What is a non-recourse loan?

A non-recourse loan means that when your home is sold to repay the loan, neither you nor your family will be required to pay more than the sales price of the home. The FHA insurance will pay for any shortfall, so long as your home sells for at least 95% of the current appraised value (the market value at the time of sale).

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For Seniors: The good and bad of the Fed’s monetary policy

One of the negatives of our Federal Reserve’s policy to expand our money supply and keep interest rates down is that seniors who have lived frugally and built up savings over the years, have not had an adequate return on those investments.  There is, however, good news.  With lower interest rates, Alabama reverse mortgage borrowers can receive more money from a reverse mortgage than they would in a higher interest rate environment.

Many seniors and their financial advisors have come to realize that home equity is as much a retirement planning tool as financial assets are.  To offset the loss of income from retirement portfolios, reverse mortgages are increasingly being recognized as an effective and reliable way to help seniors fund their longevity.

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AARP Article

Regular contributor to the AARP magazine, Jane Quinn, makes some interesting observations and recommendations. Ms. Quinn points out that 41% of American’s age 64-74 carry debt on their home. This is up an astounding 87% from just two decades ago. Later in the article, Ms. Quinn points out that a reverse mortgage is a option that seniors need to consider as they seek to fund their longevity and independence. AARP and FHA had the foresight in the 1980’s to initiate the FHA Home Equity Conversion Mortgage (HECM) reverse mortgage program to help seniors manage their “golden years”. More and more, financial advisors are coming to understand the importance of, and the wisdom behind, FHA reverse mortgage program.

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First-hand Reverse Mortgage Account

Submitted by Neal S. Hutchinson; Reverse Mortgage Expert
Early in 2009, I had decided to change careers and based on my education and experience, several people had recommended that I explore the mortgage industry.  I was talking to a couple of different mortgage brokers at the time and felt certain that this was a good path for me.  At the same time, I was helping my Mom with her expenses.  My father passed away a couple of years earlier and they were just getting by with both Social Security checks and a small investment in some stocks.  After my father died, the social security income was basically cut in half, but her expenses didn’t change very much.  She was starting to sell some stock to make ends meet, she would have to pay taxes from the sale and was also reducing her only other asset. I had started helping her with organizing, paying and trying to lower her bills.  My brothers and I started giving her a little extra each month and we had explored several different options to make sure she could pay her basic expenses each month.  If she continued to sell her stock, she would run out and then what would she do? 
We decided to sell her house and buy a smaller one, investing the extra money left over to help.  Even though she really didn’t want to move, she reluctantly put the house on the market and tried to sell the house.  It was the wrong time to try to sell a big house. After lowering the price a couple of times, it became obvious that this plan would not work out very well.  My Uncle called me and asked me if we had considered a reverse mortgage?  I told him that I had looked into that a year or two earlier and she couldn’t get enough money from a reverse mortgage to make a significant difference.  We talked about some numbers that he had discussed with someone and apparently some of the rules had changed over the last year or two.  I needed to investigate this further. 
My Uncle recommended an out of state company that he had spoken to and I called them.  They were very nice, but made some assumptions about property values in our area that didn’t seem accurate to me and then mailed us an overnight box of paperwork. The next person I had been planning to call about a potential mortgage career was Jimbo King.  It turns out that McGowin-King Mortgage had two departments – one for what I call Traditional Mortgages and the other specializes in Reverse Mortgages.  In fact, I learned that Jimbo’s father, Jim King, has been doing reverse mortgages longer than anyone in the State of Alabama.  They were definitely the local experts. We discussed the limits and rules for reverse mortgages that had changed significantly since I last looked at it and my Mom would be able to get a significant amount of money to help her.  We studied the options and realized that this was a perfect option for her. 
She gets to stay in her house for as long as she lives without the worry of any mortgage payment and she would receive a monthly check (not taxable!) that was enough for her to have a comfortable lifestyle and no more stress over which bills to pay next month. Next, I had to “sell” it to my sister and brothers.  I had already spent a lot of time reviewing this and was sure it was our best plan.  Getting their agreement would be easy, right?  Wrong.  Questions ranged from: “We’ll have to give the bank our house?” to “I don’t really know much about them, but Dave Ramsey once said they were bad, so I don’t think we should do it.”  I had to educate them on the program.  Now we all know the facts – she continues to own the house, her name stays on the title and she could sell the house or do anything she wants with it, just as before.  Instead of a monthly mortgage PAYMENT, she receives a monthly CHECK from the mortgage company! She can spend the money on anything she needs or wants.  Also, as with any loan, funds or proceeds received from a reverse mortgage loan are not taxed!
I saw first-hand how a Reverse Mortgage not only solved a financial problem, but it also removed the stress of worrying over her bills and this improved her quality of life.  She now has enough monthly income to pay all her bills and still has her stock as a backup for emergencies; she still has her house and didn’t have to move. 
Now I work for McGowin-King helping other seniors with Reverse Mortgages in Alabama.  I personally find it very gratifying to help seniors during this time of great financial difficulty. The program we used with my Mom was one of several different types of Reverse Mortgages that fit her specific situation.  There are other types for different situations and we try to fit the right program for each individual’s situation.  A Reverse Mortgage is not necessarily for everyone, but I believe that if you are 62 or older, you should know more about them. 
I am always happy to explain the Reverse Mortgage options with anyone to see if it is right for them.  Please call me if you would like to learn more about a FHA-Insured Reverse Mortgage.  My direct line is (205) 451-0678 and I will provide you with more information for your specific situation.
Neal originates mortgages for re-financing and buying houses, but specializes in Reverse Mortgages.  He is married with three children and still lives only a couple of miles from his Mom.  

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GNMA Participant Letter limits HECM HMBS pool.

A recent Participant Memorandum by GNMA (also known as Ginnie Mae) states that it will not allow fixed rate open-ended line of credit loans in its Home Equity Conversion Mortgage (HECM) Home Mortgage Backed Securities (MBHS) pool. Translation: this affects several lenders’ fixed rate products whereby the borrower — after taking the allowable lump sum at closing — was then permitted after a year to take draws on the remaining available principal limit. Fortunately, there is at least one other lender who is still offering its version of a fixed rate reverse mortgage product whereby the borrower may access the remaining principal limit after the first year. The preceding three sentences contain a lot of industry jargon, and I hope any prospective Alabama reverse mortgage borrower who wants clarification on this will contact me. I may be reached at 205-879-2099.
Jimbo King

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Kudos to Birmingham’s Stewart Welch

Media reporting on reverse mortgages has long been plagued with inaccuracies. Fortunately for prospective Birmingham reverse mortgage borrowers, Stewart Welch understands FHA's Home Equity Conversion Mortgage (HECM) program. Currently, over 99% of all reverse mortgages are HECMs and in the March 23, 2014 Sunday edition of the Birmingham News Mr. Welch explains how they can become a part of a healthy retirement plan. You can read the article on Mr. Welch's website or the Birmingham News article here


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Yay! Kipplinger Gets It Right!

Misperceptions about reverse mortgages are rampant and most date back to types of reverse mortgage loans that have not existed for over a decade.  One of the most common errors made in media reports are that upon getting a reverse mortgage the borrower loses ownership of their home.  Nothing could be further from the truth.  A reverse mortgage is simply a lien against the property like any other mortgage, home equity line, etc..  Kudos to Kipplinger for giving an accurate and easy to understand explanation of how a reverse mortgage works and how it affects heirs: http://www.kiplinger.com/article/retirement/T021-C000-S004-what-heirs-need-to-know-about-reverse-mortgages.html


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Senior Swimming Pool

Not everyone can afford a swimming pool – here is one senior homeowner’s solution.

"Now how do I get out?"

“Now how do I get out?”


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Who is caring for the caregivers? Can a HECM help?

During most of our lifetimes, we will either be a caregiver for a parent or elderly relative, or we will need someone to care for us when that time comes.  Sacrifices made by caregivers are manifold: personal money spent, time away from family and/or work, lost wages, etc. This can add up to a lot of financial and emotional stress, which can be overwhelming for some caregivers and their families.

It is estimated that services rendered by unpaid caregivers represent over $425 billion per year.  Increasingly, Alabama reverse mortgage borrowers are using their FHA Home Equity Conversion Mortgage (or HECM) to alleviate their caregiver’s financial and emotional stress.  Funds generated by reverse mortgages can be used to employ an outside home health care professional to come in on a part-time of full-time basis.  In some circumstances, funds created by reverse mortgages can even be used to compensate a friend or relative for serving in a caregiving capacity.

The HECM reverse mortgage program was created to help seniors get some of the money back that they paid into their home over the years.  Many feel that using a reverse mortgage to help your caregivers is a caring thing to do.


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Alabama Reverse Mortgage update

There’s good news for Alabamians who may be interested in a reverse mortgage. FHA is continuing the $625,500 ceiling on home values for reverse mortgage purposes. The limit for Alabama homes was $200,00 just seven years ago.

This $625,500 is a nation-wide amount, which favors Alabamian reverse mortgage prospects. In high value property states (such as California, Hawaii, New York, etc.) the average home value is much higher than Alabama, therefore a higher percentage of homes in those states are above the $625,500 valuation cap. Our state has a lower, more reasonable property values across the board, so a much smaller number of homes will be above the valuation cap.  Homes above the $625,500 value are still eligible, their value for the purposes of a reverse mortgage are capped at $625,000.

Birmingham reverse mortgage prospects — particularly those in Mountain Brook, Vestavia, and Homewood — are the most likely to exceed the ceiling. Mobile reverse mortgage prospects, especially those in Baldwin County, with it’s beach and water properties, will also see a higher percentage of homes above $625k.

The average home value across Alabama is approximately $123,000, whereas Hawaii ($500,000+) and California ($350, 000+) have a substantial number of homes above the $625,500. Again, homes above $625,500 are still eligible, they are just capped for valuation purposes at $625,500. Every year, McGowin-King helps a number of Alabama reverse mortgage borrowers with higher value homes. All the benefits of a FHA reverse mortgage apply to them as well.

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