How a Reverse Mortgage Changed My Life, with Kevin Guttman

0:01 Welcome to the Reverse Mortgage Podcast. I'm Bill Gross, your host. We get together every week and talk to top originators and managers in the industry on how they can be better in their business, how we can be better, how we can better serve our clients using the tool of reverse mortgage as well as just being more focused as a business person on our clients. We're excited to have here today a local colleague of reverse mortgage, a CRMP, certified residential mortgage professional, I'm sorry, certified reverse mortgage professional. Based in Orange County, California and an author of an amazing book, Reverse Mortgages Changed My Life, that means his life, not mine. Kevin Gutman. Thank you, Kevin, for joining us today. Thank you, Bill. Glad to be here. So, tell me, how did I mean I know it changed your life because you published a book. How did a reverse mortgage change your life? You know, it's funny. I started in the business in 20 2004 and started out just originating loans, subprime era. And 2007, I got trained in reverse mortgages. There was some things about the program I just wasn't quite comfortable with. And in 2015, HUD and Congress and the government changed those things. And they actually made the program safer for seniors. So, I got retrained to do reverse mortgages 2015. The last 10 years that's been the majority of my business. And I just am so inspired every time I meet with a senior and hear their story and they always come back and they thank me and they tell me how this has helped them how it's improved their life. So, I just thought, you know, I should write a book and just share their stories and share with other people and they can see how a reverse mortgage isn't actually a bad thing, it's a good thing. So, yeah, the book came out in February, it's doing great.

1:46 And it just really tells real stories of my clients and how it's improved their lives. So, like me, you've been around a while. I was an originator early in my career, and I did a couple of what I would call the 1.0 version of reverse mortgages back then. I think I did two total. And one was a great mortgage that ended up when the family passed, they called me to list the property and which I think demonstrates the value of the product to them at that time. So I have some experience with it, but obviously I don't do it every day as you do. So tell us what kind of circumstances? You know, the reputation of reverse mortgages is so horrible. You know, and you said it's not just for people who need it. Though there's some people who do need it and it's a good tool for certain circumstances, but it's also for people who don't need it and how to take advantage of it. So talk about Give me an example of somebody whose life was changed with reverse mortgage maybe who didn't need the mortgage, but it was a great tool to help them. Yeah, that's a good question. So I think about this lady I helped in Grand Junction, Colorado, Grandma Pat. And I always ask people, I say, "Hey, why do you want to do this? What's your objective? What are you hoping to accomplish?" And she said, "You know, I raised my daughter as a single mom and now she's a single mom. I have three grand boys, grandchildren, and I want to create memories with them. So I'm taking the equity from my house and we're going to go on a nice vacation every year.

3:11 This year they're going to Turks and Caicos for like 10 days." And she said, "Those boys are going to remember this time with their grandma." And so that's a legacy thing, right? She's taking equity up from her house. She's kind of paying forward, if you will, her inheritance to her grandchildren and she's creating these memories that they'll think about her when she's gone. So does she really need it? No, but she doesn't want to deplete her investments, so she's using equity from her house to create some memories and tighter relationships with her grandchildren. And so this is a way perhaps to be a little more accessible and or liquid and or maybe aggressive by taking the equity the house from being purely just for passing on as inheritance to not all of it, but deploying some of those assets as you as it makes sense for you to as you live. That's a fantastic example. So, obviously so case one, you can use the equity to distribute your inheritance before you pass where you're still alive. Otherwise, it's locked up. Got it. Talk a little bit about the term is H4P or using reverse mortgage for purchase. I'm a Realtor®. And I just don't see nearly as many as I think I should.

4:30 Have you had occasion to do some H4P loans? And give me an example of one if you had that was successful. Yeah, I've done several of them. They're awesome. So, an H4P H stands for HECM, home equity conversion mortgage for number four purchase. P is purchase. So, I remember this one couple came to me. They had moved from Northwest Arkansas back to Colorado Springs where they had family. And the husband had to be on oxygen at the altitude. Wasn't in the best of health. And the wife had left the room for a few minutes. And he said, "Listen, I need to make sure my wife's going to be okay when I'm not here. I'm not long for the earth." I said, "Okay, Bill, help me understand what that looks like." He said, "Well, I want to be sure she has a place that she can live in with no mortgage payment, which obviously that's only product that has that is a reverse mortgage. She doesn't have much maintenance to maintain the house. And you know, her living expenses are low. So, they found this condo. And they bought it right before Christmas. And sure enough, put one large down payment down. No monthly mortgage payment. And I told them, I said, "Listen, as long as this remains your primary home, you maintain it, you pay the property taxes, insurance, HOA dues on time, the term of the loan is 150 years. In other words, you can't outlive it." Five months later, I get a call from Sharon. Hi Kevin, this is Sharon.

5:51 I'm not sure you remember me. Of course I remember you Sharon, how are you? Well, I wanted to let you know that Bill passed. And you had told us that as long as this remains my primary home, I maintain it, I pay the property taxes, insurance, HOA dues on time, I can stay to age 150, I can't outlive it. Is that right? I said yes. Big sigh of relief. She said, oh thank you, that's the only way I can afford to stay in my home. So, this is truly a game-changing loan because a lot of people Bill live in a home they've lived in for 10, 20, 30 years, raised the family. Maybe now it doesn't suit them. They have stairs, there's a lot of maintenance, they don't want to mow the lawn or shovel the snow if they live where there's snow, and it's hard to maintain. So, now they can buy a newer home with updated amenities in the part of town they want to live in, put one large down payment down and not have a monthly mortgage payment, and improve their standard of living, their quality of life. This use of this tool is so underutilized. I think it's one of the things that caused me to launch this podcast. I'm a real estate agent. I should know about this product. And for personal reasons I've been shopping for property in Florida. I live in California. I would my wife in Florida we're married in Florida. I'd like to move to Florida at some point.

7:08 It's a fantasy. I don't know that we're going to, but whatever. And I kept looking well, I don't want to sell the house we have for various reasons, tax reasons, and my wife is here. But I could buy a house in Florida make that my primary residence for tax reasons, that'd be a big savings. Well, how much how much do I have without selling the house and digging too deep? Well, I had about $500,000. So, I'm shopping, well, that's tight. You can find a condo in Florida. But I realized after talking to one of your colleagues, well, hold on. I could probably buy an $800,000 condo and get a $300,000 HECM an HFP purchase loan for a reverse mortgage. I would I would use all the money on the purchase, but I'd be living in a nicer, much nicer condo that would make sense for us that the kids can come visit and that kind of thing. And I'm thinking, how do I not know this? I'm a real estate agent. Now, I don't sell condos in Florida. I don't work in a retirement area. So, maybe that's part of it. But even I'm talking to my real my colleagues there, my real estate colleagues in Florida, they don't even know about this product. Why is this like a hidden secret? And what can we do to get the message out more? Yeah. You wrote a book, so you're doing what you can to publicize it. I publish a podcast. I'm doing my part. But what can we as an industry do? And why is it so Why is it kept so secretive? Yeah. It's a great question. So, to your point, yes, somebody can increase their purchasing power by about 35 to 45% depending upon their age and interest rate. So, why is it such a secret? I'm not sure that the HFP program's been around since 2009. So, what is that? 16 years?

8:41 Yeah. I'm also starting to teach continuing education classes to Realtors® to help them understand. So, I have a website for Realtors®, helpingseniorsrelocate.com. And they can go on there and they can type in how many contacts they have in their database and it does a algorithm of how many deals they can generate just from their database. And I always tell the Realtor®, I said, "Listen, this is a tight market right now last few years. What if I could show you how you could generate deals from your database and you'd get both sides. You'd get the listing side and you'd get the sales side." And if you scroll down on that site, helpingseniorsrelocate.com, it just has this calculator that people can plug in, Realtor® can plug in. There it is right there. How many contacts they have, what their average price is in their market, what their commission rate is and their split, and it tells them how much money they could generate just from targeting seniors. Because, you know, we have what, 11,000 people a day turning 62? So, there, you just you just did it. It took you what, 30 seconds? Not even 20 seconds? So, it's That's a lot of money there, Kevin. Hold on. Why are we talking? Why am I not doing this?

10:00 YEAH. So, what I tell Realtors®, I said, "Look, go to your database, find those people that are 62 years or older, have a lot of equity, and maybe looking to move, and go have a conversation and say, 'Hey, if I could help you increase your purchasing power, move to a home that better suits you in a stage of life, put one large down payment down, not have a monthly payment, have no more deferred maintenance or a newer home in the area you want to live in, are you interested in that?'" And it works. You know, you Think about this, Bill. We're upgrading people's lifestyle so dramatically, because so many people think, "I can't afford to move. I've got this 2% or 3% interest rate. I don't want to give that up." And yet, they're stuck. They're stuck in the home that isn't working for them. Specifically, the stairs. You know, usually one of them can't do the stairs. And we eliminate that pro- problem, their quality of life just improves so dramatically. It's so funny you say this, because we live in a house where our master bedroom's upstairs, and it's probably the only suitable master bedroom area. We have bedrooms downstairs, too. And fortunately, my wife and I are both able to go upstairs, but time is ticking. And I know at some point, you know, one of us or both of us may not be able to, or God forbid, one of us may fall, and that's why, you know, I'm thinking more now. I keep thinking about Florida, but my wife doesn't want to move, because our grandkids are walking distance. So, we're not going anywhere. I just FYI, this is just my fantasy, but I think everybody has these kind of questions. And I and this kind of calculator for the Realtor® is why you should get in the business. So, talk a little bit about how if I'm a real estate agent and I want to approach this market, obviously I can talk to them about have you considered this product? But at that point, they're going to ask me questions.

11:45 What do I do? Do I just make the introduction with you? Is that kind of Is that kind of process you're recommending is Realtors® kind of get the lead on the hook a little bit and then if they get the fish swimming around and give you a call and put a consult together? Of course, yeah. I'm licensed in 19 states, always happy to chat with people. But Bill, I also created a kit, a specific kit for Realtors® so that they can understand this program. And it's got videos Crayons and blocks and Lego. I'm sorry. I'm sorry. Something like that. So, yeah, there's a consumer guide. There's videos. There's FAQs. Wow. There's that website I just showed you there the helpingseniorsrelocate.com. And it's just got some tools there that they can talk intelligently with their clients because none of us wants to go in front of our clients and sound stupid. Right? We at least want a working knowledge of the conversation that we can talk intelligently about that. Now, am I trying to turn Realtors® into reverse mortgage experts? No. I'm just trying to give them enough information to open the door so that they can refer those clients that may want to learn about it. And by the way, that's the biggest thing. As you know, this is not a transactional sale, it's an educational sale. And when people understand how it works, the light comes on and they say, "Wait a second. How come I didn't know this before? This sounds too good to be true. What's the catch? How come everybody doesn't do this?" Just like you said to me right before we started, "If more people knew about this, there'd be a line outside the door." That's how great it is.

13:20 Yeah. I And again, it's not great for everybody, but it's great for enough people that would be a line out your door. It's not you know, out of you know, with the 3 million Americans, there's enough that you'd be overwhelmed if they all knew about this and saw it. It's not everybody. It's not for everybody. It's not designed to be for everybody. It But it's like a tool. But for the right case, it's a very powerful tool. So, Okay. So, and I just really commend you because two things I would say, you know, not that I'm coaching you, but as I look at your business that impressed me. One, picking a lane and focusing it on it and adding gives you a chance to create real value rather just talk about it. And I've seen so many Realtors® who say, "Well, I went to a certification class. Now I'm senior certified." Well, what do you do though every day? What do you do every day to make seniors more enabled to buy or sell property? Well, learning about this kind of market opportunity, working with a professional like you would be one of those things. And you know, it's not my business. I'm not really working with consumers as much as professionals. I don't live in an area where seniors are moving in. I live where they move out. But gee, they're moving out. Show them how to move out. Maybe connect with a friend in Florida or Arizona or Nevada and work together and put a product a program like that together. Makes a lot of sense. So, congratulations. And the second, I have a I have a YouTube channel and Realtors® always say to me, "Well, I want to, you know, do more content. We do more social media." And you see these influencers talk about, "Well, create social media. What do you do?" Well, you know, go down the house and jump up and down and do all kinds of fun things. How about educate them? And you've given us just on this call some great resources the real estate agent can fill their whole calendar of social media in this area. So, congratulations for, you know, the work you've done in that.

14:59 And by the way, you mentioned YouTube. I love YouTube. And I have a channel, reversemortgage.video, where anybody can go and see these short one-to-two-minute videos. They're educational. You can't buy anything. It's just education. And I always tell people, I said, "Listen, even if you never do it, learn about it. Understand how it works. Maybe you're a child of a senior homeowner and they're struggling to make their payments or have enough money to live on. By the way, Bill, you know, the number one fear a senior has is outliving their money. And we all have three buckets we draw from. We have our wages, our earnings. We have our assets and investments, and then we have our equity. And when people tap equity, it allows the other two to last longer. And it really gives them peace of mind. I think about the very first lady I helped in 2015. And this is the third way a reverse mortgage can be used, eliminate monthly payment. That's the most popular way. She was referred to me by her daughter who was a client. Carmen was 5-ft nothing and just full of fire, just spunky and happy and gregarious and very fun lady. And so I sat with her and I just asked her, I said, "Hey Carmen, how come you want to do this? What's going on in your life?" And she said, "You know, my budget's tight." And I'm like, "Okay, a lot of people say that." So tell me more about that. What does that look like?

16:23 Bill, she's 84 years old. She's buying groceries on credit cards. And I said, "Okay." That's tight. I said, "Carmen, she only had social security." Unfortunately, there's a lot of people, you know, they only have social security. It doesn't go that far, especially with inflation. So long story short, we're at the closing table and I'm doing the math. I know how much we eliminated with her monthly payment, how much we freed up by paying off credit cards. It's about 1,100 bucks a month. So I know the number. And I say, "Hey Carmen, how is this going to help you? I mean, I get the math, but how is this going to help you?" She kisses me on the cheek, first time I've ever been kissed at closing. Had to go home and tell my wife I got kissed at closing today. 84-year-old lady freeing up $1,100 a month. She says, "You know what? Now I can sleep at night. I don't have to worry about money." And that was my very first reverse mortgage, 2015. I'm like, "Man, if I get kissed at closing, I'm in. This is awesome." Well, then you start marketing at ship clubs and that didn't work out so well, but we're going to ignore that part of the story. So, Okay, so I also know and I think that one of the challenges for all sales people is sometimes we know the right solution for a customer, but we have to help our customer get to the point where they don't just know that's the right solution, but they're willing to take the action and the risk and the follow through cuz it really affects their lives more. And so it seems that whenever you deal with seniors, there's more people involved. There's kids, there's professionals, accountants, or attorneys, or estate planners and such.

17:49 So, talk a little bit about your role in kind of helping that team approach and consulting. You must get phone calls where that you're not expecting and sometimes you probably bring in up front as part of the team. What's that look like as you're in your role as professional? You know what's interesting? It's a great point. There are other people involved, which I'm happy about. I don't mind them being involved, family or advisors. And I have yet to have somebody say no, whether it's the kids or the advisor. And I'll ask open-ended questions. I'll say, "Hey, what are your options if you don't do this?" Well, we could sell and rent. We could sell and move to another home. We could do a cash-out refinance or a home equity line of credit, have a month mandatory monthly payment. And then I'll throw this one in. I said, "Well, you can always go live with your kids." And they chafe at that. They're like, "No, I don't want to live with my kids." And the kids don't want them to live with them either, right? Everybody's got their own life. They love each other, but they don't want to live together. Right. I said, "Well, that leaves the reverse mortgage then. It's only option where you can retain ownership of title, remain in your home and age in place, gain access to your equity, sustain and protect a portion of your equity from a market correction, and not have a monthly mortgage payment refrain from having a monthly mortgage payment. And it's a non-recourse loan.

19:11 What that means is the only way the lender can get their money is through sale or refinance of the house when the last borrower moves out. So, highly regulated, very safe, and very unique tool that is misrepresented and misunderstood and therefore underutilized. You asked earlier, why isn't more people do it? We've got people like Dave Ramsey and Suze Orman out there saying things about the program that aren't true. They're inaccurate. Yeah. And people listen to those people. Yeah. There's a There's a term real estate called third base coach that and the rule is anytime you take a couple show property, if they don't bring the father, particularly the wife's father to the inspection, and they later say, "Oh, my father wants to come look at the property." You can be assured he's going to find something that will validate the sale. That's just because he wants to show his daughter he loves her and how do you do that? By being hypercritical. And I've seen that with reverse mortgages as I have with other products, particularly with attorneys, where, you know, they say, "Oh, you know, that's a very expensive loan." Well, yeah, it is. It's more expensive, but it's also very powerful. It's also very flexible. It also has tremendous application. And so, like anything in life that meets those criteria, there's an expense. Now, let's take a look at what the expense is and compare that to the potential gain. And if it saves you, for example, not having to sell securities and pay taxes or having to sell an income property you don't want to sell and pay taxes and all the costs to sell the property when you don't want to, well, now you're talking about saving a lot of money. So, if it costs a lot of money, you're saving a lot of money. I'm emphasizing louder and more words. So, do you get in discussions with at that level, granular level, with attorneys and accountants, or is that just more something that kind of happens behind the scenes?

20:55 Yeah, we like to ask a lot of questions to make sure it's going to benefit the client. So, one of the first things I ask is how long you plan on staying in the home. Most people say they're going to carry me out. I hear that a lot. Usually the break even is about 18 months. If somebody's going to stay in the home about 18 months or longer, they're going to get their money out of it. Sometimes people want to know that these advisors want to know, "Okay, you good told me all the good stuff. What's the downside?" And there are a couple downsides. One, there's going to be less equity at the end because they're not making a payment. Interest is being accrued. Interest is rising on the loan, whatever the loan balance is. So, there's going to be less at the end. Two, like you said, it's expensive. What makes it expensive? Well, most reverse mortgages in the country are FHA backed, which means they have mortgage insurance. 2% of the upfront value of the home. So, let's just say a home appraises for 500,000 for sake of example cuz we can do that math pretty easily. 2% of that is $10,000. That's added to the closing cost. So, instead of the closing cost being, you know, 13 or 15,000 on a traditional mortgage, now it's 20 or 25,000 depending upon the value. Well, what do you get for that? It becomes a non-recourse loan. So, the borrower is not responsible to pay it back.

22:15 There's no debt passed to the heirs or to the estate. So, it's very unique. It's the only loan out there like it where the borrower is not personally liable to pay it back. And there's a cost for that. FHA is insured to get all their money. The borrower is insured that they don't have to pay it back. No debt passes on to the kids. And ultimately, there is less equity. But, there is equity at the end. I'll tell you a quick story. Lady came to me in 2017 or 2018, referred to me by her financial planner. And she was a nurse for 40 years. And the financial planner said, "Okay, you've retired now. What do you want to do?" She goes, "I've always had a dream to travel around the country to visit national parks in a Sprinter van and have my little dog sit in the front seat. So, she comes to me referred to me by the financial planner. She does a reverse mortgage. She orders the sprinter van. It takes a month to build it. Orders it. The first day she gets it, she comes by my office, shows me the sprinter van, gives me the tour. Little dog's in the front seat. And then I'm getting these Facebook messages and pictures of all these places she's visiting. And just last week What's today? Friday? Just last Wednesday she says, "Hey, I just sold my house." I've been talking to her before that, obviously, but I sold my house and I'm moving back to the East Coast, New Hampshire, to live closer to my son.

23:43 She's paying cash for that house because she's still at equity from her reverse mortgage. So, there is equity at the end, just not as much. Because you've taken some of it out ahead of time and used it for whatever made sense and in many cases saved on taxes and things like that. Well, look, Kevin, obviously you're very well versed in this and we could talk for hours. I really appreciate your time today on the Reverse Mortgage Podcast. If someone wants to get a hold of you, what's the best way to talk about exploring either the reverse mortgage option for themselves personally or as a real estate professional talking about how to you know integrate that into the marketing and their business. Yeah. I have a toll-free number, [phone number]. And then I've got so many great resources on my website, reversemortgagerevolution.com. One of the things that people can go there and right there it says, "Still wondering about reverse mortgages?" I wrote a guide. They can put their name and email in there and we'll send them this guide. It's so comprehensive. It compares traditional mortgage with reverse mortgage. It compares home equity line of credit with reverse mortgage line of credit. Talks about jumbo reverse mortgages over a million dollars and up. And just FAQs in there. It's just really a good resource. So, I'd encourage people to grab that and read about it and learn about it. And they are going to know somebody who needs some help because there's like you said Bill, there's just not enough people who know about it.

25:11 And there's not enough of originators who really know this product, too. I think one of the things that's I also caused me to do this podcast was I learned that of a hundred loan originators, if you ask them if they do reverse mortgages, 99 will say yes and 98 haven't done one in the last year. And this is a very sophisticated technical product that requires I think extra sophistication and training. And that's why I really ho- I honed in on the CRMPs, the certified reverse mortgage professionals, because universally they've all been better educated, better more focused in this product, more focused in serving this market. So, congratulations for the work you've done and thank you for about the community and look forward to working with you going forward. Well, what a pleasure Bill. It's great to meet you. Thanks for having me on your show today. I appreciate it. Thank you. And for rest of you, I'm Bill Gross. This is the Reverse Mortgage Podcast. We have a new episode every week where we interview primarily top reverse mortgage originators as well as management and some vendors. We can carry the conversation on our Facebook group, the Reverse Mortgage Podcast. It's a Facebook group. You can look for somebody local to you if you need a referrals or if you're a originator, if you're looking if questions or looking for referrals for attorneys or real estate agents to support your business whatever, please feel free to go there. I'm available. I'm @BillGross Probate on so- on social media. If I can help any way, call, text or email. As always, make today your best day ever. Thanks so much.