Reverse Mortgage Myths, Trusts and Heirs, with Angela Wyckoff of Reverse Loan Solutions

0:00 [Music] welcome to reverse mortgage weekly I'm Bill Gross and I'm a specialist in probate real estate which means I get involved with estate planning or the lack of planning in Probate and one of the tools of the trade is and should more often be reverse mortgages I'm always surprised how customers haven't considered them how attorneys I work with haven't considered them they're such important tools I don't do them I'm not looking for any commission referral fees I am looking to educate the people I work with so we've launched this podcast Reverse Mortgage Podcast to talk to the best practitioners across the country to help dispel the myths and lay out the opportunities for people to use this which I would say is an important tool for the right person could be bad for the wrong person but certainly right for the right person today look excited to have with us Angela Wyckoff Angela is a reverse mortgage specialist with Reverse Loan Solutions out of Simi Valley Thousand Oaks area lives in one works at the other Angela thanks so much for joining us today thank you so much for having me so let's talk about your business to begin with you know I always find that every loan officer will tell me they do reverse mortgages I say well what was the last time you did one and you know if they're doing purchase loans and FHA and VA hard to know enough to give customers the confidence to do reverse mortgage I know you're a specialist what prompted you to become a specialist in this particular Niche so to go way back when I was 13 I was living in my grandmother's home and she was the sole caregiver for my great-grandmother so there was four generations in one home and I just watched her painfully struggle to care for my great-grandmother and you know I'd come in and help after school or what have you and it was just really hard for her she got to the point where she had to put her in a convalescent home I don't think they call them that now but you know I've always remembered that and the thought of knowing what I do now her end of Life Care would have been dramatically different so I've always

2:05 Had a passion for seniors and you know trying to help them as my parents age and you know my mother-in-law fell over her dog and laid on the floor for 4 hours she was on her way to the restroom and you know paramedics had to break in her door and I looked at my husband and I was like we cannot physically nor financially care for her when she needs you know care so we put her in a reverse mortgage on her free and clear property now she has access to a line of credit for when she needs to pay for care and you know don't use it and let it grow or use it when you need it so you know it's a really amazing retirement tool it truly is and I think I might my just like you say it can be for the right people and unfortunately in my experience not enough of the right people even know about it to consider it properly and I think the thing that you said that really resonates with me is that their quality of care at the end of the life can be so much better but they're leaving this tremendous asset kind of locked up so let's talk about kind of the myths of reverse mortgages one of my favorite topics and I know you mentioned one of your favorite topics what are the most common misconceptions about reverse mortgages well the most common is that the bank owns the home and that is not true you retain ownership to the property I highly recommend that you put it into a trust never deed your property to your children that will cause tax headaches once you're gone the other thing is that there's nothing left for the heirs and that's quite the contrary you know I've got three children in private school and I know that there is a safety net on Grandma's home so that when she does pass there is still something left for the family you know in some cases you know if you live a long time and you choose to age in place you can eat away at the equity but you know you're using your hard-earned Equity to stay in the home that you love and know

4:08 You know so that's those are two of the strongest myths others are they're so expensive well it's not that they're expensive it's that there's fees associated with them just like when you buy a car just like when you buy anything you pay a fee to do that and the fee is imposed by the FHA so these are FHA insured mortgages you can never owe more than the property is worth and then if you do end up if your loan balance exceeds the value at the time that your family is ready to you know sell or refinance the lender does give you an opportunity to purchase the property at 95% of market value so let's say the market value is 800,000 and based off the loan that was taken out now the you know parent owes you know a million on it and that now they're going into a home but you want to retain the Family Residence The Heirs can purchase it at 95% of the market value assuming they're not on title so putting that property in a trust is a huge benefit well you cut a lot there and I think you know one of the things like you say it's more expensive than some loans less than others it's price for what you get out of it therefore there's certain risk the lenders giving you one of which is if the property goes down in value or the loan balance goes up faster than the equity the lenders is taking all the risk of any shortfall unlike other mortgages and so that's one of the primary benefits it's not it's not negative it's no the bank now the bank not own the property if the bank owns the property it means you got all your money out and then some and you get to walk away I say Scott free we get a walk away without any recourse I think that's important for people to know true very true go ahead do you want say something I cut you off oh I was I was going to say you know we've all been there you know during the mortgage meltdown of 2007

6:12 2008 and the happiest people on the Block were the people that had a reverse mortgage with a line of credit because everyone else's got turned off but not theirs so just know that you know if there is something else that happens these are FHA insured loans you will not lose access to your money unless you don't follow the rules now there's two primary types of products there's loans where you take the money out and there's lines of credit where you can have a certain amount pre-approved and access it as you need it maybe you want to pay monthly for your caregiver or service or whatever that might be and so you have a line of credit set to accommodate that so how would you describe the product that people aren't aware of that you want to kind of make them aware of what is the feature or product aspect of the reverse mortgage that people should be taking more opportunity to take a look at so the aspect is this is fully customizable you can take a lump sum you can take a monthly draw you can access a line of credit you can do a little bit of all three so you know there it's customized specifically to you there are no two reverse mortgages that are alike so some people will say you know what I need 50,000 to make some repairs around the home and then I'd like a $1,000 dollar a month to help you know pay for my long-term care policy or what have you know I've pretty much seen it all and I would like to eventually go back to what you were talking about any loan officer doing reverse mortgage because I love that topic too but yeah the most important thing to know is that it's customizable and that you are in control so if you decide you know what I just want the line of credit I just want it there available for when I use it you're not going to pay interest on the unused portion so you know and it will continue

8:15 To grow as it sits there most times within a 10-year period if you just set it and forget it in 10 years the amount of the line of credit can double I also think about the on one hand people say well it's expensive because you're borrowing money a line of credit is by its nature riskier to the lender than a regular loan but you know you also only use it as appropriate like so for example maybe you have a state you have taxes that are due and you're going to be selling a property to pay the taxes but the property isn't ready to close yet rather than Rush the close or cut the price to a part you don't need you can access the line of credit and pay the taxes and then repay the loan out the proceed later gives you some flexibility that can become very valuable so again that's where becomes kind of a tool in planning it's interesting, Angela, that I don't see this topic discussed as much with estate planners as I think it should I find estate planners very focused on liquid assets putting money into stocks and bonds and those things and those are important tools as well and kind of taking people out of being over encumbered over encumbered in real estate if there such a thing but it just seems to me that at a minimum if you have residence that's paid free and clear you should have the line of credit on it why not I mean it's just it's such a viable tool why do you think it is that and my goal here is to expose us to estate planners as well as to get Originators to talk to their estate planners why is it you think it's not more commonly involved with Estate Planning and what can we do to help move that forward so the reason is because a lot of people in the past had taken advantage of the situation they said oh yeah let's just take you know amount out of your property and we'll put it in this Catalyst and then of course you know the borrower ended up losing a portion of that so it really got a negative connotation with that and so now financial planners just really try to stay away from it now there is you know an item on the application that

10:18 Says have you are you Distributing this for that purpose so it does need to be disclosed that yeah my intention is to take this money out but we don't want to equity strip either so you know it's really important to take a very intentional approach when talking about you know Estate Planning and using the equity in the home that they want to stay in when these I remember I've been in the mortgage business for decades so when these reverse mortgages first came out they were abused where people who were in the estate planning business they would get paid money for as consultants they got commissions on the stocks and bonds they would do a reverse mortgage and take out you know, $400,000 or $500,000 buy an annuity get a 5% Commission on that flip this you know the Securities over every six months or so for more commission dollars and watch the net Equity of the customer go down and so there was a lot of abuse and there are certain rules put in place to disclose that ahead of time and to penalize and restrict it and I'm sure it still goes on I'm sure there's still abuse but it's not like it was so much has changed in the last 15 years talk about that what's changed correct so in the last 15 years there have been so many changes to help make this product safer and I highly recommend that any financial planner reach out to me or any other you know reverse mortgage professional and just ask questions say I have a borrower in this particular situation what does that look like it takes no time at all to come up with you know a plan and to fully customize it for your client and so that you can see the pros the cons you know the speed bumps along the way but there's a lot of people that are you know I've talked to people where they choose to feed their cat instead of themselves they live in their car and rent out their house because

12:20 They can't afford it you know there's so very many situations I could go on and on and on but leveraging the equity in your home to stay in your home is you know is what people need to do essentially don't struggle when you don't have to in addition I think the bad rap from the original reverse mortgage implementations there's a there's a bad rap where Mom or Dad have reverse mortgage and pass and the kids live in the house hoping to live there for free because there's no mortgage payment maybe they pay the taxes maybe they pay the insurance maybe they don't and then all of a sudden after six months they get the magic letter hey we're you know we know mom and dad died and we're going to foreclose on the property and so they think of the reverse mortgages being bad as a result of that you mentioned about putting the reverse mortgage in the trust which at least begins the process of avoiding probate it doesn't eliminate the need to sell the property or refinance it or deal with it in some way but sometimes the Heirs just aren't equipped to live for free in the house forever have you have you ever had customers like that come to you and call you after that process starts and what's your best advice I actually have a client going through this right now where their mom passed away recently and their intention is to live in the property they do know that the reverse mortgage must be paid so they're taking a loan out to pay off that reverse mortgage unfortunately mom still has you know equity in the property of course there's siblings involved too but it's so important to keep in keep the lender in informed on your intention so yes for instance there's a problem with a somebody who you know maybe was a hoarder and they need time to fix up the property before they sell it reach out to the lender let them know your intention if your intention is to buy the property if your intention is to sell the property they will give you know a six-month leeway and then oftentimes they can extend it for a

14:24 Maximum of another six months so just stay in communication with the lender you there's a monthly statement that comes so you don't have to go digging for paperwork just wait for the statement to come and then call the lender and let them know and I think it's so important that you mentioned early on that the property has to be put into a trust to give you more flexibility because if you don't you can only sell the property by going through probate which creates more cost and time and limitations versus if you have the property and it's in a trust you don't need the court to approve now you might need some approval of heirs depending on how the trust is written you maybe not but it gives you a lot more options on how to sell the property when to sell the property maybe sell it and carry back paper maybe sell it and get some lump sum upfront to move out you can't do that in Probate and so it's so important and one of my reasons for doing this podcast is to reach out to reverse mortgage Originators to say you got to get your customers to put the property in the trust otherwise they to dispose of it through probate and they made the difficult job of disposal a 100 times harder and more expensive than it really needs to be so that's really one of my pet projects of this to do that is to get people on that so there you go okay so let's talk about go back to the topic I know you want talk about and I do as well which is what's the difference on working with a reverse mortgage specialist versus you know I me I L got a business card today from some guy he had like so many types of mortgages on his business card I don't remember any of because I think of him and this business card with all these words on it versus I talked to Angela and I'm going to think about reverse mortgages it doesn't mean you might not do other mortgages I don't know we don't even need to talk about that but talk about the difference and what do you bring to the table for people who come to you for advice in these areas so I had to go through a rigor a rigorous educational process because these loans are so unique and they need to be tailored to the individual client I also have a huge problem with loan

16:32 Officers that just can say oh yeah I do reverse mortgages because all they're looking at is dollar signs you know there are potential for reverse mortgage Originators to make a lot of money but you need to do it in the best way for the client so not to line your pockets but to help the client have a sustainable loan that is super important you know any licensed loan officer can do a reverse mortgage but should they not really you got to make sure that their hearts in the right place their minds in the right place that they're educated you know I've had people on the verge of foreclosure and a reverse mortgage came to the rescue so you know it really helped them stay in their home even though they were in the foreclosure process not a lot of people know that's a possibility so you know just keeping up to date on the guidelines and just the different nuances is super important that's my primary function because of how passionate I am about Helping Seniors and you know I'm constantly talking to people and I'm like wow you know this could be a great fit for you and some people just you know the second you say the word reverse mortgage they shut down and that's okay too some people you know it took four years for them to actually go through with it you know and they could have had almost you know 50% more in their line of credit but you know I'm not a pushy person I make sure that people understand the type of loan that they're taking the way to Best structure it the way to Best access the funds you know I just really try and work with the person I at the end of the day my commission is a second afterthought it's not the primary focus which unfortunately can be especially you know the rates have been higher people have you know been making less money and they're more concerned with the bottom line than helping the person yeah and I think it you know I'm in

18:36 The same boat that you are in that you know I'm a real estate agent in the probate space and there are so many real estate agents that are probate experts because they bought data and they cold call people to get leads and they've done a couple and there's nothing wrong with you know we all were new in the business at some point and working at it but I think that certain things are more technical and do require more handholding and you need to have a mentor perhaps to get started properly in those areas I know for me like I said this is an area where reverse mortgages are great but if you're G to do it do it the pro get the right customized solution and again I just can't say often enough get it into trust because at some point reverse mortgage the borrower is going to pass and then what are you GNA do and how you g to do it and unless you have the ability to write a check and pay it off where you're qualified to just refin yourself s most people need to sell the property or something like that and the trust will make it a lot simpler to do so Angela I really appreciate the time with us today and just I know I saw you online and just thought you really had a nice perspective want to share that you are Angela Wyckoff is a loan originator with Reverse Loan Solutions and we'll have her link to her contact page down below, or you can just click on the button get a quote there and she's got a cute little video of her there as well and love to see her in action and just remind this is Reverse Mortgage Podcast where we talk to successful and experts in Reverse Mortgages across the country about how to use this tool to help our customers get better outcomes and avoid both you know being house rich and cash poor and having liabilities and having to make short-term or expensive decisions where the reverse mortgage can be kind of the lubrication to that transition make it work so Angela any last words what would what would you say somebody who's trying to build their business in this field of reverse mortgages what would

20:40 Your charge to them be or what advice would you give them to be more successful just have conversations just be approachable have conversations don't go in with an ask just always try and be a resource and helpful to other people I did create a website ilovereverse.com it's a it's a portal in which you know seniors can go to just access the information or answer the questions that they're too scared to ask there's no obligation it doesn't you know track your information and nobody's going to call you initiate any contact but if you go there's various subjects that you can learn about that you can you know find out more about there's other resources on there if you need inhome care you know I just provided you know an outlet where people can go and take a look and you know again hide behind the screen and find the answers that they're looking for and then decide to make that connection wow so ilovereverse.com which brings you to this wealth of information thanks for sharing that it would not be complete without that and I mean I had to scroll down quite a bit to get I don't know how it shows on the screen here but we're we going deep with different resources so Angela thank you so much for that and thank you for your time I really appreciate like I said I know you come from place of educating giving and I think it's really important as we refer people to various vendors that they'd be like-minded and I think I feel very comfortable and will I'm sure induce people to you going forward Angela, thank you for your time today I appreciate it I appreciate it bill you take care