Making Reverse Mortgages Simple for Homeowners, with Christine Jensen

0:02 I started this podcast with the premise that we as a economy should be doing 10 times the reverse mortgages we are. Whether that be homeowners who are evidenced by homeowners who have the property owned free and clear that should have a reverse mortgage on it or at least a line of credit on it to protect their equity. And the people who buy properties for cash and live in those properties who should be buying with a reverse mortgage at least or at least a credit line type of reverse mortgage. And part of this is because for many people the reverse mortgage prob process is not simple. Well, today we have a lady who's going on life who's claim who promises to make getting a reverse mortgage read not just simple, ridiculously simple. To explain what that means, Kristin Jensen from Fairway Home Mortgage, thanks for joining us today on the Reverse Mortgage Podcast.

0:49 Bill, thanks so much for having me. And the concept of what a reverse mortgage is can be so much simpler than folks have thought. Unfortunately, it's been far too often in the past where we bring up the term reverse mortgage and people think it's way more complicated than it is. So, rather than understanding and pursuing and saying, "Okay, this is maybe a little bit more complex than I thought it was going to be, but I want to dig in." They'll just kind of give up and not pursue before they even really gave it a try.

1:32 And so, mortgage can be difficult, reverse mortgage can be you know, difficult on top of difficult. What do we do to make it simpler? Now, a key There's a key phrase I love which is simple, not easy. Right? There's certain things in life that you have to do and they're simple. You know, doing your paperwork, reading, filling out certain forms is simple. It's just not easy, there's hard work involved. So, talk about where in the reverse mortgage process do you make it ridiculously simple? May not be easy, but at least it's simpler compared to otherwise what it might be.

2:00 So, we're going to differentiate between getting the reverse mortgage because the process of getting the reverse mortgage, there's a lot of paperwork to it. There's many steps. There's some complexities if there's a trust and things like that. So, I want to save that conversation for later. And in the beginning, I just want folks to understand what this thing is and how it works. And the concept of understanding what it is and how it works can be much simpler than too many of us in my industry make it. So, little story about me. I got the privilege of homeschooling a couple of my kids years and years ago. And it was when my much older children now were back were teenagers and we were going through the middle school years. So, in teaching them algebra, teaching them geometry, and in teaching civics, and teaching history, and grammar, and all of those other topics, I had to get really creative and find ways to communicate the concepts as a teacher that they could understand. And when I simplified some of the concepts, they started to latch on to these concepts and they became they became excellent students.

3:26 So, I've tried to do that with reverse mortgages. Now, I think you need to as a as a reverse mortgage specialist, you need to clearly understand what the product is, how it works, what it can do, what it can't do, what the requirements are, that kind of thing. So, as specialists, we need to think and train ourselves in a very complex manner. We need to know all the little ins and outs so that when we turn around and communicate that message to those that want to learn more, we can communicate it in very simple and easy to approach and understandable language. So, yes, I love to make reverse mortgages ridiculously simple to understand.

4:15 So, it sounds to me like the professional athlete who practices something over and over again so that when they're in a situation, they just react naturally and without getting in their head too much, they just physically do the thing they have to do. They might look at the information, make an assessment, move here, move there, raise this, do that, but it's all automatic and I think with the business, you know, I know when I started out everything was nervous and filling out paperwork and I think the customer picks up on that tension, but the areas that I know real well, you know, I you know, I'm very comfortable with and that comes across very successfully with the customer. The challenge is what do you learn? In my business, I'm a real estate agent and I always tell real estate agents, "Well, the first thing you have to do is read the forms you're going to ask your customers to sign." Whatever that means, how many forms that is, you need to know all those forms. You have to read them all, understand them all, and be able to communicate them effectively when asked questions. If you can't do that, you're never going to be really comfortable with the client. So, to me, that's a basic rule. To mortgage originators, I always tell them, "Read the guidelines of the product you're selling." You know, used to be the 4155 for FHA loans. I would say in the old days I would go to Kinko's or FedEx office, make a copy, and I had the actual book I carried with me. If I didn't know the answer, I'd look it up right there, but I knew I knew where to find the answer instantaneously. So, what are the resources that a reverse or a mortgage originator or a forward originator looking to do reverse mortgage get into it? What are the resources they should have turned to become a master of their craft so they can then convey it to their clients in a ridiculously simple manner.

5:50 Well, I concur with you wholeheartedly, Bill. I've read manuals. I sit in on presentations done by HUD. I go to industry conferences. I network with my colleagues. I study the field of financial planning. I read the books that people have written. I get regular input of articles that are written by people in the industry and that kind of thing. But today, let's talk about how we communicate that message in a ridiculously simple manner, okay? So, I want to start with a couple of little tricks of the trade that I've pulled together. Some of Some of which are simple hand gestures. You've already noticed I'm Italian. I use my hands a lot.

6:36 So, but I also have some props that I've developed that have helped me communicate the message as well. So, let me begin with something super simple. And it's a technique that I can use when I'm, you know, in an elevator explaining something, when I go to a networking event at the Chamber of Commerce or something like that. I wear my name tag and my name tag says that I'm a reverse mortgage specialist and people kind of tilt their head to the left and they say, "Now, wait a minute. Reverse mortgages? What exactly is that? Isn't that Didn't I hear that those are bad or something like that?" So, great opportunity for me to jump in and say, "You probably already know what this is and it's simpler than you might have realized." Let's compare it to a loan that you already understand. Many of us get a forward mortgage when we are younger and I'm going to call it a forward mortgage. You probably know it just as a traditional mortgage. But let's use the example of one of my sons purchased a home, made a small down payment, and financed the rest, okay? Paid 440,000 for his house. We're in the Denver market. It's a little bit expensive here. Paid 440,000 for his house, made a $44,000 down payment, and financed 396,000, okay? So, every month he faithfully sends his payment into the mortgage company. The mortgage company happily collects that payment from him every month, and they use the money that he sends in to take that loan balance from up here where it started at 396, and as he goes year by year, that balance is going down further and further, okay?

8:26 Well, when he reaches a certain age as old as his dad and I are now, we can turn that process in reverse. 24, 25, how old are you? I'm sorry.

8:35 Well done, Bill. Well done. But we can turn that whole concept in reverse. Instead of the borrowers sending payments into the mortgage company, we can now turn it into no more payments being collected every month, and instead, allow the finance charges to accrue onto the loan balance. So, the loan balance in the beginning was going down. We got it down low enough, and now it's okay to let it start going up and up. Now, if you're like most people, that's the point where we say, "Oh, wait a minute. I don't think I want my loan balance to go up." Well, let's take a look at what this is on the other side, okay? That house that one paid 440,000 for many years later probably doubled or even tripled in value, okay? So, who cares if they have an a $200,000 loan balance against an $800,000 house.

9:40 Right. Okay? So, you've had some appreciation in value. You've already enjoyed appreciation in the value of that capital asset. It's your asset. You're allowed to start using it.

9:55 Well, the alternative is to use your gestures, you're paying for it Let me see if I can get my hands up high enough. You're paying for it out of your bank account or savings or money where your balance is going down to pay the mortgage. Yeah. And this way the money is going to stay in the account and appreciate as well. So, really it's From a simple point of view, it's who's Where is the money going to come from? It's not a matter of are you going to pay to keep the house? It's going to be how you're going to pay for the balance of that mortgage and either let the reverse mortgage do it for you or take it out of your other assets, I guess.

10:29 Yeah. Okay. So it seems to me then what That's one. Okay. So, it seems to me then that what you're saying is, or at least the part that you're doing to make it simple or at least simple for the client is being very purposeful in your communication style and systems and procedures.

10:48 Yes. Yeah, we do try to keep the language very approachable. So, let's use terms that they're already very familiar with. And let's not make it more complicated than it needs to be. Let's put it down to its simplest level. Another technique that I've developed is the comparison with a HELOC, home equity line of credit. H E L O C is a concept that a lot of people understand. So, I sometimes nickname the product that I get the honor of working with as a RELOC, a reverse equity line of credit. So, do a little compare and contrast between HELOC and RELOC. Okay? HELOC says, of your home's equity, you're allowed to you're given a credit limit, and if you'd like to draw some of that money out, you can draw it out and then pay it back and draw it out and pay it back and draw it out and pay it back as often as you like. Okay? With the reverse equity line of credit, RELOC, my nickname, you can do something very similar. You're granted a credit limit in the beginning, and then you can draw that money out and you can pay it down if you want to, and you can draw it out again if you want to and pay it back down again if you want to, as often as you like.

12:14 Okay? But, there's some really significant differences between HELOC and RELOC. First of all, HELOC gives you a fixed credit limit, and that never changes. RELOC gives you a starting point for a credit limit, and guess what? It grows each and every month whether your home value does or not. Okay? HELOC says, in most cases, they're written with a 10-year draw period. So, feel free to draw it out and pay it back and draw it out and pay it back, but only for 10 years. You're limited to a 10-year time slot. Where the RELOC says, there is no end date. That adjustable or that revolving feature is going to remain as long as you remain.

13:07 You know, just to stop one second for those watching this. And so, really what somebody should hear is, "Hey, I'm 75. I can get a HELOC, and at 85, I either have to start paying principal and I can no longer draw more money out. Or with reverse mortgage, I'm 85, and I don't have to worry about it. I just continue to use it or not use it. By that time, I don't know where I'm 67, so I can't imagine what it'd be like at 85. But certainly don't want to be applying for a new home line of credit when I'm 85. I can I can pretty much figure out that's not going to be a winning ticket.

13:39 Yeah, set it and forget it, I say. Yeah. The HELOC, also, as you just described, has mandatory payment requirements that will increase once the draw period is done and it turns into an amortizing payment. Where the REELOC says pay what you want, when you want, or defer it all to the very end if you want. Let's figure out what method is going to fit best in your cash flow plan.

14:09 But the HELOC, is also only there at the bank's option. And if they ever suspect that your home value goes down, they can pull your access to it at their option anytime they like.

14:28 Which is exactly what they did in 2008. Every lender who had HELOCs just canceled them all. Every single one. I customers so upset because we got them the part two or three years and they paid the fees or whatever to get it and they were basically worthless at that point. And they had to pay it back. You know, so you didn't have a line of credit, they had basically balance due and you need to pay us, you know, amortizing payments for the of the remaining period time. And versus on the on the REELOCs, because they are designed this way for primarily for seniors, they're designed to prevent the got you Wells Fargo the old Wells Fargo before they went bankrupt and the old, you know, Great Western Bank and Home Savings before they got you. So, you know, this is to avoid that problem.

15:14 Bingo. I like the way you explain this. This is really very engaging. You know, okay, so let's stop for a second. Obviously, you can talk about this stuff for hours because there's a lot of content you can talk about. But let's talk about the process. So, you mentioned hand gestures. I see I can just see certain topics you're using the same gesture. Yeah, I should pull back. This loan or that loan. Making the comparisons, stopping when you have important points. Is this something you train? I know that you're I know you're a coach as well at Fairway Independent Mortgage Division. Is this something that's just trained or just something you do really well? I mean, do you specifically say, "Here's the right hand gesture for this. Here's the right hand gesture for that." You record yourself, make it available to your students. What's going on here that you're helping people make it ridiculously simple?

15:56 I went to the school of hard knocks. And I fell down, and I fell down, and I fell down over and over and over again, and I started to just try different ways of messaging that began to resonate with people, and I started to have more and more success. So, the school of hard knocks gave me a terrific education and trained me well how to develop these communication techniques, and I've been trying to teach them to others as well. But I've also come up with, and I'll put these up closer to the screen.

16:35 I have a house. I have a Fairway house. I got it at a convention somewhere. I gave it to my 4-year-old grandson, but Okay, well, the next time you and I see each other, I'm going to bring you another one, because you need to have one of these around as well. Now, I like to put the Fairway side of it first, but you can also

16:53 Of course. No, go ahead. No, go ahead. You know, they're paying you. Go ahead. Feel free to promote them. I love Fairway. You know, I've interviewed people from every major almost every major reverse company. I'm open to interviewing all of them, and I do think a lot of Fairway. I You worked with Fairway forward originators for good part of my career. They're a major force here in Southern California. And the first, you know, interesting fact, the first reverse mortgage originator I interviewed was a Fairway reverse mortgage originator, though I did not yet have at that time the podcast. And so, I Fairway's been very kind to my podcast and I'm glad to let you guys, you know, promote yourself if necessary. So, go ahead, right ahead. Let's see the Fairway sign on the house again.

17:34 Okay. And your executives are nice to me, too. So, I want to promote that. Yes, perfect. So, most think now about assets and balance sheets, okay? If you were going to do a meeting with your financial advisor, your financial advisor would want to begin that consultation by taking an inventory of all of your assets. So, they usually begin with taking inventory of all of your cash assets first. So, tell me, where do you have your IRA? Where do you have your 401k? What mutual funds do you have? And let's do an itemization, an inventory of all of your cash assets. So, they total all that up and that's one side of your balance sheet. But, most of us have another asset that's sitting on our balance sheet and that is the equity that we have in our home. So, let's do a quick example of this. Let's say that somebody has a $600,000 house that has a $100,000 mortgage balance against it, okay? If they have a $600,000 house with a $100,000 mortgage balance against it, you and I could do the math in our head and say they have how much in equity in their house?

18:46 $500,000. $500,000. So, that's an asset on their balance sheet. But, let's say that when we did the inventory of all of their different investments, their retirement accounts and everything else, let's say they had a grand total of $400,000. Well, on the balance sheet, we would see a grand total of $400,000 in cash assets. We would also see $500,000 in equity. So, their total net worth is made up of 400 + 500, which is?

19:19 900,000. 900,000, okay? Most people can do that level of math in their head. And you'll notice that I specifically gave the question to you and then I asked you to answer it. When I gave the question to you and asked you to answer it, your brain started engaging

19:39 Right. With this conversation in a deeper way than you would by simply listening to my description, okay?

19:48 And you're going to learn it better, you're going to remember it deeper. Yes. Yeah, and you'll attach to it. Yeah. Okay, so the object of the game here is to get someone to attach to it. And when you give them physical representations of assets like this, then they can start to connect with it better and better. Now, on the balance sheet, there's a big difference between these two categories of assets. This category of assets is spendable and investable. This category of assets, well, it looks pretty on the balance sheet and I like living there, but in its current form, I can't do anything with it.

20:32 Right. Okay? So, if I were going to make this asset an active part of the cash flow plan, I have to find a way to convert some of this into something liquid and spendable. So, this is another then my husband built this for me. This is a representation of a little tool that we can attach to the side of the house.

20:59 Right. That when we want to, we can turn this thing on and start converting or pulling out a little bit, not a lot, not all of it,

21:09 Right. But we can start pulling out and converting some of our equity into investable or spendable cash. Right. That way, this side of the balance sheet doesn't have to bear the full load of all of my cash flow needs in retirement. I can share the load a little bit. I can load balance here

21:29 And let this part of the balance sheet take some of the brunt of it. You know, it's fascinating when you put it like that because my mind went to, well, yeah, but there's costs associated with the home side, but the truth is, there's also costs associated with the with the cash or liquid assets side in that typically you have your money invested in something that has to get sold, there's either commission or fee on that, but there's also tax implications many times, not all, depends on where it is and how you how you manage all that. Whereas on the home side of it, there's really no you really have the mortgage set, there's no additional fee, and there's really no tax implication because if you do it properly, you're pulling out interest that you've paid, you're not you're not you're pulling out your money, you're not pulling out new money, and even if you refinance with cash out, that's not taxable till you sell the property. So, there's you really have to look at the whole package in a more detailed way, but you're really giving us the things to think about to understand the fundamentals to get to that spot.

22:31 Yes. Yeah. And you're absolutely right. There's an important cost that we need to evaluate to determine whether or not this is the right tool to put into the financial plan.

22:44 Right. But at the same time, there's also costs on the other side and there's taxes to be considered and all that. So, these are all these are complicated questions that we have to make as easy as we can for our customer to understand.

22:55 Yes. Yeah. Yes. Wow. I like a lot of my work with financial planners. So, let's talk about that because I think that you know, between me and you a financial planner is not going to think they need to make it easy to understand. They're going to think they're very sophisticated. Just give me the Harvard Business School version of it. Are you presenting it to them with these same tools, props, gestures, tonality, pacing? I can just I can see how you really mastered this presentation or is it this is more the consumer facing side and that we're different with the financial planners? Cuz my experience is they still don't understand the product even when given all the details.

23:34 100% Bill. The tools that I've been explaining so far, the props that I use and the hand gestures and that sort of thing, those are more consumer facing. With financial planners, I've come up with some different techniques to help them understand the work that I do that can support the work that I do, okay? And I will often describe them as the head coach that is responsible for building the game plan, okay? They start a new relationship with a client. The client asks the financial planner, "Please get me through retirement without running out of money." Okay? So, the financial planner will begin by taking an inventory of all of the resources and then they'll spend some time listening to the client, trying to understand their hopes and their dreams and what they would really to accomplish. And then often they'll excuse the client from that first meeting and say, "Okay, I'm going to go back and study a little bit all of the notes that I've taken. I'm going to study where your assets are currently. I'm going to study what your cash flow options are going to look like in the future with your fixed income sources like pension, social security, things like that. And I'm going to devise a plan that will get you all the way from where you are today, all the way through your retirement, so that you don't run out of money before the end of your lifespan. Okay? But it's going to take me some time to build that plan.

25:12 So, let's set another appointment for next week. And this has been a common way that I see that financial planners and financial advisers will work with their clients. They start with the initial data collection phase, get to know you, let me understand all of your resources, and then I'll come back to you afterwards and I'll present a plan. Okay? So, as they are building the plan, they need to understand all kinds of things. They need to understand cash flow, they need to understand where the risks are in the portfolio, they need to understand, you know, what the spending needs are going to look like and things like that. So, they will bring in special teams coaches to help with designing this game plan. So, the head coach might have the big vision, but they'll bring in a defensive coach, and they'll bring in a special teams coach, and they'll bring in product specialists that can help them solve a component of that financial plan. Okay? So, I am one of those special teams coaches that they can bring in, and they can say, "Okay, here's the design of the plan that I have so far. Could you add something to the conversation that would increase the likelihood of success of this plan?" And I tell them so often, there's another asset that's been sitting there on the balance sheet that we haven't incorporated. Okay? You might have found that they have $2 million dollars here, and you might have realized, "Boy, there's $2 million. I can do a lot of planning successfully with $2 million." But, there's also $800,000 sitting over here. And, isn't this plan going to work a lot better if we figure out how to incorporate some of that as well?

27:10 So, bring me Go ahead. One of the things I find is the financial planners will often not promise, but hint at returns on the money side that exceed the interest on the mortgage. Well, that's just arbitrage at that point. The reason why they hesitate is cuz that makes them accountable to those numbers. And so, you have to be kind of careful how you how you present that to them. But, I just between me and you, I've seen you presentations from financial planners, and they're often talking about, you know, historically 8, 9, 10%. Well, great. Then, the 6 1/2% mortgage shouldn't be a problem. You should want all you can get and then reinvest it all. Not saying you should do it, but mathematically, that would be the case. Well, no, it's very risky. It's very expensive. It's expensive loan. Not really. It's for what it does. And so, these are all I think very you know, the there's a difference in word complex and complicated, I've come to learn. Complicated means there's numerous pieces to something that can each be simple, but because you have numerous pieces relying on each other, it becomes complicated, like a watch with multiple complications. Complex can be just very hard to understand and unwind the whole thing because it's, you know, interconnected pieces or the technology can be advanced. What you're dealing with is a very complicated piece, right? How much money do they want to take out of stocks, bonds, security, retirement? When does retirement start? When do they take social security? When does it go up? When does it go down?

28:28 And how do you use a reverse mortgage to smooth those things out? And so, I can see where the key to this whole thing is communication.

28:37 Indeed. Indeed. So, and being able to communicate those messages in a simple enough way Yeah.

28:46 Where I can communicate with a financial planner to say, "Hey, guess what? I can show you how to make that portfolio last longer

28:54 Right. And keep more assets under management for a longer period of time. It's better for your client, it's better for you, and it's by incorporating this other asset that's been sitting here on the balance sheet."

29:06 And with the entire balance sheet still performing at the highest level possible. Well, look, I'm sure I know because the nature business, there's a number of other topics I kind of cut you short on a few of them just to get the sample. But, I think that my takeaway here is to really re-look at when we talk to customers and our professionals, what do we do to be effective in our communication, whether it be props or tonality, hand gestures, certain scripting that's important for us to take a look at. How do we communicate with our customers to be more effective and make something as that can be as complicated as a reverse mortgage and ridiculously simple. So, Christine, I think you've done that today. I think you met the mark that we set out with. And we're kind of at the end of our time, so I'm going to kind of wrap it up and we'll bring you back again. We'll go into more detail on it. Christine Jensen is reverse mortgage specialist and coach with Fairway recently brand rebranded Home Mortgage.

29:57 Thank you. Go to christinereverse.com and get more information there. If you want to apply, have questions, make an appointment. And then on the website, we have her phone number. I think we have it correct. Yes, 303-456- 4403 or her email address. If you can't get that while you're driving or something, reach out to me. I'd be honored to make that introduction. And Christine, I just want to say thank you so much. I think for raising the bar of our communication skills, showing us what's possible, and as well as showing us today, you know, your systems and your procedures. So, thank you for joining us.

30:26 I'm so delighted to be here. Thank you for the invitation. And that's the Reverse Mortgage Podcast episode for this week. We get together every week with different originators. That was fascinating. I think not just as an originator, but really as a coach on what the best practices are with one of the leading companies in the industry. I'd would love to know what you think. Send me your comments, questions, reach out if I can help any way. I'm @billgrossprobate on social media. As always, make today your best day ever. Thanks so much.