A dissectologist is a person who enjoys assembling jigsaw puzzles. A Reverse Mortgage Loan Originator is a person who helps his clients assemble their financial picture. For both the dissectologist and the loan originator, the idea is to bring the various pieces together to form a complete picture, not to view them in isolation. Throughout this book, I will help you explore how a Reverse Mortgage can fit into a larger financial picture for homeowners with diverse histories and goals.
Consider the case of a woman who decided to take advantage of a Reverse Mortgage to complete her financial picture after losing her job at age eighty-two. She was working with other pieces: a fixed income, monthly mortgage payments, credit card payments, and deferred home maintenance. By bringing the Reverse Mortgage piece into play, she eliminated her monthly mortgage and credit card payments and completed her home repairs. She added guaranteed monthly income for as long as she lives in her home. I will provide more details in Chapter 2, but please consider that a Reverse Mortgage is not a one-size-fits-all solution as you settle in for a short read. Depending on the situation, it may eliminate monthly mortgage payments, increase income, or both.
As I sit here today, putting the finishing touches on this book, I am seventy-five years old and have been in the mortgage business with my wife, Terri, for twenty-five years. We have built not just “client relationships” but true friendships with many of our borrowers. As our business has shifted to include Reverse Mortgage loans, the urgency of sharing what we have seen and experienced has grown exponentially. I have often found that discussing this topic in an email, or even a conversation, does not provide enough context. There are many other books on this topic that describe the technical aspects of these loans. I specifically wrote this book from my perspective, that of a loan originator who has conversations with every borrower and remains in contact with many borrowers years after the loan closes.
My goal with this book is to educate potential borrowers, their families, and professionals who work with seniors; share some of the life-changing stories of these loans; and encourage everyone to become knowledgeable enough to make informed decisions. Thank you in advance for joining me on this journey!
Before we dive into the topic of Reverse Mortgages, I want to give you a bit of history, so you have a better understanding of who I am. Long before my career in the mortgage business, I graduated from Rensselaer Polytechnic Institute with an engineering degree, followed by military service as a pilot and plane commander in the US Navy. After four and a half years in the Navy, I worked as a sales engineer, selling natural gas compressors. In those days, I performed engineering calculations on a slide rule before getting my first calculator in 1975. In 1980, I purchased a programmable calculator, which I programmed to suit my needs. Two years later, I bought my first computer with a word processor. Why is this relevant? In my younger years, I constantly pushed the envelope on new technology and could never understand the “old guys” who weren’t interested in learning how to use these new devices. However, more than forty years later, I have become one of those “old guys” who finds the latest and greatest technology more annoying than helpful. As it turns out, many Reverse Mortgage borrowers no longer use computers, never had one in the first place, or do not use one with the ease of the younger generations. Quite frankly, many of these borrowers simply prefer doing business in person and on paper. The move toward automating the mortgage process through apps and call centers has taken the personal touch out of loan origination. While this may benefit traditional mortgages and tech-savvy applicants, I find that the Reverse Mortgage process benefits from a person-to-person approach.
After twenty-three years in sales for fifteen companies across three different industries, I left my last corporate job in 1996 when my wife and I launched our business, Orion Mortgage, Inc. We have been working together, and for ourselves, ever since. In 1996, there was little standardized training for anyone in the mortgage industry and no licensing requirements in Colorado. We learned our business one loan at a time by diligently pursuing both knowledge and opportunities. Soon we had a successful business based on repeat customers and word-of-mouth marketing. In 2006, when Colorado began requiring licenses for our profession, we both took the necessary steps to achieve licensure and have consistently maintained our status as Licensed Loan Originators ever since.
We have divided the tasks of bringing a borrower through the various steps of applying for, processing, and closing a loan to utilize each of our strengths to the greatest advantage. Most borrower conversations start with me. I walk the borrower through the entire loan application process. In this conversation, I discover their reasons for getting a loan, analyze the current situation, and offer solutions to help achieve current and future goals. Once a loan application is signed, Terri takes over the file and oversees the loan processing. She has regular contact with borrowers and answers their questions as they gather their necessary documents. She communicates with underwriters to ensure they have what they need to approve the loan and makes sure the appraisal process runs as smoothly as possible. After the underwriter has given the loan a “clear to close,” the file goes back over to me, and I attend the closing with our borrower as the final loan documents are signed. Throughout these steps, Terri and I are constantly reviewing details, trying to foresee and address any potential concerns, and working together to structure the best possible loan for each of our borrowers. Technically, each of us could perform all the various functions throughout the loan process, but we each enjoy some parts more than others, and our temperaments are better suited to different roles. Our system must work because we have had a successful twenty-five years providing Colorado homeowners with loans!
During our first decade in business, we became aware of Reverse Mortgages, but since they were FHA products, we referred all prospects to others. We were committed to a low-cost business model, and the costs to originate FHA loans were prohibitive for a small company. In 2010, the rules changed to make it reasonable for us to originate FHA loans.
In 2011, a financial planner referred a gentleman for a traditional mortgage. At the time, he was seventy-seven years old, had sold a successful business, and seemed well-situated for retirement. Unfortunately, problems stemming from the sale of the business were threatening his retirement. The buyer of his business had not refinanced the business loan into his name and had stopped making payments. The business loan still had our borrower’s home as collateral, which meant the bank threatened to foreclose on his home.
Originally, this borrower came to us for a traditional cash-out refinance to pay off the bank so he could repossess his old business. The problem was that since he was no longer the owner of the business, he did not have the documentable income necessary to qualify for the refinance. After reviewing his total situation, I recommended that he apply for a Reverse Mortgage, which he did qualify for. His Reverse Mortgage provided the cash he needed to pay off the bank. He was able to recover the business assets and began the process of selling them off.
We started originating Reverse Mortgages to solve a borrower’s problem. As we have continued to help borrowers, we have seen how powerful this product can be when properly applied.
In these next chapters, I will be describing the products and processes in ways intended to cover transactions as they are done in Colorado. I am not attempting to cover all the technical details or explain every nuance. I am not a lawyer and do not provide legal advice. I recommend that if you have any legal questions about a specific transaction that you consult a lawyer. For the latest rules and technical data concerning FHA-insured Reverse Mortgages, see: https://www.hud.gov/program_offices/housing/sfh/hecm.
For the sake of consistency, I will use the terms “borrower” or “client” in the singular even though there may be, and often are, two borrowers in a Reverse Mortgage transaction. I am using the pronoun “she” for both the sake of consistency for the reader and because single borrowers tend to be female more often than not.
You will find terms defined in the glossary at the back of the book.