The Voice of Reverse Mortgage, with Ted Butler

0:01 So there's the basics of reverse mortgage and then there's the more sophisticated advanced concepts. And I'm really excited today to have as a guest Ted Butler who is his website is the voice of reverse mortgage but really somebody who has some very deep insights in the product has a fantastic perspective overall on the market. So let's talk about Ted. What would be Let's just start off with one to give people a juicy thing to get interested in. What's one advanced topic that an experienced originator like you knows about that the brand new one's just going to miss or the call center isn't going to have on their on their little script note sheet crib not sheet. What's one advanced concept that about reverse mortgages that you want people to know about?

0:39 Well, first of all, I want to say Bill, thank you very much for the opportunity to be with you today. And hello to our listening and viewing audience. You know, one of the things I think is really important to share is the fact that the modern reverse mortgage today is far more than just a product for a needs-based client. When I started almost a hundred years ago, literally almost at the turn of the century, it was very much a needs-based program. People did this because they had to. But today, the majority of folks that we work with are people who don't need to do it, but want to do it because it's going to improve what they may already have in place. And we get to deal with very sophisticated clients who have very sophisticated financial plans and work with their advisors on how to maximize all sorts of things, whether it's income in retirement, preserving assets, just a whole host of things. Not the least of which is how what's the most financially viable way to purchase a house especially in retirement. So we work with a lot of affluent people today a lot of multi-millionaires and that might be a bit of a surprise to some folks that are thinking about reverse mortgage in more traditional terms.

1:56 So let's talk about you covered a number of topics. So let's start off with one which one of my favorites being a real estate agent which is using reverse mortgage for purchase when you have a wealth to-do customer or somebody with plenty of assets who in their mind is going to pay cash for a property. Why should they and I know the answer to this but I want to hear your perspective. Why should they use a reverse mortgage for at least a portion of the purchase price rather than pay the whole thing in cash?

2:21 Oh that's such a great question. You know, we've been trained as a society to think about cash as king and interest as a bad thing. But I'll tell you, most business is done on borrowed money. Most countries run on borrowed money, as we're pointing out. And to be as optimal as possible financially, using other people's money is a very smart way to go about living your life. We're nothing more than really just little businesses of our own. So using the reverse for purchase or what Mutual of Omaha calls the lifestyle home loan. We like that name a lot better than using the R word. It resonates better with people that are that haven't been exposed to it. But the lifestyle home loan simply allows somebody to do two things. Number one, retain more of the proceeds from the sale of their departure house. And most people, no matter how affluent they are, could always benefit by having more cash available. Particularly as we're looking at longevity issues and health issues and memory care issues. More money is definitely better in retirement. But we also work just as equally with people who have come up against a limit of what their dollars that they have to purchase with can get them. And if we can help them buy a house two, three, $500,000 more than the house they're looking at, there's a lot of people that are very happy with that proposition. Of course, the home buyer is who wouldn't rather buy a $ 1.5 million house than a million-doll house?

3:57 The Realtor® is happy, of course, because you know what Realtor® wouldn't rather sell a $ 1.5 million property than a million-doll property? But also their financial advisors are because they may have been tempted to turn to some of their investment accounts to bridge the gap to buy that house that they really want. And most people, you know, we're pretty simple creatures. We want more and we see a house and we go, "Okay, I know I've got this kind of a budget, but you know, Bill, can you help me buy that house that's, you know, maybe two or $300,000 outside of my budget?" And you can tell them yes. And it's so much easier for them to qualify with the lifestyle home loan. We're not trying to qualify them to make a monthly mortgage payment. For many people in retirement, income can be a challenge. They just don't have enough income to qualify many times. So, we take that requirement off the table. And oh my gosh, it's a lot of fun. I've got I just had I have four purchases going right now. I just had my fifth purchase sent to me today. It's something that we're seeing the consumer becoming more aware of. Definitely the Realtors® are becoming more aware of it. But where I'm really the most excited is the financial planners that we're working with embracing this concept because most of their a good number of their clients are going to be buying their dream home in retirement. And we want to help them find the most optimized way to do that. You know, part of the reason I launched this podcast, I'm embarrassed to admit as a real estate broker, I didn't know about that I qualified for HECMs for purchase or for a lifestyle mortgage as you call it.

5:32 I used to Florida, I was married in Florida, live here with my wife in LA, and I keep thinking, well, if I move to Florida, I can, you know, move my business there, avoid taxes or minimize taxes. But we want to stay here because we have grandkids nearby and unless I get divorced and I can't afford to get divorced and move. So, I'm kind of stuck. So, I had about $500,000 of liquid assets I could use. I couldn't liquidate retirement funds and without liquidating the house and didn't want to refinance and get to get another mortgage. So, I have about $5,000. I'm looking for condos and it's going to be mostly me. Condo's fine. It would work out, but it just wasn't nice enough. And then all of a sudden, I realized, but hold on. With a reverse mortgage, I can get about a $300,000 reverse given my age and situation. Well, now I'm looking at $800,000 condos. Wow, there's a whole bunch of options between 500 and 8.

6:22 They're a lot nicer. And the three the $3,000 reverse mortgage I don't have to make a payment on, which is nice. So, I'm a Realtor® and I didn't know about this product. So, that's why I do this podcast. Ted, you and I need to get this message out to more and more real estate agents and financial planners.

6:38 Yep. And we're very earnest about education. I happen to work for Mutual of Omaha. We are the largest provider of the reverse purchase. Again, what we prefer to call the lifestyle home loan. And I do a lot of education, a lot of training for Realtors®. Over the last two years, I probably trained close to 2,000 Realtors®. But that's just scratching the surface, you know. Those are only the people that have been exposed to it and want to learn more about it. And when we think about how huge our real estate industry is, you're right. It's a program that is designed for today. And one of the things I like to reference are is the National Realtors® Association's own demographic information. You know, things have changed dramatically. U the number one home buyer now is us boomers and older. We are now the number one home buyer. It didn't used to be that way. We've been the number one home seller, but now we're the number one home buyer. That

7:40 Firsttime home buyer, oh my gosh, I feel so sorry for our kids. So tough to think about buying a million-dollar starter home. You know, that's a big bite to take right out of the gate. But for our demographic, you know, we're making decisions on our timeline. We don't have kids. We don't have school to worry about. U, many of us are at a point where, you know, we're getting ready to retire and darn it, we want to live our best lives possible. We want to live in as nice a home as we can and we want to hold on to as much cash as we can. And the last thing we want in retirement is a monthly mortgage payment, right? So the lifestyle home loan, you know, checks off all of those boxes.

8:21 Yeah. Yeah. It creates such flexibility for so many different options. And I think, like I said, in my case, moving, you know, to a different state at our age is diff difficult. There's some financial advantages and there's some personal disadvantages, right? When you move, new people, new stores, new friends and all that. And that's why if we're going to move, we'd start smaller and then, you know, get acclimated maybe and then sell a house and move into something bigger. But, the reverse mortgage is perfect for that. In that we could at least get the process started while we're living here as long as our intentions to be here. As well or on the purchase side, just purchase it while we're down there and conserve cash.

8:58 Okay. So, that's the purchase piece of it. So, let's talk a bit about well, let's let me finish there. Realtors®, why do Realtors® not know this product? Like to me, this seems like such an easy sell. I don't typically work with buyers, but to me, the agents work with buyers always worry about the payment. If the payment rates go up a little bit, now the payment is higher. If the, you know, negotiation goes higher, their payment's higher, insurance goes up, their payments higher. With the first mortgage, there's no payment. So, to me, it seems like the perfect addition process. Why do you think real estate agents haven't grasped this and what can we do or the ones that you see that do grasp? I know you and I were introduced by you know quick shout out to Heather Brooks, my colleague at EXP Realy. She has a huge group of senior real estate agents. What do we do to get more agents to embrace this product?

9:49 Well, I think I think we have two hurdles to cross. One is education. And education by its very nature requires a willingness for the student to learn. And I'll just use my own personal example. I was a financial adviser before I got to the reverse mortgage industry. And I hate to admit it, but I thought I was pretty smart. I thought I knew a lot about a lot. And when it came to reverse mortgage, I didn't need to know anymore. I thought I really knew everything I did to make that decision. So, it's interesting when I teach continuing education to certified financial planners and RACPs and graduates from the American College for continuing education credit. That's a that's a kind of a sweet spot for my education. But I also do a lot of education for Realtors®. It doesn't matter what group I talk to. I start with the same exercise and that's something that I call practicing open-mindedness and I tell folks we're going to do some exercise right now and I say no we're not going to have to get out of our chairs but it's going to require a little bit of effort on your part and that's to be okay with the idea that perhaps something that you think you know is going to turn out to be wrong or that you have incomplete information. And if we can all agree that knowledge is ever expanding and that all we do throughout our life hopefully is continue to grow our knowledge, then this is going to be a really enjoyable time for you. When it's not enjoyable is when you're sitting there with your arms crossed, thinking that you know everything that I'm about to tell you because I was right where you're sitting at one point in time. I had my arms crossed many times in those presentations just not even listening.

11:34 But if we can get over that first hurdle, people's willingness to learn, that's job number one. And then we always have to address the elephant in the room. The modern reverse mortgage was not the program that started in the United States. The original reverse mortgage in the United States, the very first one done in Portland, Maine. A very touching story. Most people have heard that. A widow looking to manage life after the recent passing of her husband. And you know, I don't care whether you want to call it timing or divine intervention, but thank goodness she was in a little town called Portland, Maine, and her husband and the manager of the Thrift that held her mortgage and played football for her husband. You know, it's not what you know, it's who you know. And he took exception on her situation and said, "Okay, we can't absolve you of your obligation, but how about we do this? How about we create a version of your mortgage where we simply defer those payments until you're no longer living in the house." She was thrilled. She literally thought that was an answer to a prayer. The bank knew that they had a guaranteed asset and that was the first reverse mortgage. Hate to tell you, even though I work for a lender, I don't work for a bank. Banks left to their own devices.

12:58 Really are more interested in the bank's well-being than the borrower's well-being. And so reverse mortgages over time became weighted a little bit too heavily to the bank's advantage. And probably the most egregious difference between the old style reverse mortgage and the modern reverse mortgage was a small piece of contract language called an equity share provision. Now, Bill, I would imagine that if you read in that stack of documents something that said equity share provision share, doesn't that mean like good for both of us, right? But no, it meant that not only would the bank collect the interest that was due, but they would also from that point forward collect any of the equity that grew in the house. So, they basically were double dipping at the end. And that really caught a lot of people by surprise even though they read it basically and signed it. You know, most people don't read their mortgage documents. And you know, you and I are old enough to have gone through some pretty amazing times in this country. We got to witness firsthand one of the most incredible transformations and that was the civil rights movement here in the United States. But shortly after civil rights came a movement called seniors rights and that's where groups like ARP got their founding and their start. And it was those advocate groups that went to Washington to petition the federal government in the mid 80s to put an end to what they believed to become a predatory lending practice. And the federal government took a look at and said, "You know what?

14:28 No more. You're not going to do this to old people anymore." But they also realized that there was a real advantage to allowing older homeowners safe access to some of their housing wealth. They saw the handwriting on the wall a long time before most people did that we don't have enough people and the younger generation to pay for what the older generation is going to need as far as services like social security, Medicare, etc. So, the federal government realized that there was a way that they could allow older homeowners to become more self-sufficient and self-reliant, mainly so the government didn't have to take care of them. And we have to remember, even though this is a program created by HUD, insured and administered by the FHA, it's a revenue neutral program for the federal government. They make no money on the program. They spend no money on the program. It's all covered by the borrowers themselves. But we work with a lot of people that would much rather take care of themselves. And this program is perfectly suited for it.

15:23 So, you know, the hurdle to come over to overcome is that stigma that was created by the old style reverse mortgage. So to get back to your question, sorry, two hurdles for the Realtors®. Number one, the willingness and openness to learn. And then number two, to put aside what they think they know about the program because the modern reverse mortgage is far removed from the old bank created reverse mortgage.

15:49 The wear for this is the you have to overcome two stinks. Stink 1.0 is the first version of the reverse mortgage. There are people say it's a terrible product based on what they knew at that time and they were right. It was a terrible product the first time it came out and I originated loans back then. I did a couple reverses. I didn't abuse my customers but I saw it happening and there were some tremendous reforms made in the 2000s and the business the product today is nothing like it was. So when somebody says they know about you know shared equity when they say they know about people losing their properties with reverse mortgage that doesn't happen on the fill in product for example. It's a totally different product. The other stig we have to overcome is the current loans aren't serviced very well in that you have a natural handoff. The borrower takes out the loan and you know they're older so they're I don't know the numbers but I imagine reverse mortgages on the books less than a standard mortgage just because people are older and planning for different things. But whatever it is, when they pass and then the kids have it, if the parents didn't plan properly, now you have at least in California and many states a probate requirement because how do you change the ownership of the house? You can't just, you know, pay off the mortgage. You have to sell the house. And you can't sell the house if nobody owns it.

17:11 And if the person who owned it died unless there's some process to transfer ownership, that process is probate and can take time and money and be difficult and be contentious. And the stink of that process. And so what I say to originators around the country, the reason another reason I have this podcast is tell originators two things. One is for most loans today, there's a requirement the customer fill out a form every year. Why not use that as a mandatory touch point to help your customer and stay in touch with them and see where they are in life? How is their health? Who are their kids? Do their kids know about this loan? Do their kids know about what's going to happen with them once they're gone? And second, I think every originator should look at the how the title's held and say, "Hey, by the way, you know, I know we did the mortgage you did as Bob and Mary Smith, not the Bob and Mary Smith trust. Are you aware of the advantages of a proper estate plan that perhaps a trust might offer you?" It's not our job to sell it. It's not our job to get paid for that. It's not our job to do anything other than ask the customer, "Have they considered it?" I think that's a responsibility. And if you have to do that every year, do it every year because we can check public records and see what the case is. So talk to me a little bit about what do you do to help customers maintain a relationship? I know your reputation is impeccable. You must do more than the average originator in this area. What do you do to stay in touch with people so that rather than being thrown to and nothing against Mutual of Omaha, they're obviously a very fine company. They've been around my entire lifetime. But you stand out amongst all the other originators. What is it that you do to keep in touch with your customers so that they don't fall in the cracks?

18:42 Well, you bring up two really great points. And again, it really just comes down to communication. I am one of those loan originators who every year has a meeting with my borrowers. So, every month I have multiple meetings with my former borrowers that go back the 21 years that I've been doing reverse mortgages specifically as a check-in to see where they are in their life, what's going on. I let them know what updates may have happened to the modern reverse mortgage. And I always because of my financial planning background, I always talk to my borrowers about the end. What is it going to look like when you're no longer here? And people may not believe in God, but they should believe in God, good orderly direction. And without a will or a trust, they're setting their family up for chaos at the end. And you know, there's pros and cons to each. I let my borrowers make that decision for them. But having that conversation, bringing that awareness to them, I think is an obligation that all loan officers should have. And then to the non-loan officers out there, Realtors®, financial advisors that may be listening or watching, this is where it's really important to do your homework. Work with a reputable company, a company that you know has been there for a period of time and is going to be there for your clients long after you're gone and work with a professional who's been in the industry who can provide the insight and expertise that's required to take care of them. Now, there's a lot of people that are new to the reverse mortgage industry. We've had a flood of conventional loan officers join the reverse mortgage ranks simply because of the decimation on the conventional side with refinances going away and purchases are down. You know, and we've inherited a lot of really good people, but it takes time to develop the full understanding of this program. It is different than a regular mortgage.

20:45 For instance, Mutual of Omaha does not allow for a reverse lender or originator to do forward loans or vice versa. We feel that there's a really important reason that those two individuals aren't combined. We have a completely different timeline with our program. We are an education first as opposed to a transaction oriented concept with a regular mortgage. And working with seniors has its own level of care that's required. So, you know, those are things that I think are really good to bring up and really important for whoever is looking at the reverse mortgage, whether it's a loan officer, a Realtor®, another professional, children, by all means do your diligence. Work with somebody that you know you can really count on and that goes a long way because you'll find other loan originators that do what I do. I, you know, I'm fortunate. I get to talk to a lot of top echelon originators and many of us share a lot of the same best practices and keeping a contact with our borrowers is really one of the key ones. It's really where you start to separate yourself from the rest of the pack. Most loan officers don't do that, but you know, I'm here because I do a lot of things that other loan officers don't do. And it's, you know, I tell people it's not rocket science. It's just, you know, a little bit of extra work and a little bit of you know, extra care.

22:10 You know, I see so many, you know, being a real estate broker, I have so many originators I meet and they give me a business card is I specialize in construction loans, FHA, VA, purchase, refinance, commercial, industrial, this, that, reverse, blah. Like, how do you know any of those? I know when I was an originator and for various personal reasons I had I had 19 business cards in 18 years because the companies kept going out of business. Nothing to do with me just the nature of the mortgage industry up until 2008. I finally just said, you know what, I can't pick a winner here. I'm going to go into real estate because at least there it's my business. And I tell that because I meet, you know, real estate agents who have similarly so many different specialties and I just decide to focus on one to be really good at it. And it means my customers I think get better service. It means I have more clarity on learning and being able to learn the product. And so I like that you only individually do reverse mortgages. I recommend to customers go to companies like that. Now I know the companies have like a division for reverse. Okay, that's a different strategy. And they do the company does both but the originators do one or the other. To do both of them I just think there's so many guidelines and changes it just seems impossible to be a master of both not just in the guidelines but how you deliver the product to the customer how you communicate with the customer being so different.

23:31 Yeah and I talked to plenty of borrowers who started down the path with a loan officer that wasn't equipped to properly handle their situation. I get to do a lot of sweeping up after, you know, some of those u originators that really need to spend a little bit more time learning and becoming focused. So, but you know what, it's a message. We're just thankful that our industry is growing on the origination side.

24:02 You know, we're an interesting product. We tend to do well when things are good, but we're one of the few products that also does well when things aren't good. And right now we're kind of in one of those nether regions between good and not so good. We have a lot of storms on the horizon. We've had some real ups and downs in the stock market for any of our clients that are living on their investment accounts or their retirement accounts as a part of their source of income. It's been very challenging. And so a lot of my calls today are coming from financial advisors looking for ways to help preserve assets that their clients are needing to liquidate normally. But what happens with an with an assetbased investment like in stocks or bonds or something when you sell those for income, you've eliminated them from any potential further growth,

24:56 Right? And so the goal, especially in depressed markets, is to keep as many of those stocks available because the market will rebound. It has always rebounded and it will rebound higher probably than where it was. You just have to be patient. And so what we're doing today is shifting a lot of their cash flow needs from their retirement accounts to their otherwise illquid housing, excuse me, housing wealth. And we do two things. You know, many of them, the majority of people we talk to today, interestingly, are coming to retirement with a mortgage in tow. When I started, rarely did people have a mortgage and tow. 20 years ago, most people had their homes paid off. Not today. Us boomers, we're all about leverage. You know, we've had to put the kids through school, buy a new car, a boat, whatever. And so, most people we work with today are getting into retirement with a mortgage in towel. And if we can eliminate their largest single monthly expense, their mortgage and payment, oh my gosh, do the financial planners love us. That has just made their job so much easier. And then, you know,

26:00 You've lowered the bogey for monthly income. And then now instead of having to sell assets every month to get to where they need to go, they can stabilize it. And it's predictable. The payment is zero.

26:10 Payment zero. And they can take the money, you know, any way that they want as a monthly stipend sent to them. Cash out in a lump sum, draw from a line of credit, any accommodation thereof. And so we'll have many advisers give their clients a two or three-year plan that they're going to shift their income need from their asset accounts to their housing wealth for two years. By then, the market should have recovered. They can stop taking money out of the reverse mortgage and go back to taking money out of their reinvigorated investment accounts. You know, just all sorts of ways that people are, you know, realizing how they can utilize this important asset, their house.

26:48 Well, obviously these topics get sophisticated. I think that, you know, as I explained to people, the reverse mortgage, like a Swiss Army knife, it's not just a knife. It's not just a screwdriver. It's a knife and a screwdriver and a toothpick and 15 other things. Reverse mortgage can be as well, but it requires an expert to understand how to use it and apply it. And I imagine you get in consultations with wealth advisers and investment advisers on planning these things. That must be a important part of your business.

27:13 Yeah, it's and it's really enjoyable when I of course again from my background being able to talk to other professionals who understand money mechanics, we can really have a great conversation. But Bill, I'm going to tell you honestly, those conversations can be just as rewarding even if I'm sitting across the kitchen table from somebody who, you know, can balance their checkbook and they, you know, pay their bills on time, but, you know, beyond that, they've lived their lives. They paid their mortgage. The kids are gone. Now they need to find a way to live more comfortably or more safely. And it doesn't matter how sophisticated they are. We have a tool that provides such benefit to those that use it. And it's interesting. AP did a study a number of years ago where they canvas thousands of homeowners who have actually used the program. And I think one of the most telling aspects of the modern reverse mortgage is what the people who've used the reverse mortgage repeated over and over again as the number one benefit that they received from the reverse mortgage. And I tell folks, you might be surprised. It's not something that we can measure with a decimal point or a dollar sign. It's something called peace of mind. Peace of mind is the number one reported benefit of those who've actually used the reverse mortgage.

28:34 Yeah. Because if they need to get cash, they can quickly get it either line of credit, monthly stipend, big chunk, whatever it is, and they don't have the monthly payment obligations they might otherwise have.

28:45 Yeah. You know, it's interesting also talking with financial advisors, you know, and I ask them what's going on with their clients. Number one fear of that financial planner's client is running out of money in retirement.

28:58 Sure. And if we can help them or help, you know, that person at the kitchen table live without that fear and apprehension, boy, I tell you can't put a price on that. And that really is one of the main reasons why I do what I do. Well, Ted, if I really appreciate the chance to talk and we can go on for a long time. You're obviously a depth of knowledge. If someone wants to get more information, I have here your contact info and your website is thevoiceofreversemortgage.com [Music] and then down below is your phone number. I know you have a couple phone numbers. You have a couple states you work in. You also work in between states as you're I think sailing between Washington and California. Is that a fair statement?

29:37 Yeah, I work out of two offices primarily. One office in Bellevue, Washington, another office in Long Beach, and more than often you're going to catch me while I'm on my boat. I do a lot of work from my boat. I live on my boat part-time. I'm licensed in the five western states, but through our concierge desk, I can be your reverse mortgage professional literally in every state that Mutual of Omaha does business. So, however I can be of help, no matter how big or small the question, no matter if you are a reverse mortgage professional, a Realtor®, a financial planner, a homeowner, the children, I'm more than happy to take the time to help you with the information, make an informed decision.

30:22 Well, look, Ted, I appreciate the time today. Hope other people take advantage of the reach out whether you're a Realtor® or originator or a financial planner, advi wealth adviser. Ted's a real asset. Ted, thank you so much for your time today. Really appreciate it. Look forward to continue our conversations. Thanks so much. And for the rest of you, that was Reverse Mortgage Podcast. We do this every week. We talk to top originators around the country, originators, managers, vendors to learn how to be more effective in serving our customers. Whether you're a real estate agent or a mortgage originator or reverse mortgage specialist or an attorney or estate planner, we want to learn how to be better at offering more services and collaborating with the best professionals to serve our customers. If you like this, please like it. Put a comment in, subscribe. If you want to be interviewed on this podcast or know somebody who should, feel free to send that along as well. I'm Bill Gross at Bill Gross Probate on social media. As always, make today your best day ever. Thanks so much.