The National Association of Realtors hosted a lively webinar on using reverse mortgages in real-estate transactions — and in the process revealed that real estate professionals have many of the same questions about the program as potential buyers and borrowers.
The Chicago-based trade group, whose membership includes more than 1.2 million members across about 1,100 regional associations, aimed the event directly at agents who may not know about the program. Scott Trembley, the CEO of the Trembley Group real estate firm in Myrtle Beach, S.C., discussed the transactions and fielded questions alongside his counterpart on the loan side of the equation, Reverse Mortgage Funding originator Frank McInerney.
The home equity conversion mortgage for purchase transaction — HECM for purchase or H4P for short — represents a “powerful” tool for real estate professionals, Trembley said, noting that many of the agents at his firm who learn about the program realize how many potential sales it could have helped them close in the past.
“It brings, as a Realtor, a whole other level of respect,” Trembley said, adding that clients feel more confident in an agent if he or she explains HECM for purchase alongside other potential funding options — whether they eventually use an H4P to buy a home or not.
“This program will add to your portfolio for sure, as a Realtor,” he said.
One of the key benefits that both Trembley and McInerney mentioned: the ability to use a HECM to buy a home without having to wait for an existing property to sell. Trembley gave the example of an older couple looking to move in order to be closer to their grandchildren. They needed the proceeds from the sale of their existing home before they could buy a new property, but they were having trouble finding takers at their asking price.
Instead of waiting, Trembley said, the couple used a HECM for purchase loan to secure the funds necessary to buy their new home, then lowered the price on their existing home in order to sell it more quickly.
Webinar host Jon Boughtin, an NAR media communications specialist, fielded multiple questions from attendees, with particular attention focusing on whether or not H4P loans can be used to fund renovations at the new property. McInerney noted that because most borrowers are bringing their loan balance to the table as part of the purchase, they have no further credit line to fund additional improvements — nor, as many have asked him in the past, can H4P borrowers usually receive monthly payments. McInerney did add that in some cases, borrowers can put more money down than the requirement, thus freeing up an available one of credit.
McInerney also called out another key difference between H4P transactions and standard mortgages: Sellers are not allowed to make any concessions, such as the partial payment of closing costs, in order to sweeten the deal if a HECM is involved in the purchase.
The panel closed the event by noting that educating both borrowers and real estate professionals is still vital to the expansion of the H4P program, which was first introduced in 2009, as these transactions still account for a tiny sliver of all HECM loans issued.
Though the NAR did not have an estimate of attendance, 74 people were watching the panel according to the live-streaming service used to broadcast the event. For those who missed it, the NAR plans to release a recording of the webinar on its website, Realtor.org.
Asked and Answered in the Chat
Participants in the webinar asked several common questions in the associated chatroom. Here’s a quick roundup of the questions and answers:
Q: Does the program apply to condos?
A: Yes, but the condo has to appear on a HUD-approved list — and few typically qualify.
Q: Are there any prepayment penalties associated with a HECM for purchase?
Q: Can you use a HECM for purchase to buy a second home?
A: No, the purchase must be for a primary residence.
Written by Alex Spanko