New Homes, Retirement Savings: Originators Share HECM Success Stories

Despite industry concerns about lower endorsement volumes and constrained principal limits, reverse mortgage originators continue to see success stories on the ground level.

Kathy Collins, a branch manager at UMAX Mortgage in Carlsbad, Calif., recently assisted a couple who opened a Home Equity Conversion Mortgage to fund their grandson’s education.

“I presented them with what the reverse would do, and they talked with their family and compared it with liquidating assets or taking out a loan with scheduled payments,” she said. “I think they felt like it was by far the best option for them.”

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The couple’s home was worth more than $1 million and was owned free and clear, allowing them to comfortably tap into the equity with the bonus of not having a rigid payment schedule.

The grandson was equally grateful.

“He told his grandparents, ‘When I become super successful, I’ll just pay it off for you,’” Collins said.

For two clients of Beth Paterson, executive vice president at Reverse Mortgages SIDAC in St. Paul, Minn., a HECM was the best solution for their estate planning goals. The spouses had each previously been married, and the husband was looking for a way to take care of his current wife and his heirs. Because he was the original owner of the home, they added his new wife to the title and jointly opened the HECM.

“When something happens to him, she will remain in the house and get a portion of the funds – enough for her to maintain it and for her needs – and a portion will go to his heirs,” Paterson said, adding that they also worked closely with an attorney.

Paterson said that the wife has funds of her own that will go to her heirs, so, with everyone taken care of, both spouses were very satisfied with the outcome.

“Everyone was happy,” Paterson said. “At closing, he said he would do another reverse mortgage if they sold the house in 10 or 15 years. They would do an H4P.”

Pete Mendenhall, HECM vice president at the Federal Savings Bank in Connecticut, recently closed a HECM for Purchase for a client who had a new home built near Sacramento, Calif.

The clients had closed a HECM when they sold their previous home, and when the time came to buy the second home, the client was proactive and inquired about H4P.

Because construction on the new house wasn’t completed until about seven months after the sale of their previous home, they rented, and invested the proceeds from that sale. Mendenhall said the extra time gave them the opportunity to weigh all financing options, concluding that H4P was the best.

“They had plenty of money to buy a house, but he and his non-borrowing spouse wife decided: Why tie up all that cash in a house when they could use the H4P and save cash – and leave it at work invested, as well as not have a mandatory mortgage payment every month. Win, win, win,” Mendenhall said.

Written by Maggie Callahan