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Ease Uncertainty With A Reverse Mortgage

U.S. and global economic volatility due to the COVID-19 pandemic have many retirees (and those close to retirement) worrying how to survive these turbulent times.

Will you have enough assets to maintain your lifestyle and meet retirement spending goals in the face of a possibly long-term bear market?

Traditionally, older adults fund retirement with a mixture of Social Security, pensions, 401(k)s and other retirement and saving accounts.

However, many could be sitting on (or rather, in) hundreds of thousands or even millions of dollars they haven’t considered using: home equity. This source of wealth is often ignored in retirement income planning.

One of the most sensible ways of leveraging home equity in retirement age is through Home Equity Conversion Mortgages (HECM), also known as reverse mortgages. With increased safeguards to protect consumers and lower costs than in the past, reverse mortgages are becoming mainstream financial instruments.

How Does It Work?

Simply put, reverse mortgages enable homeowners age 60+ to borrow up to roughly 50% of their home’s value, depending on their age and that of any spouse also on the loan. Borrowers are guaranteed the right to continue living in their home for the rest of their lives (or until they permanently move out).

Furthermore, while any funds borrowed against home equity continue to accrue interest, all reverse mortgage are non-recourse loans. That means borrowers can never owe more on the loan than what the house is worth when the loan is repaid. If the house has declined in value, the FHA or the lender bears the risk (in part with the help of mandatory mortgage insurance. See below).

On the other hand, if the home should increase in value by the time the owners move out, all remaining equity after paying off the loan belongs to the borrower or their heirs.

In addition, homeowners may pay back the loan without penalty or sell the home at any time (at which point the reverse mortgage lender will be fully repaid).

Higher net worth individuals and families often choose to use reverse mortgages as part of their overall retirement income strategy. It’s not uncommon for these borrowers to make regular payments on their reverse mortgage.

Some choose to make interest-only payments, so their balance doesn’t increase at the rate it ordinarily would.

Others treat a reverse mortgage similar to a traditional loan and make regular monthly payments. With rates on par with traditional mortgages, they are able to borrow money at a low rate of interest and pay it back on their terms, as opposed to the structure of a fixed 15-, 20- or 30-year term.

And some may choose to defer payback until the last remaining borrower leaves the home.

Ways To Make Use Of One

Pay off an existing mortgage: A reverse mortgage can pay off and replace a traditional mortgage loan, reducing the burden of a mandatory monthly payment and resulting in immediate savings — especially helpful in today’s uncertain times.

Standby line of credit: Unlike traditional credit lines, reverse mortgage credit lines are federally insured and cannot be frozen or called due. The unused portion has a guaranteed growth rate of .5% over the current interest rate on the loan, allowing more funds to be borrowed over time. Even if the home decreases in value, the line of credit remains and continues to grow.

This offers an excellent insurance policy against market fluctuation, and a tax-free source of money that can be used as a buffer in a down market.

The strategy in turbulent times would be to draw funds from the credit line instead of drawing on other assets (such as selling stocks when they’re down). Thus, a reverse mortgage credit line can limit the need to make portfolio withdrawals, protecting and preserving retirement accounts.

Multiple payout options: Reverse mortgage proceeds may be accessed in a lump sum, in the form of an annuity (a lifetime payout known as “tenure”), through equal payments over a fixed period of time (known as “term”), or through a combination of these options.

While reverse mortgages can be based on fixed interest rates, the line of credit, tenure and term payouts are available only on adjustable interest rate options.

Interest rates on reverse mortgages are on par with traditional mortgage interest rates. Rates are negotiable and vary from lender to lender.

The “index rate” is the standard rate that varies depending on market interest rates. It is not controlled by the lender. The rate charged on your loan can increase or decrease depending on whether the index increases or decreases.

The margin rate is the interest percentage that is added to the index by the lender. This rate is not adjustable, meaning that after loan origination, the margin stays the same throughout the loan term, regardless of what the index may change to. It is also negotiable.

Cost Of A Reverse Mortgage

HUD counseling: To obtain reverse mortgages, borrowers must undergo mandatory counseling with a third-party HECM counselor approved by the U.S. Department of Housing and Urban Development. Typically charged at $125, this counseling addresses the lending process, benefits, drawbacks and eligibility requirements.

Home appraisal: Appraisals run on average $450 to $550 and can vary depending on the size, age and condition of your home. They are ordered through an independent appraisal management company.

Third-party closing costs: Expect to pay typical mortgage fees for loan recording, credit report and title insurance. These fees could vary and are negotiable. Ask for an itemized fee breakdown.

Mortgage Insurance Premium (MIP): There is an initial mortgage insurance premium of 2% of the home’s appraised value. Over the life of the loan, you’ll also pay an annual MIP that equals 0.5% of the outstanding mortgage balance. (This federally-backed insurance helps protect lenders in the event the value of the home drops over the life of the mortgage.)

Loan origination fee: Lenders may change a loan origination fee ranging from zero to $6,000 depending on your home value. This fee is negotiable and can vary among lenders. Most costs may be financed into the loan.

An important note on costs: Reverse mortgage borrowers must also continue to pay their property taxes, insurance and maintain the home to comply with loan guidelines.

As with any financial product or service, education is paramount. Discuss the options with a knowledgeable professional before committing.

This article originally appeared in the April 2020 Edition of The Beacon Newspaper.

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Steven J. Sless Group of PRMI Partners with Institute for Divorce Financial Analysts

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Steven J. Sless Group of PRMI Launches Video Series for Homeowners 60+

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PRMI’s Sless Group Spearheads New Reverse Mortgage Video Series

Primary Residential Mortgage (PRMI)’s Steven J. Sless Group, the lender’s consumer-direct retail branch focused solely on reverse mortgages in Owings Mills, Md., has spearheaded the creation of a new, reverse mortgage-focused video series designed to appeal to seniors and to present accurate information about the reverse mortgage product category.

© 2021 Steven J. Sless NMLS #298581 | Primary Residential Mortgage NMLS #3094 | All Rights Reserved
PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. This ad is not from HUD or FHA and was not approved by HUD or any government agency. The loan is subject to foreclosure for failure to pay taxes and insurance to maintain the property and insurance and to comply with the terms of the loan. Consumers remain responsible for property taxes, homeowner’s insurance, and home maintenance.

Video Transcript

Larry Wilner:

I am really excited today, to not only have a friend but somebody who has been very helpful to me in my lifetime and that’s Steve Sless. Steve Sless is in the reverse mortgage business and full disclosure, he and I had a long consultation about a reverse mortgage that I was thinking about. And in all candor, Steve was very honest with me and we both came to the conclusion that it was not the right option for me. So since we had that conversation, I find Steve to be a very credible source of a wide variety of information. So Steve, thank you for being here. Hope all is well-

Steven Sless:

Absolutely. Likewise, Larry, thank you so much for having me. It’s a privilege to be on. I’ve seen a lot of these episodes that you’ve produced so far, they’re incredible. And I appreciate you having me. How have you been?

Larry Wilner:

We’ve been great, we’re making through, we’re muddling through and we’re finding this time to be a period of innovation. And we’re taking full advantage of it.

Steven Sless:

Fantastic.

Larry Wilner:

So why don’t we get started? Let’s just jump right in this. Give us a little bit about your background Steve.

Steven Sless:

So background wise, I’ve been in mortgage lending for 17 years. I got in the mortgage business around 2003. And the first five years of my career, I did what most mortgage loan officers do, which is purchases, refinance, cash out, home equity loans and that sort of thing. And then in 2008 coinciding with the last financial crisis, which is interesting, that 2008 I made the transition over to reverse mortgages. And I found at the time the reverse mortgage product offered a real lifeline to folks who were struggling financially. And I jumped in, I educated myself about reverse mortgages and here we are. Fast forward all these years later, the reverse mortgage product has gone through a lot of innovation and changes over the years. It is now a true financial planning tool, which is different than it was when I first got in, where the loan was looked at more of a loan of last resort. Now we’re working with financial planners and their clients, elder law and estate planning attorneys to really make housing wealth and home equity a part of the overall retirement plan.

Larry Wilner:

Well, it’s interesting that you bring that up because I remember when we first had our initial conversations about reverse mortgage, the reputation of that world was suspect to say the least. And after I got to know you and felt comfortable with you, I even referred you to my financial planner. And I remember their first response was, “Oh please, don’t come at me with that.” And I asked them to just please give you an audience for a little while. And it was amazing to hear their followup response. And I know that you’ve become extremely connected with them. And I think, it’s clear to me that the reputation of reverse mortgage has changed quite a bit.

Steven Sless:

It has, it’s very similar to the long-term care planning world, right? There’s a lot of myths and realities. There’s a lot of misconceptions about reverse mortgages and it is a product that has evolved over the years. When I first got into it, it was only for folks who were destitute, who were out of money. They were equity rich, but cash poor. Where now housing wealth has proven to be a very strategic and a tax efficient way to just blend all of your assets into one holistic retirement plan. And you had a perfect example there, the financial planner that you and your family work with and you introduced them to me, being the nice guy that you are. And the first conversation with them, it seemed like they didn’t really want to talk reverse mortgages.

And fast forward now, that was about a year, a year and a half ago, and they’re one of our best strategic partners. We share clients and that seems to be, more often than not, what happens whenever we do have a conversation with a financial planner or anybody for that matter, who doesn’t necessarily understand what a reverse mortgage is. There’s a lot of education that goes into understanding the role that housing wealth plays in modern day retirement planning. And the fact of the matter is, it’s not for everybody as you and I discussed. But for many folks, it is an incredible product that, even if you don’t necessarily need money, there’s ways to use a reverse mortgage in financial planning and retirement planning.

Larry Wilner:

And we could talk about reverse mortgage for a long time. I’m sure you can. You’re very eloquent when you speak about it. Let’s talk about the COVID world now, or what I call the COVID factor. So give me a peak inside what your world has been like with your business and how the COVID environment has impacted your company and impacted the world of reverse mortgages.

Steven Sless:

Yeah, it’s a great question. It’s been interesting. It’s an interesting past maybe two or three months for us. So we work with, exclusively a senior clientele. So every one of our clients are 60 and up. And so, making sure that they’re protected, making sure that they’re okay, really understanding their needs and understanding their concerns. But we also do offer a product that lends well in times of need. Even though, like I said, it’s not necessarily a product designed anymore to be a loan of last resort. It can provide a financial lifeline for a lot of folks.

And what we’re experiencing right now is a real surge of business owners that are in their young sixties or late sixties, or even early to mid seventies, struggling to keep their business afloat. And in conjunction with, or in lieu of, a small business loan to carry their business through. They’re realizing now that, hey, I have a lot of personal wealth tied up in my home equity and they’re able to use a reverse mortgage to leverage that equity, tap into that housing wealth to fund their business. And so a lot of our clients are doing that right now.

We’re also seeing a surge of jumbo reverse mortgages. These are clients that you would never expect to be reverse mortgage clients. We’re closing a loan today, the guy has a $5 million home in Florida free and clear of any mortgage. He is one of the largest producers of race horses in the country. He breeds race horses for the Bob Bafferts and the Wayne Lucas’ of the world. Talking of cashflow strapped business, he’s breeding horses. You got to feed all these horses. You’ve got to care for all these horses and have the stabling room for all these horses.

So he is burning through cash right now, and this is a gentleman who has a lot of net worth, but he also understands that one of the worst things to do in financial turmoil is to pull more from your assets than you’re comfortable with. You don’t want to deplete an asset that is up and down or depleting itself. And so he has a lot of equity in the home. He’s going to leverage that equity right now, and that’s going to be his bridge. And he’s going to use that equity to bridge the gap until there’s more cashflow coming into his business. And so there’s a lot of strategic ways to use housing wealth.

Larry Wilner:

It’s fascinating to me, what I’m hearing you talk about is reverse mortgage has gone from a personal choice, a personal way of grabbing some cash for my family, for whatever expenses I have or whatever I decide I want to do, into a business strategy. So the COVID world has forced business owners to look at other avenues for cash, to keep their businesses afloat. And lo and behold, the reverse mortgage has becoming one of those strategic elements that they can utilize, right?

Steven Sless:

Yeah. I mean, at the end of the day, look, it’s your money that you put into that home. And so what a reverse mortgage is doing is it’s allowing you to now access that money and obtain that money back in your hands without the monthly cashflow burden of a mandatory mortgage payment. So reverse mortgages have flexible payments. You can choose to make a payment if you’d like to. A lot of our clients do, a lot of our clients pay interest only on the money, but you don’t have to. And so if you choose not to make a payment, that payment is deferred, you’re deferring all the payback until you leave the home. What we’re also seeing is the folks that want to age in place and adult children of older folks that are maybe looking to transition to a long-term care facility.

But now given the COVID pandemic, they don’t want to leave the home. And the adult children are coming to us to understand how mom and dad can use the equity in their home to remain in place. Maybe that’s by retro fitting the home. We’re funding a lot of wheelchair ramps and walk-in tubs right now by way of the equity in the home through a reverse mortgage. And so there’s just a vast opportunity right now to really look at reverse mortgages in a different light. And we’ve had the same issues that a lot of businesses have. We transitioned to working from home. I’ve always been a big believer throughout my career of the energy of being in the office and the comradery of being around people. I love my team. I love being around them and I love cheering them on and giving them the rah, rah and helping them to be energized about going out and looking for new business.

And we’ve found we have to do that through of course, Zoom now and other platforms. And so that’s been a slight challenge, but we’re also grateful. We’re grateful to be able to provide a product that helps so many folks in times of need. And I’m also grateful to spend a lot more time with my kids. My oldest one is three and a half. My youngest one is 18 months. And so, times like now I think I’m going to look back a decade from now and of course we never want something like this to happen. There’s a lot of folks that are sick and dying and we don’t want to overlook that. But we got to look at the blessings in all this. And one of the blessings for me has been, able to be around my kids and my family more.

Larry Wilner:

Boy, you just mentioned the age of your kids, now I really feel old Steve. I wasn’t feeling so bad…

Steven Sless:

Larry, we’re good friends. I know you pretty well, you’ve got more energy than anybody my age. What you’ve done, and we’ve talked about that a little bit just one-on-one. What you and Linda have done really at the blink of an eye to transition your business and really just starting providing incredible value to folks. You’re everywhere doing everything. And so age is just the number my friend.

Larry Wilner:

Well, I’m glad you reminded me of that. You mentioned some of the things, the restructuring of your work way. Can you give me an idea in terms of the way deals normally were done, in terms of structurally for reverse mortgages and how that’s changed, how the COVID, how this remote work has changed maybe the way that you do your deals. Can you give me some insight on that?

Steven Sless:

Sure, yeah. So historically we’ve been a face-to-face type of business. Now we’re licensed nationwide, we’re doing business in other States, but a lot of our business comes from the State of Maryland and the surrounding mid Atlantic area. And oftentimes it’s us driving and sitting at their kitchen table, really educating them in person and holding their hand through the process. We’re not able to do that now. What I’ve been truly amazed by is, our clients have adapted so well. They are comfortable with Zoom. It’s actually fun for them. They’re learning this whole new world and we’re helping to facilitate them learning it. They’re FaceTiming with their family. That’s how they’re communicating with their grandkids right now. So that’s also how they’re communicating with us. We’ve had no struggle, virtually no struggle having our clients adapt and us adapt. And to me, that’s just amazing.

Because if you would’ve asked me five, six, 10 years ago, if you ever think that the reverse mortgage business can survive, if you’re not meeting folks face to face and shaking their hands and looking them in the eye and sitting at their kitchen table or in their living room to facilitate this transaction, I would have laughed you out of the room. That’s what we’re doing. And every transaction right now is applications are being done via DocuSign. So for me, from a time management perspective to not have to travel to somebody’s home and spend two hours there and sitting with them, we’re much more efficient and we’re not losing that personal touch. Because we’re still seeing them, they’re still seeing us. In some ways, today, I got my background behind me, but sometimes I’ve just had my living room or I’m outside in the yard and they’re getting a view into my world and I’m looking into their world and their house.

And we’ve just been able to use the COVID factor, get the name in there, as a bonding experience. And so we haven’t lost a beat. We’re busier now than ever before. Although we have some challenges from the return on investment standpoint, we’re actually closing two to three times as many loans right now because we’re busier. But we’re not making any more money given what’s going on in the secondary mortgage market right now. And I don’t think we need to dive too much into that right now. So we’re experiencing challenges as a business, but all in all, it’s been incredible to see our clients respond. And this is in large part, the greatest generation. They’re used to challenges, they’re used to responding in rising up in times of need and they have, and it’s just been incredible to see.

Larry Wilner:

Well, that’s why you see Rocky behind me. That’s a picture that my kids got me. That’s Rocky at the top of the art museum steps. And although he’s a bit of a fictitious character, sometimes I think he’s very real. But it’s really interesting as you were talking, because it’s an interesting juxtaposition that in fact, while we’re now more remote than ever, that our proximity to each other is more distant than ever. It’s really created a closeness that you’ve never had before. So it’s kind of flipping the world upside down. So the fact that we can’t see each other is also giving you the opportunity to show off the rest of your world that people can’t see and creates more of a personal relationship. I think that’s a really interesting visual that I have.

I’m a videographer at heart, so when I see that, things come to me in visual images, it’s a really interesting concept that you bring up. But before we go too much farther, and again I can off on tangents with you a hundred different ways. Because you’re just really interesting to talk to and full of knowledge. Give me some idea going forward, and this is the last segment of the interview. Going forward, given that things are starting to open up, what do you see strategically that you’re going to hold on to, or develop going forward that are result of this COVID factor that had to be accounted for?

Steven Sless:

That’s a great question. I’ve given this a lot of thought. I really do think that moving forward, we incorporate technology more. Now that we know that our clients are more than capable of handling technology. We’re always a little hesitant working with an older clientele to really incorporate a lot of technology. Now, I think, and I’m pretty confident that we’ve been ahead of the curve in the reverse mortgage industry with technology. We have a lot of automation set up in our marketing systems and we’re doing some pretty innovative stuff that others in our space aren’t doing. But we certainly haven’t blown the roof off by any means with technology. I do think that we’re going to use Zoom and Skype and those platforms a lot more. I also think, I’m more comfortable now as a business operator, recruiting across the country.

I’ve always been a believer for a long time that team members have to be in the office and I need to be able to see them and touch them and monitor what they’re doing. Not micromanaging, but just in helping them grow their pipeline. I had an interview the other day with a guy in Michigan, and I have an interview this afternoon with a gentleman in Florida. I’m more comfortable as an operator recruiting across the country because, given the COVID pandemic, I’ve gotten more accustomed to using technology myself. I’m more comfortable managing loan officers and processors and other staff across the country. So I think it’s going to allow great recruitment opportunities for me to expand our operation outside of the Maryland area.

Larry Wilner:

Isn’t it interesting what a crisis can create?

Steven Sless:

It really is.

Larry Wilner:

And this isn’t to take away from all the tragedy and the death and the sickness. And let’s just stipulate to that. I have these conversations now with people, let’s just stipulate on the front end that, bottom line, this is terrible. Let’s stipulate to that. Now, beyond that, what are we getting out of it? And you’ve just highlighted I think some key and essential points Steven. And I want to bring the interview to a close. Again, we can go forever. Maybe we should have a part two part, three to this interview series.

Steven Sless:

Definitely, yeah.

Larry Wilner:

But I want to just thank you and thank you for agreeing to sit down and have this remote conversation and bring some of your knowledge to the table and insights. And really introducing a world that I don’t think a lot of people talk about. People don’t talk about reverse mortgage. I talk to a lot of people and you’re not top of mind. You’re top of mind when there’s a cash crunch. And then all of a sudden you hear about reverse mortgage. We hear a lot of things about deferring loans, those types of things, not paying loans, all that stuff. But we don’t hear about reverse mortgage as a solution. So I’m glad to bring that to the table a little bit here, and I really appreciate your time and bringing your insights to us today.

Steven Sless:

Yeah, I’m grateful for the opportunity. It’s always a pleasure to chat with you. I’m still looking forward to the days that we can sit at Stone Mill and have a cup of coffee and share breakfast together. Because I do miss my network. I miss my friends. I miss meeting with them and just grabbing a beer or grabbing a coffee. But it’s nice to be able to do this. I think the platform that you’ve created is incredible. I think what you’re doing is incredible. You’re providing value and I know that’s your intent, but you are really… You’re taking it above and beyond. And so I think it’s a testament to you and your hard work and your energy. I’m just grateful to be on and hopefully provide value to the audience, to just have them see reverse mortgages in a different light.

And I think that the product warrants looking at it from a different light. And one of my initiatives moving forward and it has been for a long time, is to make reverse mortgages a mainstream conversation. And I think we’re slowly but surely getting there. But certainly being on this episode here today and some other media opportunities that I’ve been able to receive, it helps not only myself and my business, but it helps the industry. And our industry is an industry that helps a lot of folks. So I think the more education that’s out there, the better. So I’m very grateful and appreciative.

Larry Wilner:

Well you know I’m an advocate and I appreciate that unpaid commercial. That was terrific. I always appreciate shout outs. And the thing that’s comfortable with me Steve, about reverse mortgages, isn’t the reverse mortgage, it’s you. So the credibility, the honesty, the integrity you bring to the table, is outstanding. And I only hope that people watch this full interview so they can catch the ending.

Steven Sless:

It means a lot, it really does Larry. I do appreciate it.

Larry Wilner:

And thanks again for your time.

Steven Sless:

Thank you. Have a good one.

Larry Wilner:

And you stay well please.

Video Transcript

Did you know that home buyers 62 and older can purchase their next home with a Reverse Mortgage?

It’s called a Home Equity Conversion Mortgage (HECM) for Purchase.

And it’s tailored to better suit the needs of the growing number of older home buyers.

Whether you want to upsize to the home of your dreams, to downsize – or to right size to a home more suited to meet your long-term needs, a HECM for purchase may be a better option, versus paying cash or taking out a 15-, 20- or even a 30-year mortgage at this stage in life.

Simply put, a HECM for Purchase loan combines a Reverse Mortgage with the equity from the sale of your previous home – or from other savings and assets – to buy your next primary home in one single transaction.

Regardless of how long you live in the home or what happens to your home’s value, you only make one initial down payment of roughly 50 percent towards the purchase, provided that you pay property taxes, homeowner’s insurance, and maintain the property.

Once the purchase is complete, you can make payments on the home or defer pay back until the last remaining borrower leaves the home.

There is no mandatory mortgage payment, making this option a great way to preserve cash flow later in life.

Here’s an example. Tom (67) and Barb (65) live in a 3-story home no longer suitable for their lifestyle as they grow older. They wish to purchase a ranch style home with everything on one floor where they can comfortably age in place.

Their current home value is $400,000, and they owe $100,000 on it with an ongoing payment of $1,100 a month.

After finding a new home for $300,000, Tom and Barb sell their current home and purchase the new home, where they can age comfortably in place.

They have no mandatory monthly payment, freeing up cash flow and providing flexibility as they grow older.

This additional money can be used to bolster their retirement nest egg, help fund long term care, pay off debt, leave in legacy or estate planning and still keep some liquidity for emergencies.

The alternative would have been to pay cash for the new home using all of the proceeds from the sale of the current home or to take out a traditional mortgage with a mandatory mortgage payment, leaving them with far less flexibility as they grow older.

This is a better option for many buyers nearing or in retirement.

If you’re ready to learn more, click below to get started. As always, Expect More with Sless!

Video Transcript

Speaker 1:

WOLB Baltimore and WERQ FM HD3 Baltimore.

Johnny Walker:

I’m Johnny Walker and you are listening to It’s Janice on Radio One, WOLB 1010.

Janice:

Want to know how you can protect and preserve a retirement portfolio and strategically use your home for wealth? Well, up Steven Sless is going to tell us just that. I’d like to welcome to It’s Steven Sless. Hi, Steven.

Steven Sless:

So great to be here. Thanks so much for having me.

Janice:

Steven is a National Reverse Mortgage Division Manager of PRMI. You are the Branch Manager at the Steven J. Sless Group of primary and residential mortgage. You have 17 years of mortgage industry experience and you are the first consumer direct retail branch dealing exclusively with reverse mortgages located right here in Owings Mills, Maryland. You are a traditional coach. You coach traditional loan originators, and you have over 270 branches nationwide that you work with. You regularly present seminars, learning workshops for senior home owners, their family and trusted advisors. Please tell me a little bit about how people can protect and preserve a retirement portfolio and then also use their home to create value.

Steven Sless:

Yeah, that’s a great question. Seniors across the country have amassed almost $8 trillion of untapped housing wealth, right? For most seniors, the majority of their wealth lies within their home equity. Understanding how to convert that home equity strategically and tax efficiently with a reverse mortgage can protect and preserve their retirement portfolio. They can use a reverse mortgage to fund long-term care. They can use it to supplement retirement income. They can use it to improve their home and retrofit, or remodel the home to make the home more suitable for their longterm needs. They can also use a reverse mortgage to purchase a new home later on in life, and they can stretch their retirement savings by unlocking that equity in their house and making that equity a part of their overall retirement plan.

Janice:

I’ve heard from some families that they’re leery of reverse mortgages. Since the pandemic hit, is that a busier time? Is it not as busy? What myths can you dispel about the reverse mortgage process?

Steven Sless:

Yeah, we always like to start there with our clients. Then all of the seminars and workshops that we do, the first thing that we want to tackle are the myths and the misconceptions of reverse mortgages. Reverse mortgages are probably the most misunderstood type of mortgage product that there is on the market today. One of the most impactful and one of the most beneficial, but certainly one of the most misunderstood. I think the first thing that is misunderstood is folks think that if I take a reverse mortgage, somehow I’m going to lose ownership of my home or the lender’s going to own my home, the government’s going to own my home.

I can tell you unequivocally, and I’ve done exclusively reverse mortgages now for 13 years, you are not giving up home ownership. It is a mortgage loan and the difference between a reverse mortgage and a traditional mortgage is how the loan gets paid back. With a traditional mortgage, you’re borrowing money from a lender and you’re paying the lender back in monthly payments each month. With the reverse mortgage, you’re borrowing money from the lender. However, you can have the option to defer payback until you leave the home. That’s the big difference. It provides increased liquidity, flexibility, and accessibility that most traditional mortgages don’t offer, but you don’t lose home ownership. Most people think that the fees are the interest rates are higher, they’re not. A loan that we close today closed at an interest rate of 2.8%, so interest rates are in all time lows. The fees on reverse mortgages are on par with those of traditional mortgages.

What we really try to be on the forefront of, Janice, is just bringing education and empowerment. I heard you mention empowerment before you had your last guest on. That’s a word that really resonates with me. We really try to empower our clients. We teach them what reverse mortgages is. What reverse mortgages are, sorry. We look at suitability, right? If the reverse mortgage isn’t the right tool for you, we’re going to tell you, but I think education is paramount. You have to understand these products. They are not the reverse mortgages that most people think they are.

Janice:

Wow.

Steven Sless:

As far as far as being busy, we’ve never been so busy. I think COVUD has taught us and what COVID has taught our clients is it’s important to plan. Whether that’s estate planning, whether that’s financial planning, planning is critical. Those who haven’t created a strong plan have found themselves really in a pickle. Now we’re fielding a lot of calls from the adult children of our clients saying, “Hey, we’re concerned about mom and dad. They’re a little bit older. We want to make sure that they can age in place in the comfort of their own home and we don’t want them to have to go into a retirement home or a nursing home.” A reverse mortgage is a great tool to be able to help to fund aging in place as well.

Janice:

Wow. Wonderful information. Definitely have to have you come back because there were four more questions that I have we didn’t even get to get through, but we will. We will do that. If you would love to come back, I’d love to have you back. Tell everybody how they can get in contact with you, and social media and all that contact information.

Steven Sless:

Yeah, so I’d love to come back. I appreciate the opportunity to be on today. You can reach us directly at 410-814-7575. That’s 401-814-7575. Our website is the StephenJSlessGroup.com. You can also look us up on Google. We are thrilled and proud to have all five star reviews on Google. You can just Google the Stephen J. Sless Group or Google reverse mortgages in Owings Mills, Maryland. We’re the first one that pops up and you can read all about us, and see for yourself what others are saying about their experience in working with us.

Janice:

Wow. My pleasure. Thank you for joining me today.

Steven Sless:

It’s been all my pleasure. Thank you so much, Janice.

Video Transcript

Speaker 1:

Now here’s your host for AHA Business Radio, Allan Hirsch.

Allan Hirsch:

Good evening. Welcome to tonight’s show, my guest in the studio with me is Steve Sless. He’s a reverse mortgage expert at Steven J Sless, a group of group at Primary Reverse Mortgages or Residential Mortgages. The first question I have is, first of all, welcome, I’m glad you can be here. And I hope you can straighten out some of the mysteries that surround reverse mortgages that really damage what you need to do, because they are most of them, and most of the products are really good these days.

Steven Sless:

Yeah. Allan, great to be with you, and thank you so much for having me on. And you hit the nail on the head, reverse mortgage is, it’s a product that is very misunderstood, widely confused, and where we come in, as we educate, we inform, and we empower our clients, their family and their advisors to make a well informed decision.

Allan Hirsch:

So I usually ask this upfront, what motivates you to get up in the morning and go to work?

Steven Sless:

We make an impact, we make an impact every day in the lives of our clients. We’re helping them to live a better retirement, to achieve peace of mind. And that’s our driving force each and every day.

Allan Hirsch:

So how did you get into reverse mortgages, but you got into mortgages and then transferred in, I guess, into reverse mortgages? Why don’t you tell that story? And then we’ll get into some of the details.

Steven Sless:

Yeah, I was in traditional lending for the first few years of my mortgage career. And while I enjoyed what I did, it was just underwhelming work, right? It was very transactional, we were, at the time, helping first-time home buyers or refinances, cash out refis, and I just felt myself longing for more. And in about 2008, 2009, when the financial crisis and the housing market started to melt down, the traditional lending side really took a hit. And at the time, it was either, “Look, do I want to stay in this business, or get out of the mortgage business altogether?” And there was another woman in my office that came to us and said, “Well, I’m doing reverse mortgages, and I’m really helping a lot of clients retire.” I’m like, “Reverse mortgage, that’s that product that’s… It’s just the government ways to steal your home or…” And I had the same misconceptions that a lot of our clients do today.

But I really dove in, I became educated and I empowered myself. And in doing so, I realized that reverse mortgages are a very powerful financial planning tool. And I started to originate reverse mortgages, and I just fell in love with the product. What I fell in love with the most was the clients that we were helping and the lasting impact that we were making in their lives. And now here we are 15 years later, I exclusively work in reverse mortgages, I don’t do any other type of mortgage, even though I have a license to do so, if I wish to. I love reverse mortgages. I love the business that we’re in, and I love the clients that we’re serving.

Allan Hirsch:

So you said how you ended up into it. So what is a reverse mortgage? I mean, let’s start at the basics. What’s a reverse mortgage?

Steven Sless:

Yep, a reverse mortgage is a mortgage loan that enables homeowners, 62 years of age or older, to leverage what is, in most cases, the source of their largest portion of net worth, which is their home equity, right? So they can use that home equity, turn that home equity into tax free, tangible funds, remain in their home for the rest of their life with flexible payment terms. So Allan, they don’t have to make a mortgage payment if they choose not to. And that’s very different from a traditional mortgage. And to me, does it really make sense for somebody that’s in their 60s or 70s to take out a 30 year mortgage, or even a 20 year mortgage, and have that cash flow burden of a mandatory, monthly mortgage payment later in life. Where a reverse mortgage provides liquidity, accessibility and most importantly, flexibility to enable them to be in control of their mortgage.

Allan Hirsch:

Well, not only that, as I understand it’s tax free.

Steven Sless:

It is.

Allan Hirsch:

Because you’re borrowing against your home. And so, instead of paying a mortgage payment, if you have equity in your home, you’re in a position to take out money. And at the same time, not paying for the use of it. It’s a rather unusual investment philosophy.

Steven Sless:

You’re using the wealth that you’ve built up in your home to allow you to age in place, right? And that’s the name of the game, that’s what it’s all about, that’s what our clients want to do. They want to age in place. They want to age in place with some peace of mind and some financial stability and comfort. And most of our clients look a little something like this, right? They’ve worked hard their whole life, they’ve saved money, they’ve amassed a certain amount of wealth. And at the same time they’ve paid into their home for the past 15 or 20 or 30 years, and they put themselves in an equitable position now where they have equity, and they just don’t understand how to utilize it.

And so that’s what a reverse mortgage does, it helps them convert the equity in their home into funds to add to their existing retirement portfolio, and overall strengthen their portfolio as a whole. Because now they’re incorporating the largest portion of their net worth, which is their home equity.

Allan Hirsch:

So who’s a candidate? I mean, who can borrow against their home, and take… And this is what drives me and drives people crazy. You’re borrowing against an asset, you’re taking money out, and you’re not paying for it. So who qualifies for this?

Steven Sless:

So you have to be at least 62 years of age or older, you have to be a homeowner, right? And you have to have at least about 50% equity in the home. Now there’s income and credit requirements as well, no different than a traditional mortgage. But I look at it this way, you’re going to spend what you need to spend in retirement, right? So what’s the alternative to borrowing from the wealth in your home? Well, likely it is tapping into your other retirement assets.

Allan Hirsch:

Well, a lot of people actually have paid most of their home, and don’t even think about a reverse mortgage, and go out and refinance the home, and then have to pay the mortgage.

Steven Sless:

And then at 70 years old, they’re putting themselves in a 30 year mortgage, and they’re burdening themselves with that monthly payment obligation. And so-

Allan Hirsch:

And that’s one way to get the wealth and use it. But if you took a different kind of approach, it’d be bringing you money.

Steven Sless:

It’s all about education, right? I think, for the most part, homeowners just aren’t aware of what a powerful financial planning tool the equity in their home can be, especially because of the tax benefits, right? It’s all tax free money. So yes, it is a loan, you are borrowing against an asset. But at the same time, you’re also helping to protect and preserve the money that’s in your retirement portfolio, because the less you pull from that portfolio, the more of that portfolio is going to grow. And if you can combine the two, you combine your overall retirement portfolio with some home equity, and you marry the two, well, now you’re looking at retirement from a very holistic approach. You’re using all of your assets in combination to make your retirement more fulfilling, and to make your overall portfolio stretch longer.

But most people don’t view home equity as the asset that it is. And so what we do is we help to educate them, “Look, here’s your options, here’s what a reverse mortgage can do, it’s going to be able to access… you’re going to be able to access about 50% of the value of your home. And you can take that in a few ways.” And we’ll cover those ways later on in the show.

Allan Hirsch:

I want to talk about that, because it’s totally misconception in the marketplace of home mortgages for 62 and up.

Steven Sless:

Yep. And reverse mortgages have really evolved over the years as well, where 10 years ago, reverse mortgages were really a loan of last resort, right? If you needed money, you had some equity in your home and you were over 62, you could take out a reverse mortgage without any credit or income qualification. And so what happened was, you had the wrong people taking out the wrong loan for the wrong purpose. A reverse mortgage is not meant to be a band aid. It’s not meant to be a short-term solution to a long-term problem. It’s meant to work in conjunction with your other assets, to strengthen the overall portfolio, but you had people that were taking out money out of a reverse mortgage, that money was gone. Just as quick as they got it, it was gone just as quick. And then what happened was you had a huge tax and insurance default rate. So they were burning through the money that they accessed from the wealth in their home, because it was no more than a short-term solution.

Allan Hirsch:

Well, as I understand it, they probably took the reverse mortgages as one-time payment. And then when you take a one-time payment, you’ve taken the equity out of the house.

Steven Sless:

And they also took it without any strategy of what they were going to do with that money, right? It just sat in a bank account and it got spent. And what happened was you had a lot of people that were defaulting on their taxes and insurance. Well, Allan, if you don’t pay your taxes and insurance, what’s going to happen? You’re going to be foreclosed on.

Allan Hirsch:

Foreclosed on, right.

Steven Sless:

And so there was a lot of foreclosures of people that were in reverse mortgages. It wasn’t because they were in a reverse mortgage, it’s because they didn’t pay their taxes and insurance.

Allan Hirsch:

We went a little long, I need to go into commercial break. And when we come back, I’ll continue the conversation on reverse mortgages with Steve Sless.

Speaker 1:

Once again, here’s your host, Allan Hirsch.

Allan Hirsch:

Welcome back to the night show. In the studio with me is Steve Sless. He’s a reverse mortgage expert. And if you have any questions, comments, or want to join the conversation, please call 410-481-1300. It’s fascinating that we’re talking about reverse mortgages, and so few people know how to use them and take advantage of them. So we’ve been talking about who the candidates are. But what are some of the requirements to take out of reverse mortgage?

Steven Sless:

Yeah, so you have to be at least 62 years of age or older, at least one homeowner needs to be 62 years of age or older. You have to have sufficient income and credit requirements. Now those income and credit requirements are very different than on a traditional mortgage. Because again, this is a loan that’s customized and designed for senior homeowners. And so there’s less stringent income and credit requirements, but we do look at credit and income to make sure that you’re at least able to pay the taxes and the insurance. And we talked about that being an issue before. In 2015, HUD who oversees all reverse mortgages stepped in and said, “Well, we need to make some changes, we need to make sure that people are able to pay their taxes and insurance going forward.” And they implemented what’s called the financial assessment.

So we run you through a financial assessment to make sure that you’re credit worthy and you’re income worthy to qualify for a reverse mortgage. And then we look at it and we sit down, we have a conversation about is it the right fit? Oftentimes people come to us thinking that a reverse mortgage may be the right fit, we turn away a lot of clients, it just needs to be the right fit for the right person. So not only do we do a financial assessment, but we also talk to them about their goals. If the reverse mortgage is the proper fit, great, if not, and maybe a traditional mortgage is, and we have an outlet to help them out with a traditional mortgage as well.

As far as other qualifications, you need to have sufficient equity in your home. And we talked about that being about 50% equity. So if you have a mortgage, let’s say you have a $400,000 home, you have to have at least $200,000 in equity, roughly, to qualify. And that’s about it. Those are the-

Allan Hirsch:

So if the home is not worth $200,000, you can’t get a reverse mortgage?

Steven Sless:

So let’s rewind for a moment. So some of our clients come to us with a mortgage, with a mandatory, monthly payment that they’re paying on now. And they’re just trying to eliminate that mortgage payment to free up monthly cash flow. And so let’s say you have a $400,000 home, you have a $200,000 mortgage.

Allan Hirsch:

You’re talking about some wealthy… In Baltimore City, there are a lot of homes that are worth $100,000, $150,000. They’re paid off by people, they’re 62 years of age, would they still qualify for a reverse mortgage?

Steven Sless:

Yeah, absolutely.

Allan Hirsch:

Okay. I just wanted to make sure.

Steven Sless:

There’s no minimum value requirement, there’s just a equity requirement of about 50%. So let’s say their house is worth $100,000, as long as they’re in a 50% equity position, and they meet the age, credit and income requirements, then they qualify.

Allan Hirsch:

And they qualify, and they can borrow a number, we’ll get into that, what kind of plans can be used to use the equity in your home.

Steven Sless:

Absolutely.

Allan Hirsch:

So I didn’t mean to interrupt, but I want to make sure I understood that, and the listeners understood that. Because a lot of the city and even county employees, they make sure they pay off that home as soon as they can.

Steven Sless:

Yeah. And that’s the American Dream, right? You want to buy a house, you want to pay it off, you raise your family in that house, but in doing so, what you’re also creating is this huge asset with a lot of tax benefit. And really, you just need to be educated on how to use that asset, regardless whether a reverse mortgage is the right financial planning tool for you or not, being educated about what a valuable asset your home and your home equity is, that’s critical, especially in retirement planning.

Allan Hirsch:

So why does it seem there’s such a negative response, negative reaction to reverse mortgages?

Steven Sless:

I think it has to do with what we talked about before the commercial break. The product has changed and evolved over the years and it used to be a loan of last resort. And then you had all these people that would take a reverse mortgage, they would default on their taxes and insurance, they would get foreclosed on, right? And the media, when they report on that, they report, “Person had a reverse mortgage and they got foreclosed on.” They don’t stay, “Well, it was because of tax and insurance default.”

Allan Hirsch:

Because you still have to pay the taxes and the insurance.

Steven Sless:

That’s a great point. Yep. So your requirements when in a reverse mortgage, you need to pay the taxes, the insurance and you need to maintain the home. Remember, it’s just a mortgage, you still own the home.

Allan Hirsch:

Right, you still own the home. But you, as the homeowner, you’re not paying to the mortgage company your taxes in and insurance anymore, you’ve got to pay it to the insurance company and to the government correctly.

Steven Sless:

Exactly.

Allan Hirsch:

So you’ve got to make sure you have enough income to cover those costs, and not just the mortgage.

Steven Sless:

Absolutely. And so that’s how the negative stigma of reverse mortgages came about, there was a lot of foreclosures because the product wasn’t used in the right manner. Now another, I would say a black eye on our industry is that we are allowed… My mortgage license, my NMLS license, which is the mortgage license allows, me to originate a traditional mortgage and reverse mortgage. Allan, I haven’t originated a traditional mortgage in probably 12 or 13 years, I wouldn’t even know how to begin. But you have a lot of traditional mortgage loan officers that are enabled to originate both, they view reverse mortgages as another source of income. And what that does is it gives the client, the consumer, a very poor customer experience. When somebody is stumbling their way through the product, they don’t really understand the intricacies of the product and how it works and how housing wealth and more specifically, senior housing wealth, fits into retirement planning. They’re not studying it like we study it.

Somebody who originates reverse mortgages exclusively for a living can have a conversation with you or your wealth manager about how and where, strategically, the housing wealth fits into retirement. But any mortgage loan officer can originate reverse mortgages if they wanted to. And so you have a lot of people that are originating them without a plan, without a strategy, and you have clients entering into reverse mortgages that are structured incorrectly. And that leads to headaches down the road.

You mentioned before, should somebody take a lump sum, cash payout with a reverse mortgage? Likely, the answer is no. I’ll give you a little secret in our industry, we get paid on the loan amount. So the higher the loan amount, the more money you take as the consumer, the more money I’m going to make, right? And so you also have a lot of greedy loan officers out there that are structuring these loans in a manner that’s best suited for them, not necessarily the consumer. And that’s over the years, that’s been a black eye on our industry.

Allan Hirsch:

Well, and that’s what got the mortgage industry in trouble in ’06, ’07 and ’08, that resulted in the mortgage meltdown and the real estate meltdown in this country, that the prices of housing declined for the first time in a long, long time. You got mortgage brokers that were making money on the loans, and the amount of the loans and not advising and working with the people to borrow the money properly.

Steven Sless:

And there’s a lot of education that goes into, number one, what are reverse mortgages and how it works. But then the decision, “Do I take a reverse mortgage? When do I take a reverse mortgage? Should I take it out earlier in life? Should I wait and take a reverse mortgage out?” Those are conversations that need to be had with a reverse mortgage professional, right? You wouldn’t go to a cardiologist if you had a head issue, or you wouldn’t go to-

Allan Hirsch:

You might.

Steven Sless:

You wouldn’t go to an orthopedist if you had a heart problem. You don’t want to go to any loan officer to speak about a reverse mortgage, you want to make sure, regardless whether it’s me or not, you want to make sure you’re talking to a reverse mortgage professional to get sound advice. And if you have a financial advisor or a wealth manager, bring them into the conversation, right? If you have family, bring them into the conversation. This is a crucial decision whether or not to use your home as an asset and incorporate that asset into your retirement. And there’s a lot of education and a lot of planning that goes into that decision.

Allan Hirsch:

One of the questions I ask is, I mean, you can refinance a ongoing mortgage.

Steven Sless:

Yep.

Allan Hirsch:

How difficult is it to refinance a reverse mortgage when you’re continuing to borrow against the asset value? Can you refinance that and get yourself back on track, or are you stuck?

Steven Sless:

You can. There’s certain qualifications to do so, so you have to wait 18 months from the time that you took out the reverse mortgage originally, and there has to be a benefit to the borrower. So when the underwriter looks at this, they’re going to look at, number one… Reverse mortgage borrowers and seniors in general, their protected class, right? We want to make sure that they are protected, that we are doing right by the consumer. And so the underwriter looks at it and says, “Number one, has it been 18 months?” That’s standard, you have to wait at least 18 months to refinance, but then two, what are the benefits, right? Are you just getting an extra few $1,000, in that case, there isn’t a clear benefit, there has to be a very clear benefit. And there’s guidelines that we can deal with as well to help you out in that situation.

Allan Hirsch:

Okay. We do need to go to our next commercial break. And when I come back, I will continue the conversation on reverse mortgage with Steve Sless. Did I get it right?

Steven Sless:

You’ll get it by the end of the show.

Allan Hirsch:

I’ll get it by the end of the show.

Steven Sless:

Sless.

Allan Hirsch:

Sless, S-L-E-S-S, is correct. I’m Allan Hirsch, of Allan Hirsch Advisors, and this is AHA Business Radio on CBS Sports Radio 1300 AM.

Speaker 1:

Once again, here’s your host, Allan Hirsch.

Allan Hirsch:

Welcome back to the night show. In the studio with me is Steve Sless, reverse mortgage expert. And we’ve been talking about reverse mortgages. By the way, he did remind me that he’s doing a workshop on November 9th from 8:15 to noon at Martin’s West. If anybody wants to go, it’s a great event for financial planning for seniors.

Steven Sless:

Yeah, we are. We’re partnering with three power players in the retirement planning industry. So we’re partnering with Shanker Wealth Advisors, right in Quarry Lake, Benzer insurance in hunt Valley, and Ellen Platt with The Option Group, with the intention of bringing everything that you need to know and learn about retirement under one roof. It’s free of charge. It’s at Martin’s West, Saturday morning, November 9th. For reservation information, it’s baltimoreretirement.com. You can make your reservations right online, it’s going to be a great event, really unlike anything that’s ever been put on the area before.

Allan Hirsch:

Well, anyway, good luck with doing that.

Steven Sless:

Appreciate it.

Allan Hirsch:

In the meantime, if anybody wants to call the show and ask any questions about reverse mortgages, or to join the conversation, please call 410-481-1300. One of the things with reverse mortgages, or one of the many things with reverse mortgages is its flexibility.

Steven Sless:

Yes.

Allan Hirsch:

So you talked about the requirements, they’ve evolved over the years. So how have they evolved? And what can you do in your planning that works together with the financial needs that you and your family have?

Steven Sless:

Yeah, so we talked about years ago, the reverse mortgage being a loan of last resort, but especially since 2015, the product has really evolved to be a financial planning tool, a real financial planning tool that can be incorporated into your overall retirement plan. And you hit the nail on the head, flexibility, there is no other mortgage product on the market that provides the senior homeowner with as much flexibility as a reverse mortgage does. So number one, with a reverse mortgage, you determine whether you make a monthly mortgage payment or not, the ball’s in your court. If you have a month where it works for your budget to make a monthly payment, make a monthly payment. If not, you can defer all payback of the loan until you leave the home.

And later on in the show, we’ll talk about when the loan gets paid back, how it gets paid back, and what happens to your heirs and what they get as well. Flexibility, you can take the money that you qualify for from a reverse mortgage and receive those funds in multiple ways. So option number one, a 10 year payment, which is basically an income annuity from the wealth in your home, where I’m going to tell you how much you qualify for, and then if you want to take that in equal monthly payments for the rest of your life, I’ll let you know what that number is, you’re going to get a check on the first of every month, each and every month guaranteed for the rest of your life. That’s option number one.

Option two is a term. You want to take the money for X amount of years, here’s how much money you qualify for. If you want to receive this money over 10 years, here’s how much you’re going to receive over 10 years. We see terms used a lot in Social Security deferment, and we can talk about that later on in the show as well, because that’s another strategy to maximize your retirement portfolio is being able to delay Social Security as much as possible.

Allan Hirsch:

You’re only delaying it eight years.

Steven Sless:

Right. But in eight years, you could receive a lot bigger check if you’re able to defer until 70 years old.

Allan Hirsch:

Oh yes, I understand that. But it’s an eight year deferment from 62 to 70 and a half for Social Security.

Steven Sless:

And we have clients come to us and say, “I don’t necessarily need money past… Once I’m able to turn on my Social Security, I don’t need money from the reverse mortgage.” So they can turn on… If they’re at 62, they’re trying to delay till 70, they can turn eight years of money from the wealth in their home coming into them, in eight years, the funds turn off that. Now you have the option whether to pay that back in a monthly payment, or defer pay back until you leave the home. So that’s option two.

Option three is a lump sum payout. Here’s how much money you qualify for, maybe you have a need, maybe you need to pay off some bills, consolidate some debt, you can use it that way as well. And option four, and the most powerful way to take a reverse mortgage is through a line of credit. A reverse mortgage line of credit is very different than a traditional HELOC, a traditional home equity line of credit, because it provides you with a growth rate. And the growth rate on the line of credit is a half a percent over the current interest rate. Right now, current interest rates are about four, no different than traditional mortgages. So the growth rate is going to be four and a half.

So you can take the money in a line of credit, and if you don’t need the money now, let it sit in that line of credit. And that line of credit is going to grow over time. And so if you’re 60 some, and you take a line of credit, you don’t need it, you can wait until you’re 80 or in your 80s when long-term care starts to kick in, in-home care potentially starts to kick in, health care costs start to really increase. Now you’ve been growing this line of credit for 10, 15, 20 years compounding growth 5% each and every year, and you’re going to be able to borrow a lot more money from the value of your home.

Allan Hirsch:

Over a 20 year period, 4.5% is about doubling. So if you have a half a million dollar home, you borrow 250, and you don’t take anything out for 20 years, at that point, and the value of the house has stayed the same, you can borrow two $500,000, because you originally borrowed 250 and it accumulated in the line of credit.

Steven Sless:

Right. So that is unlike any other line of credit. What’s also unlike any other line of credit is a reverse mortgage line of credit is federally insured and guaranteed. All reverse mortgages are federally insured and guaranteed. If you go to the bank, and you take out a traditional line of credit right now, let’s say it’s $50,000, and the housing market crashes like it did 10, 12 years ago. What happened to those people that had lines of credit back then? They were frozen, they were turned off, the bank can call your line of credit due anytime, and it’s up to them to make that decision. A reverse mortgage line of credit is guaranteed by FHA, it can never be frozen, it can never be pulled from you. And that growth rate is also locked in and guaranteed. Now the growth rate’s flexible, it’s going to move as interest rates move.

Allan Hirsch:

Well, the interest rates are close to the lowest they’ve ever been. So if they’re going to move anywhere, it might be down a quarter of a point or something. But eventually they’re going to be moving up. That interest rate goes up, and it accumulates faster.

Steven Sless:

Correct. And so too does the growth in the line of credit. So that that line of credit is extremely powerful. What you can also do is incorporate all four… or all three options. Let’s say you need monthly cash flow, we turn a monthly stipend on, and you receive a check each and every month, you have some short-term needs, so you take a small lump sum cash payment to pay off debt, or pay off a car or just have a rainy day fund, and you incorporate the line of credit. And now what you’ve done is you’ve put the wealth in your home, your largest asset in most cases, to work for you. And you can incorporate that into the overall portfolio.

So here’s another effective strategy. If you’re somebody that needs to draw, let’s say 4% per year from your retirement portfolio just to live your normal lifestyle, and you’re working with an advisor, and together you’ve determined that your money is going to last until, let’s say, 92 years old, just throwing a number out there.

Allan Hirsch:

Unfortunately, my dad’s 99.

Steven Sless:

To my point, people are living longer, lifespans are so much longer now than they ever have been before. The number one risk in retirement is longevity, because nobody knows how long we’re going to live. So how are you supposed to plan for retirement? You could live to 100. We did a reverse mortgage for a client last week that was 102 years old, right? So people are living longer now. And it’s very difficult to plan how long you’re going to make your money last. So the strategy we use with wealth advisors is, look, if they have a client that’s taking 4% per year just to live their normal lifestyle, and they’re projected to run out of money at, let’s say 90 or 92. Well, we’re in one of the best economies right now that we’ve seen in quite some time. And over this past 10 years, the economy has been growing, it’s likely going to either slow or it’s going to start to regress. And so what if the market goes down 10%? What if the market goes down 20%? But you still need to draw that 4% to live your normal lifestyle.

Well, now instead of your money running out at 92 or 90, it could run out at 82. And so incorporating tax free money from the wealth in your home, and using that in conjunction with your other assets, is a way to protect and preserve the overall retirement portfolio and ultimately ensure that you don’t outlive your money.

Allan Hirsch:

Yeah, and still, you only borrowing 50% of the asset value of the house.

Steven Sless:

Right. And Allan, The National Reverse Mortgage Lenders Association, NRMLA, they did a study earlier in the year and that study showed that seniors across the country have amassed almost $7.2 trillion in untapped equity. I mean, that’s a staggering number, untapped equity, reverse mortgage market penetration is miniscule, we’ve only originated reverse mortgages for a fraction of a fraction of a fraction of those who actually could qualify for it across the country. And I think a lot of that is due to lack of education. And so to be able to be on your show and have this platform to educate your listeners, I can’t thank you enough.

Allan Hirsch:

Well, it’s my pleasure. I mean, this is part of what I do, I try to educate my listeners. And with that, we’re going to go to the next commercial break. And when we continue, come back from the break, I do have the AHA trivia contest, the winner will receive a gift certificate to the Village Square Cafe in Cross Keys, which is one of my favorites. So I hope whoever wins, gets to enjoy it as well. And I’ll continue the conversation with Steve Sless… I’m just terrible. S-L-E-S-S.

Steven Sless:

Expect more with Sless.

Allan Hirsch:

With Sless, right.

Steven Sless:

That’s my tagline.

Allan Hirsch:

With Sless. We’ll be discussing reverse mortgages when we come back. So enjoy, I’m Allan Hirsch of Allan Hirsch Advisors, and this is AHA Business Radio, on CBS Sports Radio 1300 AM. We talked about taking money, what happens when they sell the house or they die? What happens to the reverse mortgage?

Steven Sless:

Yeah, so no different than a traditional mortgage, let’s say you have a reverse mortgage and you pass, you still leave the home to your heirs. And I think that’s one misconception that comes up all the time is somehow the lender is going to take over ownership of your home or the government’s going to take over ownership of your home. That’s not the case at all. So you leave the home, remember, you’re still the home owner, you leave the home to whoever it is that you want to leave the house to.

Allan Hirsch:

And you have to remember you’ve only borrowed up to…. if you haven’t borrowed at all, up to 50% of the value.

Steven Sless:

Correct. Now there’s an interest rate, and if you choose not to make monthly mortgage payments, the balance of your loan is going to increase over time. But you’re not making a monthly mortgage payment. So really what works best for you is making a payment work… does making a payment work best or just deferring payback work best? But if you pass, the home goes to your heirs, now your heirs are going to have the decision, “Do I want to keep the home? Or do I want to sell the home?” In most cases, the heirs are adult children, and so they don’t want your home, they’re going to sell the home, in most cases. They, through the proceeds of the sale, will pay off the amount of money that you borrowed from the reverse mortgage, plus the interest that’s accrued during the life of the loan. Any additional equity is the heirs to keep and that’s their inheritance.

If there’s no equity, so if you’ve borrowed the money, you’ve been in the reverse mortgage for let’s say, 25, 30 years, you’ve chosen never to make a monthly mortgage payment, the interest has accrued, but the value of your home has stayed stagnant. And you have a $300,000 home and you owe $350,000 on it. Every reverse mortgage has what’s called reverse mortgage insurance, and that makes reverse mortgages what’s called non-recourse. Being that they’re non recourse, the heirs cannot be passed on a debt that they have to pay back. So the FHA insurance will cover that difference. And that works out, Allan, if you bought a car and you bought GAP insurance on your car-

Allan Hirsch:

Well, I have it on my general insurance policy, so I don’t need it. But yeah, you’re paying the difference between the… You have an automobile accident and you pay the difference between the value of the car and what you need to get for the replacement.

Steven Sless:

Correct. But in most cases, the value of the home is going to increase over time. The heirs will walk away with some sort of inheritance, but worst case, the heirs walk away, but you’ve been able to live in this home for the rest of your life, you’ve been able to age in place with more flexibility, more peace of mind and more financial security. Now the heirs can also choose to keep the home and they can pay off the reverse mortgage through their own proceeds. Sometimes that’s through a life insurance policy, right? So if you have a life insurance policy that’s going to cover your mortgage balance, the kids can then can decide to keep the home and pass that home on to future generations or sell the home. I think the general misconception, Allan though is, if I take a reverse mortgage, I’m going to leave less to my heirs. And while you may leave less home equity to your heirs-

Allan Hirsch:

And very frankly, I don’t know if that’s a legitimate reason, because if you’re… My dad’s 99, he thinks he’s 100. And you live that long, you can’t take it with you.

Steven Sless:

Exactly.

Allan Hirsch:

So you need to spend it in your lifetime.

Steven Sless:

And I think-

Allan Hirsch:

So I think that’s in itself a misconception.

Steven Sless:

It is. The old American Dream is you pay off your home, down to zero, you leave all the equity in your home to your children and grandchildren, and that’s their inheritance. I can make the argument and we have the data to back this up, by taking out a reverse mortgage and structuring the reverse mortgage properly, and that’s key, working with a reverse mortgage professional to structure the loan properly. If the reverse mortgage proceeds are used in conjunction with the overall retirement portfolio, you can actually leave more to your heirs, it may not be as much home equity, but it’ll be a larger portfolio that you pass on to them at your death.

Allan Hirsch:

Yeah, but first of all, if you’re leaving them the assets that are sitting in the bank, you might have inheritance tax.

Steven Sless:

Correct.

Allan Hirsch:

You might have income tax when you die, and there’s no tax on reverse mortgages.

Steven Sless:

There’s no tax on reverse mortgages at all. And so you can get very, very strategic in the manner that you wish to leverage, which in most cases, the largest asset that you hold. I mean, we go back to the numbers, $7.2 trillion nationwide of housing wealth that’s just untapped.

Allan Hirsch:

I’ll take 1% of that.

Steven Sless:

Right.

Allan Hirsch:

Right now if they want to lend it me. I just want to remind the listeners that there’s a few minutes left, which state has the highest percentage of millionaires? It’s very simple. So please don’t overthink it. Give us a call, 410-481-1300 if you think you know the answer. So what have we left out on… I’m sure there’s plenty of stuff we’ve left out on reverse mortgages in the last three, four minutes. Because I really think that if seniors looked at it as an investment alternative, we’d have much more use of this product.

Steven Sless:

I totally agree. What we’ve left out is you can also purchase a home with a reverse mortgage, and that blows people’s mind. And most realtors don’t even realize that that product exists. We see this a lot in downsizing or right-sizing, right? So our recent client came to us, they had a $400,000 home in Whitemarsh, it was too much [inaudible 00:38:14], right? They wanted to right-size without sacrificing their luxuries that they wanted. They owed $100,000 on a mortgage, right? So they sold their house, they net $300,000, they bought a new $300,000 home, they put down the 50% equity requirement to access a reverse mortgage.

So you can purchase a house with a reverse mortgage. Basically you put down 50%, that’s it. There’s no monthly mortgage payment, you put down 50%, you pay your taxes, you pay the insurance, you keep up with the general upkeep of the home. So you can buy a $300,000 home, putting down $150,000, live in that home for the rest of your life and never make a monthly mortgage payment. And nobody knows about this way to structure a reverse mortgage.

Allan Hirsch:

You got to be kidding me.

Steven Sless:

That’s the answer we get from realtors all the time. I met with a realtor last week who I’ve known for quite some time and she came into our office and we did a little lunch and learn and we work with her and her team to teach them that this product even exists. She has a lot of senior clients right now that are looking to downsize.

Allan Hirsch:

Downsize. So they want to buy a condominium or a single floor home because they can’t walk the steps anymore. I mean, that’s-

Steven Sless:

And typically these transactions… A lot of times when seniors are downsizing, they’re selling a previous home and they’re paying cash for the next home, or even worse, they’re taking out a 30 year mortgage when they’re 70 years old. And that makes absolutely no sense to me. So you can take out a reverse mortgage to buy your next home, it is a very underutilized and we call it the sleeping giant of the reverse mortgage industry. But if we missed anything else, Allen, Martin’s West, November 9th.

Allan Hirsch:

Right. I know you need-

Steven Sless:

Retirement on Your Terms.

Allan Hirsch:

Right. I want to go through that. And, Steve, very quickly the show is November 9th?

Steven Sless:

Yeah.

Allan Hirsch:

8:15 to 12:00.

Steven Sless:

November 9th, Martin’s West, Retirement on Your Terms, you can make reservations at baltimoreretirement.com. Make those reservations fast, seating is limited, and it is filling up quick.

Allan Hirsch:

Okay, so how can our guests, if they don’t want to come to the event, how can they reach you?

Steven Sless:

Absolutely. So you can call me at 410-814-7575. That’s 410-814-7575 or reversebaltimore.com.

Allan Hirsch:

Well, I want to thank you for being here very much. I appreciate it. I wish we could cover more on reverse mortgages, because I think they benefit seniors more than you can imagine, because they’re tax-free instruments. And as you said, you can buy a house with a reverse mortgage and not have to pay anything but taxes and interest.

Steven Sless:

Yeah, if you think you know about reverse mortgages, forget everything you think you know, give us a call, let’s help to empower and educate you and ensure that you’re well informed.

Allan Hirsch:

Well, I want to thank you again.

Video Transcript

Dominique Henderson:

What is up, everybody? Dominique Henderson here, your CFP on YouTube. We are live streaming on a Wednesday. So if you are with us, let me know. Would love to shout you out and give me some love. Make sure you like and share this podcast with all your friends, all the aspiring financial professionals and existing financial professionals that are listening to my phone ring in the background. It’s so weird. Anyways, but it’s great. It’s great. This is a good time for you to be with us today.

If you’re out there and you’re an existing financial professional, I want you to be thinking about this particular question. How do you bring more value to the client relationship? I know that you’ve had those thoughts at night about if my client’s going to leave me, or if their competition’s doing something better than I am. How do you solidify your value to that client relationship, beside all the other stuff that you know that you’re supposed to do? The table stakes stuff. But how do you go beyond that?

That’s what we’re going to talk about today. Really, really super excited. I have a pro on that is going to help me take care of this. I want to, without further ado, bring on Mr. Steven Sless. What’s going on, Steven?

Steven Sless:

Well, it’s good, sir. Great to be with you.

Dominique Henderson:

Yes, man. We’ve been planning this for a little while and I’m so happy to see you here with the nice full beard. Dude, it’s a personality of its own.

Steven Sless:

Went to the barbershop just for you today, just for you and all the viewers.

Dominique Henderson:

This is great. It’s going to be so much fun. I am really looking forward to some of this information that you’re going to give us. But I always like to start with, give us your background. Let us know what Steven Sless is all about, what you’re into as far as this whole home wealth and reverse mortgage and stuff. I mean, you’ve got a lot of stuff that you credentialed to do, but just give us a little bit about you and introduce yourself to the audience.

Steven Sless:

Yeah, well, it’s great to be with you again. I appreciate you having me on. I’m excited. This is going to be a fantastic hour. Little bit about me, I am a mortgage industry vet. I got into the mortgage industry in 2003. For the first five years, did what most mortgage originators do, and that’s a little bit of everything. In those days, there was a lot of subprime, but purchases, refinance, cash out, home equity lines of credit, you name it.

Then in 2008, coinciding with the last financial meltdown, I realized that there was a greater calling for me within the mortgage business. And that was to work with folks that are close to or in retirement to create a better retirement by way of a reverse mortgage. At that time, I had the same misconceptions then that a lot of folks have today. It’s too good to be true. The government’s going to take your home or the lender’s going to take your home.

And so, I was very, very hesitant at first to jump into reverse, but like we’re going to encourage a lot of these professionals that are on to do tonight, I empowered myself and just was a sponge for education. Through that education, I realized that the reverse mortgage program is an unbelievably versatile way to leverage housing wealth. Since 2008, I haven’t originated another traditional mortgage. I have exclusively, and my team and I both, have exclusively worked with reverse mortgages since then.

I’ve got to say, it was the best career move I ever made and the most rewarding as well because we’re helping folks age in place and we’re helping them live retirement on their terms. It’s been phenomenal. I have a great team at the Steven J. Sless Group, just world-class. We have 55 years of reverse mortgage experience, so we close loans quickly, efficiently, and we educate our clients about how they can leverage their housing wealth to create a better retirement.

Dominique Henderson:

That’s great, man. That’s why I wanted to have you on, because you hit on something that I think is key, is the misconception. I don’t remember exactly, but it sounds good to tell people that the way we met was through social media and you saw one of my YouTube videos. So that’s the story I’m going to use on reverse mortgage.

Steven Sless:

That’s exactly what happened.

Dominique Henderson:

And so, I tackle the topic just because I thought that, like you, there was a lot of misconception, and I was only just the tip of the iceberg. I’ve gotten so many people that have DM-ed me and messaged me and commented on that video. I was like, “Oh, I didn’t really expect that.”

Steven Sless:

It’s a hot topic.

Dominique Henderson:

I’m so glad you’re here to bring some clarity to everything, man.

Steven Sless:

Yeah. Every day we dispel the myths and misconceptions and we educate. All it takes is sitting down with us. I mean, this platform is tremendous. To be able to really take on an hour long, deep dive into housing wealth and reverse mortgage is phenomenal. But every single time we sit down with a financial advisor, we changed the mindset of how home equity for folks over 62 should be utilized, every single time. I can’t tell you how many advisors I’ve met with over the years, that thought I was going to be in and out of their office in five minutes, and we wound up sitting there for two hours and they were like, “How did I not know about this before?”

It’s an amazing, amazing financial tool, but there’s a lot to it. Not for everybody. So the first thing that we help identify is who’s suitable for a reverse mortgage? What does that clientele look like? What should we, as the advisor, be looking for? Once they’re able to identify those couple key points, they call on us. We educate them, we educate the client, we meet with their family, their loved ones. And it’s just fantastic.

Dominique Henderson:

Yeah. Let’s get into that misconception, because I think that’s probably a good domino to first knock over first, is what is a reverse mortgage and what do people most commonly confuse this particular product with in regards to the constraints around it, I guess?

Steven Sless:

Yeah. Perfect starting point. A reverse mortgage is simple. It’s a mortgage loan for folks that are 62 and older, and it allows them to gain access to the wealth in their home and convert that wealth into cash. They can take the funds in a variety of different ways, and there’s the option to defer payback until the last remaining borrower leaves the home. From a cashflow perspective, they’re able to take back the equity they paid into their home over the years.

They’re able to protect and preserve their other assets because now they have another bucket of money that they didn’t have access to before, and they can defer repayment until they leave the home. They can also make payments. And so, that’s one misconception, is they can’t make a monthly mortgage payment and they can’t pay down the debt. It’s up to them. So the reverse mortgage is the most flexible mortgage product on the market today.

It allows you to pay the balance down if you want, but it also allows the folks to defer payback until the last homeowner leaves the home. Freeing up that additional cashflow could be the difference between outliving their money or not.

Dominique Henderson:

Yeah. I think that’s a key point too because a lot of people don’t realize as a home, depending on where you are in life, likely being the biggest part of your balance sheet, at least from a net worth standpoint, that the only way that you can monetize this traditionally is to sell it. But people don’t want to part with that asset. You can obviously do cash-out refis and all this other kind of stuff before you get to age 62.

But when you’re starting to think about, okay, I want to be actually in this home. This is the home that we built. This is the home we raised our kids in, whatever your deal is. I want the money out, but I don’t want to sell my home. This is an excellent tool, it seems, in order to have your cake and eat it too, if I’m not mistaken.

Steven Sless:

Let’s think about this, because that’s a great point. If you’re 70 and the bulk of your net worth does lie within the equity in your home, and you need to tap into that equity to not outlive your money or to be able to fund aging in place, what are the options? You said it. The first is sell the house. But what if I don’t want to sell the house? For most folks that are in their late sixties, seventies, eighties, they want to age in place if they can, if they can afford to and the house is suitable to do so.

What’s the other option? A mortgage. Take out a mortgage on it. Most mortgages come with a term that’s going to be 15, 20 or 30 years. Do you want to be 70 and have a mortgage payment into your eighties, nineties or till you’re a hundred years old? It is likely, in today’s day and age, that you could live to a hundred. Longevity is the number one risk in retirement because we don’t know how long we’re going to live. How in the world can we plan to not run out of money if that number is unknown?

The third option to access the housing wealth is a reverse mortgage. The reverse mortgage gives you access to that equity, just like a traditional mortgage does, just like a home equity line of credit does, but there’s no mandatory mortgage payment. You can pay anything you want to at any time. You still own the house. That’s another huge misconception, that somehow you’re giving up ownership of the home. You’re not. It’s just a mortgage. You determine if you make payments or not. If you don’t, the balance rises over time and that balance gets paid back when you leave the home.

Dominique Henderson:

Talk about the… Because I think that the one that you just hit on is this whole thing about, “I lose ownership.” I don’t know where that myth came from. I’ll be honest, I may have even said this years ago before I did some research, is why do people think that is? Do they think that just because in exchange for payments to live in a house, to pay down the balance, when you’re not making those payments anymore, they figure there’s got to be some kind of, “I got you.” I don’t know. Do you have any inkling as to where this came from?

Steven Sless:

Oh, I’ve got a lot of inklings. I look at a few things. One, traditionally, the way that the product has been marketed over the years, to me isn’t beneficial to our industry.

Dominique Henderson:

Why is that? Why is that?

Steven Sless:

On TV, it’s gain access to the home equity and no monthly mortgage payments. It sounds too good to be true. Now, it is true. There is no monthly mortgage payment that’s mandatory. But there is an interest. It’s a mortgage, so there’s an interest rate. That interest rate is added to the balance of your loan, and that’s going to compound and grow over time. So your value is increasing.

The loan is not too good to be true. You don’t have to make a mortgage payment, so that part is true. But it’s very difficult for our message to be conveyed in a 30-second or a 60-second long TV commercial. And most of the time, that’s where the general public is consuming their information. I hope that they’re going to watch streams like this. I’m starting a podcast in the winter. I hope that they consume content that way and really become educated.

But you also have… And look, this is an open forum. You have the Dave Ramsey’s of the world and the Suze Orman’s of the world that don’t have clue number one what a reverse mortgage is, how it works. They have their own agenda. The media sometimes reports on reverse mortgages. I read these articles and I want to pull whatever hair I have left, at least on my head. I don’t have to worry about that here.

Dominique Henderson:

You’ve got plenty there, buddy.

Steven Sless:

Whatever hair I have left on my head, I want to pull it out because I’m like, “This is blatantly false information that’s being put out.” But in today’s day and age, almost anybody can put out information about any topic and that’s perceived to be true if it’s on the internet or if it’s on TV. You have to sit down with a professional that understands reverse mortgages, that can talk with your financial advisor to determine what the best way to structure a reverse mortgage, if it’s suitable for you and your retirement needs, should be. But to be clear, 100% perfectly clear, you never give up ownership of your home. It’s a mortgage loan, period.

Dominique Henderson:

Got it, got it, got it. No, I appreciate that clarity there. If you’re just tuning in or just watching, we are chopping it up with Steven Sless of the Sless Group, that is Steven and his team have been specializing in reverse mortgage. I think you told me, or you said earlier, more than 55 years of combined experience with the reverse mortgage.

Steven Sless:

Exclusive to reverse mortgages, yeah.

Dominique Henderson:

Exclusive to this industry. If you’re a financial advisor out there and you’re talking to a demographic, or working with a demographic of clients that are nearing retirement, 62 and older, or even before that because some planning might need to be done in their case. You definitely need to reach out. We’re going to have his information. Just keep on watching. We’re going to answer some more questions.

Lob those questions up. You can throw them in the chat. Would love to get to them at some point during this discussion. Let’s talk about this seemingly elephant in the room, because I love to step on toes and be polarizing a little bit. Why did you feel financial advisors, financial professionals avoid this topic with their clients? Because I’m just thinking through this.

Some of the stuff, examples that you and I have talked about, and we’ll lob up another one here, but as a financial professional, I almost feel like you’re doing a disservice to not know about this and bring another level of value and options to your client base. Why are financial professionals avoiding this? Maybe you have a take on this.

Steven Sless:

Yeah. I’ve got a lot of hot takes on this. Let’s start off with this. If you’re a financial advisor and you’re a fiduciary, or you’re supposed to have the client’s best interest in mind, and you ignore the wealth in their home, you’re doing your client a disservice.

Dominique Henderson:

I totally agree.

Steven Sless:

Now, with that being said, there are a lot of fantastic financial advisors out there, and we work with a lot of them, that do understand the value of housing wealth, that understand that to create a modern day retirement strategy, home equity at least should be looked at. Whether it’s suitable or not, different story. Sometimes it is, sometimes it isn’t. Depends on a litany of other issues. What are the plans for long-term care? What are the plans for health care costs? Is the home suitable for their aging needs as the client is growing older. So there’s a lot of variables at play.

One reason, I think, is misinformation. They hear it’s too good to be true. They hear that you’re going to take their home, or whatever they’ve seen or heard. And they don’t take the time to really take a deeper dive. That’s number one. Number two, a lot of financial advisors, I think, are disconnected with the everyday average American. I like to classify financial advisors in two categories. I like to say there’s wealth movers.

They’re the ones with the big minimums, “I’m not working with you unless you have a half a million bucks or a million bucks.” They move wealth around. There’s not a lot of planning. There’s enough money there. It’s really just where you’re going to allocate the assets.

Dominique Henderson:

Got it.

Steven Sless:

Then there’s your active financial advisors that are either fee-based or commission-based. To me, it doesn’t really matter. But they’re actively involved in the planning of retirement from the wealth accumulation phase, all the way through distribution. To me, working with older clients as long as I have, it’s the distribution element that throws them off. I think most Americans that reach that retirement age have done a reasonably good job of accumulating some level of wealth.

It might not be enough to make it through their entire retirement, but they’ve done a decent job. It’s they have no idea what distribution even is, how much they can take safely to live a comfortable retirement, and how much they can take without running out of money. So it takes a financial advisor to be involved with that client, to not only move money, but to help them in the planning phases to understand how much guaranteed income they have coming in and how much wealth they have in their home. And then speak to us about whether it’s going to be beneficial to look at a reverse mortgage as a potential option.

Then you also have your financial advisors that just have their own agenda and their shtick, for lack of better terms, is they say no to everything. Don’t buy life insurance, don’t buy long-term care, don’t take a reverse mortgage, and they want to be the hero. That’s well and good. I want to be a hero to clients too. But don’t overlook what is most cases their largest asset, or don’t overlook life insurance. Don’t overlook long-term care.

In order to create a holistic top-down approach where you’re using all of your client’s assets, instead of just a few, you have to involve all facets of retirement planning.

Dominique Henderson:

No, I won’t disagree with that one iota. What I’m trying to articulate, to some degree of, I guess, average or above average quality is that as a financial professional, and I’ll use the term financial professional, the industry, I feel, has not done a really good job to educate the consumer on the different types of financial professionals. Even with Reg BI, which is a watered-down version of what we probably should have in this industry, which is a whole other podcast, that is not enough teeth to tell the consumer or signal to the consumer who they should be working with.

I and a lot of my friends already agree that the bar is too low to become a financial advisor or to use that title as a financial advisor. So I’m more appealing to that person, at least this platform is built to appeal to that person that wants to deliver real financial advice. When I say real financial advice, I mean that in the continuum of financial care, there’s different elements that your client may need.

At some time, they’re going to need your coaching skills. At some point, they’re going to meet your financial planning skills. At some point they’re going to need products and services. So you need to wear and be prepared to wear all those hats as a fiduciary, as you said. I think that holistic view allows our industry and the professional that’s serving in that industry to look at all the different available options so that we get the client to the desired outcome.

Steven Sless:

Preach on. Before we move forward, while it’s fresh in my mind, I want to go back for a moment too, because I think this is important. It’s an important point to make. I think a lot of financial advisors still to this day believe that a reverse mortgage should only be used as a last resort. And that’s the exact opposite. It should be a part of the planning strategy from as early on as possible because housing wealth is in most cases going to be your client’s largest asset.

So starting to have that conversation about how you leverage that asset strategically and tax efficiently is going to create a safer and a more secure retirement plan as your client grows older. It enables them to protect and preserve their other assets. I know that’s a topic we’re going to get to, but I just want to make that point, that a reverse mortgage is anything but a loan of last resort. It was used as a loan of last resort up until guidelines changed in 2015, which to me was the best thing that ever happened to our industry because the product at that point became a well-rounded financial planning tool, not a loan of last resort. Just wanted to make that point.

Dominique Henderson:

No, I think this is actually a good segue, Steven, into, if you don’t mind sharing, some of the details of the loan that you said you just closed, because I think it not only reinforces what you just said of this not being a loan of last resort and a tool to be used inside a financial plan, but it provides an example of how you can protect your other assets, including business assets.

We’re in a pandemic right now, and a lot of businesses have shown that, well, we’re not really pandemic ready, if anybody ever was. But some businesses, obviously, are not as prepared to handle this. We saw businesses lose 30, 40, 50% or more of their top line revenue. Talk about, if you can, that example that you gave right before we started, that was able to help this business owner.

Steven Sless:

Yeah. We had a client come to us by way of referral from a financial advisor, back in… Gosh, what month are we even in? I don’t even know where time has gone this year. We’re in August. This was in June we started working with this client, in Boca Raton, Florida, right on the inter-coastal, beautiful home, a four and a half million dollar house free and clear. There’s a lot of financial advisors on this show tonight. Would you think that somebody with the means to have a four and a half million dollar home, it’s free and clear, and plenty of other assets would be a great candidate for a reverse mortgage?

Turned out to be the most ideal candidate. This particular person, without going into too much detail, is in a business that is totally cashflow strapped right now. It’s one of the businesses that have been majorly affected by COVID. It’s starting to get better, but it’s not quite there yet. So he was in a pinch for cashflow. And so, in having a conversation with his advisor, they were going to either sell off assets or look for other means to fund his business.

This person was adamant, “I am not laying off a single employee.” Okay. Let’s help you do that. He has plenty of other assets. The guy on paper was worth seven, eight million dollars. Could have taken it from anywhere. He thought he was gonna need a few million bucks to meet payroll until his income starts coming back. We set up a call, a zoom call, which is the new way of doing things, with his advisor and himself and his wife, and we jumped right on.

We looked at all the other assets he had, and we looked at the tax implication of drawing from those assets, versus leveraging the wealth in the home. We were able to get him 2.2, almost $2.3 million in cash in hand. Not quite the three million, but now he only has to take another 700K from his investment portfolio. He leveraged 2.2, almost 2.3 million bucks from his home, tax free cash that he can choose to make a payment back on, or he doesn’t have to pay it back.

His plan, because he’s somebody that makes a lot of money and he has a lot of means, when business is normal, his plan is to pay it back. Great. If he doesn’t or if the business is affected for a longer period of time, there is no mandatory requirement to make a monthly mortgage payment back. In the conversation, the term came up, asset reallocation, and that clicked with me. That’s exactly what we did for him. We moved an asset from here to here, which prevented him from having to move all these other assets from over here, pay taxes on them, and then limit future growth on those assets, because of course, working with a great financial advisor, he’s making pretty good returns right now.

The more you can leave in your other accounts and the more you can leverage from the home tax efficiently, we were able to set this guy up with a reverse mortgage loan. You just wouldn’t think that that type of person would make a great reverse mortgage candidate, but he did, and it was a great story.

Dominique Henderson:

Thank you for sharing that. I think you bring up another point that was maybe lost on me before, looking at your material and starting to educate myself, is the tax advantage and the tax efficiency, because when you start to think about having an investment portfolio, you’ve got your taxable bucket or you have your non-taxable bucket. And so, even with the withdrawals off of those, I mean, there are tax implications, especially if you have to think about short and long-term capital gains with asset disposition and whatnot.

I think that’s an excellent point because this is access to that cash without any tax implications. Is there zero tax implications? I want to just understand that.

Steven Sless:

No, because it’s a loan. It’s not classified as income. It’s a loan. You made that money, you paid taxes on it, and then you paid into the house. So now you can draw this money back out completely tax-free, and create another tax-free bucket of money to use in a variety of different ways. That’s a pretty extreme example with a high net worth individual in a multimillion dollar home. But that same principle holds true with folks that have homes that are worth 200,000 or 300,000 or 150,000 dollars.

The equity in your home when leveraged correctly by way of a reverse mortgage is tax-free. So, yes, you have massive tax benefits, but also look at the potentially lost growth. If he had to pull out three million bucks from his investment portfolio, I mean, Dom, I don’t even want to quote what he could be possibly earning on that. But you know and the viewers know. I mean, that’s the real beauty of this, is not only is it a tax-free bucket of money, but it’s you as the advisor are going to manage more money for your client longer because you’re preserving all of your AUM.

Dominique Henderson:

Yeah. Another point that just came up while you were talking is, let’s say, God forbid that he came to you guys in March, March through April when the market was dropping like a falling knife and then have to take three million out right then. That’s going to be… Especially to see all of it have come back since then would have been really painful. So I think-

Steven Sless:

That’s a great point, too, as just a hedge against market correction. A bucket of money, you don’t have to take cash. You can put reverse mortgage proceeds into a line of credit. And that line of credit has a guaranteed growth rate. The growth rate’s half a percent over the interest rate. Today’s interest rates are high twos, low threes. So right now about three and a half percent.

You put funds into a line of credit that are going to earn three and a half percent compounding growth over the life of the loan, that’s a great bucket of money to use as a hedge in case of market correction. A quick pivot and you’re using the wealth from the home and you’re not pulling from the other assets, which I don’t have to educate the viewers on here because I think most are financial advisors. But I think that we all know the last thing that you want to do to a depleting asset is deplete it even more.

Dominique Henderson:

This is true. This is true. This is true. I think your points are really well taken. Let’s talk about this notion of… Feel free to give another example, this notion of the mechanics. I don’t want to get too far down the rabbit trail here. I think if people want to use this as a tool, A, educate yourself. B, develop a relationship with an expert like yourself if for whatever reason it doesn’t work out with you. But definitely educate yourself on this and find somebody that really specializes in this instead of just trying to YouTube or Google it and think you can do it all yourself. No, don’t do that. Please don’t do that.

Talk about the mechanics on this because… So if I’m paying a mortgage right now, and I’m age 62, I don’t own my house free and clear, is there a certain percentage of what I can take out or is this the only way that I can ever do a product like this, is if the house is completely and totally paid off?

Steven Sless:

No, we have a lot of clients right now that are using it for the single purpose of paying off their existing loan, eliminating that mandatory mortgage payment. Now they have a flexible payment going forward. They can make it or not. Most don’t because the whole premise is to create additional cash flow, but you can make payments. But yeah, a lot of folks use the reverse mortgage to pay off a mortgage.

On average, at 62 to 70, you’re able to borrow roughly 50% of your home’s value. That’s important to understand as well. There’s a lot of other mortgages out there. There’s VA loans, there’s a conventional mortgages that are going to let you borrow more. And sometimes folks get hung up on that, “Well, you’re not giving me all the value of my home.” We’re not buying your home. We’re just releasing some of the equity in the home, and if we lent you 90% of the home’s value and you decided never to make a payment, then that makes no sense. You’re going to be upside down very shortly.

We can talk about how you never leave a debt to your heirs in your estate, and you technically won’t really be upside down. But we’ll do that later on. But a lot of folks take it to just pay off a mortgage. A lot of folks take a tenure payment, which is a mortgage in reverse, hence the name, where the lender is going to just send you a check every month. We tell you how much you qualify for, and then you can just say, “Hey, I want to take in as a tenure,” basically, an income annuity that the house pays you, and you’re going to get a fixed check every month for the rest of your life.

You can also take it as a term payment over 10 years, 15 years, 20 years. Again, we tell you how much you qualify for, and then we tell you what that check would be each month for the next 10, 20, 30 years, however long you’re going to set it up for. You can take it as a line of credit, as we touched on. The most powerful way I think to structure a reverse mortgage is a combination of all of the above. That depends on what the needs and goals of the client are.

So that’s where we do a deep dive. We do a financial assessment. We look at all their needs. I’m proud to be one of the only reverse mortgage experts in the country certified in long-term care. That’s a big focus for us because we all know long-term care, that’s the number one wrecking ball to any retirement plan. It sneaks up quick and most people in their lifetime will need some level of long-term care. So we look at long-term care. We look at life insurance. We look at all of their potential needs and we educate them how the reverse mortgage could potentially help fund those needs.

Often times it’s, “I want to pay off my mortgage and get rid of that payment. I need a little bit of cash to do some renovations, to make the home more suitable for me as I’m aging in place. And let’s set up a line of credit as a bucket of money that’s going to sit over here. So if and when I need it, it’s there. And that’s my rainy day, my safety net.” Mechanics wise, that’s how the options work, and then it’s just all tailored and customized from there.

Dominique Henderson:

Tell me if I’m wrong here. In the discussion we’re having, I’m just listening to this and it sounds so much like permanent insurance, where if you really didn’t want to pay for an insurance policy, go through underwriting, do all of the things that you have to do, especially in a pandemic… I’ve actually placed some policies in a pandemic, and the questions that are on this questionnaire is getting ridiculous.

But anyways, it has a lot of similarities there because I always talk about life insurance in the context of transferring or retaining risk. Does it make sense to transfer the risk to somebody with deeper pockets at a smaller cost or negligible cost to you, or do we want to retain the risk? Well, with life and income replacement, we probably want to transfer the risk. With our car getting scratched, maybe you want to retain the risk.

In this particular case, reverse mortgages seem like another bullet in the holster, if you will, of how I can transfer risk. However, it just happens to be my asset, which is cool because I don’t have to go through any underwriting on my asset.

Steven Sless:

I think what a lot of folks overlook, and they over-complicate it, it’s really a simple concept. It’s a mortgage in reverse that’s government insured, and no, you don’t lose your house and all those things. But let’s just break it down to the simplest form that I know how. This is an example that I give in all my presentations and seminars. You worked hard your whole life, you made money. You put some of it over here in savings. You invested some in a 401k or an IRA. If you were really smart and savvy, you invested on top of that and hopefully had a financial advisor and somebody who knew what they were doing.

Maybe you have a life insurance, which is another bucket of money, especially if it’s whole policy that has some cash value. Maybe you bought some long-term care. But then you have this whole bucket of money over here that is your house, that you’ve been dropping money into, making payments. Without even realizing it, you’ve created a nest egg, which in most cases is the largest portion of your net worth. Doesn’t it make sense to just bring that into the equation.

Whether you do it or not, whether you’re going to actually borrow from the home or not, that’s a different story. But my gosh, be educated on it. Have the conversation, because that is where a lot of your money lies. Most folks don’t realize how much equity they have, number one. I talk to clients every day, they’re like, “My house is worth what?” I mean, yeah. We’re in one of the hottest housing markets that we’ve seen in quite some time. Pre-recession, the last financial downturn of ’08 and ’09, housing values are strong right now.

You might have a lot more equity in your home than you realize, and that equity can be leveraged at today’s values. That’s another great benefit that I want to bring up is you’re locking in how much you can borrow in today’s values. If your home declines next week, you’re borrowing on today’s value. It’s insured by FHA. So even if you set it up as a line of credit… Think back, Dom, what happened in ’08 and ’09. Folks had lines of credit that were their safety nets.

Dominique Henderson:

Closed. Got closed down. Yeah.

Steven Sless:

And they did that. As soon as COVID got serious, JP Morgan Chase, Wells Fargo, a lot of the big banks said, “No more borrowing from the home,” and they got very restrictive. It’s gotten a little less restrictive, but reverse mortgages are federally insured. If you borrow money at today’s value, your line of credit cannot be frozen, cannot be suspended, cannot be called due so long as you comply with the loan terms and the responsibilities, which are, you’ve got to pay your taxes, you’ve got to pay your homeowners insurance, and you’ve got to maintain the home because you own the home.

But that’s another avenue that makes the reverse mortgage is very unique and different from traditional mortgages, is that federally insured element.

Dominique Henderson:

Yeah. Yeah. No, man, you’re doing a ton of education, and I still want to get to questions. Let’s talk about one-

Steven Sless:

Cut me off. Please.

Dominique Henderson:

But I think that financial advisors, planners, professionals need to think about when forming a strategic center of influence or alliance with yourself. Because I think we’ve hit on a couple of things here… I think, and I would like to know your opinion. Because I asked, obviously I want to know your opinion. I think that it starts with the fiduciary mindset of, what’s best for my client? I may not be bringing home all the money. I may not have 100% of the wallet share. That’s cool. That’s okay.

What’s going to be best for Mr and Mrs. Joe Client, because at the end of the day, that’s why we’re in this business. We’re in the business to help people. Do you have any other tips on how people get into a relationship with yourself, or centers of influence, if we just zoom out and broaden the picture when you’re assembling your team of experts to help your clients and bring value?

Steven Sless:

I think one great point to make to the financial advisors is there’s a big difference between a mortgage loan originator and a reverse mortgage expert. My mortgage license, my NMLS license, allows me to do both traditional and forward. I could try to do a traditional mortgage right now. It would probably take me 90 days and then I’d get everything wrong. I’d probably stumble my way through it. Wouldn’t be the best service to the client. Maybe it gets done, maybe it doesn’t.

Unfortunately, that’s the mindset that a lot of traditional mortgage loan originators have today. It’s nothing against them. They’re allowed to do it, so they’re going to try to do it. But there is a huge difference between what I understand about retirement planning, my certification in long-term care, my knowledge and expertise, and my team’s knowledge and expertise in everything to do about reverse mortgages versus somebody who doesn’t specialize in it.

My one point of advice is, if you’re going to work on a reverse mortgage with a client, of course, we would love to be a resource for you. But if it’s not us, find somebody who specializes in reverse mortgages. Regarding center of influences, within my circle of influence, I have estate attorneys. I think they’re paramount, especially for an older demographic, a lot of financial advisors, insurance agents, both life insurance and just property and casualty insurance. I think that’s important, making sure that their risks are covered and managed properly.

Divorce attorneys and bankruptcy attorneys are great referral partners for us. Right now, gray divorce, older senior divorce is through the roof. Why is that? It’s because a lot of husbands and wives are locked down together. At least that’s my opinion.

Dominique Henderson:

They’re getting to know what they married.

Steven Sless:

My wife is way downstairs right now. I hope she didn’t just hear that. But it’s true. We’re getting so many referrals from divorce attorneys right now. The reverse mortgage is an incredible way to divide assets and not leave somebody hanging out to dry. It’s a great way for one to stay in the home and cash out the other spouse for 50%, without hanging somebody out to dry, that in most cases that happens in divorce.

Real estate agents, you can purchase a home with a reverse mortgage. Most real estate agents don’t understand that you can do that. Yes, you can do that, and it’s an incredible tool to use as well. That’s probably a whole other podcast because I can go on for an hour about that.

Dominique Henderson:

That is. You’re dropping some nuggets on here, by the way, because I didn’t know that.

Steven Sless:

I think if you’re doing best by your client, you should always have folks that you can turn to that are vetted, and trustworthy, and reliable. Home contractors are great partners for us. A lot of our clients want to retrofit the home and make it more suitable for their needs as they age. So we work with, and we get a lot of referrals from home contractors. I’ll have a conversation with anybody and tell them what I do, and maybe they send me a referral, maybe they don’t.

But I also provide a lot of value to my circle of influence outside of the realm of reverse mortgages. I’m a sponge for information about marketing and branding. I’ve been on a mission to personally brand myself and to brand my company under my name for about five or six years now. I just made the decision a while back I’m not going to… I love my company that I work for, but I’m the business, and I’m going to brand myself.

I think it’s a little bit more difficult for financial advisors because you have a lot of regulatory and compliance issues there, but brand yourself however you can. Be the expert in your space and bring folks into the equation that sometimes you wouldn’t even think would be great referral partners. But givers gain. That’s just the BNI mantra is givers gain, and I think the more you give to your centers of influence and to your community, whether that be through charity or giving or philanthropy, referrals, it just all comes back in spades.

Dominique Henderson:

No, I won’t disagree with that one iota. I think something you you’ve touched on with what you’ve been saying, and you didn’t use the word, but you’ve been all around it, which is a niche, having a specialization, which I tell financial professionals all the time, is find a group of people… Maybe when you come into the business, it’s a little harder. I would argue that you can start from the beginning, especially if you’re a career changer.

I’m going to get on my pedestal for just a second here, but if you’re a career changer and you’ve spent 10, 15, 20 years doing something… I talk about this advisor that I worked with and consulted with, that used to be a doctor. He always loved personal financial planning. He went back, got to CFP. Who do you think he went back to and started to understand their needs, understand their pain points the best? The doctor community. It makes a whole lot of sense.

He knew the ins and outs of trying to sell a practice, to trying to keep employees happy, the whole nine. So I think there’s a level of transferable skill sets that help you build a niche in any industry, financial services included, just like you’ve done with the reverse mortgage specialist [crosstalk 00:42:42].

Steven Sless:

That’s how you organically build a brand, right?

Dominique Henderson:

Yes.

Steven Sless:

You just become known as the expert in your space. And being the expert in my space has opened up a lot of doors, a lot of media opportunities where I’m in rotation in our local news market. Every 90 to 120 days, I’m on the news talking about reverse mortgages, newspaper articles. I have folks from across the country reaching out to cover stories about reverse mortgages, and me being the expert in the field, it’s really helped to set me apart. The riches are in the niches. I’m a big believer in that.

I’m also a big believer that you can’t be all things to everybody. If you try to be all things to everybody, you’re just going to be average in all of those things. So I agree, pick one thing, be the best at it.

Dominique Henderson:

Yeah, I agree. Let’s pop into some questions real quick, man. I know you can see some. I’m going to pick and choose here. I’m not going to get everybody today because Steven has a lot of information. And if you want to check him out, I’m going to put his information up real quick and I’ll put it up again later. You need to go visit him and his team because he knows what he’s talking about. Obviously, you can tell that in the last 40 minutes that we’ve been talking, he knows what he’s talking about. So you need to consult experts.

I’m huge believer in leverage. People don’t believe this, but I tell them that as a financial advisor, I still receive financial advice and input from another professional, not my own, not myself, because there’s bias with what I tell myself. So just practice what you preach people and go support. All right, here we go. I saw some real quick I wanted to hit on because it looked like a question that would be really good.

Give me a second here. Where is it at? Oh, here we go. Dan Sherman says, “I have a client that is 72, has very limited assets and her home is only worth 400,000. She doesn’t have LTC and I’m concerned that she might need that wealth at the end of life. Do you buy the LTC policy with the reverse mortgage? What if she doesn’t meet the three requirements for the policy? Is she still a good candidate?” I want to lob this up because I was like you’d probably be perfect to answer this.

Steven Sless:

Yeah, we help to fund a lot of long-term care, whether that’s insurance policies or just providing cashflow to cover long-term care. The way that we do that is this, because you’ve got to be careful about the advice you give to the clients compliance-wise and regulation-wise. You can’t say, “Hey, go take a reverse mortgage and bring that money back to me and use this money to pay for the policy.” What we do is we free up the cash flow.

I don’t know if she has a mortgage balance, but let’s say she has a $400,000 home and owes a hundred thousand dollars on it. Maybe she has a mortgage payment of a thousand bucks a month. We’re going to pay off that mortgage. We’re going to free up that thousand dollars a month. I don’t know how much this policy may cost if she qualifies, but that additional cashflow can help fund or fund a long-term care policy.

Then if they want to, the client can make their own decision to cash out the reverse mortgage and fund their policy. Maybe it’s a one-time pay policy or something of that nature. But we have to be careful that we’re not advising them to go do that. They need to be educated about both products and then make their decision from there as to how they’re going to qualify or how they’re going to fund it. She may be a candidate for a reverse mortgage. I would love to explore that for you. So certainly reach out to me. I’ll work up a scenario and get right back to you.

Dominique Henderson:

Cool. Thanks, Dan, for the question. I think that was a good one. Appreciate you, Steven. Roxann says, “Is there a huge balloon payment if you want to ultimately keep the house for legacy, etc?”

Steven Sless:

Great question. Great question. The way that the payback works is this. Let’s assume, like most people don’t, that there’s no payment being made. The balance is going to increase over time. When the loan comes due, the amount owed is going to be the original balance plus the amount of interest that’s accumulated over time. At closing, we provide an amortization schedule that tells them every year how much the balance is going to rise. So there’s full transparency and there’s no shock at the end.

Now, let’s say the heirs take over the home. Mom and dad, they owe 300,000. The value of the home is 350. The heirs would pay off the 300,000. They would walk with $50,000, and that’s their inheritance. That’s no different whether it’s a reverse mortgage or a traditional mortgage. Reverse mortgages are different, however. Let’s say there’s nothing left over. In fact, let’s say there’s a $400,000 balance and the home is 350. All government-insured reverse mortgages have reverse mortgage insurance on them that acts like gap insurance for your car.

You total your car, the insurance company cuts you a check for 20 grand. You owe 30. The gap insurance pays the difference of $10,000. Reverse mortgages have gap insurance on them. If there’s more owed on the home than the value of the home at the time of sale, the heirs are not responsible. The estate is not responsible for that overage. The overage is covered and paid by the FHA insurance policy. So the heirs at that point would just walk away free and clear. They would get no inheritance from the home.

But we go back to misconceptions. Another big misconception, and I don’t want to take too much time because I know we only have-

Dominique Henderson:

Now, you’re good.

Steven Sless:

… 10 more minutes left, is that if I do have reverse mortgage, I’m going to leave less to my heirs. That’s just simply not true. You may leave less home equity, but we go back to planning and we go back to preservation of other assets. It doesn’t necessarily mean that you’re going to leave them a smaller nest egg. Maybe having the reverse mortgage allowed you to fund long-term care, fund the insurance policy that’s going to pay off all of your debt, or protect and preserve the other assets under management. So the nest egg as a whole grows bigger. But back to this question, you cannot leave a debt to your heirs or to your estate that’s not covered by the insurance.

Dominique Henderson:

Perfect. Perfect. Maybe one more and some parting thoughts. Marques says, “What about clients who would like to use this option to purchase investment properties,” which you touched on a little bit, “In order to create a legacy? Are clients precluded from using these funds for other investments?” In this instance, a loan is a loan. You can decide to use the cash flow however you want, correct?

Steven Sless:

Yeah. If you’re going to cash out, you can use that cash and repurpose it however you see fit. The reverse mortgage must be on the primary residence. So you can’t purchase your investment property using the reverse mortgage. But you can certainly take a lump sum distribution from the equity in the home and apply that towards an investment property. Absolutely.

Dominique Henderson:

Yeah. Cool. I think I’ll grab this last one here. Are we advocating for reverse mortgages over annuities? I don’t think it’s one or the other. I think it is largely, at least from the context of this conversation, we brought up the point that this largely gets overlooked. I guess, in comparison to an annuity or a more traditional product, things that they teach us about in curriculum for financial advisors and things of that nature.

However, if you’re going to be, I would say, acting in the best interest of your client and bringing value to that relationship, which is where I started this whole conversation, is as a financial advisor, how do I bring value to that client? How do I solidify my point or my place in that relationship from other competition or incumbents or whatever. There’s things that you can do, obviously, on the soft skill side and things of that nature.

However, there’s other ways you can really, I would say, demonstrably prove your value. That’s by bringing in products and solutions like what Steven and I were talking about in the reverse mortgage. So hopefully that answers your question. It’s not one or the other, it’s both actually, or more than both. It could be a combination of things.

Cool, man. You have been so gracious with all your information, and I’m putting your information back up, all the data you’ve given us. Putting your information back up so everybody can see how to connect with you. Give me a summary of, if I was a financial professional with a book of business, let’s say my average client age is 60, which is not too uncommon, that’s the typical financial advisor, what would you say is the first step to starting to look at other options outside of the traditional asset allocation spectrum and ways to deliver on a plan? What would be the first piece of advice or maybe the most important piece of advice you would give to them to start to think about if they were of the more traditional mindset?

Steven Sless:

To me, that’s simple, build a trusted, vetted network of professionals that can be called on to help serve the needs of your client, whatever those needs may be.

Dominique Henderson:

I love it. I love it. Stop trying to be all and end all. I know financial advisors, and I’ve had this problem myself in my career, is you feel that you have to have all the answers, and that’s just not true. I think a lot of people would agree that it’s ridiculous to feel that way. But when you actually put rubber to the road, you still act that way, you run your business that way, you think that way, you make decisions that way. To your point, start building a Rolodex of people that you can outsource stuff to and not be afraid to trust them with your clients and build that relationship and start to add that value. I love it.

Steven Sless:

Absolutely.

Dominique Henderson:

I love it. Well, man, this has been great. Anything else you want to leave us with before we close up shop here?

Steven Sless:

I’m so grateful for the opportunity and appreciative for everybody that joined us tonight, and everybody that’s going to view this as you and I both share it on all of our social media platforms.

Dominique Henderson:

Absolutely.

Steven Sless:

I see the website is up. Definitely reach out to me through there. You can schedule a call with me through there, but LinkedIn too. LinkedIn is phenomenal. It’s where you and I, Dom-

Dominique Henderson:

Yes.

Steven Sless:

… met for the first time. I would love to connect with you, have a conversation with you, schedule a time, block out an hour to help you with a professional, better serve the needs of your clients. And connecting through LinkedIn would be a great start.

Dominique Henderson:

That is excellent. That’s excellent. If I didn’t get to your question, if we didn’t get to your question, you can definitely those to this address here and I will try to direct that as best as possible. But thank you for watching. Thank you for listening. We’ll see you next week. Thanks, Steve, for hanging with us for an hour, buddy, man. I wish you well and let’s stay in touch.

Steven Sless:

Absolutely. Pleasure was all mine. Thank you.

Dominique Henderson:

All right.

Video Transcript

Devon O’Day:

Have you ever heard the term reverse mortgage? If you’re 62 or over and you own your house, this might just be for you. If you have some financial worries because of COVID-19 or maybe just because you’re 62 and you have some financial worries, this just might be the solution to your problems. We talk with an expert with reverse mortgages, Steve Sless. He’ll explain it all.

Steven Sless:

How’s everything?

Devon O’Day:

You know what? It’s all really, really good. I mean, we live in a time that is kind of crazy, a very historic time. But I think you’ve got some really good word to help some of the, especially the senior citizens who are living in their greatest investment.

Steven Sless:

For over a decade now, we’ve been preaching the gospel of reverse mortgages and how it can help in times of economic uncertainty. And over the past decade, everybody’s been pretty confident in the market, but this global pandemic that we’re all going through right now, it’s kind of woken people up and made them realize that it’s important to plan. And for those who have the majority of their net worth tied up in their home, there’s no better way to incorporate that wealth into the retirement plan than with a reverse mortgage.

Devon O’Day:

Explain for people who, like me, who’ve heard the term reverse mortgage for about a gazillion years and we still really don’t know what it is.

Steven Sless:

The easiest way to explain is it’s just a mortgage. It’s a mortgage that’s specifically designed for folks that are 62 and older that have at least 50% equity in their home. And what it does is it just works in reverse from a traditional mortgage. And so most older Americans, the majority of their wealth is tied up in their home. How do they access the wealth? Their first option is a traditional mortgage. Everybody knows what a traditional cash out refinance it. So that’s option number one. But if you’re 70 years old, what’s the usual term on a cash out refinance? It’s typically going to be 15, 20 or 30 years. And so you got to look at it in this perspective, does it make sense at 70 to take out a traditional mortgage? Yes, it’s going to give you some money from the wealth in your home that you may need, but you’re also going to have a mandatory mortgage payment later in life when cash is king. What we’ve found is, later in life, most people think their expenses go down. They actually go up because healthcare cost, the cost of long-term or in-home care, go up as well.

And so option two, a HELOC. You can walk into your local bank and take out just a regular home equity mortgage; a mortgage against your home that’s going to provide you with some of the equity. But again, you have a mandatory monthly mortgage payment later on in life. Those right now are gone. Chase Manhattan the other day, JP Morgan Chase, just announced that they will no longer accept applications for home equity lines of credit at all. They’ve completely paused them, suspended them, and folks that have credit lines right now are in danger of having their credit line frozen, like what happened in 2008 and 2009 during the last economic downturn.

And so option number three is, if you’re over 62, you can take out a reverse mortgage, which is a loan that provides you with up to about 50% of the value of your home. You can receive the funds in a variety of different ways. You still own the home, no different than any other mortgage, but the big difference is that you don’t have a mandatory mortgage payment. And so from a cashflow perspective, you’re able to borrow money from your home without having to pay it back in your lifetime. You can make payments on it anytime that you want to. There’s no prepayment penalty, so you can pay it back anytime that works for you. Or what most of our clients do is they defer payback until they leave the home. Meaning, when they sell or when they pass away, that is when the reverse mortgage comes due. They at that point will leave the home to their heirs. The heirs have the option whether to sell the home, and at that point pay off the reverse mortgage through the proceeds of the sale, or obtain their own financing, pay off the reverse mortgage, and keep the home if they wish to keep it in the family.

Devon O’Day:

See, that’s the big question. There are so many people, they’re suffering or they’re sacrificing so they can leave something for their heirs. But the truth is, that matriarch and patriarch need to take care of themselves, and that’s probably the greatest gift to an heir anyway.

Steven Sless:

Absolutely. And I think the big misconception about reverse mortgages is, Steve, if I take out a reverse mortgage, I’m not going to leave any money to my heirs. And that’s not the case. And in many cases, taking out a reverse mortgage could actually ensure that you leave more to your heirs, because housing wealth is just one part of the equation. The money that you leave your heirs can come from multiple buckets. Of course, it can come from the wealth of your home, but it can also come from your retirement portfolio. Life insurance goes vastly overlooked in retirement planning. If you want to leave a legacy to your heirs, leave them life insurance. That’s guaranteed tax-free money. Don’t worry about what the value of your home is going to be or what your retirement account is going to look like at the time that you pass. Leave them a guarantee. Leave them life insurance.

And so what we’re able to do is we’re really able to take a deep dive with our clients, look at retirement planning from a very holistic standpoint. We look at all of their assets, not just some, and we help them figure out how to accomplish their goals. And if leaving a legacy to your children or grandchildren is important, we can help you find a way to do that. And it’s likely that we can still do that utilizing a reverse mortgage. So the number is (410) 814-7575. (410) 814-7575. And the web address is TheStevenJSless, S-L-E-S-S, group.com.

Video Transcript

Marc Glickman:

Hi and welcome to this episode of Financial Planning Innovation. It’s my pleasure to have Steve Sless online. He’s a reverse mortgage expert. Thanks for joining us today.

Steven Sless:

Hey Marc. Great to be with you. Thanks for having me.

Marc Glickman:

So tell me a little bit about your background. I know we met on LinkedIn, and I see you in the media all the time doing interviews of various types, but how did you get into reverse mortgages?

Steven Sless:

Yeah, so I’ve been in mortgages for 17 years, hence the hairline. And for the first five years it was purchased refi, I got in around 2003. So, it was good times to be a mortgage broker at that time. And in 2008, when the economy was, heading south, and the housing market was as well, there was a young lady in my office and she started originating reverse mortgages. And at the time, I’m in my twenties, can I really work with seniors? Are seniors going to want to work with me? But I dove in and I became educated in the product and really fell in love with the product. And really fell in love even more so with the impact that reverse mortgages can have on the lives of our clients.

Fast forward now, gosh, been in reverse for about 12, 13 years, exclusively. It’s all we do here and we just love it. I love our clients. We love being able to facilitate a more comfortable lifestyle and a more comfortable retirement for our clients. And really haven’t looked back since, and in retrospect, getting into reverse was the best career decision that I’ve ever made.

Marc Glickman:

That’s awesome. And I consider there’s three different types of specialists that I run into a lot. Long-term care, annuities and reverse mortgages have a bad rep from stuff that’s happened in the past, but yet they’re so broad and affect so many people and they’re great tools. And so having a specialist like yourself, I think that’s so valuable. Tell us a little bit about the reverse mortgage market. What would you say is the biggest misconception out there and how the market’s changed when you’re looking at it today?

Steven Sless:

Yeah, I think the biggest misconception is that reverse mortgages or loans of last resort. And even still to this day, even those in the financial planning community, they send us referrals almost when it’s too late. And so ideally a reverse mortgage should be a part of the conversation. It should be a part of the overall planning process. And I think we’re making some headways, we’re making a lot of strides in the reverse mortgage industry to engage more with the long-term care community, engage more with the financial planning community, because those folks need to be educated as well on how many different uses of the reverse mortgage there really are.

And in reality, a reverse mortgage is best suited for somebody that doesn’t need a reverse mortgage right now. It’s a planning tool. Seniors have a ton of housing wealth. In one of the last studies I saw, 75% of most homeowner’s net worth is tied to their home equity. And so it just makes too much sense that home equity should be made a part of the overall retirement planning equation. But it starts with financial advisors becoming educated, insurance experts becoming educated, anybody who’s in the arena of working with retirees, or soon to be retirees, should understand how reverse mortgages truly work. And while they still could be a loan of last resort, ideally they’re not. And ideally they’re for those who have wealth in their home, they also have other assets and other wealth, but now we marry the both of them together. And by doing so, we’re creating a more holistic and well-rounded retirement plan.

Marc Glickman:

Right. And I think you mentioned that they’re tools, right? And you want to do them proactively, as opposed to as a reactive last resort thing. Talking about the environment today, with coronavirus, for example, you’ve recommended for years that you should have this available to you almost as a line of credit. Can you talk a little bit about how you’ve recommended clients use reverse mortgage that way?

Steven Sless:

Our industry has been beating the drum of this for well over a decade. And we’ve been talking about set up a reverse mortgage line of credit to protect and preserve your assets in a bear market. But we’ve been riding this wave in this booming economy for the past decade plus. And a lot of our efforts have gone overlooked, right? Why set up a reverse mortgage? We’re earning six to 10% and the market right now, who cares how much equity we have in our house? Because if I invest in the market, that money is going to make more money and so on and so forth.

A reverse mortgage is an unbelievable tool to use in a bear market situation, because what it can do is it can minimize portfolio withdrawals. And right now, you have folks that are losing money in the market every day. They’re concerned, they’re panicked. If they had a reverse mortgage set up, they can turn to the reverse mortgage, draw from the equity in the home before taking from their other investment accounts right now.

And what that could do is minimize portfolio withdrawal rates. If you have some money right now that has to take a 4% withdrawal just to live their normal lifestyle, what could happen to that retirement account? What could happen to that portfolio if you, as the advisor, were able to figure out a way to take them from a 4% withdrawal rate to a three and a half, for a three, or even a 2% withdrawal rate, but inject housing wealth into the equation.

Now, you’re talking from a holistic standpoint, they’re using all their assets, not just some, and you’re able to live to see another day for lack of better terms. You can let the portfolio sit and be able to grow over time, instead of having to take withdrawals, and diminish those retirement accounts.

Marc Glickman:

Right. And so reverse mortgages, along with some insurance risk management tools, give you more financial flexibility in situations like this. Do you have a particular client story, or a client today that can still utilize this strategy? I know the appraisal values might be fluctuating. And whenever we post this video, who knows where the housing market’s going to be, but give us an example of somebody who used that strategy recently with you.

Steven Sless:

Yeah. I just hung up with one, two today, actually. So there’s a booming, proprietary and jumbo reverse mortgage market right now. There’s been a lot of innovation over the years with proprietary and jumbo loans. Folks that have large portions of equity in their home. And these are homes that are two, three, even $5 million. So I had a client today that I spoke to with, his home is $4 million. He’s in Texas, in Austin, actually, $4 million home. He has a $400,000 mortgage right now, with a $3,200 mortgage payment. And so what we can do for him is pay off that $400,000 first and foremost, $3,200 in savings every month, on top of that, he’s able to access up to a million dollars in a reverse mortgage line of credit.

Now, he doesn’t need a million dollars right now. This is a pretty well-to-do guy, very savvy. He’s done very well over the years, but he realizes, “I have a lot of equity in my home and I’m watching my retirement accounts be depleted every day. I want to set up this line of credit. So if, and when I want to kind of reposition and start pulling from the equity in my home, instead of taking my retirement withdrawals,” he has the availability to do that.

He was actually a referral from a financial advisor, and we’re seeing more often than not that’s what our clients look like today. They are pretty savvy. They’re well off. They’ve done well. They’re smart enough to understand that the equity in their home is a huge asset, that if leveraged correctly could protect and preserve the other retirement accounts. And so that’s one scenario. Another scenario is person came to us free and clear $300,000 home here in the Baltimore area. They want to set up a line of credit for the same reasons.

Now, this isn’t a million dollar home, or a $4 million home, but this is somebody that has done the right thing their whole life, they’ve saved. They’ve paid down their mortgage. They’re in a position now where, because of the virus and everything that’s going on, they’re nervous. And we’ve been talking to them for the past year about being proactive and setting up a reverse mortgage. This has been the incident, the coronavirus that has had them say, “Okay, let’s move forward. Let’s get this set up,” because they want another bucket of money to pull from, to add to their other buckets of money that may be depleting right now.

Marc Glickman:

Awesome. I think it’s a really innovative strategy. It’s not one that a lot of advisors think of, “How do we tap into the home equity.” But this gives me a way to do it. Let’s talk about some of the risk factors, or the downside. I know a lot of people are probably thinking about, “Well, you’re adding more leverage on your home equity by taking out the reverse mortgage.” What are the protections that somebody has that does this, and what are the things that they should be thinking about, just to make sure that they don’t fall into a situation where they lose their home, or they get kicked out of their home, or something like that?

Steven Sless:

Sure. So another misconception is that somehow you give up ownership of the home, so that’s not true. With a reverse mortgage, It’s just the mortgage. So you still own the home. You have three responsibilities. Responsibility number one, pay your taxes. Number two, pay your homeowner’s insurance. And number three, general upkeep and maintenance of the home. As long as you meet those three key responsibilities, you can not be foreclosed on. You cannot lose your home.

So, even if the value of your home at the time of sale is more than the sale price of the home, these are all non-recourse loans, which means that neither you or your heirs can be held responsible for any overage. Most of them are FHA insured, reverse mortgages. And so if you take out a reverse mortgage, you’re in your home for the next 30, 35 years, you wind up in a position where let’s say you owe $400,000 on a home that’s only worth $300,000, that $100,000 gap is covered, meaning it’s again, non-recourse. So your heirs would sell the home, they would walk away. They wouldn’t get any funds from the home, but they also wouldn’t be responsible to come out of pocket with those $100,000.

They’re all non-recourse loans, and that’s critical, because it allows the homeowner peace of mind to know that they can access the reverse mortgage. They can use the equity in their home. Hopefully, when they pass away, or they move, there’ll be some equity in the house to pass on to the future generations. But if not, they’re not leaving a debt to their heirs, or their estate.

Marc Glickman:

Right. And I think you mentioned the important things, and this is probably where you hear bad stories about reverse mortgages. Make sure you pay your property taxes, your insurance, and you upkeep the home. Those are the most critical things. And then of course, just be aware of what your equity value is, that you may be giving up some of that equity value that your kids would have gotten, had you had more equity value in the home. But as long as you’re okay with that, it gives you more financial flexibility as a tool. So I think it’s really…

Steven Sless:

And Marc, you can also make payments on the reverse mortgage. And so a lot of our savvier clients are saying, “Well, yeah, I’m going to access the wealth in my home. When it works for me, I’ll make a payment,” some even make an interest-only payment. And so if you’re worried about the balance of your loan increasing, we can, with a pretty simple calculation, tell you, “Here’s how much you would have to pay per month to not have your balance increase. If you can make payments, great. If not, you don’t have to. The key is flexibility. So the ball’s in their court. And no other mortgage provides the amount of flexibility that a reverse mortgage provides in that you can make payments if and when it works for you, if not, you choose not to make payments and you’re deferring payback until you leave the home, but you can always make monthly payments.

Marc Glickman:

Very cool. Well, I appreciate you being on the show today. I know we’re going to have future episodes, because this is such a broad topic that affects so many people, but thanks for sharing your expertise.

Steve Sless:

Absolutely. Thanks for having me. Great to be here.

Video Transcript

Lee Michaels:

Welcome back to All Things Baltimore. Lee Michaels here, with Steve Sless. He is the man when it comes to reverse mortgages. In fact, what’s the slogan? Get more with…

Steven Sless:

Expect more with Sless

Lee Michaels:

Expect more with… Did you come up with that?

Steven Sless:

I can’t take the credit for coming up with it. My good friend, David Holland, who runs a financial firm down in Florida, I had the opportunity to be on his TV show a few years back, and he coined the phrase, and I trademarked it, and we ran with it.

Lee Michaels:

I’m glad you said that because you’re not just a local force in the area of educating and also helping people apply for reverse mortgages, but you’ve been traveling around the country with the same message, right?

Steven Sless:

Yeah. We’re taking the message national. It’s an important topic. It’s a very misunderstood topic and that is using the wealth that you’ve created in your home by years of paying down your mortgage. Now you’ve put yourself in a position where you can recoup a lot of that wealth and use that wealth to live a better retirement. There’s a lot of education that needs to take place. We want to be on the forefront of bringing that education to the consumer. And Lee, this show has been an amazing platform to do that and the radio, but we want to take that message national as well.

Lee Michaels:

Why has the whole idea of reverse mortgage been so misunderstood?

Steven Sless:

I think it’s a different product now than it was 10 years ago.

Lee Michaels:

Okay. That’s fair.

Steven Sless:

It used to be a loan of last resort. Right?

Lee Michaels:

Okay.

Steven Sless:

You need money, you take out a reverse mortgage. And too often-

Lee Michaels:

So, that’s almost like desperation.

Steven Sless:

Exactly. And it’s not meant to be that. A reverse mortgage is meant to be a financial tool that when incorporated into your overall retirement plan, it can strengthen, protect and preserve your existing portfolio.

Lee Michaels:

So how does one know whether of reverse mortgage fits for them?

Steven Sless:

Got to get educated. Got to get educated. On my website, we have a lot of education on there. I’m happy to have a conversation with anybody to educate them.

Lee Michaels:

Free of charge?

Steven Sless:

Free of charge. We’re education first. Right. The more education I can provide, the more I can empower my clients and their family and their advisors to make a decision that’s going to be best suited for them, then I’m doing my job right.

Lee Michaels:

Now, for our viewers, I’m sure there are some basic requirements that need to be taken into consideration first and foremost before even considering applying for a reverse mortgage and could you give some of those to us?

Steven Sless:

Yeah, absolutely. I think the most important thing is is this the home that you’re going to want to remain at long-term. Right. Again, this is a long-term solution. So, for homeowners who want to age in place in the home they love, it could be a great fit. You have to have about 50% equity in the home. So, if your home is worth-

Lee Michaels:

Okay. So 50 is the number?

Steven Sless:

50 is the number. And that changes depending on how old you are, the older you are, the less that requirement is. But it’s a loan-

Lee Michaels:

Because the expectation is you won’t use as much.

Steven Sless:

It’s based on life expectancy, right, so exactly, you’re not going to use as much if you’re a little bit older. But I would say a good roundabout number for the viewers is 50%. And you have to have reasonably good credit. It doesn’t have to be great. You can certainly be on a fixed income-

Lee Michaels:

Which was going to be my next question, because if you’re talking with or talking about, say, someone who’s in retirement, that’s a fixed income. And does that automatically disqualify them or can they still seriously consider a reverse mortgage?

Steven Sless:

They certainly can. So this is a loan specifically designed for older homeowners, over the age of 62, to be able to age in place. And so, knowing that a lot of these clients are on a fixed income, this is a program that’s going to be a better fit, in many cases, than a traditional mortgage, where the requirements are a lot more strict. If you’re on a fixed income and you try to take out a traditional mortgage, it’s going to be very difficult.

Lee Michaels:

Now, what about the misnomer that once you take a reverse mortgage and something goes wrong, they’re going to take your house. Where did that come from?

Steven Sless:

I’m so happy that you brought that up. So again, we go back to 10-plus years ago, when this was a loan of last resort. You had people taking out a reverse mortgage that probably should have left the home. Right. They already were in a bad position. They couldn’t afford to live in the home. And-

Lee Michaels:

They were already behind.

Steven Sless:

They were already behind. And we’ve talked about this and I’ve used the term, it’s like sticking a bandaid on an open wound. It might be a short-term solution. It might stop the bleeding, but it’s not going to really-

Lee Michaels:

But the wound is not healed.

Steven Sless:

But the wound is not going to be healed. So again, this is a product that is designed to help you protect and preserve your overall retirement plan. It’s not going to be the solution if you already have other issues. But 10 years ago, plus, a lot of homeowners were taking out reverse mortgages that probably shouldn’t have, they were falling behind on their taxes and the insurance after a few years of being in the loan.

Lee Michaels:

Wait a minute. Now, that’s something. And you shared that with me. And I think you need to reiterate that, because even when you take out a reverse mortgage, you still have the obligation to take care of your taxes and insurance.

Steven Sless:

You still own the home. And that’s one of the most common misconceptions is if I take out a reverse mortgage, somehow I’m giving up ownership of my home. That’s anything but the case. At the end of the day, it’s just a mortgage. It’s just a mortgage-

Lee Michaels:

It’s just a mortgage. It’s just uniquely packaged different.

Steven Sless:

Exactly. It’s a mortgage that is tailored for the needs of the aging homeowner to allow them to age in place. Now, we circle back to why the reverse mortgage has a bad reputation? And let’s face it, it does. And we’re trying to dispel a lot of these myths. You had people who were using it as a loan of last resort. They shouldn’t have taken it in the first place. They should have been advised to probably sell the home. They were defaulting on their taxes. And that’s the main requirement of being in a reverse mortgage.

Lee Michaels:

Okay.

Steven Sless:

Regardless whether you have a reverse mortgage or a traditional mortgage or no mortgage, if you don’t pay your taxes, you’re out of the house.

Lee Michaels:

… if you don’t pay the taxes, it’s gone. Right, right.

Steven Sless:

And that’s what was happening. But in the media, you hear, this person had a reverse mortgage and they got foreclosed on.

Lee Michaels:

And that’s the only thing-

Steven Sless:

The whole story doesn’t come out. A reverse mortgage is actually the safest mortgage product on the market. It’s insured and guaranteed by FHA.

Lee Michaels:

Wow. And again, if someone wanted to… Because I’m asking questions that I think you would want to hear the answers to, but if there’s a question that someone watching might have that I didn’t touch on, again, how could they reach you?

Steven Sless:

Yeah, call us, 410-814-7575. Lee, that’s a 24-hour hotline.

Lee Michaels:

Okay.

Steven Sless:

So somebody can call it three in the morning with questions and we’ll make sure your questions are answered.

Lee Michaels:

You’re not going to get up at three in the morning.

Steven Sless:

I won’t, but I’ll call you back in the morning.

Lee Michaels:

Listen-

Steven Sless:

Or morewithsless.com.

Lee Michaels:

That’s great. One other question that I’ve heard is a concern and that is, “Okay, I’m a senior. I take out a reverse mortgage. Upon my transition, my children no longer have an entitlement to the house.”

Steven Sless:

Again, another common misconception. So because you still own the home, you pass the house on to whoever it is you decide to leave the home to. Now, if you pass the house on to your children, your children, upon your passing, will have the option to keep the house or sell the house. If they sell the house, they pay off the reverse mortgage.

Lee Michaels:

The loan.

Steven Sless:

Just like a traditional mortgage through the proceeds of the sale.

Lee Michaels:

And whatever is left they keep?

Steven Sless:

Whatever’s left is theirs to keep. So they still do get to obtain an inheritance from the equity in the home.

Lee Michaels:

What if the child doesn’t want to keep the home? They just sell it?

Steven Sless:

Yeah. Or the child has the option to just walk away. The lender at that point will handle the sale. If there’s any money left, it still goes to the heirs because they are entitled to that money. Just because you take out a reverse mortgage, it doesn’t necessarily mean that you’re not going to pass on an inheritance. Very often, you actually wind up passing on more of an inheritance, because if you use the wealth in the home, it’s all tax free money, and it allows you to protect your existing stocks, bonds, your other retirement portfolio, and limits the amount that you need to tap into that. But we’ve got to get very strategic and answer some basic questions and provide you with the information that you need to make a well-rounded decision.

Lee Michaels:

There’s so much information that you’re sharing with us. And yet, I kind of get from you that there’s so much more that you can share.

Steven Sless:

So much more.

Lee Michaels:

In fact, I know because we’ve talked about it, that you actually go out and do seminars to educate seniors and the homeowners about the benefits of a reverse mortgage. Are you going to be doing anything soon?

Steven Sless:

Yeah. We’re working on a big seminar coming up in the fall that you’re going to be a part of as well. And we’ve talked about that.

Lee Michaels:

Oh, well, thank you.

Steven Sless:

It’s going to be an Aging in Place Summit, all focused on helping homeowners age in place in the comfort of their own home. We’re going to have some amazing speakers at this event. More information to come. We let the cat out of the bag a little bit.

Lee Michaels:

Just a little bit. Just a little bit. But Steve, I appreciate you stopping by and of course, enlightening and educating the audience about the benefits of, and of course, dispelling some of the misnomers and rumors about a reverse mortgage, which was valid at one point in time, but no longer is the case. And all they need to do is reach out to you to get more information or to have their personal questions addressed. Correct?

Steven Sless:

Absolutely.

Lee Michaels:

Once again, your number is?

Steven Sless:

410-814-7575 or reversebaltimore.com

Lee Michaels:

All right. KSal is up next. And then we’ll have our final guest joining us to close out this afternoon’s program on All Things Baltimore.

Video Transcript

Lowell Melser:

Well, welcome back and this morning’s Consumer Alert, a study by the National Institute on Aging, shows nine out of 10 older Americans wish to stay in their home, and maintain their everyday lifestyle. But for some retirees being able to afford that, may be easier said than done. Reverse mortgage expert, Steven Sless, joins us now, with more. Good morning to you.

Steven Sless:

Good morning, great to be back.

Lowell Melser:

Yeah. This is a hot topic. We got a lot of folks that are heading towards retirement. When we’re looking towards retirement, what are some of the biggest retirement expenses that we’re facing?

Steven Sless:

Housing is number one. Housing, taxes, and healthcare.

Lowell Melser:

Mm-hmm (affirmative). So, then what questions should someone be asking their financial advisor when they’re heading towards retirement? When they’re dealing with all of these expenses?

Steven Sless:

Yeah, I think nine out of 10 homeowners want to remain in-home, and they want to be able to age in place. And so, the first question is, is the house suitable? Are they going to be able to age in place? Or do they maybe need to retrofit the home? Add a wheelchair lift, add maybe a stair lift. So, that’s question number one. Number two is, how do we fund it?

Lowell Melser:

Right.

Steven Sless:

Are we going to be able to age in place? And I think the biggest misconception, Lowell, is that Medicare, or Medicaid is going to cover long-term care, and it doesn’t. And so, there needs to be other avenues for seniors to fund, being able to age in place.

Lowell Melser:

So, how do you know if a reverse mortgage is the answer? Do you have to take a closer look at your finances to see what exactly you can afford?

Steven Sless:

Yeah. I think it comes down to suitability, it’s not for everybody. But housing wealth… Seniors across the country have amassed over $7 trillion in home equity.

Lowell Melser:

Mm-hmm (affirmative).

Steven Sless:

And so, that home equity is a great resource to be able to use it to fund long-term care. There’s three ways that they can get their hands on housing wealth. That’s a traditional refinance, a home equity line of credit, or a reverse mortgage. The first two options, however, they’re committing themselves to a monthly payment. A 20 year, or a 30 year monthly payment later in life. A reverse mortgage isn’t going to have that payment obligation.

Lowell Melser:

Mm-hmm (affirmative).

Steven Sless:

So, from a cashflow perspective, it could be a better option to fund, being able to age in place.

Lowell Melser:

And very quickly, when someone’s approaching their financial planner, is there a main question they should be asking? Are there are several questions they should be asking when dealing with this?

Steven Sless:

Several. We like to also be involved in that conversation. We work with financial planners. We work with wealth managers. We also work with a lot of senior attorneys. To be able to have a conversation, “Look, is this a fit? Is it not?” Oftentimes it is. And it’s a great way to add to the existing portfolio to protect, to preserve their assets.

Lowell Melser:

Mm-hmm (affirmative).

Steven Sless:

But it is a conversation that needs to be had. A deep dive should be done to determine whether it’s a great fit or not.

Lowell Melser:

All right. Sounds good. I got a little time, before retirement. So, we’ll see what comes. Thanks for joining us.

Steven Sless:

Absolutely.

Lowell Melser:

Some good stuff there.

Steven Sless:

Thank you.

Lowell Melser:

All right.

Video Transcript

Michael Banner:

Welcome, everybody to tonight’s latest episode of 62 Who Knew? We’re just a few days away from Thanksgiving. And regardless of all the weird things that have happened in 2020, we have a lot to be thankful for.

And tonight is something we’ve been talking about since before COVID-19, which is switching the premise of this show. And we’re not switching it that much, but we are making some very important changes. As of tonight, 62 Who Knew? is now 62 Who Knew? The Longevity Initiative. We are also going from one guest per week to a panel of anywhere from two to four guests. Tonight is three. Usually a group of national experts covering the topic that we are going to be covering that particular week. And each week that topic will be the ability for people to come into their retirement segment of their life or people that are already there to live with a higher quality of life throughout their remaining years. And with longer lifespans today, that is a very timely and relevant topic.

Now, we have built up to a high of about 80,000 viewers per week. But with COVID-19 and us having to do certain things and social distance, and I wasn’t able to make it to the studio, we’ve dropped those numbers a little, but still are between 30,000 and 40,000 views per week. I want to thank our audience for that.

For any new people that are listening for the first time, let me give you just a quick premise, because I don’t want to keep our three panelists waiting. But just a quick premise of what 62 Who Knew? is. As we all approach the age of 62, hopefully even before that, but most certainly when 62 is on our radar, we all have the same thoughts, “Should we have our house paid off? Should we take social security? Should we defer it? How much longer do we want to work? How much longer do we have to work? Do we still need our life insurance that we bought when the children were younger? The children are now gone. They’re on their own. Do we need long-term care insurance? Should we be investing in the stock market? Should we be purchasing annuities?” The questions are endless. And what’s unique about these questions, is that all fathers and mothers asked the same questions. Their fathers and mothers asked the same exact questions.

But my generation, I’m 62 now, our generation, the baby boomer generation has one more hurdle that no previous generation has ever faced before. And what is that hurdle? That hurdle is the double edge sword of longer lifespans. In today’s world, according to the American Medical Association, and specifically in the United States of America, if you make it to 62, make it, notice, I didn’t say in good health, if you simply make it to the age of 62, you have a 50/50 chance of making it to 90. Okay? If you’re in a married couple, there is almost a 50% chance that one of you are going to make it into the low to mid-nineties. And with different medical and scientific breakthroughs of the last two to three decades, no generation has ever had to face, “Should I retire, but I still have 30 years. I still have half the time I’ve been here, to still be here.”

And the truth is, the sad truth, that less than 1% of this great country can actually live from 62 to 92 on what they’ve saved, on their cash reserves, on their portfolio. So, the purpose of 62 Who Knew? is to bring on different experts every week. And we’ve been doing it for a year and a half. And it’s been very successful. As I said, we’re switching to a panel now, and to cover more topics, more specifically from different angles. Every week, we have a topic that is going to help people get from 62 to 92 with quality and dignity as the way it should be for our moms, our dads, our grandmothers, and our grandfathers. So, that is the purpose of 62 Who Knew?

I don’t want to take any more time right now. I want to get our three panelists going, because the topic tonight is a sensitive one in our industries. As you all know, 62 Who Knew? most popular topic in the last 18 months, has been long-term care insurance. The second most popular topic has been Alzheimer’s and different types of dementias. We’ve had national leaders on that topic. The third, reverse mortgages. And the fourth, Medicare and its related subjects.

Tonight, our topic is why haven’t the reverse mortgage world, the equity world and the long-term care insurance world joined forces. We talk about it. We write about it. But why haven’t these two industries that serve the same exact group joined together to help the millions. And make no mistake, it is millions of seniors, who otherwise think they can’t afford a high quality of long-term care insurance, which if a lot of people had, they would have been in a lot better shape for the last nine months during COVID-19. So, I promised you a timely and relevant topic, and here it is.

Now, let’s introduce our expert panel. The first person I’d like to introduce is Mr. Steven Sless. Steven, this is your fourth time on the show. So, Steven is well-known to us. Steven is a well-known national expert in the reverse mortgage world. He is the founder of the Steven Sless Group, as you can see behind him. And he is in charge of the reverse mortgage division of a national reverse mortgage and forward mortgage company, PRMI.

On the lower left corner, if you’re seeing things the way I am, we have Mr. Bill Comfort, president of Comfort Insurance. But more even importantly, Bill, even though he doesn’t like it when I say this, is well known, so well known as one of the most eloquent speakers, knowledgeable speakers in the long-term care insurance industry. There is not anyone that doesn’t listen to Bill speak and learn every day that he does something. He is also one of the most popular, if not the most popular instructors in the CLTC certification, which the best long-term care insurance people in the country all have that certification. And Bill has been here before, and we welcome you back. Now, Mr. Demarkey, this is your first time I’m on the show, correct?

Joe Demarkey:

Correct.

Michael Banner:

Oh, I’m not hearing, Joe. [inaudible 00:08:07]. Hello? No, we’re not hearing Joe, John. But while you fix the volume, Mr. Joe Demarkey, is the director of special projects of Reverse Mortgage Funding located in New Jersey, one of the largest wholesale and national reverse mortgage companies in the country. And he is also on the board of directors, and has been one of the key players for the last decade or more in NRMLA, the National Reverse Mortgage Lending Association. If anyone has his hand on the pace or the pulse of the national reverse mortgage world, it is Joe Demarkey. Welcome to, 62 Who Knew? my friend.

Joe Demarkey:

Thanks, Michael.

Michael Banner:

All right. John, I don’t know if you can hear them. Bill and Steve, say hello, and see if I can hear you.

Steven Sless:

Hey, everybody.

Bill Comfort:

Hi, Michael. I’m glad to be here again. Excuse me.

Michael Banner:

I hope you guys can hear, because I’m not hearing anybody. A minor technology glitch. We’re good? Technology glitch. We have a whole team of people here to help.

Bill Comfort:

But it’s work is great.

Michael Banner:

Oh, there we go. There’s my team. So, they’re like my fan club. My fan club broke up last week. The guy died. Okay. So, that was my video team helping me right there. All right. Well, now I can hear you.

Gentlemen, welcome. Our first panel show, simulcast into a podcast on several different platforms in the next couple of weeks here going forward. We’re going to be not only a national TV show, but a national podcast. So, thank you. I mean, you’re each exceptional people in your own right and in our industries. Thank you for being here really, and truly.

Steven Sless:

Thank you, Michael.

Joe Demarkey:

Thank you, Michael.

Michael Banner:

So, let’s get into this. The long-term care insurance world serves people like no other. Second only, or I would say probably first, we might be second only, Joe and Steve to longterm care insurance. Reverse mortgages can be used, equity can be used to help people afford long-term care insurance. Reverse mortgages can be used to eliminate their current mortgage payment. I think Bill, you have some examples of that. Yet, although we talk about it, we write about it, Bill, you and I have spoken about it at many long-term care national conventions.

I don’t think there is a reverse mortgage person that has spoken at more long-term care conventions than myself in the last 10 to 12 years. Joe Demarkey and I, and other people in reverse mortgage funding have certainly been talking about it for at least a decade. Steven Sless, for the last several years that we know each other. I’m going to ask you your opinion. And I’m going to start with Bill, the long-term care insurance expert. Why haven’t our industries clicked? Why haven’t we wrapped our arms around each other and fell in love with each other yet? We’re not even dating.

Bill Comfort:

All right. Well, I think it’s not just the long-term care insurance business, which I specialize in, but let me answer that question in referring to financial services, financial advising, financial planning, most broadly as you’ve discussed many times on your show, Michael. Historically, and this is looking back a number of years, there’s a lot of skepticism about reverse mortgages. It was seen as dollars of last resort, only for people who had no other option to do anything with, and various criticisms of the product. And I assume, we’ll talk a little bit about how that’s changed and evolved in a very positive way for consumers. But I think it starts with the financial services industry broadly, not seeing reverse mortgages as a legitimate equity tool, a legitimate way to access a resource, an asset, which is the equity that seniors have built into their homes. And that’s changing.

Michael Banner:

It is.

Bill Comfort:

So, the question is why have we not embraced, the two industries embraced each other up before? There’s been a standoffishness that that’s some separate decision. But what we’re seeing is from a financial planning standpoint, it’s being recognized almost as a separate asset class in terms of diversification and liquidity, and flexibility. And it can be used to help find source dollars to pay for other needed coverage that protects even more than just the equity in the home, the entire financial security of a person, a couple and a family, and that would be through long-term care insurance. And I think it’s a great place to start because long-term care insurance expands the value from using reverse mortgage proceeds to help pay for necessary needed coverage that can do much more than just a person’s own money on their own.

Michael Banner:

Exactly.

Bill Comfort:

So, I think that it’s changing rapidly from a couple of different levels. But what we need to do is we need to make that introduction. We need to have that first date and begin working this out.

Michael Banner:

Steven, as always, Bill put it eloquently, but your opinion on why, because you’re one of the… I have to say, everybody is younger than me. In fact, I’m the oldest person on the screen. And that’s annoying. But you’re young blood, even though you’ve been doing this for years. And you’re out there doing the education. You’re part of NRMLA, which we’re going to talk to Joe about. Same question to you, why haven’t these two industries just fell in love with each other, love at first sight? Is it that hesitation that Bill is talking about?

Steven Sless:

I think Bill hit the nail right on the head. For years, reverse mortgages have been viewed by the financial planning community as loans of last resort, but that’s changing and it’s changing quickly. We, today, now have a lot of retirement researchers, folks that have no interest in the long-term care industry or the reverse mortgage industry. They study retirement planning. They’re PhDs. They have alphabet soup next to their name. They have all the credentials that warrant listening to these folks. And what they’re saying is, pay attention to long-term care, pay attention to reverse mortgages. These are critical tools that can be used to fund a better retirement and to be able to age safely in place. And I think that is starting to change rapidly.

Now, I last year received the CLTC accreditation. And I took Bill’s course, and I learned so much about long-term care that I had… I thought that I understood long-term care until I took the CLTC course. I think more folks in our industry need to learn more about the long-term care industry and vice versa.

Michael Banner:

Yes.

Steven Sless:

If this is going to be a long-lasting marriage, I think we need to understand the intricacies of the products, how many different products there are out there. I was blown away at how many long-term care options there are, how many viable options there are for folks to be able to age in place, not only with long-term care insurance, but what some of these hybrid insurance policies. And so, I think there’s more education to be done, but I’m confident both of our industries are on the verge and on the cusp of really joining forces. And Michael, it starts here tonight with this show.

Michael Banner:

I hope so. Mr. Demarkey, your first words of wisdom on 62 Who Knew? Joe is a person, I have to say, I don’t want to embarrass Joe, but there are less than five people, I mean, I know many reverse mortgage people, just like I know many long-term care insurance people, but there are maybe four or five people in the nation that when they talk, I shut up and listen. And Joe Demarkey is one of those people, I have just an utmost respect and admiration for him. Joe, what do you see from NRMLA’s point of view, from the national point of view, from our favorite wholesale lender there, what do you see in comparison to what they’re saying right now?

Joe Demarkey:

So, I think they both got it right. There’s more conversation taking place between the reverse mortgage industry, and let’s call it the financial advisory industry. There’s been an enormous amount of academic research that has been done on reverse mortgages by the financial planning industry over the past three, four, five, six years.

To the financial advisors who might be watching and listening, I would encourage you to go to your publications, your trade publications, like the Journal of Financial Planning, and look for those research articles that have already been published by academia on the efficacy of reverse mortgages and how they can help ensure a much higher degree of success for your clients and their retirement plans.

One of the things that I’ve always struggled with since I’ve been in the banking and mortgage banking industries, is why people have an adverse reaction when they think about borrowing money, specifically with a mortgage loan of any kind, whether it’s a conventional mortgage or reverse mortgage. Debt makes the world go round. And people borrow money every single day in our country, whether it’s purchasing a new home, whether it’s purchasing a new car, whether it’s buying groceries and you’re swiping your credit card.

So, debt is an important part of everybody’s financial health. And mortgages and reverse mortgages certainly have their place in helping people manage their finances even through their retirement years. And here’s one of my favorite statistics, because people always ask questions about whether or not I should be debt-free on my house when I go into retirement.

Two years ago in 2018, The Ohio State University, I’m sorry, Michael, recently published a study where over two and a half million people applied for a mortgage loan of some kind in our country. That’s a two and a half million people are borrowing money against their homes, who are aged 62 or older. So, are people borrowing money in retirement? Yes. Are people borrowing money against their homes in retirement? Absolutely. Two and a half million of them.

Michael Banner:

Yes.

Joe Demarkey:

So, people are using debt to improve their overall financial health, whether they need to take money out of their home to do something with, buy a new car, finance home improvements, maybe make their house more appropriate for their age. As we get older, sometimes our health declines a little bit. Maybe you need to make some necessary home modifications to your house, so that you can age there and you can live there, live the quality of life that you want to, or maybe you’re just refinancing your debt and you’re improving your financial situation because interest rates are low right now.

Michael Banner:

Yes, they’re.

Joe Demarkey:

And you’re either lowering your monthly payment or, Michael, maybe they’re actually exploring a reverse mortgage to borrow money, to improve your financial health and to help you age in place. And Michael, I love what we talked about the other day. Since the outset of the pandemic, most people in our country who are retired or near retirement are starting to think differently about that old cliché of aging in place. Now, it’s aging in a safe place.

Michael Banner:

Absolutely.

Joe Demarkey:

This demographic is right in the crosshairs of COVID. And the last thing that most older homeowners want to do is be forced to leave their existing home and move into a facility while there’s a pandemic going on in our country. And that’s why, and Steve can attest to this, we’ve seen an increase in people inquiring about reverse mortgages in our countries since the outset of the pandemic back in March.

Michael Banner:

Absolutely. Yeah. I know. Bill, would you like to show a couple of examples? I still have more to talk about with the perception, like you had said, Bill, of the reverse mortgage. We’ve tried hard, not just Steven and myself, and Joe, and help from outside industries like long-term care, we’ve tried very, very hard to change that perception. And some might say we’re doing a good job. And some might say it’s like pushing a wet tissue up a hill. Because we have a lot of detractors out there, who still as wrong as they are, still won’t let up. And I’m talking about, let’s face it, some large people.

And I’m not going to be afraid to mention them on this particular show. Because we have Dave Ramsey, with hundreds of thousands of followers. Dave Ramsey, you couldn’t crowd the head of a pin with what Dave Ramsey actually knows about reverse mortgages, but he consistently says they’re dangerous and you can lose your house, which obviously you can’t, as long as you pay your taxes and insurance, which, wow, that sounds familiar. That’s like a regular mortgage. Isn’t that incredible?

You have people like CNN and USA Today, newspapers and consumer digest. It seems like they just want to hurt us every six to eight weeks. How do we as an industry, and I’m directing this right now, more towards Joe and Stephen, as an industry combat that? I mean, I know a few times I’ve had a temper tantrum on LinkedIn, and that said to all my friends on LinkedIn, “Look guys, if the big boys, and let’s just say it, if the big boys don’t want to do it, maybe for legal reasons or whatever their reasons may be, why don’t the Mike Banners and the Steve Sless get together.” And I’ve put this on LinkedIn several times. Nobody likes the idea. Each put up 250 or 500 bucks, change money, pocket money. But let’s have 20 of us do it, and take out a $10,000 ad in USA Today that says, “They’re wrong. This is a great thing.” How as an industry, are we going to change that perception? Stephen, Joe?

Steven Sless:

I think Michael, I think the perception is changing, right? As there is more academic research come out.

Michael Banner:

It is.

Steven Sless:

And as we share that academic research, I think the perception is changing. But folks like Dave Ramsey, Susie Orman, is another one, these folks they’re personalities, and they have an agenda, right? If you think Dave Ramsey or Susie Orman, are great financial minds, you’re kidding yourself.

Michael Banner:

That’s right.

Steven Sless:

They have an agenda. Their agenda is get as many clicks, get as many likes and get as many people to buy their services and products as they possibly can. And so, they’re intentionally controversial. Unfortunately, in doing so, they’re harming the people that they claim to be helping so much.

Michael Banner:

Exactly.

Steven Sless:

What we can do as an industry is to continue to show the facts. The facts don’t lie. And we can present modeling and say, “Look, here’s what your retirement looks like with a reverse mortgage. Here’s what it looks like without a reverse mortgage.” And the fact of the matter is, if you call yourself a fiduciary, and there’s a lot of financial advisors out there that are going to that term fiduciary, that means that you must have your client’s best interest in mind. There is no way that you can ignore what’s in most cases, their largest asset, and totally just put off even entertaining or learning about what a reverse mortgage is, if you’re truly putting your client’s best interest first. It’s impossible. Folks that are 62 plus, for most of them, the majority of their net worth lies within their home equity.

Michael Banner:

Exactly.

Steven Sless:

The house is a low growth potential asset. There are other higher growth potential assets such as stocks, what’s in your retirement portfolio. And so, you have to look at this from a very holistic standpoint. You got to take into consideration that, look, if your house is only going to go up, 2%, 3%, maybe 4% per year, what can I make on my other retirement investments? And then how can I protect and preserve those investments by leveraging? And Joe, said borrowing before. I’d rather call it leveraging. Because the most astute and savvy financial investors understand one thing better than anybody else out there. And that’s why they’re so successful. They understand leverage. It’s how they built their businesses. It’s why they’re successful. You’re leveraging one of your largest assets to make your overall pool of money larger.

And if we continue to beat that drum and explain to folks why it’s so important to entertain using the housing wealth, forget Dave Ramsey and Susie Orman, it’s going to get to the point where their opinion doesn’t even matter anymore.

Michael Banner:

I agree with that.

Steven Sless:

We need to continue to present the facts.

Michael Banner:

Right. And Bill, how are we going to… Well, I’m going to ask a question and it’s going to seem like I’m going off on a tangent, but I’m not. I promise I’ll draw it back in. I’m going to ask a question to the three of you. Bill, you’re the first person. You’re all going to get the same question. What are the three most powerful words in the world? Bill, you’re first.

Bill Comfort:

Drawing from my business, from my profession and what motivates people to take action with life insurance and disability, and long-term care insurance, I would answer the question and say the three most powerful words are, I love you.

Michael Banner:

Well, I love you too. But answer the-

Bill Comfort:

And I care about you. I mean, we have to take care of ourself, be responsible for ourselves. But when we have a spouse, we have a partner, we have kids, these are people that we’ve invited in a sense into our lives, and have a responsibility to them as well. And good retirement planning, good investment planning, and from my perspective, from my specialty, good extended care, long-term care planning, it’s not about paying for your care, which it will. It’s about protecting those people who you love.

Michael Banner:

Exactly. Joe, my question for you, what’s the three most powerful words in the world?

Joe Demarkey:

Make informed decisions.

Michael Banner:

Oh, I like that. I like that.

Joe Demarkey:

I try and teach that to my kids. My wife and I talk about it all the time. Talk about it with my extended family and friends. And when it comes to any aspect of your life, don’t make knee-jerk decisions.

Michael Banner:

Right.

Joe Demarkey:

Be thoughtful and learn as much as you can. And just make informed decisions, would be my answer.

Michael Banner:

No one’s ever answered that question that way. Figures you’d be original. Steven Sless, what are the most three powerful words in the world?

Steven Sless:

Look, I can’t beat Bill’s, I love you. I mean, what’s more powerful than that?

Michael Banner:

I love you too, but answer the question.

Steven Sless:

Yeah. To me, I can tell you one word that we throw out there all the time, and that’s empowerment. It just become empowered, become educated, become well-informed. If that, whether that’s one of the most important words or one of the three most important words, I don’t know, but it’s something we try to reinforce all the time is empowerment. What you don’t know can hurt you. Right?

Michael Banner:

Yep.

Steven Sless:

And so, understanding all aspects of not only retirement planning, but just general life things. I mean, become empowered, take the knowledge in and really understand before you make a well-informed decision.

Michael Banner:

All right, I’m going to bring this back to why I asked the question and I’m going to give you my answer to the question. And then we’re going to spend then just a few minutes on this topic, again, of changing what people think about us. And then we’re going to go on to the more positive giving examples and talking about how we can really help millions of seniors have a better life.

To me, the most powerful three words in the world are always, it’s not even close. Well, I love you, was a close second. Is perception beats reality. There is no exception to that rule. If a young baby thinks holding this blue blanket is going to make them sleep, you hand them a yellow blanket, they don’t sleep. Full adults, want their rabbits or have their lucky pan, or whatever it may be, perception beats reality. And I don’t want to beat this to death, but I want to talk about this.

In your industry, Bill, you and I know people with thousands, if not tens of thousands of agents, that actually thinks it’s against the law, that they could lose their insurance license, if they even bring up the two evil words of reverse mortgages. And Steven and Joe, in our own industry, when I marketed this show today and said what the topic was, I got hit, “So, Banner, what are you crazy? You can’t do that. That’s off limits.” We’ve got to change this perception. And yes, it starts here. And we’ve already talked about a few things.

But now I want to go to Bill, what do we have to do, other than send them a copy of this show? What do we have to do to change that perception? Because there’s hundreds of thousands, well, there’s six million insurance agents in this country. Is that amazing? Six million. A couple of million of them sell the type of insurance, I mean, that’s right from the websites. A couple of million of them sell homeowners warranties, which are considered insurance and things such as that, that have nothing to do with what a Bill Comfort, or Mark Goldberg, or a Peter Bingel Blackstone. Of the four million left, quite frankly, there is a couple of million that do life insurance, annuities and all sorts of products.

But there are literally hundreds of thousands of long-term care insurance agents. How do we get to them? Do we come… Of course, with COVID-19, let’s take that out of the picture. I’m not speaking at large long-term care conventions. No one is speaking anywhere nowadays. But once this is behind us, Bill, in your opinion, should there be major reverse mortgage players at every long-term care insurance event screaming this, like you said, Steve beating the drum, screaming this from the rooftops? Because I’ve been screaming it for 10 years and I’m losing my voice.

Bill Comfort:

And vice versa, Michael.

Michael Banner:

Yes.

Bill Comfort:

There need to be long-term care insurance companies, representatives, planners like me at reverse mortgage meetings. We need to get to know each other. Michael, you and I have been talking about this for years. And then Steven, when you were in the class a year ago, I mean, we spent more time in class around the subject. And everyone, these other planners, fee-based fiduciary planners, you could see them, “Yeah. That’s not really, that doesn’t fit.” And within two minutes, probably, of connecting talking, and you sharing your expertise on what the product does, was just amazing how everybody started picking up, “Well, could you do this? Could you do that? Could you take the proceeds and buy a policy and what kind of policy would be best?”

And we just have to start doing that. So, yeah, we need reverse mortgage people at long-term care insurance conferences and vice versa. What we need more than anything else, and this is one of my mantras, is too many agents and financial advisors up until now have pretty much waited for people to ask to buy long-term care insurance.

Michael Banner:

Yes.

Bill Comfort:

To say, “Okay. We just put mom in assisted living after taking care of her home for four years, and it ain’t about wreck the family and all our relationships, I guess we better look at this.” But what has to happen is, good agents, good advisors have to bring the subject to up, and guess what? It’s a hard conversation. This hit me this morning. I posted something on LinkedIn, and I was relating that, that yeah, it’s a hard conversation because it’s emotional.

Michael Banner:

Mm-hmm (affirmative).

Bill Comfort:

Nobody wants to think about getting old and needing care. But if you don’t have a plan, if you don’t have the funding to pay for care, it literally will wreck everything else. And here’s the little play on words that hit me this morning is, yes, it’s a hard conversation, but it’s a heart conversation.

Michael Banner:

I like that.

Bill Comfort:

And planners need to be connecting with what’s important to their clients. And how do we solve these problems? Now, once, and I believe that most agents, financial planners, advisors, fee-based, however, fiduciary, whatever labels are out there, most of them really do care about what’s best for their clients.

Michael Banner:

I agree with that. Absolutely.

Bill Comfort:

But we have to get them past their conventional wisdom, which is not wise, both on long-term care insurance and reverse mortgages. And holy cow, what if we could start to find ways to pay for more coverage for folks without it compromising other lifestyle issues. So, I think it’s happening. The insurance industry has to see reverse mortgages as the powerful, flexible tool that it is. And the reverse mortgage industry, I think broadly has to be open to our clients. Our mortgagees have to be able to use this money that they get any way they want to, not just to remodel the house or pay a bill here or there, because they don’t have any money anywhere else.

Michael Banner:

That’s exactly right. Joe, from a huge wholesale lender, well, of course you’re a huge retail company as well, what do you feel about that perception or the concept of a large lender attending long-term care? I mean, you and I had a ball at an in-home care show several years ago. But what about a large lender taking part in long-term care events throughout the country? Is it time?

Joe Demarkey:

Of course, we should. We’re serving the same demographic. And the more that folks like Bill and his peers understand what we do, and the more that Steven and I, and you understand what their industry does, the better off we’re all going to be.

At the end of the day, we’re trying to provide financial products and services to a growing demographic in our country, who needs or wants something. And it’s funny, Michael, you and I have talked about this before. I’ve been a banker and a mortgage banker now for my entire career, which is longer than I want to admit, but coming up on 35 years, and I’ve never seen a more brilliantly designed residential mortgage loan in the country than a reverse mortgage.

Michael Banner:

So true.

Joe Demarkey:

At the same time, it is also the one that is most misunderstood. And we need to teach people like we’re doing today, right now, we need to teach people, back to Stephen’s point from before, forget about what detractors say, just talk about the facts.

Michael Banner:

That’s right.

Joe Demarkey:

Teach people about how mortgages work, how home equity lines of credit work, how reverse mortgages work. And let people make an informed decision. What folks like Bill and the financial planning community learn the facts about all types of residential mortgage loans, and they’ll help their clients make informed decisions.

Michael Banner:

All right. Steven, what can you add to this? And then I know Bill, you have some actual examples of what we can do for our mutual clients, but Steven?

Steven Sless:

Yeah. So, like we mentioned before, I took Bill’s CLTC course last year. And bill, if you remember, there was probably, I don’t know, 15, maybe 17 financial advisors from all across the country that came into the class. I happened to be the only reverse mortgage professional in the class. And in talking to them, and having conversations with them in the class and both out of the class, grabbing a bite after the class and just talking about how we help each other’s clients, I’ve got, I don’t know, five or six referrals. And these were folks that would have never been helped in the way that they were helped, if not for us joining forces, and me engaging with your community, and your community accepting my conversation about reverse mortgages.

Because if you remember, when I first started talking about reverse mortgages, everybody was on the front of their seats. And by the time I got done, they were on the back of their seats. They were like, “You know what? This really makes a lot of sense.” To Joe’s point, there is no mortgage product in the country, in any other country that I can think of that has the flexibility of reverse mortgage, that provides everything that a reverse mortgage provides in liquidity, accessibility and flexibility. And it is the safest mortgage product on the market today, because it’s federally insured. It’s the most heavily regulated mortgage product that there is, hands down, and it’s not even close. These are safe financial tools, that are not designed to be a loan of last resort, that are meant to be used as a strategic tool to help fund a better retirement, to help free up funds for long-term care, to help our clients age in place.

And it is time, I know we talked about it starting tonight. We’re working on pushing out a lot of content. We’re developing shows just like you are Michael, video series, podcast. I think both long-term care industry and the reverse mortgage industry, it’s just, I think we’ve dropped the ball when it comes to marketing directly to the consumer. We can’t rely on business to business relationships. The message has to get out to the consumer, these are all safe products.

Now, I’m not saying that a reverse mortgage is for everybody. I’m not saying long-term care insurance is for everybody, but they are for a lot of folks who wouldn’t think they are for them. And they need to get educated. But they’re not going to get educated unless they have a wide array of education provided to them.

Michael Banner:

Absolutely. I know this is going to sound weird, when you and Joe talk about that it’s the best design mortgage in the country, as weird as this sounds, I swear it gives me the chills, because it is.

Steven Sless:

It is.

Michael Banner:

And it truly is. And it’s the most misunderstood. It’s surrounded by half-truths and misinformation. And I hope before I retire, we have a small hand in changing that perception. But Bill, I know you have some actual examples for us.

Bill Comfort:

Sure, I do. But I want to turn the questioning around a little bit, because I want to raise the question that it’s one of those perceptions in my industry and I think in yours as well. So, before we look at some examples of what could be done, just as an example, let’s get right on the table right now, and answer to this question. And Joe, maybe to start with you from the top down, can a consumer take a reverse mortgage in whatever payout form it might be, just generally, and use those proceeds or use the extra financial flexibility they have to purchase other financial products? In this example, specifically, can they use the reverse mortgage to buy long-term care insurance? Is that allowed?

Joe Demarkey:

Of course, it is. The only issues for the reverse mortgage industry and answering your question Bill, is that there’s a regulation, there’s a law that says that Steven, picking on Steven because I can see him, Stephen, can’t be compensated for the sale of the reverse mortgage and the sale of the other financial or insurance product, as long as Steven is not as a salesman.

Bill Comfort:

And the same for me, I can’t both make an insurance commission and a reverse mortgage.

Michael Banner:

Right.

Joe Demarkey:

Exactly. Exactly.

Bill Comfort:

Yeah.

Joe Demarkey:

But can Stephen refer a client to you or you to Steven, and Steven originates a reverse mortgage, and you secure a transaction regarding LTCI? Absolutely. There’s nothing that prohibits that sort of behavior between our industry and the long-term care insurance industry.

Bill Comfort:

And I think that’s one of the biggest misconceptions that’s out there. I know it’s in my industry, and we’ve talked about it Michael, that it’s in your industry. And I think as soon as we get past that, and here’s an analogy, and I think we need to think about it, this simply having the availability of a hundred thousand or 200,000 of home equity in whatever form through a reverse mortgage, and you use that, or you use some of that to buy other needed things like long-term care insurance. That’s no different than having a hundred thousand or 200,000 in CDs, that you’re accessing it. It’s the same kind of financial transaction.

Joe Demarkey:

Bill, here’s my favorite example. Let’s suppose that a client wants a reverse mortgage and they have an existing mortgage of $250,000, and they’re making their monthly payments to their lender every single month. They’re a great borrower. They’re responsible. And they talk to Steven about a reverse mortgage. And guess what? Based on how old they are and how much their house is worth, they qualify for $250,000. So, they would use 100% of the proceeds of a reverse mortgage that Steven helps them obtain to pay off an existing mortgage loan. They don’t get any cash whatsoever, none from the reverse mortgage, but what they’ve done is they’ve improved their cashflow. They’ve eliminated maybe their biggest monthly expense. And it allows them to be able to better afford a long-term care insurance policy, if that’s what they want.

Bill Comfort:

Perfect. Right. Right. Steven, you were going to add something. And then I think this sets up the examples, Michael.

Michael Banner:

Yes, very much.

Steven Sless:

Yeah. I mean, I think we can go even more granular than that. How about we use the reverse mortgage at 65 and we turn on a five-year tenure payment to bridge the gap. So, instead of turning on Social Security at 65, you delay Social Security, turn Social Security on at 70, and use and leverage your housing wealth, your home equity to bridge that five-year gap. And the result is going to be permanently increasing your Social Security check. So, it’s 70, you’re receiving a check that’s much larger than you would have at 65. And you’ve been able to do so by using reverse mortgage funds to get you to that point. And then if you want to turn funds off, you can simply turn them off.

That’s something else that folks don’t understand about reverse mortgages, is it almost works like a spigot. My friend, Don Graves came up with that analogy. You can turn funds on and you can just as easily turn funds off with a reverse mortgage. It’s the most flexible, customizable mortgage loan that there is. And I think great points, Joe, and great points, Bill. And I know Bill, you have some really fantastic examples that I want to take a look at.

Michael Banner:

at his point, I don’t know which one of the three of you I love most. I’m actually, I mean, I’m in reverse mortgage heaven. I hope I don’t wake up this morning, and have them go, “Oh, I guess tonight is the new show.” Right? That this is reality. Thank you for asking that question, Bill. Thank you for answering it, Steven and Joe. I’m going to replay that segment of the show, probably 4,000 times tonight before I go to bed. But Bill, show us some real life examples.

Bill Comfort:

Sure. Now, this is just an example of some different ways to use reverse mortgage assets dollars to buy long-term care insurance. I’m going to give you just a couple of different examples. These are neither better. None of these are better nor worse. You need the input and advice of a skilled long-term care specialist to design your coverage, the rest of your financial team folks like Joe, and Michael, and Steven, on the reverse mortgage side.

So, what I want to show you is I’m starting with a very, I would call this a meaningful average type of a benefit today. So, we have a 65 year old couple, and the long-term care insurance, If either one of them needed care, physical help, or cognitive mental supervision like Alzheimer’s or dementia. A benefit, it starts at 4,000 a month. There’s total coverage of four years each. Ideally, you design it with what’s called shared benefits. So, there’s an eight year pot of money that this couple can use interchangeably, flexibly either way. $384,000, is $4,000 a month times eight years. That’s your starting savings account for long-term care needs in a sense. And a critical provision where this 4,000 a month and the total, automatically grows at 3% a year to keep up with the growing cost of everything.

And look at this, this plan for this 65 year old couple, when they reach age 85, the benefit will be $7,224 a month, just simple math on the 3% inflation. And the maximum pool is close to $700,000 for care.

Michael Banner:

That’s amazing.

Bill Comfort:

That’s eight years of care for one or shared between the two spouses. So, let’s look at a couple of pricing, examples. And these are just ideas.

So, first up in, and it’s interesting, I hear from people in my industry, “Oh, if people do reverse mortgages, that’s great. They can get a hundred thousand or 200,000 of equity out. We can put it into one of these new linked hybrid programs that has death benefits. So if they never need it, their heirs get the money back and the single pay.” Well, that might be a good idea, but it might not, if you need to do other things like stretch or delay Social Security or fund other things in your life. But just to buy the package I just described, and this is an average premium from three different companies. Single pay, this is for the husband and the wife together, would take about 186, let’s call it 190,000. At a 50% reverse mortgage loan, you’d need about 380,000 to 400,000 in equity to do that. But you do one and done. You’d be paid up.

And there’s about 200,000 of total death benefits, if neither spouse needed care. So, this is one idea. You could also pay for it for life, 15,000 a year, or about 1,200, 1,300 a month. So Joe, your idea, or forget, in the conversation, use the reverse mortgage to pay off your first mortgage. And if your principal and interest let’s say was $1,500 a year, you’re not making that payment anymore.

Michael Banner:

A month.

Bill Comfort:

So, excuse me, a month. Yeah, correct. 1500 a month. Well, you can afford this premium on a monthly basis without having to commit the capital. But look at this, and this is unfairly received a lot of bad press. And a lot of people are dismissing it, and they should not. And that’s what we call just traditional long-term care insurance. So, no cash value, no death benefit. You just buy the pure long-term care insurance.

So, let me go back. You were paying for the death benefit here. You were paying for cash value. Maybe you don’t need that. Maybe what you need is just the long-term care insurance. So, the exact same design, the exact same care benefits that would cost 1,300 a month with a hybrid plan, only costs about 640 a month with the traditional policy.

Now, so Joe, let’s use your example. Couple pays off their first mortgage with the proceeds from the reverse mortgage, and they now have $1,500 a month in principal and interest they don’t have to pay. They do, Michael, you always are good about reminding folks, “You still have to pay your taxes, property taxes, and insurance and upkeep.” But if you had 1,500 a month, you can buy excellent long-term care insurance. Let’s just call it 640, 700. And you’ve got 800 or 900 a month more that’s back into your life and lifestyle. Maybe just that cash flow helps you stretch and wait on your Social Security till age 70, or just helps you expand the way that you want to live.

So, these are just two quick examples that show different types of reverse mortgage, taking a lump sum and buying another financial product that has tremendous value. By the way, you put 186,000 in or at the low end 640 a month. And at age 85, you have almost $700,000 available to pay for long-term care expenses, if you need care. And that’s tremendous leverage, to use a word that we’ve used. But think about it, what it does for your spouse. Think about what it does for your kids. Think about what it does for the rest of the financial security that’s there.

So, those are some examples. And I think we’ve got another whole show, probably waiting in the wings, Michael, about ethically, where do you draw lines and measure what’s best? But at the end of the day, we can’t draw general conclusions. It’s client to client, family to family, planners and specialists like those of us on this call that we’ll work it out. But it’s available. And I think that’s really exciting.

Michael Banner:

And I want to just throw something out quick before Joe and Steve put in their opinion. This’ll be another show and probably one or two of the three of you, I hope we’ll be on this show when we bring on a Medicare expert. It’s a totally different topic. But if they were to use $600, $640 of that $1,200 to $1,500 payment that we just eliminated with a reverse mortgage for long-term care insurance.

And since your example was for two 65-year olds, if they use the other 600 or less for two med sup policies from mom and dad, they are now literally set for life of never having to hand out a penny and never worrying about… Let’s face it, this is the first pandemic in our lifetime. So, I don’t want to be one of those salespeople that goes, “Oh my God, what if there’s another one? What if this one gets worse?” I’m worried about that. But just for every reason, cancer, female cancer, man cancer, prostate cancer, cervical cancer, breast cancer, these are things we live with now and they have a cure rate. That’s one of the good things about the baby generation. They have a cure rate higher than ever before. But to use the term from your industry Bill, they’re getting… What is that term? They’re getting their premium while they’re on-

Bill Comfort:

While they’re on claim that premiums are waived or forgiven.

Michael Banner:

That’s right. So, for them to have, I know my mom and dad, mom ended up dying of cancer, Dad of congestive heart failure. Mom went too early. They both went to early, but they lived great lives. If we didn’t have them med sup policies between back surgeries, minor heart attacks, some female cancer from my mother, prostate cancer from my dad in his seventies, even though he was cured of everything. They were both cured. But if there wasn’t a med sup policy, my dad would have been bankrupt or I would have bankrupt the company paying those bills. Now, that’s a separate show. But to be able to say to somebody with a $1,200 or $1,500 mortgage payment, we can eliminate that and give you the two things that guarantee you never being in the home. You will say, it’s your home safely. That’s a life changer for this country. Am I over-exaggerating Joe, Steve or Bill?

Bill Comfort:

No, that Steven, that’s your point of the ability for this product to be so flexible that it can meet so many different needs as different clients habit.

Steven Sless:

Absolutely. And I think, retirement is expensive, but what’s more expensive is a lack of information. And what we find is too many baby boomers and too many seniors try to take retirement on themselves. And there’s a big difference between wealth accumulation and wealth distribution. Now, having to understand how much you can draw safely, how to pay for long-term care. What if something goes wrong in the house? Sorry, are you covered for that? Medicare is a whole different subject. So, there’s a lot of information to take in, but there’s great professionals out there. Reach out to one of us or reach out to anybody in your local market and become empowered. That’s my best point of advice that I can give as we try to wrap it up here.

Michael Banner:

Well, you know what? If it’s okay with you guys, I’m going to say this very quickly, we have 30 seconds left in the TV show, but since we’re transferring to a podcast, the TV audience, if you’d like, because we’re having a good conversation, I don’t want to rush it right now. I don’t expect you to be here for hours more. But when the TV show ends, we are going to continue on Facebook and on several other platforms. So, to our TV audience, thank you very much. Thank our panelists. But we are going to continue on, go to Facebook, go to Facebook or YouTube, and you can see the continuance of this, because we’re not stopping until we’re done. So, thank you to the TV audience, but we can keep going.

Joe, again, the thoughts of really reaching out to hundreds of that, when you gave that two and a half million figure of that’s how many seniors, that is such a number that is so far above numbers, you and I discussed maybe five or seven years ago at a NRMLA conference in California. Two and a half million seniors is still borrowing money on their house. To be able to say to those two and a half million or the next two and a half million, that we can show you how to buy long-term care insurance, Medicare supplement insurance, we can protect you for the rest of your life. I mean, what a staggering legacy for the reverse mortgage to reach for from that topic that no one understood, from that product of last resort to possibly that product that can help an entire new generation.

Joe Demarkey:

Yeah. And I guess, to folks like Bill and other financial advisors that are watching or listening, a good chunk of that two and a half million population who applied for some sort of mortgage loan, might’ve been encouraged or educated by their financial advisor to do so.

Michael Banner:

Yes.

Joe Demarkey:

Again, because the house has been… Bill, you can speak to this better than I can. Most financial advisors have ignored home equity as an asset class in their planning for their clients. I’ll use my dad as the example. My dad is still with me. Thank God. He’s 82 years old. And I remember when I was growing up as a kid and I started to learn about financial matters, that he always told me what he was taught. You work hard. You save during your working years. And then you spend down that money during your retirement years.

And the fact of the matter is because we’re living longer, that most people haven’t saved enough. If you’re going to get Social Security, which most people do, if you’re lucky enough to have a pension, which not most people do anymore, that traditional three legged stool that my dad taught me about Social Security, your savings, your pension, that was going to carry you financially through retirement, not when we’re living so much longer. Michael, those statistics you gave at the top of the broadcast were incredible. You have a 50% chance of living till age 90, if you are 62 years old today. How are you going to afford to live the quality of life that you want to, if you’ve got another third of your life to go? You got another 30 years to live, can you afford to live the lifestyle that you want to for yourself? And if you can’t because you haven’t saved enough, or you’re not receiving as much guaranteed retirement income as you’re going to through Social Security, again, if you’re lucky enough to get a pension, that’s great. What do you do?

And for the first time ever financial advisors are starting to realize that a lot of consumers around the country are starting to realize, “I’ve got to think about my house. What do I do about my house? Can I help improve the chance that I have to be successful with my retirement plan, if I use my house some way, some form?” And two and a half million people did that in 2018, they applied for a mortgage loan of some kind-

Michael Banner:

That’s right.

Joe Demarkey:

… to help improve their financial situation.

Michael Banner:

Yeah. And although we have spent a great deal of the show talking about reverse mortgages, let’s not forget, correct me if I’m wrong, Bill, but your real target audience, or I should say the smartest time, which I wasn’t smart enough to do, and so that ship has sailed, is actually to buy long-term care insurance around your mid fifties, or am I close to reality there when we can do it?

Bill Comfort:

Yeah. That 55 to 60 is the sweet spot of pricing health for insurability. And the other big commitments are done or almost done, particularly putting kids through college. And so, let’s tie this in there, right? Because let’s say through your 54, 55, 56 year old couple, they’re not eligible for reverse mortgage yet. But one of the questions I always get is they say, “We can afford this premium.” Now, it wouldn’t be 640 a month. It might only be 400 a month at 55, the example we used. And I’m just shooting from the hip there. But they say, “We can afford that today. We’re both still working.” But it’s just, it’s a little concerning, we get to 65, 70, where we’re retired, we’re on a fixed income, Social Security, drawing from our savings.

And I think for some people, they hesitate to buy the coverage at the right time, because they’re not sure how to pay for it forever. Now, paying upfront one single lump sum is one way around that. But honestly, most people don’t have enough money to put that big chunk in there, particularly to buy enough coverage. Some do, but broad market, we’re not enough into the great middle market. And of course, there’s people with money that’s less that shouldn’t be buying the insurance. But I could see, at 55 you buy it. And then you begin to talk about the possibility, just the possibility. And Joe, this is right to what you’re saying now of using a reverse mortgage later to free up cashflow, eliminate the monthly P and I, principal and interest payments, or to pull a lump sum out to reallocate. There’s that future financial security that I think the boomers are more than willing to start looking at and thinking about.

Michael Banner:

I don’t want to keep you guys for hours and hours, although at the rate it’s going, I really would like to, because this has just been fantastic for me. I have to tell you that. Steven, talk to us a little about the proprietary reverse mortgage programs that are now going up to three and $4 million. This is a whole new class of people that can take a million dollars out of their two or two and a half million dollar house, or pay off a million dollar mortgage and not free up 1,200 a month, free up 8,000 a month. And the amazing financial tools that could be done with that type of capital. Or Bill, instead of them putting up 186,000, maybe they’re putting up 300,000 and getting a staggering, that’s a whole new world for us. And of course, Joe, with a reverse mortgage funding has one of the finest proprietary programs in the country. I’ve closed several of them. This is a new world for reverse mortgages. These people that say it’s just for poor people, not anymore.

Steven Sless:

Well, because that goes back to the point of leverage, Michael, what these folks understand, and we just closed a jumbo reverse mortgage a couple months back for a guy in Boca Raton, Florida right in your state, Michael, $4.5 million home, completely free and clear of any mortgage. Now, why in the world would somebody with a four and a half million dollar home and no mortgage, take out a reverse mortgage? You’d think this guy is crazy. This is what the most astute and savvy investors understand better than anything else, it’s leverage. It’s like, Steve, why wouldn’t I leverage this equity? Look at what I’m making. And this particular person has a lot of means. I mean, he has a net worth, well, into six, $7 million. It’s like, why in the world would I draw that out? When I can draw the equity out of my home, my home is never going to go up at the rate of my investment portfolio right now. They understand leverage.

And now, we’re seeing a whole new class of reverse mortgage clientele come into our industry. And they’re looking at their home as the investment tool and the financial tool that it truly is.

I think backtracking for a second. And then, Joe can certainly talk about RMF’s product because they’re one of the big innovators in the market with the proprietary products. But I want to go back for a moment and talk about the everyday person. I was talking to a financial advisor yesterday on a Zoom call and he’s like, “You know what, Steve? I, the financial advisor, I’m only talking to the upper 5%, right? What about the other 95%?” And I look at my parents, my parents, I just did a reverse mortgage for my parents two months ago.

And I think my parents represent exactly what our normal reverse mortgage client looks like. They’ve worked hard their whole life. They’ve saved. They’ve invested. They’ve done all the right things, but they were late savers, right? They need to start saving until they were in their late forties, early fifties. It really took until my sister and I were out of the home before they could really start to ramp up their retirement savings. And by that point, it’s just too late. They didn’t feel they have the means to entertain talking to a financial advisor. They’ve always been DIYers. They’ve just done it on their own. And they’ve gotten to this point where now it’s time to start talking about retirement.

My dad is almost 70. He’s going to be retiring soon. And my mom, she’s just not long for the job that she’s doing any longer. At some point sooner, rather than later, they’re going to need to retire. And now, they make the big switch. The big switch from wealth accumulation to wealth distribution. We’re having to talk about long-term care. My grandfather, God bless him. He’s 97 years old. He was healthy as a clam until COVID hit. And with him being locked down for the past nine months, his health has gone dramatically downhill. And now, the whole family has to come into play. And we’re realizing how difficult long-term care is. He does not have long-term care insurance. We’re having to fund his long-term care insurance and provide that care as well.

But I think my parents represent that 95% of folks that are out there on an island. They’re not represented by a financial advisor. So, who’s speaking to them? Shows like this, we’re speaking directly to them. But how else are we getting directly to those folks, those folks who are just out there doing it on their own, but they’re going to have a big surprise coming really soon, if they don’t talk to a professional, a long-term care professional, a financial services professional, and maybe a reverse mortgage professional to help them navigate the murky waters of retirement.

Michael Banner:

Absolutely. Absolutely. Very well put. Absolutely. Joe, do you want to say anything about the proprietary product and what you think that’s bringing to the industry?

Joe Demarkey:

Yeah. Listen, the government products which dominates the industry today has helped over a million homeowners around the country be able to access their home equity, never have to make a monthly payment, as long as they’re just being a good borrower, a good homeowner. They’re paying their taxes on time. Keeping their house insured, and they live there as their principal residence. The proprietary products, the non-government products that we’re talking about, help meet the borrowing needs of other people. For example, Steve’s example of somebody who lives in a very high valued home, who might need to borrow a lot more money or want to borrow a lot more money than the government program would allow for, that’s the obvious segment of the market that the proprietary reverse mortgage products that are available in the country can help me.

We can also help me, the borrowing needs of people who live in properties through no fault of their own, that don’t qualify for the government reverse mortgage program. And I’m thinking about condominium owners, Michael, especially down in your neck of the woods in Florida. It’s a startling statistic that only, I think it’s like 11% or 12% of all condominiums in the country today are FHA approved. That means 88% or 89% are not.

Michael Banner:

That’s right.

Joe Demarkey:

And there’s plenty of those condominiums unit owners who happen to be 62 years of age or older, and proprietary reverse mortgage loans can help a good portion of those folks as well. So, listen, proprietary reverse mortgages help to expand the market. They help to serve borrowers who are not well-served by the government program that exists today.

Michael Banner:

Absolutely.

Joe Demarkey:

And that’s a good thing. We’ll reach more of those borrowers. So, a lot of product innovation that’s happening in our industry, including at my company, and we’ll come out with even more variations of the product, I’m sure in the years ahead that will help expand the market even further.

Michael Banner:

Fantastic. All right. Well, I kept you about 10 minutes longer than expected, but I do thank you for this. To me, this has been, I don’t know, almost a culmination of 10 years. And the three of you made that come true tonight.

In the next couple of months, our new Longevity Initiative is going to be dealing with Medicare and Medicaid, quite frankly, last expense insurance. We all know how expensive funerals have gotten. Of course, Medicare supplements. We’re going to be bringing back our national expert on dementia, which it’s amazing to me what our numbers, what our viewers are when we talk dementia. Because we all are, I mean, of all diseases, I know that’s my number one fear. That that’s just a crippling disease. And it doesn’t know what religion you are or what color you are, or what income bracket you’re in. Unlike a lot of other things that your income bracket can help you cure.

We’re going to be bringing back the Weizmann Institute to talk about examples. And I know a few of you have seen those shows when the Weizmann Institute from Israel was on two shows ago, two Weizmann shows ago. I don’t know if you remember when we brought on Mr. Richard Ellison, he said to me, “Michael, how old are your grandchildren?” And I said, “Well, they’re 14, seven, three and six months.” And he went, “And I’m going to give you my word on something.” I said, “What’s that?”

And I don’t know if you guys remember this, because I know you watched the show. I don’t know if Joe, if you watched back then, it was a couple of months ago. He said, “Michael, your grandchildren will be playing tennis in the heat of the summer in Florida, when they’re a hundred years old. They are, the medical community, as much as we’ve made advancements in the last three decades, in the next two to three decades, Alzheimer’s, heart disease, all types of female and male cancers, we’re almost at an 80% to 90% cure rate.”

But the Weizmann Institute just about a year ago, and it’s already in human testing right now, came up with a medication that eradicates the plaque on your arteries. Okay? If you eradicate the plaque on your arteries, people will not have heart attacks. Well, they will, for other reasons, but that’s the main reason. People will not have strokes. And then another section of the Weizmann Institute said, “Wait a minute, Alzheimer’s is created by plaque on the brain. Can we have that medication?” And a year later, they now feel they are this close to a cure for dementia, eradicating the plaque on the brain. People are going to be living to a hundred, 110, 125 years old. That’s not only a financial problem to your average person, we’re going to have to increase the loan to values, guys, on reverse mortgages.

But how about the food shortage? How many supermarkets are there? There’s a shortage now of healthcare people. What’s going to happen when we’re living to be a hundred, 110, 120. How about senior housing? Our world is going to be different in the next two to three decades. And I hope we can be a source of some information on all the topics I’ve mentioned.

I hope the three of you will be back not just for a reverse mortgage show, but I want the three of you or two or one, or three of you to always be on the show to talk about the things that are affecting seniors. And I just thank you so much for being here. You have no idea how much I appreciate it. Thank you so much.

Steven Sless:

Thank you, Michael.

Joe Demarkey:

Thanks, Michael.

Bill Comfort:

Thank you, Michael.

Michael Banner:

All right. Now, guys, before we cut off, I know the TV audience has gone and I didn’t get a chance to say this. So, hopefully, a lot of people switched over to Facebook. But to my three guests, to John Gaston in the back, who is the owner of We Beam TV, and to all our 62 Who Knew? viewers, I hope you have a happy and healthy Thanksgiving. I know it’s going to be a rough one with COVID-19.

I have to say, I’m going to be told a million times when we cut off, “You didn’t bring up the website, Michael. You’re not selling.” Can you imagine Joe, somebody telling me I’m not selling enough, that I didn’t bring up the website the whole damn show. Everybody, our people, our viewers, go to 62whoknew.com. Send me an email, mbanner@62whoknew.com. “I need information on reverse mortgages. I need information on long-term care.” I will put you with the best. You’re looking at the best. So again, happy Thanksgiving. And thank you all so much for being here. Take care.

Video Transcript

Megan:

… questions you might have. The new year we know is just two days away. Now is the time to start thinking clearly, getting serious about planning for your future. Reverse mortgage expert with Primary Residential Mortgage Incorporated, Steven Sless, is joining us here this morning. Thank you so much for coming in.

Steven Sless:

Thank you, Megan. Happy new year.

Megan:

Happy new year. This is an option for the seniors out there. When we were talking about reverse mortgage, it was a little foreign to me. I wasn’t exactly sure what it was, and you said that’s why you’re here.

Steven Sless:

Absolutely. Yeah. Reverse mortgage … look for seniors that are especially … it’s new year’s time; it’s time to make new year’s resolutions. If retirement and planning for a stronger retirement is part of your new year’s resolutions, looking into a reverse mortgage could be a great way to protect and preserve your overall retirement portfolio.

Megan:

How does it work?

Steven Sless:

Yeah. Look, seniors across America have amassed almost $7.2 trillion in housing wealth, in home equity. That’s a staggering number. How do you now incorporate that home equity into your overall retirement plan? You always hear all the time what’s your retirement number? How much do you need for retirement? There’s no magical number. It’s really how you draw the money that you have. You have all this housing wealth, now how do you incorporate this wealth into your retirement plan? A reverse mortgage could be a way to do that. And there’s some ways to take the money out of your home with the reverse mortgage that we’ll talk about as well.

Megan:

Okay. I was a little scared, because I thought right away, is this dangerous? Is this risky? Because after 62, you want to have some things that are a little more safe.

Steven Sless:

Sure. Well, the home is where the heart is, right? And for people who’ve lived in their home for 10, 20, 30, 40 years in some cases, you want to make sure that you’re not just depleting your equity. I think the big misconception is if I take a reverse mortgage, I’m going to leave less to my heirs, and that’s not the case. If you marry the equity in your home with your other retirement assets, now you can create a stronger retirement plan.

Megan:

So then what happens to the actual mortgage?

Steven Sless:

The reverse mortgage will replace a current mortgage that you have now. And the reverse mortgage provides three key factors, liquidity, accessibility, and flexibility. And so you’re able to strategically draw the wealth in your home. We’re not talking about just cashing out your house and having a big pile of money.

Megan:

Right. That would seem very scary.

Steven Sless:

The funds from a reverse mortgage can be taken in a tenure payment, which is a lifetime check paid to you from the wealth in your home, a term, so over a set period of time, a lump sum or a line of credit. It really comes down to what works best for you and your overall retirement plan. That’s where we come in. We look at what you have and we figure out what’s going to work best.

Megan:

You got to sit down with an expert and look at your plan and your future. Thank you so much. Some great ideas. Something to think about, of course, as we’re planning and getting things in track for 2020.

Video Transcript

Speaker 1:

Live from WBFF Baltimore, this is Fox 45, Good Day Baltimore.

Speaker 2:

Well many older Americans still worry if they have saved enough money to relax and live peacefully after retirement. How you can efficiently save your money and fund your longevity. 9:21 is the time, you’re watching Fox 45, Good Day Baltimore.

If you are like many older Americans, you have worked hard and you’ve saved money, but you may still have concerns about having enough to live comfortably throughout your entire retirement. So here to break down some of the options, reverse mortgage expert, Steven Sless with Primary Residential Mortgage joining us this morning. Good morning.

Steven Sless:

Good morning.

Speaker 2:

So this is a concern a lot of people have. So when we talk about reverse mortgages, explain exactly what that is.

Steven Sless:

Yeah, I think reverse mortgage is probably the most misunderstood type of mortgage product that’s on the market today. And it’s quite simple, a reverse mortgage is a loan that’s designed for senior homeowners to allow them to age in place and being able to get their hands on some of the equity in their home that they’ve put into the home over the years by making a monthly mortgage payment. So a reverse mortgage now makes those funds accessible and they can be received over a variety of different ways.

Speaker 2:

So is that a good option for everyone or are there pros and cons to it?

Steven Sless:

That’s a great question. So we always look at suitability. It’s not a loan that’s for everyone, but for the right senior homeowner, it is a fantastic program that will allow them to retire on their terms with more peace of mind and financial security.

Speaker 2:

Is it something that the homeowner who may be looking to do that needs to consider just for themselves, or do they have to take their family into consideration because then what happens to that loan beyond what they may be able to…

Steven Sless:

Right. Yeah, we always encourage the involvement of adult children, other family members, loved ones and even wealth advisors and advisors that are going to look at finances from a holistic standpoint. We certainly encourage to bring everybody into the conversation because it is a decision that is an important one and if you do have a loved one or an advisor that helps coach you along the way, we want to speak to them as well.

Speaker 2:

But it can give you peace of mind at that point in your life. What does make someone a good candidate for that? I guess some of that, does it have to do with the amount of equity you have in your home?

Steven Sless:

So you’ve got to have about 50% equity and most of our clients look a little something like this, right? They’ve worked hard their whole life, they’ve saved money, yet the bulk portion of their net worth lies in their home equity. And so we help educate them how to tap into that equity and convert that equity into tangible funds.

Speaker 2:

Okay, a lot of people may have questions as they’re listening to you all now. You have an event coming up that could help to answer some of those?

Steven Sless:

We do, it’s called retirement on your terms, straight talk real solutions. It’s November 9th, it’s Saturday morning at Martin’s West. We’re bringing in three other dynamic power players in the retirement planning industry with the hope of being able to have a day of education, empowerment and to get peace of mind in retirement.

Speaker 2:

Just quickly, where do they find that information?

Steven Sless:

Baltimoreretirement.com.

Speaker 2:

That’s easy.

Steven Sless:

Simple enough, right?

Speaker 2:

Thank you, Steven, I appreciate it.

Steven Sless:

Absolutely, thank you.

Video Transcript

Speaker 1:

While some older adults might be looking to move into a new house, either to downsize or maybe be near family, but they might be missing out on an important program when it comes to buying their home and reverse mortgage expert, Steven Sless is joining us this morning. Good morning.

Steven Sless:

Good morning. Great to be back.

Speaker 1:

Well, thanks for coming in. So when is this a good idea to explore a reverse mortgage?

Steven Sless:

Yeah. So look, rates are at all time lows. We’re coming into a spring buying season. And for folks that are 62 years of age or older, there’s a better way to buy versus paying cash or with a traditional mortgage. And so seniors that are 62 and older can purchase their next home with what’s called a HECM for purchase or a home equity conversion mortgage for purchase. And what that enables them to do is pay a one-time 50% down payment and that’s it. That’s all they ever pay. Right?

Speaker 1:

They’re not paying the principal. They’re not paying interest. They’re-

Steven Sless:

Well, they’re deferring payback until they leave the home right? And so their responsibilities are taxes and insurance, but there’s no mandatory monthly payment. And so they can treat it as a traditional mortgage if they want to and they can make monthly mortgage payments, but they don’t have to. And so from a cashflow perspective, what could they do with that extra money? They could fund longterm care. They could invest it, or they could just put it into their retirement nest egg to protect and prolong their overall retirement portfolio.

Speaker 1:

But you still have to come up with it when you sell the house. Is that right?

Steven Sless:

Well, you have to pay it back when you leave the home. So when you leave the house, let’s say you pass away, you pass the house to your heirs, they still get the house. You still own the house in this program. And so you pass the house to your heirs, they’re going to sell the house. They’re going to pay back the money that you borrowed, which is that other 50% plus interest. If there’s any equity left, that equity is theirs to keep. If there’s not, these loans are federally insured. And so you’re guaranteed never to pass on any debt to your heirs or to your estate.

Speaker 1:

So if someone’s interested in doing something like this, what is sort of the first step?

Steven Sless:

The first step is become empowered and become educated. This is a fantastic product for the right person. Ideally, you want to be able to live in the house for a long time. If you’re looking to buy a house as an investment property, it’s not the right fit. If you’re only looking to be there for the next five or so years, it’s not the right fit. But for somebody that wants to either upsize, downsize, or rightsize their home in retirement, just to buy a house more suited to age in place. As you’re growing older, maybe you want a house on one floor, but become empowered, become educated, learn about all the potential products that are out there for you. You may find this is going to be the best fit.

Speaker 1:

All right. And if someone wants to talk to you directly, where should they go?

Steven Sless:

They should visit our website, reversebaltimore.com or give us a call (410) 814-7575.

Speaker 1:

All right, Steven thanks for coming in.

Steven Sless:

Always a pleasure.

Speaker 1:

You’re welcome.

Video Transcript

David Holland:

I’ve got some questions for you, but first give us a quick overview of the different types of mortgages that are out there, and then maybe where reverse mortgages fit into that equation.

Steven J. Sless:

Absolutely. So there’s a lot of different ways for a senior home owner to use the wealth in their home to plan a better retirement. The first of which is a reverse mortgage. And we’ll talk about the different options as far as how they can customize and tailor a reverse mortgage specifically to their goals. But there’s also other options. There’s a traditional home equity line of credit. There’s a cash out refinance. And so we really need to evaluate what’s best for that client. How long are they looking to live in the home for? If they’re looking to be there and live in that home for the rest of their life, then we do look more towards a reverse mortgage rather than a traditional home equity line of credit or a cash out refinance.

David Holland:

Okay.

Steven J. Sless:

And then within reverse mortgages, there’s a few different ways that they can choose to access their funds. The first of which is a line of credit. So somebody who doesn’t necessarily need the money right now, most of the time that is a homeowner in their 60s, that’s doing okay. Maybe they’re working, maybe they’re not, but they’re not yet to the point where medical costs start to creep in, longterm care needs start to creep in, but they can set up this line of credit that’s going to grow for them over time. So when they are in their 70s or in their 80s or in their 90s, people are living a lot longer nowadays-

David Holland:

Sure.

Steven J. Sless:

… they have this wealth that they’ve been growing over time that they have access to.

David Holland:

Okay.

Steven J. Sless:

There’s also a tenure where they’re getting a check every month for the rest of their life. Most of the time, that’s going to be a homeowner that does need a cashflow influx. And there’s a term payment. So they tell me, “Steve, hey, I want to receive funds for the next 10 years.” And I say, “Okay, here’s how much money you qualify for.” We divide that number by 10 years and they’re receiving a check each and every month until that time is up. And there’s also a lump sum. And the lump sum is more for those who have an immediate use for cash.

Video Transcript

Speaker 1:

While many Americans are facing financial hardships with the country on lockdown, but it can be especially hard for seniors who are now looking to dip into their retirement savings and joining us with some tips on how the help is Steven Sless. Good morning, Steven. How are you today?

Steven Sless:

I’m doing well. Great to be back with you.

Speaker 1:

Really a very frustrating time for so many people and seniors, many of them aren’t wanting to dip into their retirements but are being forced to.

Steven Sless:

They are, and you know, this global pandemic has seniors very concerned about having the dip into their savings and retirement accounts and the fact is, if you’re retired or close to retired, however, most of your wealth is likely in your home equity and so understanding how to tap into your housing wealth strategically and tax efficiently, may be the key to protecting and preserving those other retirement accounts.

Speaker 1:

Is that a good idea right now or should that be a last resort?

Steven Sless:

You know, it’s a great idea to be very strategic and use the housing wealth as a planning tool. Housing wealth is not of loan of last resort. Ideally, you want to incorporate the wealth in your home, which does likely represent the largest portion of your net worth, into your overall retirement plan. There’s many ways to do that. However, currently lending has become very restrictive.

In fact, JP Morgan Chase, one of the nation’s largest mortgage lenders, has suspended all home equity line of credit applications, making it very hard to access wealth right now. It’s important for seniors to understand that they do have options. They need to become empowered. They need to become educated to learn what those options are

Speaker 1:

What are some of those options, Steven?

Steven Sless:

Yeah, so a home equity conversion mortgage is a reverse mortgage. It’s a loan for folks that are over 62 and above and it allows them to access wealth that’s tied up in their home equity, but also to be very strategic about it. And I think one of the big misconceptions about reverse mortgages is you’re giving up home ownership. You’re certainly not. This is a loan that allows you to access the wealth in your home. You can receive funds in a variety of different ways, but you’re not giving up home ownership and so it’s certainly something for folks that are over 62, that are concerned about dipping into their other retirement savings accounts, to look into this product.

Speaker 1:

All right, Steven Sless. Thank you so much for joining us this morning. Really appreciate it.

Steven Sless:

My pleasure. Great to be back with you.

Video Transcript

Mike Banner:

Good afternoon. It’s Mike Banner. We’re here for another episode of 62 Who Knew, here at the beautiful studios in New Port Richey, Florida, and here we go again. I was prepared to have another topic this week because two weeks in a row we discussed the relevance or the relationship between long-term care insurance and equity in your home, in other words reverse mortgages.

And in the two weeks that we did that where we changed the format of the show to having a panel of speakers, we had record viewership for our show between 55,000 and 80,000 viewers for the last two weeks tuned in to listen to our panel of experts talk about the relationship of these two great industries. Or should I be more exact and say the lack of relationship in these two great industries, reverse mortgages and long-term care insurance, who are serving almost the exact demographic.

Why haven’t these industries got together and done a better job at this? Well, they are and it’s starting right here. So I was prepared to go to a different topic this week, but quite frankly an article came out in the Washington Post just a few days ago. I know I sent it to you, John. I don’t know if you want to bring it up, but we could do that later. And the article is aptly titled, The Home Stretch: Accessing Home Value to Fund Long-Term Care, and is right on point and even brings up some incredible statistics that took me by surprise.

So instead of changing topics, we’re going to go right back into this. Only two-thirds our panel are here. One-third of our panel was very busy and couldn’t make it, before we bring them on. But the two-thirds that are here are two of the best, Mr. Bill Comfort, the number one instructor of the certified long-term care insurance designation, and president of Comfort Long Term Care Insurance. Widely known throughout the country as one of the voices of long-term care insurance. And of course, Mr. Steven Sless, one of our favorite guests, who is a national reverse mortgage expert.

And to my knowledge, we’ll ask him when he comes on, the only reverse mortgage expert in the country that actually took the time to take the CLTV, LTCI certification. And he doesn’t even have an insurance license, yet he went sat through a class with Bill Comfort and learned all about long-term care insurance. So we’re going to bring them up right now. But as always we’re not going to bring… Oh, we brought them up right now anyway. I said that too quick.

We’ll skip the normal who knew at 62 you had 30 years to live. Most people are watching that already know that. So thank you to all our new viewers and our past viewers that have given us record-breaking viewership the last two weeks and I owe that, I’m sure to you too. Peter Gelbach is not with us tonight and Mark Goldberg. But talk about great timing with this article. We’re trying to bring this very message to our two industries and here are three relatively young authors. Did you see their pictures? These people are as close to long-term care. I’m not going to make an analogy because it’ll be improper.

Most of my analogies I’m being told can somehow come across as improper. But they certainly have their expertise. Two actually from Australia and one is from America. I contacted Mr. Robert Eaton. Talk about a coincidence to see if he’d like to be on the show. Yes, he would. And he lives in Clearwater, Florida. What are the odds on that? So we’re having breakfast on Wednesday, and we’ll see. But what a great article. A few things stood out to me, but Steven and Bill, welcome back. Thank you for being here again.

Bill Comfort:

Thanks, Michael. It’s great to be here.

Steven Sless:

It’s a privilege to be back. I appreciate you having me back on.

Mike Banner:

All right. And before we actually get into this article, have you two had any, I won’t say repercussions, but direct results. I know you’re putting it out. I know, Steven you’re using your media team to cut it a lot up into little snippets and get it out there. I don’t know if that’s complete yet. But have you had any comments on for what we’ve done the last couple weeks. Go ahead, Steven.

Steven Sless:

Yeah. A lot of my peers in the industry have reached out and have taken note of us kind of being on the forefront of bringing this education to light. I think it’s been long overdue. What’s ironic is I gave a presentation at the NRMLA conference, the National Reverse Mortgage Lender Association conference back in the summer and then again just recently last month where I brought up how our industries, the long-term care industry and the reverse mortgage industry need to come together.

And then Michael, you’ve really taken the ball and run with it. I think that time is now. So a lot of my peers have reached out to me to congratulate me to being a part of this initiative. And they’re excited to do the same. They’re excited to take the same course that I took to become certified in long-term care to really make it a part of their business plan moving forward in 2021 and beyond.

Mike Banner:

All right. And before I ask Bill the same question, I’m going to put you on the spot, Steven. I hate to do this. I’ve never done this to you, but I’m doing it now. Are you ready? Let’s see.

Steven Sless:

Let’s do it.

Mike Banner:

Let’s see who’s really the father. No, no. That’s Maury Povich, I’m sorry. Here’s my question for you. Are you really the father of those… What was NRMLAs reaction? I ask this question with total… I asked the question not knowing your answer. Not the people attending, because I know this was virtual, but as an industry, what was NRMLA’s reaction to joining these two forces?

Steven Sless:

As a trade association, and Mike you and I have had extensive conversations about this. I think as a trade association, NRMLA, again, National Reverse Mortgage Lender Association probably should in retrospect, should have done a better job of being out on the forefront of this a lot sooner, but that time again is now. I was pleasantly surprised to have them welcome this idea with open arms, and they know that I’m out and about and discussing it on shows like this, about marrying our two industries and coming together for really the betterment of the clients that we work with. They’re behind it a hundred percent, I think. And going back five, 10 years ago, we couldn’t have said that about NRMLA before.

Mike Banner:

That’s true, and I’m so glad to hear that. Bill, what are your peers saying about what we’re doing?

Bill Comfort:

Yeah. It’s a really good question, and it’s interesting how both the discussions that we’re having and the interest in the programs these last two weeks, as well as the article that you’ve highlighted, we’re going to touch on a little bit tonight, just the timing of a lot of these things have been just fortuitous. What I’m hearing from my peers, so other long-term care specialists and also folks a little more broadly in financial planning and financial services is kind of two-fold. It’s about time. In other words, for this intersection to happen, but then also almost in the same breath saying, every time, I’ve ever brought up a reverse mortgage or talked to anybody about it in whatever context from the insurance financial services engagement with clients is it’s dismissed.

Oh, I don’t like that. I don’t like the idea or they don’t understand it. But that’s really the point. It’s time for a new look, a new understanding of not only what a reverse mortgages do and the flexibility as a financial tool. And that’s been happening a bit on the academic side for a year or two. But practically planning with clients, it’s time that agents and advisors learn about reverse mortgages. And as Steve has said vice versa, because there’s in some ways an equal amount of misunderstanding or dismissal of long-term care insurance as a needed product for retirement.

So I mean, the message is man, this is great timing. Where do we go? How do we do it? What are the things that need to be understood. And that’s what we’re hoping to develop a little further tonight too.

Mike Banner:

I know, Steve, you must get that same feeling I do. In fact, one of the people who’s not here tonight, but one of our closest friends and friends of 62 Who Knew you know Mark Goldberg who was on last week said to me, “Michael, I brought it up three times.” I know he copied you two. I brought it up, well, three times when they couldn’t afford what I was showing them. Why don’t we consider a reverse mortgage? And they not only said no, but they dismissed it, “No, I don’t want one of those.” And although it is not Mark’s position, and I don’t blame him to keep pushing. That’s not what he’s there for. He’s not a mortgage person, but I guarantee you if Steven or I said to those people, “May I ask why did you have such an emotional reaction?” The result Steven would have been, “Because you’ll take my home and my children. I won’t get anything.” I know when I hear people go, “No,” it makes my blood boil.

Steven Sless:

And I would add to that, Michael. I think to Bill’s point, the same goes the other way around. When we’ve brought up long-term care insurance to clients, the first reaction you get is what no way. That’s too expensive. I can’t afford that. When I bring up, “Hey, working with a financial advisor. Do you work with a financial…” “Oh, no. I can’t afford working with a financial advisor.” So breaking down these misconceptions and delivering education through platforms like this, I think are needed and I think when both the long-term care industry and reverse mortgage industry really come together, not to sell products, not to sell more reverse mortgages, but for the betterment of the consumer. Retirement is very different today than it ever has been before and so too is the way we need to look at funding retirement.

There’s a lot of advanced planning strategies that can be opened up with long-term care insurance, with reverse mortgages. But I would say the advisors and the clients, it does take having an open mindset. And if a client can come to a TV show like this or look at an article that was in the paper the other day, and realize that these are real planning strategies that folks across the country are taking. What we try to do is back it up with numbers.

I can pinpoint to the zip code how many of your neighbors have a reverse mortgage. There’s a lot of folks taking out a reverse mortgage right now and I know Bill can do the same with long-term care insurance. These products are being used. They’re being used very strategically and very proactively to create a better retirement. They’re not the loans of last resort they once were and they’re not that expensive insurance product that can only be sought after by the wealthy.

Bill Comfort:

Right, right. And I think, Michael, you know through your research and the development of this program, your viewers and folks who watch this on replay are more sophisticated than just, “Oh, this is all about an easy sale or whatever.” It’s not. I’m not suggesting nor is Steven, and I know that’s not the agenda. We’re not suggesting this is the answer or the best answer, or a new answer that everybody should do using a reverse mortgage to fund long-term care insurance or to help with that or whatever. It’s a tool. The insurance product is a tool to help you fund and overcome deficits and paying for care, you can’t do on your own.

Reverse mortgages are a tool to unlock home equity. I love that idea of unlocking home equity that otherwise is illiquid to use for so many possibilities. So we’re not here to say, “This is the greatest newest thing and everybody needs to do it.” We are here saying everyone who has a stake in planning for retirement, whether it’s for yourself or it’s for your clients must now advance their knowledge, not only in long-term care insurance in new ways and reverse mortgages in new ways, but there’s an opportunity where the two together can create significant financial advantage for families.

Mike Banner:

No doubt about that. Like we’ve been talking about for more than a decade now and that amazes me that it’s more than a decade. I still think that the part of the world… I’m sorry, I’m getting too big. The part of the country that never could afford long-term care insurance, it’s not even in their sphere. It’s near because that’s just it. We’re not those people. They don’t realize that there is a tool, and it’s not for everyone, but there is a platform or a vehicle like a reverse mortgage that yes, you can have that coverage. It’s not just your rich cousin. It’s you. You can have the same coverage. And that’s what’s exciting to me is getting it to that new demographic.

Bill Comfort:

That’s one of those conventional wisdoms that it’s only for wealthy people or you have to have X amount of money, or I couldn’t possibly afford it. That’s wrong, A. And some of it is because people aren’t designing clients, and agents are not designing the coverage properly. But it’s interesting because it’s also a convenient belief. It’s a mistaken belief, but it’s convenient because it lets people let themselves off the hook. It’s wrong, but it fits into consumer biases about things. So these are some of the things that need to change.

And it’s interesting. I think for many people, that group, Michael that you’re talking about, that you’re advocating for, that have home equity, that need long-term care insurance, but have always thought or felt, even looked at the coverage and decided it was too expensive, if it helps them buy it. Not that it necessarily pays for it 100% itself, but if it helps them buy it. And I think this is a key idea. And Steven, some of your examples about how reverse mortgages play into lifestyle as well, but what if you could afford the insurance without having to compromise lifestyle or even long-term financial security. I think that’s what a lot of people… That’s the bottom line for them.

Steven Sless:

I think in general people have a misconception about what long-term care insurance is and what a reverse mortgage is. In our industry, the general idea of a reverse mortgage is cashing out the equity in your home, and taking out this big lump sum of cash. We very, very seldom advise that as a way to structure a reverse mortgage. Moreover, it is tailoring a reverse mortgage as a line of credit tailoring it as a lifetime check that is sent to you every month or a term payment that’s sent to you over a select period of years.

That is a more strategic way to leverage what is in most cases your largest asset. But the idea, the notion that if you do a reverse mortgage, you’re going to take out all of your equity and then leave a smaller legacy to your loved ones simply isn’t the case. Let’s say you do nothing, but then you need care. And Bill, I know you can speak more broadly about the cost of that care, but you could wind up depleting your entire portfolio and really leave nothing to your kids. Instead, look at ways that you can, again, preserve your lifestyle, but also preserve your other accounts by using what is in most cases a lower growth potential asset in the home. And if you have a portfolio that’s making you money at a rate of six, seven, eight, nine whatever percentage, that is more than your home is making you year over year.

So using the home very strategically and very methodically, and really understanding, one, you got to understand the cost of care, but then all of these different products that are out there. There’s hybrid products. There’s products that involve life insurance and long-term care and then look at different ways to design the reverse mortgage, because you’ll be surprised and what you’re going to find is oftentimes you can afford some sort of level of long-term care and you can pay for it by designing your reverse mortgage in the proper way.

Bill Comfort:

And it’s again, not a zero sum. It’s not a zero-sum calculation that you’re going to lose the house, lose your home equity, but you got long-term care insurance and you may never use it or it’s expensive, or whatever. Again, that’s an over simplification that many people… I’m surprised at how many sophisticated financial advisors buy into, step into or cheat intellectually with that type of a shorthand. It’s easy to dismiss an idea you don’t want to think about, but it’s not really developing the planning strategies.

So it’s interesting. I think the leading edge of the baby boomers is 74. The trailing edge is 57. So the majority of the baby boomers are 62 to 70, plus a little bit older. Those are still good key buying ages for long-term care insurance if you’re healthy. They are certainly at 62 fully in the reverse mortgage eligibility age range. And this whole idea that we hear from folks, “Well, I don’t want to tap the home equity. I don’t want to use the home equity because then I can’t leave it to the kids.”

In another context, if it’s just looking at long-term care insurance separately, I have boomer clients tell me, I don’t want to buy long-term care insurance. I don’t need to because we don’t plan to leave the kids any money. Especially if we need care, we’ll just spend our own money on us. We’ve told them don’t expect an inheritance.

Now, they don’t hate their kids. They’re just being realistic that they could, maybe will have to spend the money themselves. Okay. Let’s play that out. How does it work? But just to start here, isn’t it interesting how some people in one breath will say, “Oh, well, I don’t want to compromise a risk, the equity in the house.” And then in the next breath will say, “Well, yeah. But we’re not planning to leave any money to the kids anyway, so we’ll just spend it on ourselves.” Sometimes these things are-

Mike Banner:

They don’t match.

Bill Comfort:

… irreconcilable. Once you really begin to have what I like to call a grown-up conversation about the subject.

Mike Banner:

Before we get to some statistics, and they cover a little of that in this article, it’s a very… Usually, I pick apart articles about long-term care insurance or reverse mortgages. This was very, very well written and I hope one, or two, or three of them can come on with you guys to the show in the next 30 days. But they do bring up that long-term care insurance and reverse mortgages are emotional to people. You hit it on the head when you said, Bill, that continuing this misinformation is the most convenient. “No, I don’t want a reverse mortgage. They’re going to take my house.” “No, they’re not. May I explain it?” “No, no. Really, I don’t want it. How about long-term care insurance? It’s way too expensive.” “But it’s not. May I tell?” “It’s not really something I’m interested in.”

You’re right. It’s a convenient way to remain ignorant, but on two very emotional subjects, their home and their health, and nobody wants to talk about it. So I want to bring up a statistic that I was surprised at and then of course, Bill, you came back with another statistic which really flipped me out. And again, I’m not as much into statistics as many people are because I think depending on your source, that’s how accurate your statistics are. In fact, 86.5% of statistics are actually made up. I know that, because I just made that one up. So there’s the proof of that.

But according to the US Department of Health and Human Services, 47% of men and 58% of women who recently turned 65 will need some form of long-care insurance, will have some sort of a long-term care event and they will need to be covered for approximately one to two years. And Bill, you always come out with that unique perspective, which is, “Michael, that’s sometimes a hurtful statistic.” Well, because many people go, “Well, one, one and a half years, I can handle that. I mean, why is everybody so scared? Why should I pay premiums on a long-term care insurance?” Would you please tell them the next statistic, Bill? What happens after that first time?

Bill Comfort:

Right. That’s a great setup. These statistics are important because they can inform us. They can help us. They can guide us. But they can also mislead us. The average length of care, year and a half, two years, whatever, well, that’s fine. But that average includes people who are in a nursing home for 20 or 30 days getting physical therapy after their hip replacement and then they’re literally back on their feet back home and independent. So the 30-day rehab stay averages that long-term care need number down. If you look at just custodial care, ongoing help with things like bathing and dressing, for example, just being safe, getting around the house physically or supervision for cognitive mental limitations, we think of Alzheimer’s, dementia, it could be a head injury. If you just look at those things, the average jumps to about two and a half years for men, close to four years for women.

And here’s I think the most telling statistic, using some of these same data sets from the government. Once a person has needed care for at least one year. So the claims or the need for care that gets to a year at that point, the average jumps to five years or more. So when somebody says, “Well, I could afford a year or two.” “Okay. Could you afford four or five?” Because if you need care for a year, the average jumps up dramatically because we’re taking the short term stuff kind of out of the calculation. And that’s where we need to be careful.

Aren’t there fewer and fewer people percentage-wise? Yeah, but you know what, you can’t measure that. Are you going to need care for six months or five years? Michael, you and I’ve talked about this several times. It’s going to be one or the other.

Mike Banner:

That’s right.

Bill Comfort:

And the one that’s devastating, if you haven’t planned for it, that’s where the consequences come in. That’s kind of my little statistical lesson related to this.

Mike Banner:

That second statistic of it can last four to five years after the first 12 months, that takes away that average person going, “I can handle a year. What’s the big deal?”

Bill Comfort:

Right.

Mike Banner:

And they may be able to handle four or five years. The point is they also may have no savings left after that four or five years. How do you define handling it? Steven, your input on that because I have a couple of things for you right now.

Steven Sless:

I think over the past… So Bill mentioned, the baby boomers that are kind of making their way of age right now to baby boomer status are in their late 50s, turning young 60s. And I think over the past 10, 12 years, I think we’ve all, but especially them, they’ve been spoiled by this hot stock market and they’ve seen their investments grow and they’ve seen their portfolio grow. And I think there’s a lot of overconfidence in the markets out there. I remember back to when I got in the reverse mortgage business, and the economy wasn’t so great, I got in the reverse mortgage business in the middle of an economic downturn with a product that was far inferior than it is today.

And those people are going to have a big shock when the market shifts. I’m not saying it’s going to. God, I pray it doesn’t, but it could and if it does, then what? So being proactive instead of reactive, I think in planning of course is important. Understanding that regardless of how many assets you have and what your rate of return is on those assets, it’s likely that if you are in your 60s or 70s or even 50 still, the bulk of your net worth lies within your home equity. Just understand what options you have.

I’m not saying do a reverse mortgage or a home equity line. I’m not saying buy long-term care insurance, but be proactive and understand what these options are. We’re going to get to a place one day where the market’s not doing as well as it is now. I hope that is a long time away, but it may not be. So having a plan in place and setting up a reverse mortgage line of credit gives you locked in protection. There’s a guaranteed growth rate on a reverse mortgage line of credit that guarantees irregardless of housing values, irregardless of the stock market. You will make a growth on your line of credit. You are guaranteed to grow that line of credit each and every year.

You’re also guaranteed because these are federally insured reverse mortgages that your line of credit can never be frozen, suspended or called due in the event of an economic downturn. Think back, again, ’08, ’09. If you had a line of credit in place, what happened? It’s likely that your bank either called it due, froze it or suspended it. Even when COVID first hit, there was a lot of big lending institutions. JPMorgan Chase was one. Wells Fargo is another one. They froze all home equity lines of credit. You couldn’t access your line of credit.

There was folks that had a hundred thousand dollar line of credit, and still to this day may not have access to it. That can’t happen with a reverse mortgage. So even if you don’t necessarily use a reverse mortgage right here now, maybe you have the funds to self-pay either for care or for a long-term care policy, taking out a reverse mortgage as a backup, as an insurance policy, it could be very, very, very beneficial but you have to be educated and you have to really understand that there are a lot of options out there for you.

Mike Banner:

Yep. And then of course the factor, and I’m going to get to one. There’s three statistics here that if you and I were not in the reverse mortgage business, if we were coming from a country, and there’s not many countries that don’t have reverse mortgages. A lot of people don’t realize that. Canada has the equity release. Australia, the Mid East, the Far East, all have their own versions. Ours is the best. I’m not saying that because we’re sitting here, it simply is the best. But let’s also not forget that regarding… You hear the horror stories if I owed more on my house than it’s worth. Please explain to people, because again I’m not going to do it, because it seems a little self-serving to me.

How does it affect your estate? I’m loading the question, I know, but I’m doing it anyway. How does it affect your children, your estate, your heirs, if we’re in the middle of another great recession? They live to be 95. Every economic thing is against us. The house is upside down 100 grand, 200 grand. Tell me, how does that affect the heirs or the estate?

Steven Sless:

It’s a great lead-in, Michael. I appreciate it. All reverse mortgages are non-recourse loans. What does that mean? Non-recourse means that neither you, or your estate, or your heirs are going to be responsible if there is an overage. I like to look at it almost like gap insurance for your car, right? So you total your car, your insurance company cuts you. You owe $30,000 dollars. The insurance company says. “Well, your car is worth $20,000. Here’s a check for $20,000. What about this other $10,000 that I owe? Well, too bad. You owe that money. If you buy gap insurance, that gap insurance protects you. So that overage, that $10,000 is covered. You’re not responsible for it. Reverse mortgages have that same type of non-recourse gap insurance on them.

You’re paying a fee for that insurance. You’re paying 2% of the appraised value, and then there’s an ongoing mortgage insurance premium that you’re paying each year as well. That insurance is what makes the reverse mortgage non-recourse. If that scenario plays out, and you’re in your late 90s, you’ve used up all the money from your reverse mortgage, the value of your home let’s say is worth $300,000 but you owe $400,000 on that reverse mortgage, you, your heirs, your estate, they walk away. Walk away. You’ve actually gotten one over on the reverse mortgage lending institution. And the gap, that insurance is going to make them whole. That insurance provided from FHA is going to make the lending institution whole.

So the concept that you’re going to leave a debt to your heirs simply because you have a reverse mortgage, just isn’t the case. I would argue if you structure the reverse mortgage properly and you couple it with other advanced planning strategies, you can actually wind up leaving more to your heirs because you took out a reverse mortgage. And that goes back to what I was talking about before in providing a hedge against sequence of return risks. Using, leveraging, policies like a long-term care insurance policy to protect and preserve your other assets, to allow those assets to continue to grow particularly in times where the market is good, but also when the market is on a decline. The last thing that you want to do is to pull from a depleting asset and then you’re going to deplete that asset and double the time.

So understanding that you have a lot of wealth in your home. Likely that wealth represents the largest portion of your net worth. There are other options out there as far as long-term care. Life insurance as well. You’re concerned about leaving a legacy. Look into life insurance and then look into one of these life insurance policies that have a long-term care provider as well. There’s just a lot of options that need to be presented in a clear and concise manner.

Mike Banner:

Right. And let me be clear, because it’s amazing how many people don’t realize this. The reverse mortgage is still a small fraction of the entire mortgage industry. It truly is. So for all you tens of millions of people that have a mortgage, a regular mortgage, a forward mortgage, you have signed personally for that mortgage, okay? A personal guarantee. What does that mean? That means when you’re gone, and we hope that’s not for a long time, and somebody from the mortgage lender calls one of your children, because let’s face it, a small percentage of this country has an estate attorney. They’re going to be calling my older daughter who you know will be making decisions when I leave the planet.

And if we were in the middle of a recession, they’re going to say, “Tabitha, your dad’s $100,000 upside down on the house.” “Yes, I know.” “Can you pay that?” “Well, I’m not going to pay it. It’s not my mortgage.” “Did dad leave any life insurance? Did dad leave a portfolio? Is there anything in annuities? Is there anything in a savings account?” They’re allowed to do that. You have personally guaranteed that loan. In our world, Steven and my world, in the reverse mortgage world, they’re not even allowed to ask those questions.

Mom and dad could leave a million dollars in life insurance. But if the house is 100 grand over, 100 grand upside down, they can’t touch it. They don’t even have to know it exists. And it’s amazing people as much as we try and pound this out there, Steven, they just don’t realize that. All right. I’m going to do three statistics now that again if we didn’t know that the public didn’t wrap their arms around reverse mortgages, you’d think we’d be doing 10 times more.

This is in this article. 58% of older adults in the US have not changed residences in more than 20 years, and that’s the first statistic. And I have to tell you that took me by surprise, but I live in Florida, which is the retirement capital of the United States of America. The average age of a person in Florida, I think the last time I looked was somewhere around 106. But maybe because I do live in Florida where people come to retire that statistic threw me. 58% of adults have not changed residents in more than 20 years. Before I go on with the second statistic, what do you two think about that? Are you seeing that up north, out west, that people are in their home for 20 years? Because I sure as hell don’t see that here in Florida.

Bill Comfort:

I think it speaks to an idea that’s been held in America for many, many years. And that is the home is an important place. It is emotional. It’s where the family gathers. It’s where the kids were raised. It’s where we’ve had later in life building of memories with a spouse and partner, and kids even. I think the takeaway for this subject, which is continuing to look at long-term care planning in the context of the home and reverse mortgages, people want to stay at home wherever that is.

Mike Banner:

That’s right.

Bill Comfort:

As much of a home-like setting as possible. And that statistic just reinforces this idea that home and longevity, aging in place, safely aging in place is a really powerful concept for people. And it’s another one of those, you can’t have both ways. You can’t have the home and the home equity and the financial security you’ve built with everything else. If all of a sudden you’re having to put out 5 or 6,000 a month for part-time home care on top of everything else.

Mike Banner:

Yeah. People do have to make a choice and sometimes that’s rough on them, isn’t it, Steven?

Steven Sless:

I think one thing that we’ve all learned the hard way, this year is home is important. We’re all locked down in our… Well, most of us. And Michael, you’re in Florida. Up north, we have a lot more tighter restrictions than you do down there. Home is a very important place. It’s where the heart is, for sure. It’s also where a lot of the wealth is for sure. This year, we had more conversations with adult children, folks that are my age, folks that are in their late 30s, young 40s, even young 50s saying, “You know what, we want mom and dad to age in a safe place. We don’t want them to go into a nursing home. We don’t want them to go into a long-term care facility.” And there’s a lot of nice, safe long-term care facilities out there. But with the COVID pandemic, I think there’s more of a focus now on aging in place.

We’ve partnered with a lot of renovation companies this year. We’re helping to retrofit their home and use some reverse mortgage proceeds, use some of that equity in the house to make some customizations to the house, to make it that safe place where mom and dad can live out the rest of their days. So the adult children can have peace of mind that yes, mom and dad are in a safe place or even building in-law suites. We’re helping to design spaces in the house for in-home care representatives to come in, and whether it’s you know building wheelchairs outside.

Home ownership, being at home, it’s all very important and it is emotional. Now, what I’ve found… This is my 13th year of doing reverse mortgages. I’ve been in the reverse mortgage industry for 13 years. When I first got into the industry, it seems like there was a lot more of an emotional attachment to the home. I don’t want to say that there still… There isn’t now, but I think this generation of baby boomer realizes they don’t have a pension unless they work for the federal government or some large corporation that’s provided them with one.

They need to get creative in how they’re going to fund a robust retirement where they can maintain some level or improve their level of lifestyle. So I think while there still is this emotional attachment to the home, it’s not as deep of an attachment as maybe 10, 15 years ago.

Mike Banner:

Yeah. I absolutely agree with that. Now, that was the first statistic. 58% of older adults have not changed residents in 20 years. Here’s the one that says what we’re doing here, and we’re not the only ones doing it, but hopefully we’re doing it better and louder. Here’s the second statistic. 75% of those people who have been there more than 20 years say they have every intention to live in their current home for the rest of their lives. And those same people, the great majority of them never want to be in a nursing home or in a facility. They would prefer to receive care at home. It just brings me back to that staggering thought that I don’t understand, and probably won’t for my whole life is that why don’t those people have a nice low-cost reverse mortgage so they can have an incredible long-term care insurance policy attached with a life insurance policy?

Am I saying this right, Bill? Attached with a guaranteed refund to premium if they don’t use it. I mean I had so many people have said to me, and remember, I don’t have an insurance license. What I know comes from people like you. But when I bring up long-term care insurance and because I have a passion for it, and they go, “But what if we never use it? It’s such a waste.” You have products, Bill, correct me if I’m wrong. That return, their premium, I mean, can you imagine saying in any other insurance? Let’s say my major medical that at 62 years old since I’m private pay is $1,800 a month. That’s for the next three years until I turn 65.

It’s a good thing business is good, okay? That’s more than the average house payment in the United States of America. Can you imagine if Blue Cross Blue Shield said to me, “Don’t worry about it. If you never make a claim, we’ll give it back to you.” Are you kidding me? Yet, that’s what your industry does. I know that righter course, it increased the price of the insurance. But it takes all the risk away. I just don’t get it why people are aren’t lined up in the streets with their favorite long-term care insurance person going, “Give me that product that if I never use it, you give me back all the money. Oh, and by the way, take the premium out of my equity and my house because I don’t want to disturb the quality of my life.” Oh my god.

Bill Comfort:

Right. And here we’re back to this idea that we have these tools that we can use to meet the needs, the desires, the wishes of clients to accomplish other things. I mean, one of the things that I say all the time and it can kind of sound trite, but the policy is not the plan. The long-term care insurance policy is not the plan for care, just like your life insurance policy isn’t your estate plan. The insurance policies provide the money so that your plans just like your investments do for retirement, so that your plans that you have for yourself, for your family, can live out. Can play out the way that you want, intend, hope, even if you have this circumstance that none of us want, which is a need for care.

But what if you need care, and your spouse, and your kids not only maintain their financial security, but your spouse and kids don’t have to step up to be primary caregivers. They could be care managers because you got enough money cash flow, from the insurance to help pay for that care, that they otherwise would provide or sacrifice the financial security to provide. That’s really the bottom line on long-term care insurance, and the role it plays and how it supports these things, staying at home, wanting to stay at home, aging in place, and so on. Well, we’ll go on. We’ve got some time ahead.

Mike Banner:

We still got. Yeah, I want to bring up, because you, and Mark, and I had a great show about this a few months ago. I think it was a privilege you know to take care of my father the last 18 months of his life. The last 12 months were a little rough, but the last three months were rough. But you brought up rather than being the caregiver, the care manager. And sometimes to somebody that’s never gone through it like me until this happened 15 years ago, my father I think in many cases throughout the country, the remaining spouse is the caretaker for the one that goes first.

So my father was the main caretaker for my mother. But when my father was sinking, I became the main caretaker. We had a close relationship. You both know I wrote a book about that. I’m going to get uncool here, but I remember the first time dad had an accident in bed because he couldn’t make it to the bathroom quick enough and I went in to help. I saw it as nothing. I mean, there’s a big strong man and he just didn’t make it because he’s moving slower. It was a good year before his death. He wasn’t immobile. He had all his mental faculties, but he had this terrible, terrible look on his face as I was helping clean up the bed. I said, “What’s the matter? Are you in pain or anything? “No, it’s just you shouldn’t be doing this.” I said, “Of course, I should. This is what I’m supposed to do. You took care of me my whole life. I want to do it.” He goes, “Well, you may want to do it, but I don’t want you to do it. This is not the way it’s supposed to be.”

So when you say be a care manager rather than a caretaker. When we did decide to bring somebody in, and dad didn’t have long-term care insurance, I didn’t know you guys then, again, fortunately business was good and we could afford it, most people couldn’t. It’s amazing how it allowed me to go back to being the son who loves his dad rather than the son that might have to help him off the toilet because his legs weren’t that strong anymore.

We had a guest on about six months ago. I don’t know if he wants me to name him because he’s a great guy, but we were talking about sales pitches and we always push here, we don’t do sales pitches for reverse mortgages or long-term care insurance. They are tools and if they are the right tool at the right price. But he said, “Michael, I’ll tell you how I close a lot of long-term care insurance policies.” And I go, “How’s that?” He go, “Well, my children, I have two daughters and they’ll help me if I get sick.”

He said, “I’d say to them… Close with your two daughters?” “Yes, very. They are insisting they take care of me.” “Think of one of your daughters giving you a bath, and they say, where’s the policy? Where’s the application? Where do I sign?” You don’t think about those things, but like I said your comment of going from a caretaker to a care manager. It made life much easier on dad. A little easier on me. I enjoyed taking care of him. But the more important thing was it made it easier on him to not have his son doing those things.

Bill Comfort:

Here’s the thing, and all three of us know it because we’re studying each other’s business and listening and learning from each other. Kids will take care of their parents. Spouses will take care of each other, because we love these people and we want to make sure that they’re safe. And it can be rewarding and there’s elements of it that are rewarding. But is that what you want as your primary plan? Because I will tell you without an explicit plan for funding the professional help, the family and the kids are on the hook and all the emotional, if not physical consequences burdens that come with it will be there.

When somebody says to me, “Well, my kids will take care of me.” Here’s what I say. I look them straight in the eye and I say, “Of course, they will.” Let’s discuss some ways to help your kids and your spouse take care of you better and longer. To take care of you on your terms versus the terms that are dictated by the disability or the impairment. Now, we’re getting you know kind of philosophical here, and, Steven, from your experience, I know we’re seeing reverse mortgages change in terms of the flexibility, all the different dynamic ways that they can be used very creatively as part of an overall financial plan. But there’s sort of two elements here I want to make really clear.

It’s possible to use a reverse mortgage to fund care, to pay for care either from that monthly payment or out of the line of credit. So that’s one use of a reverse mortgage. And I think that’s sort of what most people think of when you say use a reverse mortgage to fund long-term care. It means paying directly for care. But that’s just self-funding. That’s just self-insuring. You’re using one of your own assets and your own money. That’s okay if that’s what you have to do. But then the other element, I think this new intersection that we’re talking about is using the reverse mortgage to fund long-term care insurance, which opens up even greater possibilities and flexibilities in a financial retirement, if not estate plan.

Steven Sless:

Absolutely, without a doubt. And I think the last show that we were on together, we talked about, look, there’s a lot of ways that a reverse mortgage can help fund care, of course, but also that long-term care policy. The first way is if long-term care is going to cost you seven, eight, $900 per month, and I’m just throwing those numbers out there, and you have a mortgage payment, which is seven, $800, $900 a month, $1,000 a month, the first thing that a reverse mortgage can do is it can pay off your existing mortgage loan thus eliminating the mandatory mortgage payment.

Now, you can make payments if you choose to. That’s where the flexibility comes in. A lot of our clients do. They make payments until they can no longer afford to do so or until they just decide later on down the road, “Why am I doing this? It doesn’t make sense. I’d rather spend the money on other things.” So that’s the first way, eliminating the mortgage payment. But the second way is actually leveraging your home equity and converting that home equity into tax-free tangible funds that now you can take and go fund a long-term care insurance policy.

And you can take those funds from a line of credit. You can take cash out of the reverse mortgage and do it that way. You can turn on a monthly payment to be sent to you every month and then you just turn around and send that monthly payment to the long-term care insurance company. And you can also use the reverse mortgage to… Again, I always come back to advanced planning strategies. We talked about it on the last show delaying social security, freeing up finances, maximizing your retirement. Nest egg. Living an intentional retirement, not a, “Oh, what do I do now?” And it’s a very reactional retirement. But I think, and I know we only have a few minutes left here.

This conversation, all of this education, it has to reach the folks who don’t think that these things are for them, who don’t think they can afford the long-term care. They don’t understand reverse mortgages. I think for most of those folks, they’ve done a pretty good job of wealth accumulation, wealth distribution, and where to distribute funds in retirement to whether or not to fund a long-term care policy, whether or not to invest in the markets, to be in the markets at all. What type of risk tolerance to take?

That’s a foreign language to I think most baby boomers and most retirees, and I think that’s where the financial planning community needs to come in, because to me this is all about the three pillars. You have your financial planning. You have your long-term care insurance and you have your reverse mortgage or a traditional mortgage. A traditional mortgage can be used to pay for a long-term care policy as well. But they need to understand that there’s options in the general public that may not look at these financial products as viable options for them, need to just sit down with a professional and just understand them. Understand that distribution is very different than saving and putting money away what you’ve done for the past 30, 40 years.

Mike Banner:

I agree.

Bill Comfort:

I think a takeaway, and you just made me think of this, Steven, a takeaway for people who are watching this show, let’s say, and are intrigued by this idea, how does it work? How might it work? Find a long-term care specialist, a reverse mortgage professional who will truly take the time to educate you even if the sale is not going to happen in a week or a month, but is just willing to invest in your education for the benefit of you and your family. Seek out those professionals and educate yourself. But here’s what strikes me. If this is appealing or of interest, make sure you’re pressing your other advisors to learn about it.

If they dismiss it and say, “Oh, it’s too expensive or oh, you don’t need long-term care insurance or oh, reverse mortgages are a terrible idea,” don’t be afraid to say, “I’ve been learning some things that are telling me very different.” It’s sometimes hard for folks to say to a planner, or a CPA, or an estate planning attorney.

Steven Sless:

Or your children. I think for most people, their children are their advisors. Have these open conversations with them. Not everybody has a financial planner.

Bill Comfort:

True.

Mike Banner:

Children for sure. Yeah, I’ve always said… I’ve had people. I don’t know if you’ve had yet, Steven. It doesn’t happen that often. We only basically have a minute, so I don’t want to spend too much time on this, where somebody says, “My children, or my son, or my daughter really don’t want me to take the reverse mortgage. They want the house to be free and clear when I die.” Now, my employees are not allowed to say this, but my come back to them is, “Wow. I’m just so sorry you have children like that who are putting their inheritance in front of your quality of life.” I mean, I’d like to just smack the shit out of those children. And they’re probably my age or a little younger.

All right. We got 39 seconds to go. I’m going to invite you both back very soon. Next week, I have one of the largest financial planning voices in the country, David Lykken. Lykken on the Radio has tens and tens of thousands of downloads and we are going to talk a little bit about financial planners and why they’re not jumping in the long-term care world. Bill, I wouldn’t be surprised to see you on that show, I’ll really be honest with you. And maybe Steven Sless.

Bill Comfort:

I’ll be listening one way or the other.

Mike Banner:

Yeah. And maybe Steven Sless. Thank you guys. We have 10 seconds to go. We’re going to keep riding this out in 2021. We’re going to be doing speaking all over the country together. Thank you to our audience for being here. We appreciate it.

Video Transcript

Welcome to the Grow Your Business and Grow Your Wealth podcast with Gary Heldt. Gary is an expert in helping business owners put together a plan that will provide a better future for their businesses, themselves, and their families. On the podcast, Gary interviews other professionals who share his vision, and together, they share secrets and strategies any business owner can use to build a better financial foundation for your business and your life.

Gary Heldt:

Welcome back to the podcast. Today, our guest is Steve Sless, who is the National Reverse Mortgage Division Manager for Primary Residential Mortgage. Steve, thanks for joining us today.

Steven J. Sless:

My pleasure. Thanks for having me, Gary. Really appreciate it.

Gary Heldt:

You have over 20 years of experience in the mortgage industry. What got you into doing mortgages?

Steven J. Sless:

That’s a great question. I got into the mortgage industry when I was, really, 20 years old. I can’t believe it’s been close to 20 years already. For me, I was in the car industry. I was a finance manager in the car industry, right out of high school, and then made the natural transition at the time. The mortgage business was really taking off. There was a lot of subprime and refinance back then.

I discovered very early on in my mortgage career that I just wanted more. I wanted to provide more value to the clients. It’s one thing to lower their interest rate or to get them some cash out, but what’s my niche? How can I really make an impact in the mortgage industry? And it took until 2008, until I discovered and learned for myself what a reverse mortgage was. Prior to 2008, I had heard about reverse mortgages, but I think I had the same negative connotation of reverse mortgages that a lot of folks have today. They’re either too good to be true, or it’s just a way for the government to take your house. You hear all these myths and misconceptions, but in ’08, I really dove in headfirst, became educated, empowered myself, and in doing so, I learned what a really impactful, powerful product the reverse mortgage is. And I haven’t looked back since. I’ve only done reverse mortgages since ’08.

Gary Heldt:

Okay. That’s great that lots of times people go for a long time in their career before they find a niche and are able to stay with it. With the reverse mortgage, there’s definitely, you touched on it, that there are a lot of negative things that are out there about it. And most of the time when all’s you’re hearing is negative, that means that it’s not good, or maybe people just don’t know. Can you tell us what some of the pros and cons are to having a reverse mortgage?

Steven J. Sless:

I think it all comes down to that education. It’s not for everybody, but reverse mortgages have evolved over the years to really be a well-rounded financial planning tool.

Admittedly, back in ’08, when I started doing reverse mortgages, they were a loan of last resort. If you were broke, and you were out of money, you depleted your retirement savings, but you still had some equity in the house, a reverse mortgage was the way for you to leverage that equity, to be able to stretch the rest of your money, to hopefully to not run out of money in retirement.

And over the years, the product has evolved into a retirement planning tool, where it’s used proactively now, instead of reactively. I think the problem with the reverse mortgage in the past was you had too many folks that were using it reactively.

One of the requirements of the reverse mortgage is that you have to maintain your taxes, your homeowner’s insurance, and you have to maintain the upkeep of the home. Well, if you’re reactive, and you’re using the product reactively, and you’re already out of money, that was happening before, and the folks that were taking reverse mortgages out as a reactionary tool, they were already destitute, they were already out of money. All the reverse mortgage did was it prolonged the inevitable, which was, look, it was too much home, the homeowner probably couldn’t afford the home, and at that point, they should have sold instead of taking out a reverse mortgage. That caused a lot of people to default on their taxes and the insurance and failed to meet the obligations of the loan. The result of that was you had a lot of homeowners being foreclosed on.

I think the biggest misconception with a reverse mortgage is that you could lose your home. Nobody has ever lost their home simply because they had a reverse mortgage. You have to pay your taxes, you have to pay your insurance, you have to maintain the home.

Now that the reverse mortgage is being used proactively, and a lot of folks in the financial planning community, the American College, who puts out a lot of curriculum for financial planners, they’ve adopted reverse mortgages as a tool to stretch one’s retirement savings proactively, not reactively. The result has been, we are only at 2.2% foreclosure rate for reverse mortgages right now of folks that fail to meet the obligations. That was close to 10% about 10 years ago. So as an industry, we’ve done a really good job of teaching folks. Use this tool proactively not reactively, and you have to maintain the obligations of the loan.

Gary Heldt:

With that, what are some of the… You’re saying that you’re using it proactively to help with the financial planning and things like that. Tell us a little bit more about that.

Steven J. Sless:

Yeah. We do that with a lot of our financial advisor partners, who we sit down with them, and we say, “Look, your client, it’s likely that, if you have a client that’s over 62, there’s a good chance that the majority of their net worth lies within their home equity. Let’s come together and figure out how that home equity fits in as a piece to the puzzle in an overall comprehensive retirement strategy.”

We look at it like this. The home is a low growth-potential asset. Historically, the home is going to go up three to four percent per year. Your stock portfolio, your bond portfolio, your 401K, your IRA, look at what they’ve done over the past 10 years. It’s likely that they’ve grown by more than three or four percent. And so strategically, it makes a lot of sense to use the equity in the home to allow your other retirement assets to do their thing, to grow, to compound interest.

That’s one strategy. Another strategy is using the equity in the home as a buffer asset, a pool of money, a bucket of money, that can stand outside the portfolio, that can be used strategically when needed. So if the market takes a downturn, you turn to your buffer asset.

Most of the very astute financial investors have enough money, where, if there’s a downshift in the market, they don’t have to tap into their retirement portfolio because we all know tapping into the retirement portfolio during tough economic times could have devastating effects. Having a buffer asset set up, it’s great for a down market. Using the equity in the home, instead of using your other assets, is also a great strategy to protect and preserve your other retirement assets and let them to grow and compound over time.

Gary Heldt:

Can we take a step back and have you explain really what a reverse mortgage is and how it really works.

Steven J. Sless:

Yeah. Great question again.

Reverse mortgage is simple. It is for folks that are 60 plus, and it’s a tool that allows them to tap into the equity in their home without the requirement of a monthly mortgage payment, while they still own the home and continue to live there. Similar to a traditional mortgage, this is going to make some of the wealth in the home accessible. But the real benefit of using a reverse mortgage in your 60s, 70s or even 80s, as opposed to a traditional mortgage, is that there’s a flexible monthly payment option. There is no mandatory mortgage payment. And so it’s up to you, the consumer, the client, whether you’re going to make a payment and treat it as a traditional mortgage, or whether it will be more beneficial for your retirement lifestyle to forego making payments and defer payback until you leave the home.

Gary Heldt:

In either one of those situation, what’s the interest rate compared to a conventional mortgage?

Steven J. Sless:

Yeah. I think another common misconception is that reverse mortgage interest rates are higher. They’re actually not. We’re closing loans right now, reverse mortgage loans, in the high 2’s, so 2.8, 2.9. There’s variable-rate options, which are a little bit lower. There’s also fixed-rate options. And that’s where, to figure out what’s best suitable for the client, we sit down, we conduct a financial assessment, we review goals, talk about options, and let the… Our job, I think, is just to empower the client, the family, and the advisor with all of the information for them to make the most educated decision. But interest rates are right on par with traditional loans.

Gary Heldt:

So what happens? I guess, what’s the most amount that, not at dollar wise, but just as a percentage of the reverse mortgage would lend based on a home?

Steven J. Sless:

Depends on the age, and it also depends on current interest rates. I would say, on average, anywhere between 50 to 60% of the value of the home.

Gary Heldt:

Okay. So when mom has a reverse mortgage, mom passes away, what happens then?

Steven J. Sless:

Yeah. No different than a traditional loan. The house is going to go to the heirs, whoever it is that mom and dad have decided to leave the home to, and the heirs have a few options. Option one is they can keep the house and remain in the home. If they want to do that, pretty simple. They pay back what mom and dad borrowed from the reverse mortgage, plus the interest that’s accumulated over time. They can stay in the home from there. They would call, get a pay off. They would pay off the loan, either by refinancing it into their own name, or maybe mom and dad had a life insurance policy, or maybe the kids have funds of their own that they can use to pay off the reverse mortgage. So that’s option number one.

Option number two, and I think the most common option, especially for adult children nowadays, they don’t want mom and dad’s house. They can come in, sell the home, pay back the reverse mortgage with the proceeds of the sale. And any remaining equity is theirs to keep, and that’s their inheritance.

The beauty about reverse mortgages is that they’re federally insured, and they’re non-recourse loans. The non-recourse means that no debt can be passed to the heirs or the estate. It’s almost like gap insurance for your car. You buy a car, they offer you gap insurance. If you go out and total your car, you owe $30,000. The insurance company cuts you a check for $20,000. There’s gap insurance that covers that $10,000 difference.

Reverse mortgages have that same type of insurance, that gap insurance. So if mom and dad owe $400,000 on their home, and if you’re only able to sell it for $350,000 or $300,000, the FHA insurance covers that gap. And you, as the heir or the estate, you just walk away.

Gary Heldt:

Okay. So if someone gets a reverse mortgage, you’re saying that they could treat it just like it’s a traditional mortgage and pay back the principal and interest.

Steven J. Sless:

Yeah.

Gary Heldt:

Now, are there any additional fees that come along with a reverse mortgage?

Steven J. Sless:

There used to be. Most of those fees, in fact, almost all of those fees, have been phased out over the years. This is a very different reverse mortgage product today than it was even two years ago, particularly five to 10 years ago.

10 years ago, and I’ll be the first one to admit, when I got into the industry, these were expensive loans with high interest rates, with prepayment penalties. There was ongoing servicing fees. For some, it was the right financial tool, but for most, there were better alternatives.

And over the years, the industry has lobbied for better terms. The government has done a really good job of reducing the burden to the heirs, making sure that there’s equity that can be preserved in the home and providing safeguards and protections for the homeowner as well.

There’s no servicing fees. There is no, I like to call them, junk fees. There’s no additional fees. It’s simply interest that is added to the balance that’s borrowed. On top of the interest, there’s an upfront mortgage insurance premium and an annual mortgage insurance premium. The upfront premium is going to be 2% of the appraised value. That’s kind of the barrier to entry to get into the reverse mortgage. It’s a part of the closing costs that can be financed into the loan, but whatever the value of your home is, 2% is paid to FHA, and that initializes your mortgage insurance, that gap insurance that we discussed.

In addition, there’s also an annual mortgage insurance premium, and that’s half of a percent, 0.5% of the ongoing balance that you carry that is added to your loan amount that becomes due and payable when you leave the home. So there’s two ways that FHA receives the premium for the insurance.

Gary Heldt:

The first one is 2% of the appraised value of the home, not 2% of the loan.

Steven J. Sless:

Correct. 2% of the appraised value of the home.

Gary Heldt:

Gotcha. What happens if mom gets sick, mom has to go into a nursing home or rehab facility because they fell and broke their leg and supposed to only be there for three weeks, and it ends up being six weeks, ends up being where it’s six months? What happens at that point?

Steven J. Sless:

Well, Gary, look, I mean, this is a loan for older homeowners. This happens all the time. The requirement is that you occupy the home as your primary residence, which means at least six months and a day out of the year.

But look, stuff happens. If you’re going to go into a short-term care facility, that’s fine. No worries there. If it’s going to be longer than six months and a day, you want to contact the service provider on the loan and remain in contact with the service provider. Communication is paramount here. The service providers, of course, understand that this happens a lot, and there’s short-term care, there’s long-term care. If it’s going to be something that’s more long-term, and it’s likely that you’re not going to return to the home, at that point, the loan will come due and payable. And together with the homeowner and their family and their advisors, they’ll want to figure out, “Is it even beneficial to keep the home any longer?”

Most of the time, if you’re going to go into a long-term care facility, you’re going to have to sell the home in order to pay to be in that facility. Or why wouldn’t you sell the home because why would you carry any mortgage at all and even have interest, even if it’s a reverse mortgage where you don’t have to make a payment. Why have any mortgage at all at that point? It’s going to be more beneficial to sell the house, pay back what you owe on the reverse mortgage, and use the additional equity to help pay for the care in the long-term care facility.

But my best advice in that situation is communicate, communicate, communicate. You’re going to get a monthly statement every month in the mail. That monthly statement will have the name and number of the service provider. Be in constant… Even if you can’t do it because of course you’re focused on care, designate somebody in your family that’s going to be the communicator to the service provider, and always remain in contact with that service provider.

Gary Heldt:

With the reverse mortgage loans, what am I allowed to use that money for?

Steven J. Sless:

Really, you can use it for anything. There’s no restrictions on what you use the money for. Now, what we see a lot of our clients using the money for is one, to fund long-term care, whether that’s a long-term care insurance policy, or whether that’s to self-fund care. Another great way to fund long-term care with a reverse mortgage is, look, long-term care insurance policies aren’t cheap. They’re great, but they’re not cheap. So if you’re somebody that has a monthly mortgage payment, a thousand bucks, $1,500, $2,000 a month, the reverse mortgage can pay off and replace your current mortgage loan, eliminating the mandatory mortgage payment, thus freeing up the cash flow for you to fund that long-term care insurance policy. That’s one way to use the money.

Another way to use the money is to put it in a reverse mortgage line of credit. You don’t have to take any money out, or you can only take what you need out. The rest can be funneled into a reverse mortgage line of credit. The reverse mortgage line of credit offers a cost-of-living increase each and every year. It’s a growth rate, and it grows by half of a percent over the interest rate that you’re paying on the loan. If you’re somebody that doesn’t need money now, but you want to set up a line of credit as a buffer asset or just a rainy day fund, put it all in the line of credit. If you never use it, you never owe it. But it’s a great insurance policy in case of a down-market or in case you need to fund long-term care, if you need to fund healthcare cost, or any emergency costs.

But there’s really no restrictions on what you can use the money for. We have a lot of clients that take it out just to enhance their lifestyle. Perhaps they want to retrofit the home. They want to remodel the home to ensure that the home is suitable to meet their needs as they’re growing older and aging in place. Some clients just say, “You know what, we want to travel the world. We’ve never gotten a chance to just enjoy life and enjoy retirement. Our kids are grown. They’re out of the house. We’re going to take some money out. It’s our money anyway. We paid it in there, and we’re just going to do what we want to do with it.”

Gary Heldt:

You talked about using it like a line of credit type thing. If I use it as a line of credit, and I haven’t withdrawn any money from it, I guess first, am I being charged interest on it? Second, am I still having to pay the FHA fee that you talked about at the beginning and annually?

Steven J. Sless:

Yeah. To set up the line of credit, you would pay closing costs. And when I say pay closing costs, it’s up to you whether you pay them actually out of pocket or finance them into the loan. Most folks finance them into the loan. And you can finance a hundred percent of the closing costs into the loan by the way. The barrier to entry, I like to call it, is the closing costs and the mortgage insurance premium. Once you pay those fees, if you don’t use the line of credit, you never owe anything on it, and there’s no interest being accumulated on those funds. They just sit there in reserve. They’re on standby. If you need them, you can tap into them strategically over time.

All reverse mortgage proceeds are tax-free because think about how that money got there. You paid taxes on it, and then you paid it into the home. So you’ve already paid taxes on that money. Now, when you’re taking it out as a loan against the home, there’s no taxes on it. That’s another really strategic way to look at this. If you have to pull from your 401K, your IRA, or your retirement portfolio, chances are you’re paying taxes on every distribution. Not only are you paying taxes, but you’re also limiting future growth because you’re pulling that total sum down. Every time you take a withdrawal, your number comes down. So less growth, more taxes, versus using the equity in the home first. No taxes, and you’re using it from a lower growth-potential asset.

Gary Heldt:

Sure. In going through, because again, there’s subtle differences between, obviously, the more conventional mortgages that we understand versus the reverse mortgage. When you’re saying that there’s closing costs, are they the same type of closing costs that I would if I refinanced or I purchased the home? Are they the same closing costs?

Steven J. Sless:

Same closing costs. Title, recordation, that sort of thing. Yeah, the closing costs aren’t different. The only difference is the insurance.

Gary Heldt:

Okay. What would the reverse mortgage side drives what the interest rate is? Because I know lots of times on the conventional side, depends on your income, your debt-to-equity ratio, your credit score, and so forth. What is it that drives it for the reverse mortgage side?

Steven J. Sless:

These are phenomenal questions, really phenomenal questions. The interest rate is determined by a rate margin and an index. The rate margin is negotiable with your lender. Current rate margins that are being offered are anywhere between two to two and a half percent. And on top of that margin, you add the index. Reverse mortgages have used the LIBOR index for about the past 10 years, and we’re making a transition in the industry right now. Most people don’t know, but the LIBOR is being phased away. Come 2021, the LIBOR is going away. The industry has moved to the CMT index. It’s likely that probably end of next year, maybe into 2022, we go to the SOFR index. They’re all about the same. The blend between the rate margin and the current CMT index puts you at a stark interest rate of the high twos, 2.8, 2.9.

Gary Heldt:

Okay. Tell us, give us a good story about somebody that you helped out with a reverse mortgage that really makes you proud that you’re able to able to help them.

Steven J. Sless:

This is easy. My parents I just did a reverse mortgage for my parents last month. It was a very emotional transaction, Gary, I got to tell you. I think my parents represent what I think most of our clients look like. They’ve worked hard their whole life, blue collar, they still work today. My dad is in his early seventies, my mom is in her late sixties. They’ve done everything right, but they were late savers. They gave everything to myself and my sister. They saved late, so they didn’t accumulate enough for retirement to really be comfortable. They live a decent lifestyle, and they live a great life. They’re not in need for anything. But they worry, and I worry, and my sister worries that they’re going to outlive their money. Knock on wood. I pray to God that that’s the case. But most of their wealth is in their home equity. They’ve worked hard to make mortgage payments their whole life. They’ve preserved equity in their home. And they’re in a position right now where that wealth represents the largest portion of their net worth.

I’ve been trying to talk my mom and dad into taking a reverse mortgage out for a long time, and their rebuttal back to me was, “Well, I want to leave the home to you and your sister.” Okay. We don’t need it. I don’t want their money. What I’ve tried to explain to her is that it’s likely, even though I don’t need your money, you would actually leave me more if you took the reverse mortgage. And that’s contrary to popular belief. Most people believe that, “Well, how’s that possible? If your interest is accumulating over time, and your balance is going up over time, because that’s how reverse mortgages work. If you don’t make a monthly mortgage payment, how am I going to leave you more money?”

It’s because we can let their 401Ks and their IRAs continue to grow without taking those withdrawals out. We also would eliminate their mortgage payment. They had a $1,400-a-month mortgage payment that we eliminated. Their plan is to continue to make payments until they no longer can. What I’m trying to get them to do right now is look, forget making that monthly mortgage payment. Use it to fund a long-term care policy.

My grandfather right now is 97 years old, and he’s been healthy as a rock his whole life. And COVID has really affected him pretty severely. He was always active, and, not being active anymore and not being able to get around and about, it’s really harmed his health. And we’re experiencing as a family right now how difficult long-term care is. I’m certified in long-term care. I’m one of the only reverse mortgage professionals in the country with that designation. So I really have a deep understanding that the impacts of long-term care, not only on the consumer and the person in need of care, but on the family as well.

I’m trying to talk them into getting a long-term care policy. But bottom line is, they have a lot of additional cashflow freed up, $1,400 a month, and they’re able to draw wealth out of their home to just live a more comfortable retirement, to ensure and to provide them with the peace of mind that they’re just not going to outlive their money. And to me, that’s the story of reverse mortgages, and that’s the power in the impact of reverse mortgages. And it’s what drives me and gets me out of bed every day. And it’s why I love what I do so much.

Gary Heldt:

Right. Explain the difference between somebody like you, a professional that’s been doing this for a number of years, versus… We hear the TV commercials and things like that of people saying, “Oh, you should get your reverse mortgage and things.” What’s the difference? Using a professional versus, I’m going to say, the online version of things?

Steven J. Sless:

There’s a big difference. There’s a really big difference. My best advice to anybody seeking to learn about a reverse mortgage, you got to work with somebody that exclusively does reverse mortgages. Even though they’re called a mortgage, it is night and day from the traditional mortgage side of our industry.

I think one of the big problems in our industry today is that my license, my mortgage license, is the same license of somebody who does traditional mortgages. I’ve chosen for reverse mortgages to be my niche. That’s my passion. That’s what I specialize in. And I think our firm is the best in the country. I’m a little biased of course, but I really think that we’re great at what we do, and I have a phenomenal team behind me.

Most folks that obtain a reverse mortgage do so with a loan originator that only does reverse mortgages here and there. They may do one or two per year. We’re doing 20 a month, 25 a month. There’s a big difference there in, not only the expertise and the skillset, but just… Look, anybody can take a mortgage application, but then what? We’ve developed a very streamlined process to make this a very smooth and easy transaction. But I think we also can speak more to the astute, savvier homeowner that wants to understand how they incorporate their equity within their retirement strategy. And a everyday loan officer just isn’t going to be able to have that detailed of a conversation. It’s not what they do.

If somebody came to me to buy a home, and they were a first time home buyer in their twenties, I could probably do it. It wouldn’t be a pleasant experience for me or them, but it would get done. And I think that’s what happens in our industry too much. We have too many loans that just get done, and it’s a terrible experience for everybody involved.

My best advice: work with somebody, seek somebody that only does reverse mortgage, that has the knowledge and has the skillset and has the expertise and also has the strategic partnerships that we have. We’re involved with financial planning firms, estate and trust attorneys. We have a whole roster of third-party individuals that we can refer on a referral basis to make sure that you have a bulletproof and well-rounded retirement. We’re not just here to offer you reverse mortgages. We’re here to be a resource to help you create a better retirement.

Gary Heldt:

All right. I’m sure you’ve heard the horror stories over the years of the reverse mortgages and stuff like that. You said that things have really changed over the past two to five to 10 years. Because I’m sure you’ve heard more horror stories than I have. What’s the biggest horror story that you’ve heard, but that you know isn’t true, that our listeners can, can hear from someone? I think we’ve cleared up a lot of the myths about it. But give us something else.

Steven J. Sless:

Yeah. I saw a segment on the news. It was a Houston, Texas news broadcast a few months ago. And they covered a story on this woman in her eighties that was foreclosed on. Terrible. Absolutely terrible, tragic, and it tugs at all heartstrings. But when they reported it, they reported it, “Well, she got foreclosed on because she had a reverse mortgage.”

And that couldn’t be further from the truth. This was somebody who took their reverse mortgage out years back, before there was all the rules and safeguards and regulations that there are today. It would be very difficult for her situation to happen today. What happened is she took the reverse mortgage out, probably wasn’t the right tool for her to use at that point. She should have sold the home and downsized, perhaps rent it. Her income level just wasn’t suitable. It wasn’t suitable for her to be a homeowner any longer. But she took out a reverse mortgage. She took a lot of cash out of her home. That cash was quickly used up, and she didn’t have enough money left to pay her taxes and the insurance.

I don’t care if you have a reverse mortgage, a traditional mortgage, or no mortgage at all, Gary. If you don’t pay your taxes or your insurance, you’re going to get foreclosed on. Your local municipality will at some point come knocking on your door. And if you don’t pay your taxes, Uncle Sam will foreclose on your home. And that’s what happened with her. The reporting was very misleading. It’s not true that, because she had a reverse mortgage, she got foreclosed on. Now she did have a reverse mortgage. Maybe she wasn’t informed, when she took out her reverse mortgage, of the obligations. I don’t know. But the bottom line is nobody that has a reverse mortgage can ever lose their home so long as they pay the taxes, the insurance, and they maintain the home, and they occupy the home as their principal residence at least six months and a day out of the year.

And that’s just one example of stories similar to that that I’ve heard over the years. And it’s very unfortunate because it diminishes the impact of how reverse mortgages have helped over a million homeowners nationwide live a better retirement. And I think those stories that the media portrays in the light that they do, it’s just a dangerous narrative to put out there. And it’s very misleading, and it’s not true.

Gary Heldt:

I believe in education. I think that if we educate our clients, it’s going to help them understand their options and maybe help them make a decision. I know that you do education for people. Can you tell our listeners about some of the different education things that you’re doing, and how they can find these so they can learn more about the reverse mortgages?

Steven J. Sless:

Yeah, for sure. In normal times, pre-COVID times, we’re out there doing seminars on a monthly basis, where we would rent out a dining hall or a restaurant, and we would send invites out, we would advertise on TV and radio and shows like yours, and we would drive awareness that way. And it’s a great way to learn, to come out to an in-person event, very hands-off no sales, enjoy dinner on us, and learn about reverse mortgages. Great. If you’re interested, come see us after the event, and if not, no harm, no foul. We hope you enjoy your dinner. Those we’ve done for over 10 years. And they’ve been a great way, especially in our local community, in the mid-Atlantic Maryland, Pennsylvania, Virginia, Delaware, we’ve made a big impact in helping people understand reverse mortgages that way.

We’re doing webinars now. I’m on shows like yours. We’re providing information via our website. We have a new video series that we put together, where we recorded 37 videos that will cover the gamut about reverse mortgages, from funding long-term care to stretching retirement savings, to modifying the home, just different unique ways to use reverse mortgages. We’re all over social media, putting out education and information as well.

I like to think that we’re leading the way to change the conversation about how reverse mortgages are used. We’re getting there. We’re not there yet. I think, by and large, there’s still a lot of myths and misconceptions about the loan that need to be overcome. But we’re really actively trying to pursue all avenues and all opportunities to just spread the gospel, if you will, of reverse mortgages and how great they are.

Gary Heldt:

Tell us, how can our listeners find that? Is it through your website or what is it? How do they find this?

Steven J. Sless:

Yeah, our website is thestevenjslessgroup.com. It’s thestevenjslessgroup.com. On LinkedIn and Facebook @More, M-O-R-E, withSless, my last name. MorewithSless, a little play on words there. I’m on Facebook. I’m on LinkedIn, Instagram, anywhere on social media. Feel free to follow me. I post at least three, four times a week, and it’s all reverse mortgage related. You may see some pictures of my family and kids mixed in there as well because I’m super proud of them. But most of my posts are business-related and about reverse mortgages.

And give us a call. If you just want to have a conversation about reverse mortgages, learn about reverse mortgages, and a very easy-to-understand and hands-off approach, our contact number is (410) 814-7575, (410) 814-7575. And if you mention that you called in from the show, I will make sure that I call you back and speak with you personally.

Gary Heldt:

Great. Great, I really appreciate that, and I think the listeners will too. Appreciate your time. Appreciate all of the education that we got today on this. Today our guest has been Steve Sless. He is the premier mortgage, reverse mortgage guru. We appreciate your time today.

Steven J. Sless:

Likewise, Gary. Thank you so much.

Video Transcript

Randy Zachary:

What’s up world? Welcome to Realty Universal Radio, the fastest hour in radio, no doubt about it. I’m Randy Zachary and this is a show about real estate, about god, about life, about giving back, about being the change in the world that you’d like to see. Our privilege to bring to you Nathalie Mullinix and Realty Universal, a company dedicated to excellence. Realty Universal is a revolution founded on a very simple principle. We believe sellers and buyers should have choices. We have been a pioneer in the menu program system. More on that, of course, a little later.

Nathalie Mullinix, president and founder of Realty Universal, averaged over 80 million dollars a year in sales prior to stepping back to focus more on building Realty Universal membership network. She’s an accomplished speaker, writer, consultant, trainer, and, oh by the way, mother. She travels world-wide, literally, spreading the gospel of Realty Universal. And now, Nathalie Mullinix.

Nathalie Mullinix:

Hey everybody. I’m so happy to be here another week. I always say that literally. I have to kind of giggle every week because as you get older you’ll know what I mean. I’m so happy to share and to be here. Today we have a regular guest who is amazing. He stays up on all the updates and everything going on. With us being baby boomers, not everybody listens to baby boomer but many baby boomers are coming of age constantly now and quite a large population. So many people want to age in place, stay in their home. Some go to assisted living. Some have to go to nursing homes. There’s just so many gamut’s and things that happen. It’s so good to be prepared because it gets here before we know it.

Reverse mortgages are… For those of you that have been around a long time in the real estate industry… and we have many agents and brokers listening in, and general public… in the old days reverse mortgages were taboo. There was negative amortization. People were afraid of it and didn’t know what they were getting into. That’s where our government laws changes, protect the public. Now reverse mortgages are amazing.

Today, I don’t know of any expert at all… and I know a lot of people around the world, literally… that’s as good as Steve Sless in going over this because he has committed and stayed the course with it for years and just keeps getting better and better and up to date on it and just really is spreading the word, getting it out, helping many people. He has become regarded as the go to housing wealth expert by various media outlets bringing 16 years of mortgage industry experience. And he runs PRMIs, first consumer direct retail brand, dealing exclusively with reverse mortgages. Exclusively. And they’re pros. It’s located in Owings Mills, Maryland. He also coaches traditional loan originators working at PRMI’s 270 branches nationwide about reverse mortgages. Steven’s a powerful speaker and communicator, which you’ll hear. He regularly presents seminars and learning workshops for senior home owners, their family, and trusted advisors. His passion, expertise, and personality electrify audiences and inspire people to act.

It’s a big decision when you’re going through this and do you do this or do you do that. Everybody has an opinion, so it’s really important to get expert advice. He educates everyone on the house and the strategic use of the housing wealth, because we’re going to hear some golden nuggets today about how reverse mortgages not only let you age in place, they actually help you set up a game plan, equity, a couple things. I won’t go into it all right now. I want Steve to go over it. But how you can do so much. He’s going to dispel myths and common misconceptions about reverse mortgages and be able to tell and you can tell seniors, or if you are a senior, how to achieve peace of mind by helping them to secure the retirement they deserve.

Steve’s got… Expect more with Sless is more than a tagline. He vows to provide exceptional value and incomparable service. For more information you guys can contact us. We have also on the site information on how to contact people to get to Steve right away. He’s going to go over it as well. But without further ado, I’d like to welcome Steven Sless. Hey there.

Steven Sless:

Hey there. Great to be back. How have you been?

Nathalie Mullinix:

I’ve been great. Was that a mouthful or what? But I wanted… I love everybody to know what you’re doing. I’ve been great. It’s so great to have you back. I’m sure there’s been some changes even in the last six months that we aren’t aware of because things seem to change pretty fast. I’ve been really good.

So you have really figured out how to take your platform and help many people rather than just one at a time, even though one at a time is very important. Tell us, what’s been going on with you?

Steven Sless:

We’ve just been keeping busy. We exclusively work with reverse mortgages and I think that’s what separates us from most in the industry. And we are focused on education. We’ve been holding seminars and workshops mostly in the mid Atlantic but we do those also across the country. We have a huge seminar coming up this coming week on Saturday, November 9. For those of you in Baltimore, that seminar is at Martin’s West right on Dogwood Road off of Security Boulevard. It’s called Retirement on Your Terms: Straight Talk, Real Solutions. We’ve partnered with four industry leading experts in retirement planning and the real focus is to have an event where seniors can come out to free of charge and learn everything that they need to know about retirement, retirement planning, creating streams of income in retirement, senior care, how to ensure quality care as you’re growing older and as you’re aging in place.

So we’ve been focused on putting that event together. We do a lot of other media. Been on TV recently on the local news just educating about reverse mortgages because as you said in the opening it is a fantastic program that has evolved to become a real retirement planning tool over the years, but nobody really knows what they are. They still think it’s the reverse mortgages from 20 years ago. Your grandparents’ reverse mortgage. It’s anything but.

Nathalie Mullinix:

Exactly. And people are just so… and everybody talks and then you have social media and some people had bad experiences with them in the ’80s and ’90s, and this is just a whole new ball game, it really is. So tell everybody… For those who do not know what a reverse mortgage is exactly, tell everybody what this is.

Steven Sless:

It’s actually quite simple. It’s a mortgage loan that provides senior home owners that are 62 years of age or above the ability to pull back some of the equity that they’ve paid into their home over the years. You’ve spent your life investing in savings and saving and so you have a portfolio, hopefully, that is working for you. What you’ve also done is you’ve paid a monthly mortgage payment and you’ve created a level of equity in the home. If you have at least 50% equity and you’re over 62, you could qualify for a reverse mortgage. What a reverse mortgage does, it allows you to now get some of that equity back in a variety of different ways. We can cover those different ways later on in the show. I think what it really does is it provides the home owner the ability to enjoy retirement without monthly mortgage payments, improved cash flow, pay off debt, and stretch retirement savings all using the equity in your home.

Nathalie Mullinix:

It’s amazing. But nowadays… And the interest rates are so low right now. Are they ever fixed within a reverse mortgage? Or is it always based on an adjustable rate?

Steven Sless:

There’s two different options. There’s a fixed rate option and a variable rate option, and you’re right. Rates are super low. Reverse mortgage rates today are in the high threes, low fours. Very good time to look at utilizing your housing wealth and marrying the wealth that you have in your home with your other assets. Now you’re looking at retirement from a wholistic standpoint. You’re bringing together your 401k, your stocks, bonds, annuities, and the wealth in your home. You’re marrying them into one wholistic approach to retirement and the result is you strengthen, protect, and preserve the overall retirement nest egg.

Nathalie Mullinix:

Right. That’s fantastic. Now, how old do people have to be to do a reverse mortgage? [crosstalk 00:09:40] I’m just asking because I don’t want to go… It’s funny. We have to… So 62 years old. Now if their partner… or they’re married, their spouse… is younger, how does that work?

Steven Sless:

At least one home owner needs to be at least 62 years of age or older to qualify for the reverse mortgage. If there’s a spouse that is younger there are spousal protections… it’s called a non-borrowing spouse… to ensure if, let’s say, the spouse that is of age passes away the other spouse can remain in the home for the rest of their life with a reverse mortgage and they don’t have to leave the home.

Nathalie Mullinix:

That’s great. And what if there’s children? It doesn’t matter if there’s… As long as somebody’s 62 years old…

Steven Sless:

As long as at least one home owner is 62 years of age or older you can qualify.

Nathalie Mullinix:

And what about credit?

Steven Sless:

There are credit and income requirements. Nathalie, that’s one of the changes that happened that you were speaking about in the opening. Let’s go back for a minute to what reverse mortgages used to look like.

Nathalie Mullinix:

That’s a good way to do it.

Steven Sless:

10 years ago, 20 years old, if you were 62 years old and you had equity in your home and you had a pulse you could qualify for a reverse mortgage. It was very easy. What was happening is the wrong… People were taking reverse mortgages for the wrong reason. Reverse mortgages were designed by the government in the ’80s in the Reagan Administration to supplement retirement income, to be able to use the equity in your home to live a better retirement. They weren’t meant to be loans of last resort. They weren’t meant to be used as a bandaid to cure a short term solution that’s probably more of a long term solution. You had people that were taking out reverse mortgages that were taking a lot of money out of their home, they were misusing that money, the loans weren’t structured properly to meet the needs of the home owner. What happened was many of those home owners defaulted on their taxes and their insurance.

Nathalie Mullinix:

That makes sense.

Steven Sless:

That is a qualification of the reverse mortgage. You have to pay your taxes no different than a traditional mortgage. Or if you didn’t have a mortgage on your home, you still have to pay the taxes. A lot of people were taking money, they were defaulting on their taxes and the insurance, and you know what happens if you don’t pay your taxes. You’re going to get foreclosed on. There was a very large rate of foreclosure of people that were in reverse mortgages. It wasn’t because of the reverse mortgage, it was because the loan wasn’t structured properly, the client wasn’t educated properly, and they were too easy to get.

In 2015, the government stepped in and said, “We got to put a stop to this. This is a problem.” They did a lot of research and they came out with what’s called the financial assessment. So we do look at credit. We do look at income. Keep in mind these are loans designed for many home owners that are on fixed incomes, so the income requirement is less stringent than on a traditional mortgage. So to are the credit requirements. But we do look at the ability to pay your taxes and insurance. Even though you don’t have to pay a mortgage payment with a reverse mortgage, we do need to make sure that you at least have enough income coming in and you are credit worthy enough to prove to our underwriter that you are going to make payments on the taxes and insurance and keep up with the general upkeep of the home.

Nathalie Mullinix:

That’s fantastic. So they actually… But do they tie in the payments like PITI, or do they say they’re going to be separate? Can the home owner elect to have the payments [inaudible]?

Steven Sless:

It is the client’s responsibility to pay the taxes and the insurance.

Nathalie Mullinix:

So let me give you a… What if somebody is, say, 65 and they only get 1,000 a month social security and they’re not working? And say they don’t owe anything on their house. They’re not going to get very much? Are they going to go by the regular… For example, if you were going to buy a house or do a regular loan, and say your ratios are 36/41 or whatever, back end ratios, is it completely different? Do they qualify in a different way?

Steven Sless:

It’s completely different. We qualify based on RI, residual income, not DTI, which is debt to income ratio. RI is residual income. Basically, what does your money look like? How much do you have coming in versus how much do you have going out? What geographical region of the country do you live in? Because the cost of living is more expensive on the west coast than the middle of the country, so that’s a factor as well. And then we do look at your debts versus your income but the bottom line is we need to make sure that you have enough to cover the taxes and the insurance. We look at how much the taxes and insurance are and we’re able to make the determination whether or not you have enough income to qualify.

Nathalie Mullinix:

So if they have 100% equity but they don’t have much income then they’re in a bind really. It’s not going to work. Will it?

Steven Sless:

They could potentially qualify because we can also… and we’re getting into the weeds a bit about qualifying… what’s called asset dissipation. Even if you don’t have income, per se, we can dissipate assets. Maybe you have a 401k that has money in there. We can look at that 401k and do a calculation that provides you with, quote unquote, income each month. We can also look at the equity in your home as an asset and we can dissipate that asset and use that asset as monthly income. So there’s a lot of different ways that we can qualify you. Again, going back to this is a loan that is customized and designed for seniors, we understand… and the government did a lot of… There was a lot of thought that went into this. The government, when they came out with this financial assessment, understood this is a loan for many people who likely are on a fixed income. We can’t disqualify them or punish them for having a limited income, we just need to make sure that they are going to be able to meet their responsibilities, which are taxes and insurance.

Nathalie Mullinix:

That makes total sense. So it’s really worthy somebody contacting you regardless of their situation. Don’t just assume… If you’re listening in and you’re interested in getting this information for yourself, relative, friend, please do not assume that they’re not going to be able to do it, they have bad credit. They’re not making any money. It’s worth it if they have a house and there’s equity in their home… Steve, you said at least 50% equity, right?

Steven Sless:

Mm-hmm. I would say if you’re interested in learning more about a reverse mortgage… Again, you do need about 50% equity, but all to often I think some of our clients try to guess on the equity and the house is actually worth a lot more than they think. I think if you’re remotely close to 50% equity, at least one home owner is over the age of 62, give us a call or go to our website and schedule a time with us to learn more. We’re all about education. We’re all about empowerment. It’s important to become educated and empowered especially when you’re talking about retirement planning. Not just reverse mortgages, but just how are you going to fund your entire longevity? People are living longer now than they ever have been before and retirement is a whole lot trickier today than it ever has been. You need to be educated and you got to get all the information that you can and we’re happy to help.

Nathalie Mullinix:

Do you ever do the… like what you’re doing on Saturday. I’ll actually be in Florida at a convention. What you’re doing on Saturday at Martin’s West and you have the experts and you’re going over every aspect, etc., do you ever do that on a webinar where somebody can sit in and listen to all of that with experts? Is that a future plan?

Steven Sless:

We do a lot of individual webinars. Let’s say somebody comes to us and they want to learn about a reverse mortgage but their adult children live in a different state. We’ll bring all parties together on a webinar. Or if they have a wealth manager or a financial advisor that they work with, we want them to be a part of the conversation. A lot of our business comes from wealth managers, comes from CTAs, estate planners, attorneys that are working in that senior arena. We want everybody to be a part of that conversation. So we do webinars for those people. We don’t do a lot of webinars for the general public because I want to be able to look you in the eye, shake your hand, and educate you in person. It’s just my style. We do travel the country. We hold these events. They’re all free. We don’t charge for any events that we put on. Oftentimes we’re bringing in other partners of ours. For instance, this coming Saturday we’re partnering with a wealth management firm in the area here, an insurance agency, a senior care advocacy agency, to just bring additional value to the consumers, to the audience, that’s going to be in attendance.

Nathalie Mullinix:

Because there’s so much they don’t know. For example, will somebody be there talking about Medicare or Medicaid?

Steven Sless:

The financial advisor, her name is Sandy Stoll, she’s fantastic. She’s going to be talking about strategies for social security, Medicare, Medicaid, how to navigate all of your options. She’ll be talking about how to create a sustainable income stream throughout your entire retirement. Then we have Eric Benzer from the Benzer Insurance Agency. He’s going to be talking about protecting and preserving the assets that you do have. And Ellen Platt, who’s with the Option Group, she does senior care. She wants to ensure that you understand how to receive superior quality of care throughout your entire life. And then I’m going to be speaking about reverse mortgages and housing wealth. Oftentimes it’s the wealth in the come, it’s the reverse mortgage, that can help fund all those other things.

Nathalie Mullinix:

Right. And so many people do have the bulk of their moneys in their home. It’s just a fact when they own their homes, especially as you get older and you’ve stayed in the same home for years. That’s fantastic.

It’s interesting… and for those of you listening… gone through a situation where my mother is in an assisted living center because she has early dementia, early Alzheimer’s. We were looking, I remember before, at her aging in place. Bernie had passed, so she was by herself, and you have different scenarios where people are taking their parents in or not taking them in. The reverse mortgage is a great option to let them stay in their home as long as it’s feasibly possible. It just makes so much sense because people are usually happier in their own home. But what I learned… I learned so much. I’ve been in this industry, real estate, for almost 35 years. And I’ve helped people. We’ve helped other people move on, move from their homes and move into assisted nursing homes, etc. Senior communities, over 55 communities. I didn’t realize how much there is to learn about the senior care, the Medicaid, how it works in different states. It’s Medicaid, right, not Medicare? Because I get the two…

Steven Sless:

I mean, there’s so many options out there and so little education.

Nathalie Mullinix:

It’s interesting, though, to find out how… I always thought it’s a federal program, but the states mandate it and regulate. One state doesn’t have the same plan as another state. So my question… It’s mind boggling and it’s so important to figure it out because what Steve can teach you and will teach you can save your life really, because it’s nothing like ending up not doing anything and then there would’ve been ways that you could’ve had this money work for you for the rest of your life.

With that mouthful I want to ask, would somebody have long term healthcare… They can use that, if the policy’s set up properly, to stay in their home, right? They’re not all set up where you have to go to an assisted living or nursing home, right? I think. I’m pretty sure that there’s some-

Steven Sless:

I mean, long term care is an incredible tool if you set it up properly. We certainly… long term care, life insurance. Just understanding those options and how to navigate them. And oftentimes life insurance is going to provide some cash value that you can also tap into. For those type of tools we always turn to the experts in those fields, so we have a roster of trusted resources that we have that can advise us and our clients in that, and then where does the wealth in the home come into play and how can the wealth that you’ve created in the home help to fund long term care, fund life insurance, or fund in home care as well. Just making sure that you can age in place within the comfort of your own home and not have to leave the home if you do get sick.

Nathalie Mullinix:

And it’s so important because when you’re doing this… There were some long term care policies… I know we’re talking about reverse mortgages, but it really ties in when you’re looking at the plan. There were some where somebody has to go to a facility, but there’s some where you can take the life insurance that also offers long term care and then when you pass your family’s still going to get money out of that and they will let you stay at home. So it’s really important. And there’s also different states. I think Maryland, is it Medicaid, allows you to… if you have the long term policy, they’ll allow you to… It’s so crucial to have experts, like what Steve’s talking about right now, and not just second guess it, not just jump into something, because one of the long term care policies will give you the Medicaid exclusion. For example, that you could have 300,000 in assets in Maryland. Every state’s different. Before they start… Before they tell you to… and they can still get Medicaid. Many places you have to be down to under 300,000 dollars to be able to get Medicaid and if you don’t have certain things in place…

What Steve’s talking about with reverse mortgages and how to fund them with your house and the other policies that go along with it… you don’t have to have them for a reverse mortgage. But the other polices that can really protect you make such a difference to make sure it’s set up the proper way with whoever’s doing it knows these state laws and what the other laws are. Correct? It’s an interesting-

Steven Sless:

Yeah. I think it really just all about education. Education is paramount to making sure that you can have a successful retirement where you don’t have to worry necessarily about the nuances in funding different avenues of retirement. You just want to be able to have some peace of mind. You want to be able to enjoy retirement. You don’t want to have to think about, “If I get sick, how am I going to fund that? If I have to go into a long term care facility, how is that going to be funded?” I think the more you can do up front when you’re younger, the more successful and the more comfortable your retirement is going to be. But don’t be shy to reach out to experts. Most experts, whether it be retirement planning or Medicare, long term care, they’ll have a conversation with you, no different than us, completely free of charge. You become educated. You become empowered. If you decided to move forward from there, fantastic. If not, no harm, no foul. At least you then have the information to make a well informed decision for yourself or a loved one.

Nathalie Mullinix:

It’s just incredible. And I’ve learned a lot these past 14 months having to deal with my own mother. It’s unbelievable. Just even the benefits and things that are out there that we’re not aware of.

So with reverse mortgages, do you have a lot of people come… I mean, people are coming to… Are a lot of people waiting? When they’re 62… Okay, I’m going to come up with a scenario, because you know me. I always try to come up with different scenarios because people are people. So say somebody gets a reverse mortgage and they’re 65 years old, so they’re over 62, and they’re married. Their spouse is 45. We’ve got the men marrying the younger women. We have to have the women marrying the younger men. I’m only kidding. We need to reverse things around a bit here. So one is 65 and we’ll say the man is 65, the woman’s 45. I’ll be old fashioned here. He gets Alzheimer’s, dementia, and the woman takes care of him as long as she can and then she just can’t. I can tell you, it’s just not something that one person can do. It’s a lot of work and even for the person it’s good to have other things done.

So say that person at 65 is then going to move over to an assisted living place and then memory care. What happens to the spouse that’s 45? Because that person didn’t die. Are they able to stay in the house? Or do they have to move?

Steven Sless:

The spouse would be able to stay in the home for the rest of their life without a mandatory monthly mortgage payment and be able to at least some peace of mind knowing that they’re not going to be burdened with a monthly mortgage payment each month. It really, at that point, will come down to how the reverse mortgage has been structured. If there’s funds that are being set up to come in either at a monthly basis or in a line of credit, the spouse will not have access to those funds. That’s where working with the real professionals who…

Nathalie Mullinix:

Okay, they wouldn’t have access. Only the one that’s 65?

Steven Sless:

Correct. They wouldn’t have to leave the home. They could remain in the home forever, for the rest of their life. They would not have access, however, to any future funds from the reverse mortgage.

Nathalie Mullinix:

Okay. But the other one doesn’t have to pass away for them to be able to stay in the home. They can still stay in the home if the other one needs to go.

Steven Sless:

Absolutely.

Nathalie Mullinix:

That’s fantastic, though. That’s really good.

Steven Sless:

And that’s come a long way, too, over the years. It used to be that if you were a spouse that was younger you were removed completely from the title and the deed of the home. You had no home ownership, no rights, no nothing. Now that’s changed and evolved. That was one of the biggest and most important and impactful changes over the years, is non-borrowing spouses are protected and do not have to leave the home and will not be foreclosed on in the event the qualifying spouse leaves the home, whether it be into a care facility or passing away.

Nathalie Mullinix:

That’s fantastic, it really is, because you can really plan. When they have the reverse mortgage I guess they can’t take out another equity loan on top of it, right, because they’re going to be first place unless somebody give them a second. They’re not allowed to do a second mortgage, are they? Or a third mortgage?

Steven Sless:

No. A reverse mortgage is in first lean position. It would be very unlikely that anybody would go into second lean position behind a reverse mortgage.

Nathalie Mullinix:

But if somebody wanted to they could. If a private person said, “I’ll give you money but I’m just going to put it on there,” but it wouldn’t… It would be risky for them because they’re probably never get their money back, right?

Steven Sless:

Correct.

Nathalie Mullinix:

And then these mortgages… It’s now under FHA? Or has it always been? Can you tell? Because a lot of agents and brokers are listening or will listen in the future. Is that basically how it’s set up now?

Steven Sless:

There’s an FHA insured reverse mortgage, which probably represents about 98%, 99% of the industry. That percentage may be off by a bit but I think I’m pretty right. Then there’s also a proprietary reverse mortgage. There’s actually many proprietary reverse mortgage options on the market today. Maryland does not have any. I’m in Maryland, so I do a lot of proprietary reverse mortgage products. We do some out of state but not a lot. But you have private lenders that have now come into the reverse mortgage space seeing what a difference makes and impacting the lives of senior home owners. They now provide options that are not government loans but a very competitive product, oftentimes a cheaper product than the government option. If we have somebody in a state that allows a proprietary reverse mortgage we look at both options and we weight the options. Oftentimes in my experience the government is going to be a better solution unless it’s a very high dollar home.

Nathalie Mullinix:

But Steve, when did that come into play? The proprietary lenders… I know years ago, but when did they start letting them do that again?

Steven Sless:

Proprietary reverse mortgages have been around for five, six years now. They’ve become very popular and there’s been more innovation in proprietary reverse mortgage products probably in the past two to three years.

Nathalie Mullinix:

But they’re not in Maryland?

Steven Sless:

There’s no proprietary reverse mortgage products allowed in Maryland. Maryland has a law that does not allow a negative amateurized product: a private neg-am reverse mortgage product. Maryland’s actually one of the only states that does not allow it. It has to be government issued.

Nathalie Mullinix:

Okay. I wonder why…

Steven Sless:

Most of the proprietary products are for jumbo reverse mortgages. For 100 dollar homes, that is a great fit for one of the proprietary products.

Nathalie Mullinix:

For a larger… really? Amazing. Now one of the… because there’s things we’ve talked about before many times. With the FHA reverse mortgage, if somebody has it the spouse lives in the house even if the other one… once they pass away and the house is going to be sold and say the market’s really gone down and more is owed than what they can sell it for. Under the FHA reverse mortgage, that’s okay as far as for the family. They’re not going to have any decisions or judgements They’re not going to owe any money, right? Can you explain that to the audience, how that works? And if that’s also the case in the proprietary reverse mortgages?

Steven Sless:

All reverse mortgages, whether it be proprietary or government insured, they all what’s called non-recourse loans which means that no debt…

Nathalie Mullinix:

They have to be proprietary then?

Steven Sless:

They have to be non-recourse.

Nathalie Mullinix:

That’s fantastic because that’s where I was a little afraid when you said they can have private lenders out there.

Steven Sless:

Yeah. They were all non-recourse. Basically, if you pass you owe 300,000 dollars on your reverse mortgage. Your heirs receive the home. They can only sell the house for 250. That 50,000 dollar difference, your heirs or your estate are not responsible for. The insurance on reverse mortgages covers that difference. It’s almost like buying gap insurance for your car. If you buy a car, you buy gap insurance. Your car gets totaled the insurance company writes you a check for 20,000 dollars. You owe 30,000 dollars. You’re not responsible for that 10,000 dollar difference. Reverse mortgages work exactly the same. We call it peace of mind insurance because you can take a reverse mortgage out without having to worry about passing on a debt to your heirs or to estate that they’re going to have to come out of pocket to pay.

Nathalie Mullinix:

I wonder if that’s… It’s 50 states in the US. I wonder if internationally or Canada… I wonder if these other countries have things set up similarly. Or probably not.

Steven Sless:

Reverse mortgages are gaining popularity across the world. Canada has a reverse mortgage product. I believe Australia has a reverse mortgage product. The principles and the strategies behind using housing wealth and marrying that housing wealth into your retirement plan, it does strengthen, it does protect, and it does preserve your overall portfolio. I think a lot of wealth managers now are starting to realize that. When we talk to wealth managers the conversation is, “Look, if you have a client and that client needs to draw 4% per year just to live their normal lifestyle and you project them to run out of money, drawing that 4% they’re going to run out of money at 95 years old.” That’s okay right now, but what if the market goes down? What if the market goes down by 10% or 15% or 20%? Now what? They may still need to draw that same 4% to just live.

So if you bring in the housing wealth, which is all tax free money by the way… All the proceeds from a reverse mortgage loan, it’s a loan. It’s not income. So there’s no taxes on loan proceeds. You’re bringing into the equation a lot of untaxed home equity that can be turned into cash in multiple strategic ways. Now you’re bringing that into the overall portfolio to prolong the life of the portfolio: to make sure that the client can fund their entire longevity and they’re not going to outlive their money.

Nathalie Mullinix:

But is it only non-taxed up to 50,000, up to 250? Is there a certain amount like there is if you’re a principle resident and you’re married or not married? Does that play into it? Or no?

Steven Sless:

You’re borrowing your own home equity. It’s not income. You’re not making income. You’re borrowing your equity. You already paid taxes on that money because every time you made a mortgage payment you were creating a certain level of home equity, so the money that you already paid into was already taxed. Now a reverse mortgage is just a way to pull that money back out. There’s a few different ways to… I was going to say there’s a few ways you can pull it out. A reverse mortgage is just one. You can take a traditional home equity line or a regular mortgage, but if you’re 70, or even if you’re 62, do you really want to take a 30 year mortgage and be burdened with 30 year’s worth of a mortgage payment? Where a reverse mortgage you can pull out money, not have a mandatory mortgage payment. You can treat it like a traditional mortgage if you want to. You can make payments, Nathalie, on a reverse mortgage. But you don’t have to. So later on in life when cash flow is critical and you have health care to fund, long term care to fund, in home care potentially to fund, it’s important to be able to maintain cash. A reverse mortgage allows you to do just that.

Nathalie Mullinix:

Amazing stuff. That’s why I always say… and you’ve heard me say it before… I wish they had taught us compound interest when we were kids because I’m like, “That money you just pay and pay and you can build it.” It’s amazing what learning how to do this does for you and your life and peace of mind.

Can you do a jumbo reverse mortgage here in Maryland?

Steven Sless:

A jumbo? No. There’s no jumbo reverse mortgage products in Maryland.

Nathalie Mullinix:

So FHA… It goes up to the FHA limit then just like regular loans?

Steven Sless:

Correct.

Nathalie Mullinix:

So the jumbo reverse would fall under the proprietary lenders because they don’t have conventional reverse mortgages?

Steven Sless:

No. They have the government insured and they have proprietary. I think at some point we get proprietary in Maryland. There’s some lobbying that probably needs to be done. It’s some old law. You know how these old laws are. There’s so many stupid old laws are but for whatever reason Maryland doesn’t allow it.

Nathalie Mullinix:

If you break that old law they say ignorance is not their problem. And you’re like, “Wait a minute, how are we supposed to know everything?”

Steven Sless:

Very true.

Nathalie Mullinix:

Of course, with lending it’s different because you’re going to go under guidelines just like we do in real estate and that’s where you have to go to the experts. But it’s hysterical to me how many things that they just expect us to know these days. I love it. I just love it. And I tell you, lots of times this doesn’t hit home until you’re dealing with it. It’s just amazing to me how you can set this up and really protect your family for the future, too, and your moneys.

Tell us what you… I’ll let you roll with it and I’ll be quiet for a bit.

Steven Sless:

I think it’s important to… If any listeners are interested in reaching out to us for a no obligation consultation, give us a call. 410-814-7575, 410-814-7575, or you can visit us at reversebaltimore.com. That’s reversebaltimore.com. We are nationwide. Our website is Reverse Baltimore but we can do business in multiple states throughout the country. So wherever you’re listening, even if it’s not a state that I’m licensed in, chances are I know somebody in that state that can help you out. We’re here to help in any way that we possibly can. Certainly contact us. Let us educate you, let us empower you, and let us teach you what a powerful financial tool the wealth in your home can be.

Nathalie Mullinix:

Can you do the jumbo reverse… like Hawaii and other places and California where there’s a lot of higher dollar… Well, there’s high dollar everywhere.

Steven Sless:

Any state that I’m licensed in that offers jumbo reverse mortgages or proprietary reverse mortgages I can help.

Nathalie Mullinix:

You can do it? Okay. Fantastic.

Steven Sless:

We do quite a bit of those in California. Obviously, California: property values are through the roof. The market penetration on proprietary in California, that’s where almost every proprietary reverse mortgages originated now, was California. But you also have some really high dollar values in Florida, Arizona. I mean, there’s… New Jersey.

Nathalie Mullinix:

Everywhere has high dollar, you know what I mean? Everywhere has high dollar. I just didn’t realize… I know there’s certain… Like now, some of the no doc, no loans, are not allowed in some states but they are opening up in somewhere that was kind of went away when we had the crash.

Steven Sless:

Yep. And I think, Nathalie, over the years the general misconception about reverse mortgage is that it’s only for those who have no options. It’s anything but. I think that stigma over the years has kept people away from learning about reverse mortgages. They are not designed to be bandaid loans. We have plenty of clients that come to us when it is almost too late and they say, “I’d like to take a reverse mortgage.” And we do the financial assessment for them we identify pretty quickly that’s probably wise to look at selling the home, look at downsizing, look at lowering your expenses because we don’t want to put a bandaid on an open wound. This is a long term financial solution that involves the equity in your home. You want to make sure that you’re going to live there for quite some time. If somebody tells me, “I’m looking to move in the next years,” a reverse mortgage isn’t the right product for you. There may be other products that would benefit you more.

So we don’t look at look just do you qualify. We look at suitability. But if you’re somebody who has worked hard their whole life, saved money, has accumulated a reasonable amount of wealth, but yet you still worry about the potential of outliving your money, I would say you’re a great candidate for educating yourself about a reverse mortgage. You’re somebody who should definitely give us a call.

Nathalie Mullinix:

I said I wasn’t going to say anything but I can’t help it. You know how I am. Can you do it on a first and a second home? Or it has to be only on your first home?

Steven Sless:

Got to be primary residence only.

Nathalie Mullinix:

Primary, okay. Some of these I know I’m just asking, but to ask. Then the other question is… You made a good point. Some people come to you and it is kind of late because they’re not working and they don’t have enough money to do anything. Say somebody’s working and they know they’re going to… they’re 62… retire at 65. They come to you and say… and they’re making a decent six figures plus, whatever. They come to you and say, “I want to do a reverse mortgage now.” Do you go… When that’s set up, is that set up until they die? Or does that get checked every year? And do they redo their incomes and change it?

Steven Sless:

No. Once you have the reverse mortgage, the way it’s structured at the time that you take it is how it’s going to be. When we sit down and we do a consultation, I want to know what your goals are. I want to know when you’re looking to retire, how much income you have coming in now, how much you might need for the future, because these are loans that can be customized and structured very strategically to fit within many people’s retirement portfolio. We have clients that are very high net worth, that are worth millions of dollars, that have equity in their home and they want to make it work for them. We have others that don’t have such a high net worth. They may not have a lot of income coming in but they have a good amount of equity in the home. We need to then come in and educate them and show them how to make that equity work for them. The home equity is just sitting there. It’s locked between your four walls it’s trapped and it’s not doing anything for you but sitting there.

Another exception, Nathalie, I think is we have clients that come to us and say, “If I do a reverse mortgage, I’m going to leave less to my heirs. I want to be able to leave an inheritance. I’m going to leave less to my heirs.” That’s just not the case.

Nathalie Mullinix:

Because of the negative amortization.

Steven Sless:

You may leave less home equity to your heirs if you do a reverse mortgage, but it doesn’t mean that you’re going to leave them less of an inheritance. If you bring in housing wealth, which is tax-free money, you minimize the amount that you have to draw out of your retirement accounts. We go back to that situation where I was telling you about the conversation we have with a lot of our advisors. If you’re somebody that needs to take 4% per year, can we work with you and work with your advisor to have you take maybe 2% or 3%? Your investment accounts you want to leave alone as much as possible. You want them to grow especially now in an economy that’s been growing for the past decade plus. The more you pull from your investment account, the less growth you’re going to have over time.

If you can bring to the table tax-free money from the wealth in your home that you put there… Think about that. Your IRA, your 401k. You put that money there. You invested that money. You also put your home equity there. It’s the same money. You spent your hard earned money to pay down your mortgage to potentially put yourself in a situation where now you can incorporate that money, get some of that back, and be able to live a more comfortable retirement. That’s the conversation that we want to have with everybody. It’s a very detailed, dialed in conversation about not just how much equity you have in your home, how do we structure it to make sure that it’s going to best benefit you and that we’re putting the loan together in a way that is going to be successful for the long haul: to ensure that you’re not going to run out of money.

Nathalie Mullinix:

That’s fantastic.

Steven Sless:

And you can also buy a house with the reverse mortgage. You can downsize or right-size and you can purchase your next home with a reverse mortgage.

Nathalie Mullinix:

Let’s go over that. I didn’t… forgot about that.

Steven Sless:

A HECM for purchase. H-E-C-M. It stands for home equity conversion mortgage. You can do a HECM for purchase, which is basically buying your next home with a reverse mortgage. The senior housing market right now is tremendous. We talk to realtors all the time. They’re working with more seniors now to buy homes, whether it be to upsize, downsize, or right-size. Think about you have 10,000 people a day turning 62 years old. The senior demographic is one of the largest demographics that are buying homes right now. Typically those homes are purchased in cash because it is more difficult to qualify for a traditional mortgage later in life when you’re on a fixed income.

I’ll tell you a story about a HECM for purchase that we did recently. You know the local area here. We had a client from the White Marsh-Perry Hall area. Their home that were currently living in is worth 400,000 dollars. It was too much home for them. It was three stories. They wanted something that was going to be a bit smaller, maybe two stories, but they really wanted something that was going to be a one floor. They’re in their late 60s. They can’t walk steps any more. What they didn’t want is they didn’t want to sacrifice in home. They wanted a nice kitchen. They wanted a nice bathroom. They wanted the amenities they were used to. They’re coming out of a 400,000 dollar home. It’s a nice house. They owed 100,000 dollars on that home. They listed that home. They sold that home. They net 300,000 dollars. They then purchased a 300,000 dollar home. They downsized a bit without sacrificing. They found a home that was all one floor, a nice rancher, same area. It was 300,000 dollars.

With a HECM for purchase, or a reverse mortgage for purchase, you need to put down about 50% to put yourself in that 50% equity position. Of the 300,000 that they net, they put down 150,000 dollars. They then gave 150,000 dollars in cash to their wealth advisor to add to their existing retirement portfolio. They’re in a 300,000 dollar home for 150,000 dollars cash. They never have a mortgage. They only are required to pay taxes and insurance. Think about that.

Nathalie Mullinix:

That’s great. But what was interest rate around, probably? I mean, I can’t remember exactly.

Steven Sless:

3.8, 3.9? Very low. Rates are in historic lows right now..

Nathalie Mullinix:

Would that have been fixed?

Steven Sless:

They did an annual arm, which is… It’s an arm but it doesn’t adjust on a monthly basis. It adjusts on an annual basis. There’s rate caps. There’s a 2% annual rate cap and a 5% lifetime rate cap to protect them. But rates are very low right now and so in many cases arms make sense. They could’ve done it with a fixed rate but they chose to go the arm route to get a lower interest rate. But think about… How else would they have bought that house? They could’ve done a 30 year mortgage. In their late 60s you’re doing a 30 year mortgage. To me that’s madness. To commit yourself to a mortgage payment into your late 80s, early 90s, is just crazy. And to burden yourself with a monthly payment like that is crazy. They could’ve bought the house with cash and used all 300,000 dollars that they got from the sale of that home, spent it all on…

Nathalie Mullinix:

That’s real smart. Instead they put into the… Give it to the wealth manager. Now, what if they’re snow birds and they go to Hawaii or go to Florida or somewhere warm during the winter? What’s the minimum amount of months they must be in the house while they’re having a reverse mortgage?

Steven Sless:

Six months and a day makes it your primary residence.

Nathalie Mullinix:

That’s awesome. Wow. Sounds really good.

Steven Sless:

And a lot of our clients do that. Sometimes they’re even… especially for the higher net worth clients that we have. They want to get their hands on tax-free money from their primary residence and then go buy a home in Florida or go buy a home in Arizona or Texas or a warmer climate. There’s a lot of different ways that you can use the equity in your home. Again, it all comes back to education and empowerment. If you’re somebody who is interested in a reverse mortgage or thinks that the wealth in your home may work for you, give us a call: 410-814-7575 or visit reversebaltimore.com. Again, I am in Baltimore so that’s my website but we do business all over the country and we can help you in any state that I’m licensed in. If it’s a state that I’m not licensed in, I can still find somebody that I will be confident enough to refer you to.

Nathalie Mullinix:

I love it. And what time are you… on Saturday? Just because I won’t be around. But if I know people… On Saturday at Martin’s West. What time is it?

Steven Sless:

Saturday, Martin’s West. Registration is from 8:15 until 9:00. The program is from 9:00 until noon. And reservations… We have over 100 reservations already. We have room for about 120, 130 people there. So reservations have booked up really quick. But if anybody’s interested in that event, you’re local, you’re in Maryland, you can make reservations on the event website which is baltimoreretirement.com.

Nathalie Mullinix:

That’s amazing. It’s a plan. I just want to ask…

Steven Sless:

And that is 100% free of charge for that event as well.

Nathalie Mullinix:

That’s fantastic. I love it. So wrap it. I love it. You always have so… And breakfast. What a deal. You always have so much good information.

Steven Sless:

[crosstalk 00:52:52].

Nathalie Mullinix:

You always have such good information and these new changes, you always keep us up to date, which I so appreciate it. If they wanted to go fixed rate… They’re doing the adjustable like the scenario you gave us with the people from White Marsh and they went and were able to take 150 and give it to their financial advisor and then do the HECM. So they bought the house with the reverse mortgage. They chose for the adjustable rate. Does that go up… can go up to a percent or down to a… What’s it based on? The Tea Bill or index?

Steven Sless:

It’s based on the LIBOR, which is the London Inter-Bank Offered rate. The LIBOR has been a safe index over the years. There’s not a lot of fluctuation with it. Reverse rates, you don’t see the constant ups and downs like you do with traditional rates. Traditional rates are based on the 10 year… If you get a home equity line, chances are it’s based on the prime rate. Reverse mortgage rates have nothing to do with that, so if you see on TV rates are going up, rates are going to down, doesn’t necessarily mean that reverse mortgage interest rates are moving at all.

Nathalie Mullinix:

When we do it the way we do in the real estate world on our properties. Is it going to be up like when it goes up or down within two? How does it gauge on the LIBOR? Is it like one?

Steven Sless:

There’s rate caps. There’s a 2% annual cap. There’s a 5% lifetime cap.

Nathalie Mullinix:

So there is a 5% cap.

Steven Sless:

There are caps. There are protections just in case the LIBOR does go up.

Nathalie Mullinix:

Perfect. And if they want to do it fixed, they can do it fixed, even though it’s negative amortization? Even though it’s done in a different way?

Steven Sless:

Yeah. Fixed rate’s available. Again, it’s going to come down to having a conversation and figuring out what the right fit is. The variable rate options provide more flexibility when it comes to structuring the loan. If you do a fixed rate, typically that’s going to be somebody who wants to pool one lump sum. They want to buy a car. They’d rather not finance it and not pay cash. They’d rather use their home equity to buy the car or they want to consolidate and pay off some debt. It really just depends on the individual situation of the client and that’s where we really like to sit down, do a deep dive. And depending on their goals and their wants and their needs we can then help structure the right loan, whether that’s a variable or a fixed.

Nathalie Mullinix:

I love it. This is fantastic.

Steven Sless:

And our time always flies by. We always have a blast on these shows.

Nathalie Mullinix:

Oh my gosh, it flies by so fast. But I tell you, the nuggets and the information that you give are just incredible.

Steven Sless:

I appreciate that. We love what we do. I think that’s what… It just makes our job so fun. We love what we do. We love working with our clients. We love educating. We love bringing the wealth management community into the fold. There’s somebody that… We’ve never worked with them that we have now. You’ve had all this product innovation and now the product lends so well to a wealth manager using this as a tool to help somebody fund a very fruitful and meaningful retirement. We love what we do. I hope that is reflected by the work that we do as well. It’s fun and it’s a job that really means a lot to us, and it’s really not a job. It’s getting up every day and being able to come to the office and work with our clients. It’s so rewarding.

Nathalie Mullinix:

You are so dedicated. I mean, you have been in this for so long and it’s just amazing to me. You’re helping thousands of people, really, with the way you’re doing it all over. I’m very impressed. It’s amazing how much we can do as citizens, as people, when knowledge is power, isn’t it? That’s the thing. So many ways that we do things with our money can be handled differently if we just knew what to do. It’s really worth it to get in touch with Steve. Steve can help you anywhere in the country. Anywhere. You’re so knowledgeable you can still refer people anywhere and give them good advice. It’s definitely worth it to do it. That’s like with real estate. We can help you anywhere because of all the experience. It’s always worth it to get that extra knowledge. I’m so happy to have you back and we’ll talk soon.

Steven Sless:

Great to be back and I greatly appreciate you having me back on.

Nathalie Mullinix:

This has been a pleasure and this has been great. Now all us… You’re not at the baby boomer stages, but I’m getting up there. Well, I’m a baby boomer. It comes by very fast. Let me just tell any of you young ones out there, it comes a lot quicker than you’ll ever think. You won’t realize it until you get there and go, “Really? This is not possible.” As they say, age is just a number though.

Steven Sless:

It’s life, isn’t it? It just flies. Especially if you’re having fun. The old saying is true. Time just flies when you’re having fun.

Nathalie Mullinix:

It’s a number but it’s really… One of the things is as you get older you really do want peace: peace and security. You don’t want to be worried about things and this definitely helps you do that. And for somebody that hasn’t bought a house yet, they can still do it too. It’s never too late when we start putting things in play. Never ever too late.

Steven Sless:

Absolutely.

Nathalie Mullinix:

All right, Steve. I’ll talk to you really soon because this is so exciting. I want to get it out there everywhere as well. And to everybody out there I wish you peace.

Video Transcript

Randy Zachary:

What’s up world and welcome to REALTY UNIVERSAL Radio, the fastest hour in radio. No doubt about it. I’m Randy Zachary. This is a show about real estate, about God, about life, about giving back, about being the change in the world that you’d like to see. I’m privileged to bring to you Nathalie Mullinix and REALTY UNIVERSAL, a company dedicated to excellence. REALTY UNIVERSAL is a revolution founded on a very simple principle. We believe sellers and buyers should have choices. We have been a pioneer in the menu program system. More on that of course a little later. Nathalie Mullinix, president and founder of REALTY UNIVERSAL averaged over $80 million a year in sales prior to stepping back to focus more on building REALTY UNIVERSAL Membership Network. She’s an accomplished speaker, writer, consultant, trainer, and by the way, mother. She travels worldwide, literally spreading the gospel, if you will, of REALTY UNIVERSAL. And now, Nathalie Mullinix.

Nathalie Mullinix:

Hey everybody. I’m so happy to be here another week. My traveling of course has been definitely cut to zero since February. We’re in September right now. It’s been really wild. I can … We’re all going through it all over the world and looking forward to next year. Usually I’m never one to say I’m looking forward to the future. I mean, I love the future, don’t get me wrong. But I love to enjoy now, here and now. But it’s been very trying for everybody, and this is so new, this COVID-19 and the politics. It’s just been a very weird world, I think for everybody. Today I’m really excited because we have Steven Sless who’s coming on today. He’s a regular contributor to us. I trust him wholeheartedly. It’s just really fun because we will get good solid information up to date today about reverse mortgages. So much is going on.

I don’t know about you, but so many of us are used to Googling or whichever search engine you use, and we don’t always get all the facts. There’s so much information everywhere we go. I mean, I’m an old timer and you can’t even go into the store and buy something without seeing 50 or 100 different varieties. It’s just really wonderful to me when we can simplify things and we can make sense of it and we know it really is the real deal. Because today, I think what I’m hearing from many people, including myself, is that we just don’t know what to believe. Our normal is not normal and things are changing and it’s just so important to stay balanced today. So where do we go from here? COVID-19 has had a major effect on all of us and we all pray that you and your family are safe and healthy. This period has caused us to really look at what is most important. We’re also so used to trusting that our monies are safe, our plans are intact at least to the point that we have made plans.

It’s so important right now to keep peace, to stay the course, to not have fear, to really think like a leader, because otherwise you’re going to be pulled in so many directions. Reverse mortgages have changed dramatically for the better. Steve, an expert in reverse mortgages is going to join us today and give us details on how to age in place and even purchase a home, either using a reverse mortgage or a forward reverse mortgage. I bet many on here, we have agents brokers that’ll listen to it later … Most of the people download these days because the podcasts are so easy to do it rather than listen to live. But it varies. I bet many didn’t know that you can actually get credit lines on your reverse mortgages now that earn interest. As I was mentioning in the beginning, we don’t know what to trust, who to trust, what to trust anymore. Things are just up in the air and I believe they will settle down in time and we’ll all make it.

It’s life, and it’s not always … Life is not always easy. I love having Steve on our show because he is a master at doing his homework on reverse mortgages daily. I mean that from the bottom of my heart. He truly cares about everyone he serves. It isn’t just a business center for him and I’m honored to know him. I’ve known him long enough now, seen what he does and hear what he does, that I know he really … We can depend on what he tells us. Of course on here, we don’t give legal advice because we’re not allowed to. You always want to do your own homework, et cetera, and things do change. We just want to put that out there. He takes the time to get to know people and trust comes with time. Steven Sless runs PRMI’s first consumer direct retail branch, dealing exclusively with reverse mortgages. He’s located Owings, North Maryland, but he can actually place you and give you help anywhere in the country. He also coaches traditional loan originators working at PRMI’s 270 branches nationwide about reverse mortgages.

He is a powerful speaker and communicator. He regularly presents seminars and learning workshops for senior homeowners, their family and trusted advisors. With today, with most of us using Zoom and other platforms, he can do this for you anywhere, wherever you are. It’s easy to set up. Steven educates on how the strategic use of home wealth by way of a reverse mortgage can protect and preserve a retirement portfolio to ensure so seniors don’t outlive their money. Right now it’s really … I just want to say it seems very, very important because a lot of people, how do we know if money’s are safe? Are they really safe in the stock market? Are they really safe in the banks? I mean, the banks say they’re insured up to $250,000 by FDIC, but what happens if there’s a run on the banks? What happens with the federal? I mean, these protections are in place, but what really happens? Some of you may be saying, “Well, I don’t have any money saved or any money put anywhere.” That’s okay. It’s just, it never … It’s really important to look at the whole picture and still be safe.

The one thing about a reverse mortgage and your property, is it’s there. You have to pay taxes. Taxes have to be paid. Insurance has to be paid and you have insurance to cover any destruction. So it’s a very, very safe investment. I could go on and on and on, but I don’t want to do that because I’m going to bring Steven on. His goal is to dispel the myths and common misperceptions about reverse mortgages. As old timers and many people that have heard about them, and then from the ’90s, ’90s were not a good time to do reverse mortgages in my opinion. Maybe they probably were if you really know what you were doing, but now is a good time. So many laws and changes have come into effect to protect everybody. It’s really a cool thing. In 2019, Steven earned the CLTC, which stands for Certified Long-Term Care professional designation and financially, physically, and emotionally to protect people for years down the road. Without further ado, I’d like to welcome Steven Sless. Hey, how are you?

Steven Sless:

I am fantastic. That was some testimony there. I’m humbled by it. I appreciate it. I’m grateful. I’m excited to-

Nathalie Mullinix:

I really mean it.

Steven Sless:

… be back on with you.

Nathalie Mullinix:

Thank you. It’s so great to have you on because you really do do your homework and I know we’re giving everybody really good …. You’re giving really wonderful nuggets and advice to help people and have that … Lots of times with what you’ve done, with what I’ve done when we really become experts in our field, and they say you’re an expert after 10,000 hours … Well, I think we’ve got way more than that. When you look at it, it’s way more than that, way more. I think it’s like over 100,000 if I add up all these years, Oh my goodness. We take it for granted that people kind of know things that we know. Everybody knows something that the other doesn’t know, and I think this is really important right now. I’d never really thought about how our home is so important. Right now, lots of landlords are in big trouble around the country, and I had to experience something firsthand as well with a property. With all the moratoriums, there’s like people, Oh my gosh, they might lose a house if they can’t pay the mortgage.

There’s so many things going on that are so up in the air right now. But when it comes to a reverse mortgage with the home that you live in or that you own, and it seems like such a safe place to be and to park your money. Would you agree kind of with this case type COVID, I mean, situation going on?

Steven Sless:

Well, I think let’s separate it. I think reverse mortgages are playing a big role in the American recovery right now. That we’re seeing reverse mortgages used by folks that you would never imagine would be great reverse mortgage candidates. There’s a lot of folks that are coming to us right now with homes valued at over a million dollars. They run businesses, they’re CEOs and business professionals, and they’re looking for a way to keep their business afloat. Maybe they borrowed money and maybe they took out one of the government loans to borrow money to keep their businesses afloat. But instead of pulling from all of their personal assets and depleting all of their personal assets, they’re turning to their home. Which their home is a big part of their overall net worth. They’re able to turn to their home and borrow some of their home equity using a reverse mortgage as a bridge loan to keep their business afloat. Reverse mortgages are used by those professionals right now.

Then we’re also seeing, a big conversation that we’re having today is with the adult children of senior homeowners. Prior to COVID, maybe the plan was for mom and dad one day to go into a nursing home or a long-term care facility. Don’t get me wrong, there’re some very nice long-term care facilities. But now, given COVID and given what’s happened in some of these long-term care facilities, now they want to make sure that mom and dad have a plan to age in place comfortably in the home that they love. Using the equity that’s built up in the home is a great way to be able to afford that. It’s a great way for mom and dad to fund long-term care, to eliminate an existing mortgage payment, to free up some cashflow, maybe to supplement their retirement income. Oftentimes, proceeds from the reverse mortgage are used to improve the home to make it more suitable for mom and dad’s lifestyle needs as they’re going to be growing older in this home and aging in place.

As you mentioned in the entrance and in the intro, and we can get into this a little bit more later on in the podcast, is you can actually buy a home with a reverse mortgage. There’s a lot of folks doing that right now.

Nathalie Mullinix:

Got it. Wow. I love it. It’s so cool because you really see how these different make these different models can make such a difference in times of uncertainty. So for those people that may not know what a reverse mortgage is, tell us then on what exactly it is.

Steven Sless:

Yeah. It’s actually quite simple. A reverse mortgage gives homeowners, 60 plus, access to the wealth tied up in their home equity while they still own the home and they continue to live there. You’re borrowing some of the equity that you put into the home over the years by making regular mortgage payments. Now you’ve put yourself in a position where a good portion of your net worth does lie within your home equity. A reverse mortgage unlocks that equity and it enables you to pull out some of that equity strategically and tax efficiently to fund a better retirement.

Nathalie Mullinix:

Then did you say it’s age 62? Or did that change?

Steven Sless:

Age 62 for the government insured reverse mortgage, the jumbo products for homes that are valued over $800,000 nowadays, you only have to be 60 to qualify for those products.

Nathalie Mullinix:

Really?

Steven Sless:

So that has changed. Yeah

Nathalie Mullinix:

Really?

Steven Sless:

I think it’s-

Nathalie Mullinix:

I didn’t know that. Wow, go ahead.

Steven Sless:

Yeah. It’s a big change.

Nathalie Mullinix:

Go ahead.

Steven Sless:

What happened is, the jumbo reverse mortgages are proprietary mortgage products. They’re developed by reverse mortgage lenders, and I think there’s a need in the marketplace right now. Homeowners-

Nathalie Mullinix:

They’re covered, they’re not-

Steven Sless:

… have a …

Nathalie Mullinix:

They’re not covered by the government insured at all? They’re just strictly jumbos. Okay.

Steven Sless:

Yeah. These are proprietary loan products. Now they still have a lot of the same protections that the government products have, but they’re not government issued products. These are proprietary products that have been developed by reverse mortgage lenders to fill a void within the marketplace. That void was folks with higher valued homes. There’s a lot of folks out there with homes that are worth 800,000, a million. We closed a reverse mortgage last month for a home that was valued $4.5 million. We were able to draw out $2.1 million in cash, cash, tax-free cash that this person was able to take and repurpose to fund a better retirement. There’s been a lot of innovation over the years with these reverse mortgages.

Nathalie Mullinix:

A quick question. Because you know how my mind will think of these different questions off it and we’ll kind of jump around, but go back to talk. A quick question then, on the proprietary jumbo products, so to speak, are they protected for example, on the government insured? If the value goes down, the government takes it, it’s insuring the mortgage. On the proprietary products, are they still covered if the house ends up losing its value?

Steven Sless:

Yeah. They’re all non-recourse loan products, which means that no debt is passed on to the heirs or the estate if there’s an overage above and beyond what’s owed on the house when you leave the home.

Nathalie Mullinix:

Amazing. I love it. I love it. Wow.

Nathalie Mullinix:

You know what, I am … I’m sorry about that. Are you there?

Steven Sless:

That’s okay. I thought we were starting over.

Nathalie Mullinix:

That’s what I do. I’m just enjoying myself, sitting at home, and I hit the button by accident. See, I don’t stay still too well, do I? You know me well enough. For some reason, I don’t know. That is … I love it. I love it. You can do them in all 50 states, right, pretty much?

Steven Sless:

I’m licensed in 12 States. My company primary residential mortgage is licensed in 49 of the 50, everywhere but in New York. So yes, we can facilitate a reverse mortgage in almost all 50 states.

Nathalie Mullinix:

Hawaii too, huh? Because that’s cool.

Steven Sless:

Hawaii too. Yeah.

Nathalie Mullinix:

Okay. Oh my gosh, I’m loving this. It’s just, right now with COVID how does that … The reverse mortgage is still going to be pretty much, it’s going to be 50%. The property has to have at least 50% equity in it. Is that a good rule of thumb for any property pretty much?

Steven Sless:

Yeah. A good rule of thumb is about 50%. The older you are, the less equity you need to have. If somebody is, I’d say over 75 they may not need the full 50% equity to qualify. Somebody that’s closer to 62, which is the qualifying age for the government insured reverse mortgage product, I would say a general rule of thumb is you got to have about 50% equity.

Nathalie Mullinix:

Okay. When you said over 75, what would be just a percentage, just to throw one out there? I know we’re not giving legal advice, and things could change, but what’s approximate if they’re over 75?

Steven Sless:

Yeah. You don’t-

Nathalie Mullinix:

Could they-

Steven Sless:

You don’t see a big swing. Maybe 45% equity. You still have to have close to that 50% number. I would say 50% is a general rule of thumb. But if you’re somebody that’s serious about looking into it, you would want to reach out to us and we can do a proposal for you to let you know how much equity you do need to have.

Nathalie Mullinix:

Okay. That’s fantastic. I love it. I love it. I’m just excited because this gives you a lot of security right now and you don’t have to worry about, well, your money just going up in wherever. Because it’s … Right now, do you see the stock market? It went way down and it’s going back up, and it’s gone back down and it’s just all over the place. I wish that … When people do the option trading, it’s risky, but I think it’s the … Or this wing trading, it does seem to get them more money, but it’s risky. They say the long-term holding is good too, but it’s weird. Let me ask you, I’m going to ask you, can someone lose their home with a reverse mortgage?

Steven Sless:

That’s a misconception and I’m glad you brought that up because that’s where I always like to start. You hear out there, “If I do a reverse mortgage, I could lose my home.” That’s simply not the case. I want to give you the backstory of why people think that way and maybe in doing so it’ll help kind of folks understand why there’s a misconception out there that you can lose your home with a reverse mortgage. There are responsibilities in having a reverse mortgage. There’s three main responsibilities. Number one, you have to pay your homeowners insurance. Two, you have to pay your property taxes. Number three, you have to maintain the home because it’s your house and you still own the home. Now you may hear me say that and say, “Well, how is that different from having a traditional mortgage or even no mortgage at all?” It’s not.

You own a home, you got to pay your taxes, you got to pay your insurance, and you got to maintain the home. With a reverse mortgage, if you do not meet any of those three responsibilities, the loan could be called due and you would have to pay off the loan and at that point, pay off the money that you borrowed. If you can’t do so, you could be foreclosed on. But those are the three responsibilities. As long as you meet those responsibilities, you cannot lose your home. Nobody in the history of reverse mortgages has ever lost their home because they had the reverse mortgage. But what’s happened over the years, and not so much so since a lot of these new guideline changes have been implemented … In 2015 there was a big change where now we have to look at credit and income as qualifying factors. Prior to 2015, if you were 62 and you had, at that point, close to 60, maybe even 65% equity and you own your home, you could qualify for a reverse mortgage and it didn’t matter if you had good credit, good income.

None of that mattered. What happened is you had a lot of people that were taking reverse mortgages for the wrong reasons. A reverse mortgage is not meant to be a loan of last resort. It’s not meant to be a bandaid on an open wound. If you’re somebody who already can’t afford to live in the home, if you can’t afford to pay property taxes or your homeowners insurance, or if you can’t afford to maintain the home, you shouldn’t take out a reverse mortgage. But folks did, they got into trouble. They couldn’t afford to pay their property taxes and comply with the responsibilities, and they lost their home. After 2015, now we have to look at credit, we have to look at income. You have to qualify for a reverse mortgage in a similar fashion that you have to qualify for a traditional mortgage. The rate of foreclosure on reverse mortgages has plummeted. It’s gone way down.

Nathalie Mullinix:

That makes sense.

Steven Sless:

Very, very few people right now are getting foreclosed on. But to go back to the initial question, no, you cannot lose your home simply because of having a reverse mortgage. You can lose your home however, if you don’t meet the terms of the loan.

Nathalie Mullinix:

That makes total sense. Okay. Way back in the ’90s, because reverse mortgage still is negative amortization. When they borrow the money, they’re going to owe more than what they … Say the mortgage is 300,000, the house is worth 600 and they have 300,000 equity. That 300,000, it’s going to be more when the loan comes due or when the person passes away, et cetera because there’s negative amortization. But because interest rates are low now, that probably it’s still good?

Steven Sless:

That certainly has a lot to do with it. Interest rates on reverse mortgages right now are in the high twos, low threes. It’s a great way to borrow from your equity at a very, very low rate of interest. But yes, the way that reverse mortgages work is you are borrowing tax-free from the equity in your home. Now another misconception is there’s no monthly mortgage payment. I like to call it a flexible payment. I don’t like to say there’s no payment. Because you can make the payment, you can treat it as a traditional loan if you want to. The key with the reverse mortgage and what a reverse mortgage provides that no other mortgage provides is the flexibility. You can make a payment, when it works for you, if it works for you. Or you don’t have to make a mortgage payment and you can defer paying back the loan, principal and interest until you leave the home. Whether that’s by you passing away or whether one day you just say, “You know what, this is too much home for me and I’m going to list it and sell it.”

If you do so, you pay off the amount of money that you borrowed, plus the interest that accumulated over the life of your loan and you leave the home. But you can make a payment-

Nathalie Mullinix:

That’s not bad.

Steven Sless:

… if you want to. There’s a lot of people that do right now and they treat it like a traditional mortgage. Maybe they’re in their young 60s and maybe they’re going to make a payment. But what happens if they need long-term care? What happens if an emergency were to arise? They’re not saddled with a mortgage payment each and every month. That’s the big plus.

Nathalie Mullinix:

That’s fantastic. But let me ask you this, because say somebody is 62 and just say they have 80%. I mean, their house is almost paid off or it’s paid off. They only get social security and they don’t have any other income, but their credit’s perfect. In that situation, they wouldn’t qualify for that because of everything’s changed since 2015. They have perfect credit, they have a lot of equity, but their income isn’t high, so they wouldn’t qualify for that much. Would they usually?

Steven Sless:

A reverse mortgage-

Nathalie Mullinix:

Say they don’t have a job.

Steven Sless:

… it’s typically easier to qualify for a reverse mortgage than a traditional mortgage, and I’ll tell you why? Reverse mortgages, to qualify, we look at residual income. RI, we call it. With a traditional mortgage, the traditional mortgage underwriter is going to look at DTI, debt to income ratio. Those are two different factors. What we need to make sure of is after all of your expenses are paid, there’s enough money coming in each month to pay your taxes, to pay your insurance and to maintain the home. Because again, those are the three responsibilities. But there’s no … You don’t need to meet like a 42% DTI like you do-

Nathalie Mullinix:

Really.

Steven Sless:

… in the forward world. it’s very different.

Nathalie Mullinix:

Because I would assume that.

Steven Sless:

Yeah. A lot of our clients, I wouldn’t say most, but a lot of our clients are only on a single income. Whether it be social security or a pension. You don’t need a lot of income to qualify. You just need enough baseline income to afford to comply with the responsibilities of the loan.

Nathalie Mullinix:

They would take annuities and then factor money in the bank or stocks and all that? Would they take that into consideration like asset loans or no?

Steven Sless:

Yeah, we can …. We actually did alone last month. The homeowner had very little income coming in, but he had $2 million in an IRA. We were able to take that $2 million and do an income calculation on it, and he qualified. Not because he had a little bit of income coming in, because otherwise he wouldn’t have qualified without these assets, but he had $2 million sitting in an IRA that we were able to repurpose as income. Not touch it. We’re not touching that money, but we just say, “Hey, that money is there.”

Nathalie Mullinix:

Right. You know it’s covered. Right.

Steven Sless:

We knew it was covered. We could look at how much his taxes and insurance are and determine that there’s plenty of money there to be able to afford living in the home.

Nathalie Mullinix:

That’s excellent. That’s excellent. So it’s different just because my brain … I’m 35 years in real estate and we look at ratios and numbers and all that? It’s totally, like throw that o

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