Dallas News: Reverse Mortgage Worth Knowing About

A reverse mortgage is a choice worth knowing about, writes syndicated columnist Scott Burns in The Dallas Morning News this week.

Burns decided to address the topic after seeing an advertisement for the reverse mortgage for purchase product, he writes. To find out more, he met with a Tampa, Florida-based originator from Retirement Funding Solutions, Chris Bruser. 

“Basically, the purchase money reverse mortgage is a wrinkle on a conventional reverse mortgage,” Burns writes. “These Home Equity Conversion Mortgages may allow you to pay off an existing mortgage on a home you already own and have an additional line of credit to cover other expenses.”

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The column discusses typical uses of reverse mortgages, and some of the details about rules and qualifications. With Bruser’s input, Burns covers the recent trend toward the use of reverse mortgages as financial planning tools. 

“People with a glass-half-empty view of the world imagine losing all of their equity,” he writes. “People with a glass-half-full view consider the benefit of having a limited loss in a risky universe. The most they can lose is their home equity.”

View the Dallas Morning News article.

Written by Elizabeth Ecker

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  • “If you are 62 or older, you can now buy a home with a large down payment — that “around 50 percent” figure — and never make a mortgage payment on the remaining amount of the purchase price.” While Scott seemed to have gotten the ad right, he took what the ad said and corrupted it by stating “…a mortgage payment…” instead of “another monthly mortgage payment….” Even with HECMs for Purchase a HECM has at least one payment that will be due and payable.

    Why can’t a borrower purchase a home with something substantially less than 50% of the purchase price. The tact is a hang over from fixed rate Standard days and must be killed by HUD. There is no need for the proceeds used for the purchase to be considered mandatory obligations.

    HECMs for Purchase are the new way for some TPOs, originators, and mortgagees to maximize the secondary market premium on a single transaction to the detriment of the senior. Many seniors are convinced by the worst aspects of the psychology of money to keep as much cash as possible in their hands when the HECM has more than an adequate line of credit to help them avoid unnecessary interest from taking out 100% of the proceeds.

    Most seniors do not comprehend the devastation that unbridled compounding can do to their overall net estate. Too many falsely believe that they will obtain positive arbitrage when in fact most do not and worst few track it.

    When a senior uses a fixed rate HECM to close a home purchase, they put themselves at a distinct cash flow disadvantage. If they find that they are in a negative arbitrage situation and try to cure it by paying down the HECM, that cash is lost to them with a fixed rate HECM unless they refinance since fixed rate HECMs have no line of credit available to the borrower from which to re-borrow balance due pay downs.

  • I laughed when I read the following at the end of the article:

    “Learn about reverse mortgages in short, easy reads

    Scott Burns: ‘Reverse Mortgages — Their Time Has Come,’ April 13, 2012.”

    At that time we still had fixed rate Standards.

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