Are You Using Your Home Equity? With Matt Harrison of Movement Mortgage

0:02 So, I have been on this quest to learn about reverse mortgages. I'm a real estate professional for over a year now. And one of the things I've learned is the world of difference between those people who have it on their business card or their website as one of many tools and those who specialize in reverse mortgages as professional. I really lucky to have a return guest, Matt Harrison of Movement Mortgage, who is a retirement mortgage professional, specifically trained, specifically supported with this company for this product. Matt, thanks so much for joining us today.

0:33 Hey, thank you so much for having me on, Bill. Now, I'm sure you also come across originators who do traditional loans. We call them forward loans in this space. You know, and as a real estate agent, I get the occasional approach from somebody who offers me to do a VA, FHA, conventional, construction, or this, or that. I think there's no way you can do two of those, let alone all of them. Talk a little bit about what it was that caused you from a career point of view to choose to specialize in reverse mortgages.

1:02 Yeah, great question. So, I think and to hit to your point, you know, you can I like to use medical analogies, you know, and if you go into a general practitioner, you know, they're going to be able to diagnose you, kind of give you an idea. They went to med school medical school. They kind of learned a little bit about everything. But, you know, if I have something, you know, wrong and it's an injury to my knee and let's say that I need to go get surgery on my knee, I am not going to my general practitioner for that surgery. I'm going to be going to an orthopedic surgeon that specializes in knees because I want to make sure that this is something that this particular doctor does every single day. It's they're an expert at it. They know a knee better than anybody else and I'm going to want to make sure that's the person that works on my knee. So, when we look at, you know, really anything that we do, you know, in the mortgage space, we have the same type of originators out there. We'll have those that can kind of do a little bit of everything. But then you have those that specialize in a program. For me, I used to be the guy that did everything. You know, I, you know, originated forward and reverse, a little bit here, a little bit there. But it was my really my dad who came to me with a little bit of a of a problem. He was, you know, needing to sell his house and move into something different. And you know he really didn't want to have a monthly mortgage payment and you know retirement was looming you know in a couple of years and so you know at that point I dove into reverse in a much more meaningful way and at the end of the experience and my dad long story short was able to buy a $620,000 home and he only had to bring in $380,000 that was his cash investment. The reverse mortgage brought in the rest and he was able to buy that house.

3:01 But at the end of that, he said, "Matt, why doesn't everyone do this? Why is this not something that, you know, the mainstream public will do on a regular basis?" And I said, "Dad, I've been in the industry for almost 20 years at this point, and I'm barely learning about it." And so I saw it as a huge opportunity to really dive in, learn about all of the nuances. And really understand this program on how it can supercharge your retirement and put you into a better spot financially. And so that was my story on it. You know, it's funny you say that because I've been in this business for decades. I was an originator at first. I originated some of the reverse mortgages I call 1.0, the older version of it. And moved into real estate full-time almost 20 years ago. But because I had done it, I thought I knew the product. And what's true about this product in particular, like everything in life, it's changed so much that all the things I knew were holding me back from using it. And I was shocked to find, for example, that this is ideal for many people like your father in the story that you gave. Like me, when I was shopping for a property I didn't buy, but perhaps relocating or moving my primary residence to Florida a few months ago. I'm a real estate agent. I do a lot of business. I didn't know that reverse mortgage was even in the cards to think about. And I was and that's why I launched this podcast.

4:30 I said, "Well, if I don't know this, there are a lot of people that know this." And for all the struggling in the industry, for all the originators struggling and the Realtor® struggling, here's a case where if you just teach people what's available, you'll create more market share for yourself and the people you work with. So, I agree wholeheartedly. It really is about getting the word out. So, let's talk about the first example that you gave was with your father using it for purchase. I think that's probably the most underutilized piece of that and I don't know why it's underutilized. That's why I have this podcast. We're going to get a bunch of people to watch the this podcast to talk about it, but you know what? Why do you think it is so underutilized and what can we do you think, to help make it more at least considered in the toolbox before people make a decision?

5:14 Yeah. And I think some of this is going to stem back to the stigma of what reverse mortgages used to be or what people think that they currently are. And when you when you have a stigma, when you have a an idea about what you think something is,

5:32 You're already predispositioned to have an opinion about that. And unfortunately, reverses way back in the day, they gave themselves their own bad name, right? I mean, they weren't a good program in my I mean, they did fit for some people, but

5:47 You know, FHA came in, too many people got ripped off and frauded by the first version. Way too many people. Was set up. It was almost and there was scams that were run off of them that really destroyed some people's wealth and it got taken advantage of. I would call it the stinkma the stink of that program at that time. And I used it effectively but you know if only 10% was fraud as a lot of businesses going down and that's why the program had to get changed.

6:14 Yeah. And like I said it is such a different program now. And so that's the first hurdle. The first hurdle really is education. You know, e educating people on how this program works so that they can make a informed decision on if this is going to be a good, you know, good option for them. So, I think education is big. So, when we talk about, you know, reverse in the purchase space, and I'll just go to my dad's example because it's a perfect one to look at. My dad had a $300,000 house. This was seven years ago, and it just wasn't going to fit for him. He needed something bigger, better, nicer, that sort of thing. And so we moved into trying to figure out, okay, well, what can you what can you buy? And he found something at about 620 that really kind of fit his needs. Well, if you sell a house for $300,000, you want to buy a $620,000 home, you have a couple of different ways to do it, right? You can pay for it cash. And so he could take $300,000 from the sale of his house and take $320,000 from his retirement and combine the two and buy this home cash. And there's a lot of retirees that will do this, right? Is it okay? Sure. Is it the most efficient way to use your money? In my mind, it's not because you're parking all of your parking money into an illiquid asset and that asset, the money you park into it has a 0% growth rate. What builds the value of your home is what the market is doing and not how much money you've put into it. So, option number one, could he do it? Yes. Did he have the funds to do it? Sure. But he really didn't want to do it. Okay? He didn't want to take money from his retirement account in the tune of $320,000 to buy this home cash. His second option would be to use a normal traditional mortgage. So he brings in a $300,000, you know, down payment. He has a $320,000 loan. And now he's got a mortgage

8:19 Payment for the next 30 years. You know, that would be in the tune. Back then it was about $1,800 a month. And you know, if you think about it, when you get into retirement years, your cash flow position is very important. How much money do you have coming in versus money going out? And if you don't have to make a housing payment, if you don't have to be taking $1,800 from your social security and your retirement portfolio to make a housing payment, would it be better not to? I mean, you might be able to, but let's talk about efficiency of money. You know, if you don't have to do that, can you put that money somewhere else? And so my dad was in that boat. And so with the reverse mortgage, he was able to bring in three, you know, he had to bring in $380,000 as a certain amount or percentage depending on age that you have to bring in as far as your down payment. Now, the reverse mortgage loan brings in the rest. And from that point moving forward, your obligation to make a principle and interest payment becomes completely optional. Now, Bill, when I first did this loan, I had no idea all of the other really fun things that you can plan when you have a reverse mortgage in place. I just threw this out to my dad. Dad, you don't have to make a payment.

9:36 You only have to bring in 380. So, he still had to liquidate 80 grand out of his retirement account, but for him and my stepmom, they do not have to make a payment for the rest of their lives, right? So, when we talk about efficiency of money, he didn't have to bring as much in to buy the home cash. He doesn't have to make a monthly mortgage payment. He did have to take out 80 grand from his retirement account to do this as far as the additional down payment. But if you just do the math, you know, $1,800 a month in a payment you don't need to make and divide that by 80 grand is going to be, you know, roughly, let me just do the math here since we're since we're talking about it. Let's go 80 grand and we divide that by 1,800 a month.

10:26 44. It's 44 months. I that's his break even point. And so, you know, a little about three and a half years, you know, all day long that makes sense, right? So, you know, for him it was why doesn't everybody do this? And Matt, you should be getting out there more and teaching. And, you know, I think that's really what we're trying to do collectively as an industry is teach people about how this program works. Is there a better way? Is there a more efficient way to buy property in retirement? And you know we have a lot of fun with it.

11:03 You know the that scenario there's two challenges for people who are in retirement. One is they're used to not you know in your case of a of a paid off house. They're used to not paying for a house. And so it's not just $1,800 payment versus renting or $800 versus their current payment. It's really they have maybe have been paying a mortgage or they were thrilled to pay it off five years ago and they've been living their life at an equilibrium with no payment. And so the idea of having to move and make a payment is a challenge. And the second is you or I being in business, the truth is you and I could easily go out and make one or two or three deals that would pay for that year's worth of payments by building our business. Once you're in retirement, you kind of lose the opportunity on the income side. Now, many people, you know, could get a new job or a part-time job or may retirees take up real estate, but it's not as simple as just flipping a switch and working a few more hours to make the money up. And emotionally, it's a big challenge. And so, the idea of having a housing situation that makes sense with no payments due at least is attractive option that everybody should have presented them at some point.

12:10 Absolutely. You know, like I said, this is this is a pathway. There are multiple pathways to take and you know not everyone is going to select this pathway.

12:19 Yeah. But you know for those that look at it and the one thing I love about this program Bill is this is a math-based program.

12:28 It's a math-based program. And when you can see the math in different pathways that you take whether you buy your home cash or you use a normal mortgage or you use a reverse math is math. And so when you're able to show people how retirement could look in each one of those pathways, that's when it becomes powerful because again, that knowledge becomes power that they're able to use in that decision making process as far as how they want to do this. And we're really only scratching the surface as far as all of the bells and whistles that come with using a reverse mortgage,

13:04 Right? But, you know, I get I get it all the time, right? Okay, Matt, I don't have title to my house, right? If I do a reverse. No, you still have title to your house. The bank does not own your property. Okay, Matt. So, I hear that my heirs are going to be stuck with a bill at the end and there's not going to be any equity left. Well, depending on where the value of the home goes because there's no guarantee there. But if we just take a normal average 4% appreciation rate for property, which by the way, if we look back over the last 80 plus years, I just saw this presentation by Barry Habib with MBS Highway, there have only been five years in the last 83 where we had a negative market in real estate nationally.

13:52 I think four was like 1%. It wasn't really substantial. Four of those five. Five. So we can we can basically project out, hey, this is a comfortable growth rate as far as the value of your home. And yes, at some point you're either going to sell the property or you're going to pass away while you're there.

14:09 If you want to sell it, you list it for sale, you sell it, you pay off the mortgage balance, all the remaining equity position is yours. When you pass, your kids can either decide to keep the house by refinancing or paying off the loan balance or for most of us, we're going to sell the property that our parents kind of pass to us because we can't figure out a way to split it five ways. So list it for sale, pay off the balance, and the remaining equity then goes to the kids. But in the event that for some reason the loan balance is higher than the value, we're repeating 2008 all over again. This loan allows for no repercussion to come to the heirs. So this is a nonreourse loan. The heirs do not have to come in with a single penny and they can either walk away from it. They don't have to pay a dime or they can still retain the property by paying 95% of the current appraised value and retain it. So there's a lot of protections that are in place with the program as far as that's concerned.

15:12 Well, the 95% I think applies only to the HECMs version, the government sponsored version of this which is the vast majority of those issued. But just to put a little disclaimer on that and I think that is an interesting point that you know most foreclosures on reverse mortgages are either old reverse mortgages back in the day when they did 80% loan to value and the borrower lived a longer time longer than expected and got all the money out of the house plus some their loan balance went up faster than the house and they took all the cash

15:45 In which case they got all the cash. I mean, if it the house upside down on those old versions, even it's only because it got the cash and there's no risk to the errors. On the newer ones, there's a lower loan to value. So, it's so unlikely it ever happen, but if it does, you get you can basically buy the property with a 5% discount on the HECMs loans with a guaranteed short sale tool that's been added to the program. So, there's a lot of great ways. The other way foreclosures happen is, and I get involved in this a lot, the deedants pass, maybe the parents in many cases, and the kids just ignore the reality that there was a mortgage. Maybe they don't know and it's public record. You can check or a siblings living in the house and hiding the mortgage statements and hiding the fact that there's forclosure happening and then all of a sudden there's a foreclosure posted and that's just bad planning and bad management. But even there I have a reverse mortgage SOS program where we can step in and help move things quickly to get done if necessary. So again, I think with within a reason there's no excuse to ever lose the property and even under extraordinary economic changes that might happen in the future, there's some built-in protections that make this superior than have your cash tied up and or for sure your cash tied up and or other mortgages. So let's talk a bit about we talk about the purchase side of it.

17:03 How about the family and this is common here in LA where somebody bought a house, you know, in the 80s maybe for $800,000 or $600,000 and had a three or $400,000 mortgage and time's gone on now and they still owe $100 $200,000 and they're making the payment and maybe they're now entering a phase where their cash flow is tighter. So, it's a refinance where they're going to pay off the loan, maybe take some cash for something, gift, vacation, estate planning. Talk a bit about using this tool as a refinance tool rather than just the for purchase version of it.

17:36 Yeah, great question. So, you know, again, a lot of people right now that have mortgages have really good interest rates. You know, they refinance back in the day. They got a two or 3% interest rate and they tell all their buddies about it and you know it's something that they're proud of and that's and that's awesome and I let people know that hey you know what there's really nothing wrong with your current pathway if you're making a payment and you've got a low interest rate and you know you're able to maintain your head above water and your financial picture. There's nothing wrong with that. What we look at is there a more efficient way to do it, right? And so I love to ask this question, especially when I'm around financial planners. And you know, let's say that Bill, this is your mortgage and you know, you're paying $1,500 a month and got a fantastic rate and you've got about 10 years left in your mortgage. Okay. The first thing that I would say is, "All right, Bill, if I was your financial planner today and I said,"I want you to give me $1,500 a month for the next 10 years." So, that's going to be a good chunk of change, right, over the next 10 years. I'm going to put that money into an illiquid asset. You can't touch it. And it gets even better. It has a 0% growth rate.

19:10 How excited would you be, Bill, to invest your money with me at $1,500 a month for the next 10 years? Yeah. Well, I've done it [laughter] on purpose.

19:21 Yeah. So, and in essence, that is exactly what we're doing when we pay a mortgage payment, right? It is I that mathematically that is what we're doing. We're taking money and we're putting it into a payment into an illiquid asset that we cannot touch unless we get a loan on it or we sell the property and that money that we're putting in is not growing for us. The market tells us what our growth is on the property, not how much money we put into it.

19:50 Right? So, what I'd like to challenge people to think about is, all right, Bill, this is this is your current plan. You're paying $1,500 a month. What if I was to ask you if you could find a better place to put $1,500 a month? Do you think you'd be able to find one?

20:11 Right. You know, if you didn't have to put it in your mortgage, could you find a better place to put $1,500 a month? Because Go ahead, Bill. Well, say this is why real estate investors almost always buy property with leverage because, you know, if a property goes up two or 3% per year, that's not a great return. But if you put 80% down through a mortgage and 20% down payment as cash, that three that 2% per year is like times four and you get an 8% return. And if your mortgage is 6%, you're making more money on the equity of the house than on the mortgage over time. Once you've paid down that mortgage substantially, you've lost that leverage. And so at some point it makes sense economically to relev and arbitrage or now if it's your house, there's some different emotional issues and those things that somebody has to deal with. There's different security issues and different you know estate planning issues. But as a general investor, no investor buys a property for cash or with 90% equity because returns never work. They should always be able to get more return for the overall property than the interest rate they're going to pay on the portion that's the loan. And so a homeowner in the same spot, they maybe it made a lot of sense when they bought the house. They didn't buy it for cash.

21:36 They bought it for 20% down and 30 years later it's paid off. They should be thinking about releveraging it to get better returns. At least consider the option. I'm not saying it's right for everybody or even the majority of people, but everybody should look at it as a consideration.

21:51 Yeah, absolutely. I mean, if that money, if that $1,800 a month could instead be going to a new investment property, right? Or, you know, something like that to where you're building a, you know, a rate of return that's going to be coming back,

22:04 Right? Absolutely makes sense to do that because really there's only five things you can do with money, right? You can spend it, you can save it, you can invest it, you can give it away to charity, or you can burn it. And I wouldn't recommend doing that, right? So, you know, when you're looking at those opportunities, you know, can that $1,800 a month payment potentially go somewhere else that could make you a better rate of return, whether that's in real estate, whether maybe it goes with a financial planner. Allow the financial planner to help that build at five or eight or 10% per year. Again, the math on that looks so good. It really does when you start to think about, all right, how can I be more efficient with the money that I am using? Can I put it somewhere else that's going to be doing better for me? And so for anyone that has a home that they still have a mortgage payment on it, this is something you should really start to digest. You know, do could I put myself in a better spot? And by the way, Bill, if you had a 0% interest rate, you're still putting money into an illquid asset with 0% growth as far as the money part,

23:18 Right? And could that be going somewhere different? And so we have to start to think about that in a little bit different light because your home can be used as a tool to allow for you to build more wealth and a bigger nest egg.

23:34 So all that sounds great theoretically, right? Let's say I agree with the premise, but you know, how does the rubber hit the road? Meaning imagine I'm a homeowner watching this or I'm a forward I'm a regular loan officer, Ford originator, you know, watching this saying, "Hey, I have a customer might be interested in this. How do I go from well this is a great concept to well how the numbers really look like for me how much can I get what can I do with that money what's that return going to look like what does the process look like from a interested party and then I guess obviously the same's true from a professional if you're a financial planner of some sort how do you go from this is a good theory to hey here's your options and you can borrow this money and here's what you can do with it what does that process look like

24:14 Yeah so it's really simple you know we talk about it theoretically but again this is a math-based program, right? So, we you know, at Movement, we have a lot of software programs that are very simple to use and understand, and we can show those, you know, with a client. And really, we only need a couple of very specific pieces of information, the age of the youngest borrower. Now, for the home equity conversion mortgage or HECMs program that FHA insures, you've got to be at least 62 years old. Or if you're married, at least one of you needs to be 62 and the other one can be under. Now, there are a couple of states. Texas, I'm talking to you. They're going to be a little different. Both have to be 62 in that respect, but for a majority of the United States, if you're married, at least one of you needs to be 62. Your spouse can be under, but we're going to go off of age. That's a big factor as far as the initial information we need. Second, we need to know the value of your home approximately. How much is it worth? And then along with that, what is owed right now on your current mortgage? And maybe you own it free and clear. We're going to get into that one here in just a minute. But if you have a mortgage, how much is that mortgage? And what does that payment look like for you right now? With that information alone, we can develop a proposal. We can go through a strategic planning session to teach you, hey, this is what your pathway currently looks like. This is where your money's going. This is how much money you're projected to spend over the next 10 or 15 or 20 years in the monthly payment that you're currently making. And put that side byside to what the reverse mortgage would look like for you depending on if you're wanting to save the payment you don't need to make anymore and put it somewhere else or do you want to spend it? Are you going to invest it? We can go through all of those scenarios.

26:09 So again, you can see mathematically how this works. And you're also going to be able to see what's happening to the loan balance through time. And so that's really the easiest way to explain this. And that process, I mean, for the clients that I work with, Bill, we're generally looking at about a half hour to do some fact-finding, make sure we understand where their scenario is. But this does not require a hard credit pull at this point. It does not require an application. This is just going through what the numbers look like for you today, how this will affect you. And again, we can start to have some fun with it. We've got the ability to look at someone's, you know, nest egg as far as money that's invested in 401ks or IAS. And let's say they're pulling out $4,000 a month. Well, how long is that going to last them, you know, for their retirement? And what does that look like with or without a reverse mortgage to start to use in a coordinated strategy. But for the financial planners out there, that's where we have a lot of fun, too. We like to blend in both the reverse mortgage and what they're doing with their assets under management to show a couple of different ways to help the sustainability of their retirement. And this is from studies that are done from PhDs in their own field. This is Dr. Dr. Wade Fowl, Barry Saxs, Jamie Hopkins that have already done the research and have come up with, you know, the game plan for, okay, if you want to maximize retirement, this is how you do it.

27:48 So, it sounds like it's a fairly easy, unlike pre-qualifying to buy a mortgage, which is really kind of like a colonoscopy. It's just not as pleasant as a colonoscopy is. No offense to movement mortgage or my favorite originators out there, but come on. It we can't give people a straight answer without and it's because you can't give them an accurate answer in many cases without that. But on the reverse mortgage and that include I guess a reverse mortgage for purchase really the whole consult is 30 minutes and you're going to pretty much know what your options are. I mean obviously the value of the property has to be verified with an appraisal. You can call me and I can you do some we have five different automated valuation models. ZIL is one of them but there's four others that are in many cases more accurate. So I can help with that if you ever need help with that. But you can give Matt a call and walk through a separate time to do a consult and 30 minutes at least see what your options are on paper. And if you're financial professional, seeing a customer who maybe it doesn't have as much assets as they want and is sitting on equity. This is a tool that most financial planners, wealth management people don't talk about. I think to their detriment, I think to the customer's detriment as well. And that's the main thing is the customer. So Matt, I appreciate your time today. Okay. And I see on your website you have a contact me button as well as your phone number and contact information. If someone wants to get with you and if for some reason you're listening on the audio, reach out to me. You'll be more glad. I talked to Matt regularly. He's been a guest on this program a few times, but feel free to reach out. Phone number 80133.

29:13 Yeah. [phone number]. Great number, man. [phone number]. His website. And he is a professional in specifically reverse mortgages. Matt, thank you so much for taking time with us today. I really appreciate I was learning a lot. More importantly, I think you really you really create a comforted perspective this business to make to break it down, make it more simple for people. Thank you so much.

29:37 Thank you, Bill, as always. Appreciate the opportunity. And for the rest of you, this is Reverse Mortgage Weekly. We get together, Reverse Mortgage Podcast. We get together every week with mostly reverse mortgage originators like Matt, people who specialize in this field, sometimes management vendors, to learn how to be more effective with our customers and our referral sources. If I can help, reach out. I'm at Bill Gross Probate on social media. If you have questions, comments, put in the chat, send me an email, like, subscribe. If I can help, if you want to be interviewed on this program as well, feel free to reach out to me. I'm always looking for good guests. You can't be as good as Matt, but I can get you one as well. So, if I can help reach out, as always, make today your best day