the customer and the underwriter because I have to try to please both of you. I want to make things easy for the underwriter to ...
I try to paint a picture for ... The underwrite is the people who make the decisions. I send all the paperwork in with the appraisal, the income verification,
all that stuff to the underwriter. The underwriter reviews it all and says, "Okay, this is what it is."
And if I'm unclear, if there's some unique situations like this lady up in the mountains I was talking about on the western slope. Her and her sister live there together, they lived there in a mobile home with ... I don't have time for all the stories, Marie just signaled me that I've got a minute left. So, anyways, but I painted a very good picture for the underwriter for their unique situations, very unique. And we got ... There was no questions about the stuff that I pointed out to her, I talked about in my cover letter.s and everything was clean on that. They owned a different property in Arizona, all kinds of stuff.
But anyways, I can deal with any unique situation. I can. If I don't know it right offhand I'll get the information. Please feel free to call me any time at (303) 467-7821, (303) 467-7821. My name is Bruce Simmons, I am the reverse mortgage manager with American Liberty Mortgage here in Denver. You can visit me online at reversemortgageradio.net, reversemortgageradio.net. Or just call me directly. Thanks so much for joining me today, it's been a pleasure. Have a great day.
Call reverse mortgage specialist Bruce Simmons of American Liberty Mortgage directly at (303) 467-7821 to begin drawing equity from your home. Bruce will come to you anywhere in the front range for an in person, no obligation consultation. Learn more about reverse mortgages and watch testimonial videos on reversemortgageradio.net, NMLS #409914 regulated by the Division of Real Estate.