In this illuminating episode, Bruce Simmons explores the practical and historical aspects of reverse mortgages. Highlighting their potential to alleviate financial burdens on seniors, Bruce shares heart-wrenching stories of individuals trapped by debt. With expert insights and personal anecdotes, he challenges the stigmas attached to these loans and opens the floor for informed discussions around financial planning strategies. Dive deep into the mechanics of reverse mortgages and discover if they could be the key to financial freedom for you or your loved ones.
Today, I’ll share with you a story about one of the most feared loans in America that’s been disparaged, slandered, misunderstood, and attacked by pundits, radio and TV hosts, financial planners, and mortgage professionals alike. Some fear the loan as if it were a twisted laboratory experiment that escaped only to roam free to terrorize American homeowners. Pretty scary, huh? Well, that’s how a recent video from Shannon Hicks with Hecum World, or also on YouTube, if you just search for Hecum World, H-E-C-M-W-O-R-L-D, just search for Hecum World, and you can watch the video. But Shannon Hicks is a respected… established person, I should say, in the reverse mortgage industry. And very well respected as well. I didn’t mean to imply that he’s not. But I recommend you check out the video for yourself because I can’t do it justice. But go to heckumworld.com and you can watch it for yourself. Now, remember that Heckum World is actually a website that’s designed for reverse mortgage professionals. But I recommend it. For anybody that’s interested in learning about reverse mortgages, I’ve been in the business since 2003, and I still learn stuff from him. And in fact, there’s stuff in this article or this video today that I learned about the history of reverse mortgages. And I thought I pretty much knew all the history. But Shannon shared some information with us about the history of reverse mortgages. And I’m going to share with you today as well, too, if you don’t have time to go see it. I’m also going to share with you what this fear of reverse mortgages, because that’s what obviously the most feared loan in America is. It’s a fear of reverse mortgages. But what it looks like in real life, and just an episode that just happened about a week ago, where somebody contacted a radio station to get advice. And I want to share with you what happened, but you got to stick around for that. Okay. Thank you so much for joining me today. My name is Bruce Simmons. I’m the reverse mortgage manager with American Liberty Mortgage in Denver, and you can reach me directly. If you have any questions about reverse mortgages, call me at 303- 403-467-7821. 303-467-7821. That’s my direct line. You can also visit me online at ReverseMortgageRadio.net. ReverseMortgageRadio.net. You can go there to listen to the entire podcast on my website there and it’ll be up next week. Or you can also download my consumer guide or do both. But I’ve got a consumer guide on my website that goes into a lot of detail, probably too much detail. In fact, I’ve been saying for about the last six months, and I’m going to revamp this, and I will get around to it hopefully by the end of this year. But it’s got a ton of good information about reverse mortgages on there. Download it. Read it. If you want a physical copy, you can contact me, shoot me an email, or call me, and I’ll mail you a copy directly so you don’t have to print it. If you’re like me, I like to print everything pretty much. I don’t like reading right off the Internet, so I print most stuff. But let’s go back now to the article. Let’s see. So this is an article from Shannon Hicks with Heckam World. And I’m going to start from the beginning. OK, so he says today I’ll share a story about one of the most feared loans in America that’s been disparaged, slandered, misunderstood and attacked by pundits, radio and TV hosts, financial planners and even mortgage professionals. Some fear the loan as if it were a twisted laboratory experiment that escaped only to roam free to terrorize American homeowners. Pretty scary, isn’t it? Well, after all, it was UCLA professor Yunping Chen who pioneered the idea of this most feared financial product. What would an economist and gerontologist know anyway, right? Enough to speak before the Subcommittee on Housing for the Elderly of the Senate Special Committee on Aging in 1969. His ongoing research centered on the convergence of economics and gerontology in ways to reduce dependence on Social Security programs. And what he did is Mr. Chin wrote this in his column called Reverse Review. He said, I believe that incidents of poverty among old people would be lowered if poverty were measured using what might be called the net worth approach. The net worth approach calls for adding up all assets, liquid and non-liquid. Chen added that the challenge was how to not have to sell illiquid assets such as the home. This prompted him to develop the concept of a financial product that would convert a homeowner’s equity into a lifelong flow of spendable cash while remaining in the home. Now, you know, and this is me talking again, I’m breaking away from the article. But I’ve always said you can’t spend your equity at the drugstore or the gas station or the grocery store. You have to convert it to spendable money before you can do anything with it. It’s great to own a home free and clear. That’s awesome. But what good does it do you if you can’t Tap into the actual money that that represents if you ever need it. That’s the challenge with paying off your home. There’s so many people who still idolize the idea of owning a free and clear home, and that is a fantastic goal personally. But then if you ever do need to convert it into cash, you’ve got to have a way to do that pretty quickly. Or what’s even better is set it up to where you can tap into that cash at a moment’s notice. So in other words, set it up now so that it’s available to you later. I talked to a guy from – he called me from Arizona and he wanted to – me to run numbers for him based on today’s numbers, but he’s looking at starting a reverse mortgage 20 years from now when he’s 85, when his wife is 83. And I said, you know, it makes a whole lot more sense to maybe take a look at doing this now, putting all the money into a line of credit, and then having that money grow over time. You’ll end up with more money, plus the flexibility of having access to that money if you ever needed it, And the ability to repay it down and keep that line of credit growing over time. And I’ve talked about all these concepts over the years on the show. But basically, let me real quick just give a quick summary of reverse mortgages because I neglected to do that. In case you just tuned in, you’ve never heard me before. My name is Bruce Simmons and I’m the reverse mortgage manager for American Liberty Mortgage here in Denver. A reverse mortgage is… An FHA-insured loan, most of the time. It doesn’t always have to be. And for people with high-valued homes or a condo that is not FHA-approved, we have alternatives for those situations. But most people fall into the FHA program, which is called the Home Equity Conversion Mortgage, or HECM, HECM for short. That’s what we call it. That’s why Shannon calls his website HECMworld.com. But the home equity conversion mortgage is an FHA-insured loan that’s specifically designed for people that are 62 and over. It allows you to convert, like I’m talking about, convert part of the value that you have in your home into money that you can spend. The beauty of this program is that as long as you or your spouse live in the home and you continue to pay your own property taxes and homeowners insurance because it’s still your home. Remember, the bank does not own the home. It’s yours. You can sell it whenever you want. You could paint it purple, add a bedroom, whatever. But you’ve got to continue to pay your own property taxes and homeowners insurance. You do have to live there as your primary residence. You can’t do this on rental property. You have to keep your name on title and maintain the home. As long as you do those five things, you never, ever, ever are required to make a monthly mortgage payment or any payment at all. You never have to pay anything. You’re still charged interest though. So that interest that you’re charged gets added to the loan balance. It’s what’s called a negative amortization loan or a negative amortized loan. So the loan balance increases over time because you’re being charged interest and mortgage insurance because all FHA loans have mortgage insurance on it. So what happens is in month, you just got the loan, you took it out for $100,000 balance. Now, a month later, you get a statement in the mail and you see, oh my goodness, it’s $100,600. I just lost $600 in equity in the house. Well, if your house stayed exactly the same value, yeah, you could say that, but you still have equity in your home and odds are the value of your home is increasing. If you figure the 25-year average equity or appreciation on a home is about 4%. And in Denver, in the metro area, my guess is it’s a lot higher than that. But let’s just use 4%. If you’ve got a $500,000 home and it’s gaining 4% a year, that’s $20,000 that you’ve gained in the first year of the loan. So in other words, your home value went from $500,000 to $520,000. Odds are the value, even if you took out, say, $200,000 on a reverse mortgage, and if the interest rate were 8%, just to keep the numbers simple, if it was 8% on $200,000, that’s what? $16,000, right? that you would be charged on the reverse mortgage. So you still actually gained 4% in, or excuse me, $4,000 in equity in your home. So you gotta keep these things in mind. And also the other factor is, Well, now you’re not selling out this extra $1,000, $1,200, $1,500 principal and interest payment. In fact, I talked to somebody today or earlier this week, I mean, that they have a $2,400 principal and interest mortgage payment because they did it over a very short time period thinking, hey, this is the best way. We’ll get this loan paid off in 12 and a half years. Well, just a couple years later, they’re thinking, holy cow, this is a big nut to crack every month, $2,400. And they talk to their kids about it, and they’re considering looking at their – well, we’re looking into a reverse mortgage. I’m going to be meeting with them later. And they’re 90% sure this is what they’re going to do. So it can save you all this money out of your pocket. You’re losing some equity. Okay, but odds are you’re still gaining it. You just wouldn’t gain as much as you would if you were paying this big mortgage payment. Let’s keep all that in mind. All right. Let’s go back to the article. So we’re talking about this article from Hecum World, and it’s by Shannon Hicks. And it’s not really an article. I’m reading what he said on the video. He has a video, but he also provides a transcript. But he’s talking about Yongping Chen, who pioneered the idea of reverse mortgages. And he’s a a gerontologist and an economist. He’s trying to figure out, okay, how can we convert an illiquid asset such as a home into a cash flow for people? But then just a few years later, because this was in 1969 when he first started talking to the Congress about it and such. But in 1975, a guy by the name of Jack Gutentag, who was at the Wharton School, He was also known as the mortgage professor. He established an academic paper saying the loan was badly needed. This is his quote. He says, it is also very different from and more complex than any existing financial instrument. It constitutes a challenge of the first magnitude to the imagination of government and to the ingenuity and adaptability of the private financial system. He was very foresight, very foresightful, I should say, or very prophetic, as the loan is often seen as very complex, right? And that’s part of the downside. I think that adds fuel to the fire of all these misconceptions. A lot of people say, oh, this is a complex loan. when you break it down, and I’ve done this before on the show in past episodes, it really isn’t. You’re getting a certain portion of the value of your home. You’re still being charged interest, but you’re not paying it. So the interest compounds over the years on the house and you end up owing more on the loan than you did when you first took it out. There’s a possibility that you could end up owing more on the loan than the value of the home. It’s possible. It’s unlikely because right now we don’t loan 60, 70, 80% of the value. Our typical loan to values are somewhere between 30 to 50% of the value of the home, depending upon your age, given the interest rates right now. FHA dictates to us, the lender, how much we’re allowed to make available to you. And it’s based on a formula. That factors in the age of the youngest homeowner. The older you are, the more we can loan. The value of the home, obviously, the higher the value, the better. And the interest rate. And this is where this is an inverse relationship. The higher the interest rate, the lower. the amount of money we can loan you as a percentage of the value of the home. So while we were loaning 50% to 65% or even 70% to some of the older people back in 2020 and 2021, now since interest rates have gone up so much, most people get between 30% to 50%, usually 32%, 33% to 50%. if you’re on the older side if you’re over 85 you could get say you know a little more than 50 all the way up if you’re 99 i think you can get close to 65 or 70 but you got to be 99 to do that but anyways so it really is not that complex the loan isn’t but these misconceptions have fueled the fire of fear and that this loan is so bad. It’s terrible. Don’t do it. No, you’re going to die if you do it. No, it’s not that way. But just today, my web guy was, he sent me an email this morning that I clicked on a link from a video last week. And on that video, there’s a lady that calls into this radio show. And she’s 86 years old. She says she owns her home free and clear. She owns her car free and clear. But she has $30,000 in credit card debt. $30,000 in credit card debt at age 86. Can you imagine? That would be scary. That’s what’s really scary, right? Getting into that much consumer debt. What are you going to do? And What really drives me crazy, now this was a Dave Ramsey show. Dave Ramsey was not the one talking to the homeowner. He wasn’t there. There was a guy by the name of George. I think that was his name. He didn’t say it on the video, but in the comments section, people talked about it. And I went through these comments. I went through probably 100 different comments on this thing. Not a single person even mentioned, probably never thought of the words reverse mortgage. This lady is an ideal candidate for a reverse mortgage. She didn’t want to borrow money. She didn’t want to rely on family. She said basically her income is $1,200 a month. She has outgoing money expenses of about $1,400 a month. And in the past, she has borrowed from her daughter and her ex-husband, which is very embarrassing for her. She doesn’t want to do it. These guys on the radio show are talking about, well, can you move in with your daughter? Can you sell your home? Well, at first they said, no, you don’t want to sell your home because then you’re going to be subject to rent. And rent can go up really quickly, like taxes and insurance can’t. But the lady lives in Florida. She said her home was worth about $250,000. But this lady is 86 years old. Can you imagine the relief? The absolute peace of mind she would have if she did a reverse mortgage, paid off her $30,000 in debt, and received an extra $200 or $300 a month in income to cover that little… She probably wouldn’t even need it if she got rid of the debt, but to cover that little shortfall of $200 a month. And she could probably leave money in a line of credit for emergencies because she also mentioned… She had a recent car repair and a dental repair. And then this was a kicker. She says she’s suffering from leukemia and she’d been suffering from leukemia for over 20 years. She just retired from working at 80 years old. So she was working while she had leukemia. I mean, this poor lady has gone through All kinds of bad stuff. She was a single mom and she did, you know, then I guess she got married after a while because she did mention her ex-husband. But that probably didn’t work out apparently. But then she said, yeah, and she also had like a $200 vet bill or something. And this radio host guy, George or whatever his name was, said, well, you may have to rehome your dog. Rehome? You mean give my dog away? The one thing that’s probably keeping her in sanity? And they never mentioned reverse mortgage. They never talked about bankruptcy, which she probably wouldn’t qualify because she has too much equity. But they didn’t talk about any possible food stamps or what they call SNAP, the SNAP program, any other possibilities. They didn’t recommend her to the area on aging for elderly people that has good ideas, a lot of benefits on aging. or ways to tap into additional benefits that might be available. These guys are committing malpractice. I mean, they’re not attorneys, thank God, but they’re just doing a disservice because Dave Ramsey has installed this fear into them of reverse mortgages because he’s that way with any kind of debt. Now, there’s good debt and there’s bad debt. Good debt is things that you can use to create more income from. Or in this situation, this lady didn’t have to leave her house to her kids. She had some kids that she’s not communicating with. She just has this one daughter that she cares about. And that daughter has helped her in the past. And they say, well, would your daughter give you $200 every month just on a regular basis? I mean, why would you… make somebody who’s humiliated asking for help do this. That just blew me away. And that was just a perfect example of the fear of reverse mortgages because it makes no sense. Why would you not consider a reverse mortgage if you’re in that situation? And I’m going to tell you, talking to you, if you’re an attorney, if you’re a financial advisor, if you’re a real estate agent, talk to people you know that might be having challenges in this environment where taxes are going up. Insurance, homeowners insurance is skyrocketing. My insurance went up by 900 bucks. My taxes went up by, I don’t know, another thousand this year. Just that, not counting all the inflation and food costs and everything else, medical expenses. There’s so many things that that elderly people especially go through when they’re on a fixed income even though they got a decent raise uh this year from social security it ain’t enough most of the time and you’ve got to have some kind of savings to back it up in fact american america online aol did an article about reverse mortgages and what kills me on that too they didn’t talk about reverse mortgage or they didn’t they did an article talking about the radio show and they say um The Ramsey show host tells broke 86-year-old Florida woman with almost $30,000 in credit card debt she has only one option. Are they right? That’s the title of the AOL article that was posted earlier this week. And they, in their article, they talk about other things like that I mentioned about the assistance SNAP program and area on aging. They did not mention reverse mortgages as a possibility either. What is wrong with people? Is it just really that big of a reverse mortgage desert out there that people don’t understand it? Please call me if you have any questions about reverse mortgages. You can reach me directly at 303-513-2748. My name is Bruce Simmons, and as you can tell, I’m passionate about reverse mortgages. I think everybody, I really think this, everybody should review a reverse mortgage. You should look at it to see if it’s an option. Does it make sense for you? It may not. It very well might not at all. You may tell me to go jump in a lake, but at least then you’re making an informed decision, right? I spoke with some people earlier this week. they we didn’t have quite enough money to pay off their existing mortgage and they had money to cover it they could have covered the the difference it was only about a $15,000 shortfall and they have that money in their account and they’re pulling $1,000 a month out of their 401k anyway to cover the $1,000 a month mortgage payment principal and interest so you say okay well if they did the reverse mortgage they’d recoup their $15,000 in 15 months right if you’re If you’re paying out $15,000 a year right now, if you have to pay $15,000 to get the reverse mortgage because basically, I don’t remember the numbers. We could loan them $250,000. Their mortgage payoff was $265,000. So the difference was $15,000 that they had to bring to closings. they would get that money back in just 15 months because they’re not having to put out that extra $1,000 mortgage payment. But they decided not to do it at this time. And I respect that. I have no problems with them saying, you know what, right now we’re not going to do it. Values might go up, interest rates might come down. Of course, they might not, but they can reevaluate it at a later date too. And so there’s no problem with that, but they made an informed decision That’s the key thing. Go to my website, download my consumer guide. My website is reversemortgageradio.net and you can click on radio show. It says radio show, reverse mortgage radio, and then it says popular next to it because it is popular. A lot of people will go there and listen to the podcast. And I’m working on getting it on iHeart or iTunes or whatever it is. I’ve got it on a couple other formats that people listen to. But honestly, I can’t remember my… my password for Apple and I’m having trouble because they don’t recognize me. Anyways, that’s another topic. If you could help me with that, you can call me as well too. But I appreciate any help I can get technology speaking wise. The way that this article wraps up though, because he talks about In conclusion, this is the video again. He says the HECM is simply a mortgage with a very particular set of features. Features, while unparalleled, that can create confusion and misunderstanding among homeowners, policymakers, and professionals alike. And then he quotes Dan Holtquist, who’s the author of Understanding Reverse. He says, it seems nobody wants a reverse mortgage, but everyone wants what the reverse mortgage does for them. Clearly, there’s a disconnect between the product and what people think about the product. That’s why I do this radio show, to try to get through to people that this is not the devil. This isn’t like the movie Waterboy. Foosball’s the devil. That’s what the lady always said on Waterboy, if you ever watch that movie. I like dorky movies like that. But reverse mortgages is not the devil. Okay, mom, ma, or whatever her name was. So keep that in mind that reverse mortgages have a very particular use and it may or may not be right for you. But I think you should check into it. Find out, learn the details. If you have a parent that you think this might benefit, give me a call. I can talk to you about their situation. You call me with their… Give me the value of their home, their dates of birth, and the amount owed on the home, and I can run numbers very easily for you. There’s no commitment. I go out and meet with people, just like I did those folks earlier this week that decided against doing it. I met with them. I went over numbers with them, showed them exactly how it works. They made an informed decision right now that it’s not for them. I’m thinking it probably will be in a year or so, but we’ll just have to wait and see. But I was up front with him and showed him all the costs, broke everything down for him, and they go from there. The goal of this whole program is to, I want you to get information from different sources. Get Dan Holtquist’s book, Understanding Reversed by Dan Holtquist. Go to heckumworld.com. Check out a lot of the videos that Shannon has there. They’re fantastic. I highly recommend it. Go to my website at reversemortgageradio.net. Go to reversemortgage.org. That’s the National Reverse Mortgage Lenders Association website that has a ton of fantastic information on it. Talk to your financial advisor, but make sure they understand it before they tell you no. Because a lot of people you may talk with, you say, I’m thinking about that reverse mortgage thing. Oh no, don’t do that. They’re going to take your home. You’re going to die because you have this reverse mortgage. I heard somebody whose brother-in-law’s ex-uncle’s nephew’s cousin got foreclosed on because they had a reverse mortgage. No, they didn’t. Now, even if they did get foreclosed on, it’s probably because they didn’t pay their taxes or they left the home permanently. Either way, give me a call with any questions. I’d love to talk with you about your situation and give you the accurate information you need to make an informed decision. My name is Bruce Simmons and you can reach me at 303-467-7821. 303-467-7821, or visit me online at reversemortgageradio.net. Download my consumer guide there. I’d love to talk with you about it. I look forward to talking to you at some point in the future. Thanks so much for joining me today.
