Third Time’s a Charm: One Loan Officer’s Unique Client Experience

There is the misconception that a person can only be eligible for one reverse mortgage in a lifetime, but the opposite is actually true. Educating as many people as possible about this misconception is the mission of Larry Waters, senior reverse mortgage consultant at Resolute Bank in Maumee, Ohio.

Waters has been in the mortgage industry for over 20 years and has been involved in reverse mortgages since 2003. Specializing in reverse mortgages has allowed him to be able to educate more people about the true benefits of the product.

“I love helping clients realize the benefits of reverse mortgages,” Waters says. “A lot of people aren’t prepared for retirement and are just getting by right now, but with inflation and health care costs continuing to increase, they will realize the need for another option.”

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This mindset led him to one particular client nine years ago. This client was located, at the time, in Spokane, Wash., where she was living alone after her adult children moved away. The woman wanted to sell her home to downsize, but it needed some upgrades, mostly aesthetic things, Waters shares.

“Initially, she went to a realtor and at the time, he didn’t even know about reverse mortgages, nor did she,” says Waters. “The woman then went to the bank to try to get a regular mortgage, but was denied because she didn’t have the income she used to when her husband was alive.”

The bank actually brought up the idea to her about a reverse mortgage and then she contacted Waters. Over the next five years, Waters originated a total of three loans for his client.

The first loan was to cover all of the renovations on her home so she was able to sell it for top dollar and move to a smaller home. She took out a set amount of loan proceeds initially and then took the rest in a line of credit. She then took the proceeds she made from selling her first home and paid off the loan and bought a second home in cash, explains Waters.

Once in the second home, the client told Waters she wanted to free up some cash and took out a second reverse mortgage through a line of credit. “She didn’t need an income stream each month,” says Waters. “She was pretty frugal and only used it when she had unexpected expenses.”

A few more years down the road, the woman contacted Waters again and explained that she wanted to move again because she didn’t like her neighbor. There were also new homes being built downtown that were built specifically to accommodate seniors.

Again, she was able to pay off her last reverse mortgage and the result was a third reverse mortgage. This time though, Waters originated a HECM for Purchase for her.

With each reverse mortgage she also was responsible for paying all of the closing costs and other fees, though Waters did offer her discounted lender credits as much as possible.

“When we were doing this, there weren’t any of the income requirements for eligibility that are present now,” Waters says.

The option of multiple reverse mortgages is something that Waters wants to bring awareness to, and since this client, he has had repeat clients who were in need of a second reverse mortgage after the first.

“People need to know that a reverse mortgage isn’t necessarily a one and done deal,” says Waters. “A lot of times they think it’s the last thing that they’ll do, but sometimes things change and they want to move. It can work for five or 10 years and then could possibly help them again to downsize or move to another location.”

Written by Alana Stramowski

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  • If RMD polled readers, it might be surprising to those who do not originate how many of us have had borrowers who have obtained more than one HECM and how many of those borrowers there have been.

  • I would be curious to hear other industry participants’ reaction to the concept of a “short-term” HECM such as the one described in the first scenario above. Low/No cost programs make this financially more attractive for the borrower – less so for the lender and secondary market, where even a full-cost but short-term HECM loan is unattractive.

  • I know Larry Waters and yes he is right, I also agree with The_Cynic’s comment.

    My opinion is that the article is still a good one to publish. We have a lot of new people coming into the reverse mortgage space, there is a lot to learn, more today than ever.

    Hopefully most new faces coming into the industry are instructed by their companies to subscribe to the RMD! If that is the case, they are reading this article now!

    Some other points to add to Larry’s comments are, that on a refinance of an existing HECM, we have the 5 X rule that applies! This means that after all costs associated with obtaining the new HECM (Net after the pervious MIP credit) the borrower must be able to net 5 times the amount of the total closings costs on the new loan in order to qualify! Some extenuating circumstances may be able to be considered by underwriting to waive this ruling.

    On a HECM for purchase, that is a whole different subject, the only thing applies is that if the borrower has an existing HECM on their present home owned, the balance of the HECM would have to be satisfied before another endorsement could be given.

    John A. Smaldone
    http://www.hanover-financial.com

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