After Long Dry Spell, Jumbo Reverse Mortgage Closings Begin

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After rolling out the first new jumbo reverse mortgage product in two years, Generation Mortgage announced it closed the first Plus product on Wednesday.

“The Generation Plus loan caters to an underserved segment of senior homeowners living in higher-valued homes,” said Scott Peters, President and CEO, Generation Mortgage Company. “We’re very pleased with the quick market acceptance of our jumbo product as it demonstrates that Generation Mortgage is filling a genuine market need among seniors seeking to obtain the highest payout possible on one of their most valuable assets.”

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Available for seniors with homes appraised between $500,000 and $6 million, the product can offer certain borrowers with more proceeds than the Federal Housing Administration’s reverse mortgage product.

“Getting this reverse mortgage gives new meaning to the phrase, ‘house proud,'” said Barbara, a Newport Beach resident who closed on the loan.  “Until now, we were unable to leverage our home equity. This was a huge frustration as we did not want to move and we had all this money tied up in home equity. The Generation Plus loan has been the perfect solution allowing us to access this money, stay in our home, and gave us peace of mind.”

According to the couple, tapping into their home equity allows them to invest for their personal goals of providing financial security to their heirs.

“Most homeowners I’ve spoken with are strategically re-evaluating their estate and are considering using a jumbo reverse mortgage to re-distribute their assets in a manner that promotes their legacy,” said Raymond Denton, a reverse mortgage originator with iReverse Home Loans and Generation partner.  “The Generation Plus loan may allow consumers to reduce inheritance taxes and provides maximum financial benefit to heirs.”

Different than jumbo reverse mortgages offered in the past, the Plus requires a minimum FICO score of 700, a first for the industry.  The product also provides borrowers and their estate an extra benefit through its Gen Plus Estate Guard.  

”The benefit is that despite the non-recourse nature of the loan, borrowers and heirs are potentially exposed to significant tax liability if the future home value is not sufficient to cover the accrued loan balance,” said the company in materials provided to correspondents.  ”By having the ability to monitor the home value versus the loan balance, they can potentially help keep the loan from becoming grossly upside down.”

RMD previously covered more of the unique aspects of the loan here.

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  • Even though GM is a competitor, what Mr. Jeff Lewis and GM have provided the industry should be lauded. While it is great they have provided a proprietary product, its Estate Guard is an important component for borrowers. Hopefully, borrowers will perceive its value and utilize it if the situation calls for it. Unfortunately there is no Estate Guard for HECMs, exposing both HECM borrowers and more particularly heirs with potential income tax liabilities.rnrnThe other day, a supposed authority excused ignoring tax issues related to HECMs by declaring that HECM borrowers have homes closer in value to $200 than $2,000,000. Unfortunately this individual has no realization that income tax issues are the same for those having homes worth $200 as they are for those having homes worth $2,000,000. This is a typical response of those who have little experience with or sophistication in income tax matters.rnrnRight now with no estate tax in 2010, estates (trusts, heirs, and trust beneficiaries) of HECM borrowers passing away this year are in most cases more protected and shielded now than in prior years from exposure to potential increases from income tax liabilities which can result from cancellation of debt through foreclosure, deed in lieu of foreclosure, short sale and other dispositions. Of course this assumes there will be no retroactive changes in the estate tax.rnrnSome try to argue that there are three classifications for the recourse nature of mortgages: recourse, nonrecourse, and FHA insured. Even HUD declares that HECMs are u201cnonrecourse loansu201d in its HECM Handbook, as well as Mortgagee Letter 2008-38.rnrnIt is absolutely irresponsible that some servicers fail to issue Forms rn1099-C. It is time for our industry to drop internal myths and mature.rn

    • Tex,rnrnWhat I do not understand is how this product will help “inheritance taxes.” Did I miss something? Currently there is no federal estate tax!! How does a loan help with inheritance taxes anyway?rnrnGenerally loans are used to reduce other debts or increase assets. So any debt it creates is offset by some asset or payoff of another debt. Please enlighten.rnrnMaybe you can explain.

      • Raymond D.,rnrnMaybe you can please explain yourself as to why it will help inheritance taxes? Are you advocating a specific investment scheme which does not violate 12 U.S.C. 1715z-20(n)(1) or (o)? If so, that would be quite enlightening.

  • >>What I do not understand is how this product will help “inheritance taxes.” Did I miss something?rnrnApparently “yes”. Either that or you’ve got too much time on your hands again and just want to be heard.rnrn>> Currently there is no federal estate tax!!rnrnHummm … so Estate Planning is no longer necessary because currently there’s no federal estate tax?rnrn>>Maybe you can explain.rnrnI was fortunate because the consumer who spent time with me in this area was an Estate Planning Attorney, who was also a CPA and understood how Reverse Mortgages work. Last April he got his Reverse Mortgage because it made the most sense for his Estate Planning purposes, and Inheritance Taxes were his primary consideration.rnrnIf you truly want to learn, you’ll find somebody with the same skillset and ask for some of their time. If you’re seriously interested, I’ll introduce you to my client. He’ll probably charge a consulation fee, but it’ll be money well spent. He’ll take you way beyond the fundamentals. However, I don’t think you’re serious at all … I think you’ve got too much time on your hands.rnrnrnGenerally loans are used to reduce other debts or increase assets. So any debt it creates is offset by some asset or payoff of another debt. Please enlighten.rnrnrnrnMaybe you can explain.

    • Raymond Denton,rnrnThere is always room for estate planning whether there is an estate tax or not. But here is precisely what YOU were quoted as saying: “The Generation Plus loan may allow consumers to reduce inheritance taxes and provides maximum financial benefit to heirs.” So please explain how.rnrnPlease note last April there was no Generation Plus so what does this product have to do with this CPA/estate planning attorney you know? You specifically said that Generation Plus may allow consumers to lower inheritance taxes and all I am doing is asking you to explain how. But as you normally do, you are deflecting because YOU do not know.rnrnOne day you will learn that estate plans are not cookie cutters. If they are designed well, they are designed for the specific individual in a specific situation.rnrnI have heard several reverse mortgage originators try to explain what they mean when they make statements like you did. Too many times like you they are just parroting what they heard. Sad thing is that it makes us all look as bad as the individual proclaiming this message. The fact is you do not know how it might reduce the federal estate tax. If you do NOT know, there is no shame in simply saying so. rnrn

    • rainmand,rnrnSome of us want to understand why you proclaim what you do. We want to hear it from someone who is more like us than an attorney and has concluded that it reduces inheritance taxes. Over and over again we hear: “Go to so and so and pay him the big bucks. He will tell you why what I say is right.” We all know we can do that.rnrnI for one cannot understand why you dodge the questions. You made the statement. Why do you refuse to answer? You might have a great point but when you respond the way you do, it creates real doubts about its validity.rnrnThe_Cynic has a point if there is no estate tax, how does a reverse mortgage lower inheritance taxes? I am sure you believe what you say but why? It’s OK if you can’t explain it but we just want to know why you make the statement. If it is because someone told you so and you believe that person but do not know why — that is OK. I was hoping to learn how the product itself reduces inheritance taxes from how you see things. Oh well,u2026. rn

    • Raymond,rnrnIs this statement accurate: u201cMost homeowners Iu2019ve spoken with are strategically re-evaluating their estate and are considering using a jumbo reverse mortgage to re-distribute their assets in a manner that promotes their legacyu201d? In the past you have described yourself as a discounter. It seems you are speaking to a very different segment of homeowners than some of the rest of us. rnrnIt seems I overlooked your request that you want me to explain why taking out a reverse mortgage will not do anything to lower estate taxes.rnrnThe federal estate tax is intended to tax the assets of a decedent as of the date of death. It allows a few deductions including debts. So if a senior gets a reverse mortgage and takes out $300,000 in cash and owes $310,000 on it when that person dies, for estate tax purposes, the net impact is to provide a $10,000 lower taxable estate. Or if the reverse is replacing another debt, it is simply changing the type of debt or the name of the lender with another lender. Paying off debt with debt proceeds does nothing to the overall estate. It is that simple.rnrnNow I have a question. How does a reverse mortgage help to u201cre-distributeu201d the assets in an estate to promote a legacy? rn

  • >>I for one cannot understand why you dodge the questionsrnrnTo be quite honest with you, “I don’t like you”. I help people who are sincere, but you’re not. We’ve been through this before, and I’ve seen others go through it with you too, and I don’t want to participate.

    • rainmand,rnrnThe topic at hand is one you selected all by yourself — lowering u201cinheritance taxesu201d by simply taking out a proprietary reverse mortgage. If this is true, it is an important topic. rnrnFirst as stated before by someone in the thread above, there is no estate tax this year. We can learn something from the estate tax situation of the George Steinbrenner family; his estate has no estate tax. Maybe you can demonstrate how George Steinbrenner could have saved more by taking out a proprietary reverse mortgage than it would have cost. Now that would be instructive. rn rnIt seems you are sidetracked about your honesty, your assessment of the sincerity of others, and even your likes and dislikes. In short you are sidetracked and want to sidetrack others over, with, and about you. rnrnThere is absolutely nothing wrong with expressing an opinion but there is something very wrong with turning your lack of knowledge about the subject into personal attacks on others. You did this before on the subject of the community property rules of transmutation in California and you are TRYING to do it once more here. rnrnIn reading a short one paragraph review of a book on reverse mortgages you did on the Internet, you referred to yourself in one form or another eight different times. You even tried to give your phone number in that review, which the retailer left out. So after reading that review, it is far less surprising to see you employ the same type of tactics in this thread. rn

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