Using a Reverse Mortgage for Purchase, with Tim Kennedy

0:00 Share my screen. But welcome to the Reverse Mortgage Podcast. I'm Bill Gross, your host at Bill Gross Propate on social media. And one of the key ways reverse mortgages are not used enough. The reason I launched this podcast is I believe that really customers only use it about onetenth the time they should. And real estate agents, take notes, get your pens out here. Loan officers, if you're doing reverse mortgages, we're going to turn we're going to talk to somebody who's an expert in how to use reverse mortgage for purchases. We're excited to have a company that does a lot of purchase business, Tim Candy from Move Home Mortgage. Tim, how you doing? Hey, good afternoon. Hey, Bill. Thanks for having me. I appreciate the time. And I know that, you know, I talked to like you originators who are focused in the reverse mortgage space, experts in the reverse mortgage space. They all seem to have a different focus. Now, some are more evangelical about the product, some are focused more in estate planning, some are focused more in other areas. I know when we spoke to you the first time I met you that you're really focused on using this as a tool for people who are buying houses that they should be using reverse mortgage. In my experience, so many people buy properties for cash that at a minimum if you're 62 years or older, why not get the reverse line of credit or pull the money out, invest it somewhere else? But let's talk about reverse mortgages for purchases. So Tim, where do you see the bigger opportunity that people are missing that you talked to and helped them take advantage of? Yeah. So, the reverse for purchase is a unique product and it and listen, we've done a terrible job promoting it. And the idea now is what we're trying to do is educate more and more Realtors® on the benefit of the reverse mortgage as they purchase product like one-time close with the reverse mortgage. And the premise behind it is number one, we can help Realtors®, increase their listings, increase their sales, and increase their buyers purchase power. On the flip side, we can help homeowners over the age of 62 find the homes that satisfy their wants and needs without the obligation

2:06 Of a principal and interest payments. So, you talk about a couple things. Getting more sales, buyers being able to get money for a house, and I forget the third one I was listening to. I kind of got I start thinking about the money. I'm gonna Oh, increase the buyer's purchase power. Okay, so let's talk about that. Let's first talk about because if you're a real estate agent, you pay attention to this. You can sell more houses. How does reverse mortgage increase the buyer's purchase power when they're buying a property? Well, you have to remember now, right? They're over the age of 62. In most scenarios, they're already on a fixed income and they may not necessarily qualify for a traditional forward mortgage, an FHA loan or a conventional loan. With the reverse mortgage, it's not a strict debt to income ratio or a strict FICO score. It's a financial assessment. So, all they need to do is qualify. And then they would qualify for a certain percentage of the equity in that home that we would use to purchase that home with the reverse mortgage. Now commonly somebody who's 62 65 they're going to get about 30 40% loan to value. Yeah. So depending so the way the reverse mortgages work, Bill, right, the based on the age of the youngest borrower, they get a percentage of the they get a percentage of the equity in the home based on their age. So for argument sake, if you're 62, you're going to be somewhere around 35% loan to value. And if you're 92, you'd be up around, you know, 60 to 65% loan to value. But the idea is, and you mentioned it before, instead of a homeowner, right? Here's the scenario. Somebody has a home. It's too big. It's too expensive. They can't handle the stairs. They can't handle the landscaping. They can't pay the taxes, insurance, they can't handle the ingground pooling. Just too big. But they can't afford to move. The other part of it is they can't afford to

4:09 Give up all the equity in that home when they sell it to purchase the next home because they need that money to live off in retirement. Most seniors today, homeowners today, 70% of their net worth is tied up in the equities of their home and they need that money to live, right? So, the idea of the reverse mortgage for purchase, number one, eliminate that principal interest payment. Number two, they can keep 40 or 60% of the proceeds from the home they just sold in the bank, right? And then we would finance the difference with the reverse mortgage. And now they can live in that home without the obligation of a principal and interest payment. So just to give you put some numbers to it, you know, personally, I was looking to buy new personal residence. I live in California in Florida and you know, how much cash do I have if I want to pay cash for the property? So because I don't want to I don't want a mortgage when I move. I'm 66. My wife's a little older. We're, you know, I'm making good money now, but I want to plan for I don't. So, I look at some condos and you know, for cash, I have made $500,000. If I don't liquidate stuff, I could just, you know, write check and buy a house for $500,000. But if I look at properties at $800,000, I can get a $300,000 reverse mortgage, which means I can buy a nicer property. I'm not paying me any money on the reverse mortgage loan and my property that's appreciating is an $800,000 house instead of a $500,000 house. So, while there is interest being paid on that mortgage, I'm earning appreciation on a bigger theoretically nicer property as well.

5:52 So, to me, it's like, well, that's like a no lose. Why wouldn't everybody buying a house for cash not either buy more depending on how much that is or buy for the same amount if you don't need it more and keep the cash in the bank and find a way to so what is the interest rate the mortgages today the reverse mortgages for purchase there's fixed and adjustable y what's the range of the fixed rates today in the sevens of some sort yeah they're probably a little higher than that but I want to go back to what you just mentioned before about increasing your purchase power, right? I've had I had a client here. They sold their home here in Long Island. It was about a 3,000 square foot home. They sold it for I don't know $600 700,000. And they went further out east and purchased a home in a in a golf community, gated community, clubhouse, pool overlooking the 10th hole of the golf course. And that house had to be a million-dollar purchase and a 45 uh00 square foot home. And the premise behind that was is yeah, he purchased a much nicer house, a much nicer house than he thought he could ever afford. He put he put down the same amount of money if he was going to pay cash on, for example, that $500,000 house. So he put down 500,000. We financed 500,000 and now he's living in a in a golf community without the obligation of a principal and interest payment similar to what you had just discussed in Florida. Getting back to your to the interest rates. Yeah. So the adjustable rates today and listen they vary but the adjustable rate is somewhere between six and a half and 7%. Right. And the fixed rates today are probably somewhere in the mid to low nines. Okay. So the rate sounds, you know, just as a real estate agent doing home loans today, buyers are in the six and a half to seven range. Nine sounds high, but you're also getting a different risk profile of loan. The adjustables being the sevens. And I

7:56 Think to remind to remind people, you're only paying interest on the portion of the loan. So like to use my scenario, you know, the extra $300,000 I'm buying is also appreciating by on average 4% per year. So I'm paying seven, I'm getting four back. It's almost covering half of the of that equity backed by the appreciation of the property. Yeah. Yeah. I just want to go over a quick scenario with you. I was on a phone call yesterday with a client. They are selling or she is selling her $750,000 home. She has a $330,000 mortgage on that property. So, she's probably paying about $2,000 a month in principal and interest. She's going to walk when she sells that home, she'll walk out of there Bill with roughly I believe about $350,000 and she's purchasing another home for I'm checking my notes here. I think it's three she purch home for 300,000. She has to put down 150,000. We're financing the other $150,000. So, what that means now is she's moving into home. She's right sizing. She'll no longer have a principal and interest payment. And from the sale of her previous home, she's still going to keep about 150 or close to $200,000 in the bank for her to use in retirement.

9:29 Wow. Wow. Wow. And so that's a tremendous tool. And the way I look at that is almost familiar. I was planning on, you know, it's I don't know. My fantasy is to move to Florida. I met my wife in Florida, got married there, but we have my daughter and two grandkids five blocks from my house. So unless I want to get divorced, which would then take my down payment anyway. Divorce is a whole divorce is a whole another conversation, Bill. We can have that another day. Unless I'm going to do that, I'm not moving to Florida. But I still fantasize. Because I check prices all the time in Bocraton and in Surfside where I like to move and but and it's and we've talked about with our kids and who knows what the future looks like but you know like I said I can't quite buy for cash yet given I have assets are producing income for me but at some point we'll liquidate them but I'm thinking if I could keep them that'd be great but really I when I noticed well to be honest I don't need to buy $500,000 house I can buy an 800 because of the mortgage that buying power it created for me hey that we're looking to spend that much. We're looking now 600 or 700,000 is fine. I don't need 800,000 house. So it create more buying power. Now as a real estate agent, these are things that we need to get involved with. And so either as an agent, we need to learn this material cold and or have relationship with you, Tim Kennedy, to help teach us and or send our customers there to get them interested in the opportunities of extending your buying power and making a buyer where one doesn't exist without that because of the opportunities. So it's challenging because everybody still has these misconceptions. Yes. And wrong information about reverse mortgages. So when we have these conversation with Realtors®, we do Realtor® lunch and loan lunch and learns all over the country and initially you know they're very negative against it and they're uncomfortable about especially approaching that conversation with their clients. Yes. With their buyers or sellers. Yes. But the idea is people have to understand that you know

11:31 A reverse mortgage today the home equity conversion mortgage right keep in mind it's managed by HUD. It's insured by FHA. There's probably a dozen different government agencies overseeing this product because the seniors today are a protected class, you know. So, this is a very it's probably the safest mortgage product out there. Okay? And we don't discuss it enough. And especially with the Realtors®, they have to understand and learn a little. They don't listen, we're the pros, right? They don't have to know it in detail, but they should know the basics, right? Number one, nobody's giving up home ownership. The homeowner is still going to remain on title of the house. It's their home. They can renovate the home. They can fix up the home. Their only requirement is they live in that home as their primary residence. They pay their taxes and insurance. And they maintain the property, you know, and if we can get that message out to the Realtors®. And the idea at the end of the day, if we do this right and we coordinate it correctly with their other, you know, assets and liquid assets and money in the bank, you know, at the end of the day, that homeowner could leave a bigger legacy to their children if we coordinate this the correct way. Right.

12:50 So, it sounds like sounds like this is a tool, and again, this tool isn't for everybody. It's like any tool in the tool box. It's is good for certain people. Is not good for certain people. But I think the key is to really learn how to use it. Now, do are you able to give particular scenarios if somebody calls you up and says, "Hey, I'm looking to buy a house for cash for this much. Can you have the ability to come back and say, well, you can do that and or you can buy this much more with a verse mortgage you have to pay on and yes, it's equity it's being charged against your property, but your equity is growing as well." Do you have the ability to give people that kind of immediate answer? Oh, 100%. So we have the software and the graphs and the charts and we can go through a presentation like that. You have to understand, Bill, you know, when we talk about retirement income planning, we talk about three different buckets. The number one bucket is our income. You know what we're doing right now, you and I, we're working. We're earning an income. We're putting money away to social security. We're putting money away into our retirement accounts. But one day that's going to stop because one day we will retire. And then we focus more on what we call bucket number two, the money we've saved all these years while we're accumulating wealth and the retirement accounts and the 401ks and whatever else we may have. And then what we like to discuss a lot about is bucket number three, the home equity. And the reason we talk about home equity is because homeowners over the age of 62 today are carrying over 17 trillion dollars of home equity. And why aren't we discussing that when we're talking about retirement income planning? So, the idea is let's leave bucket two alone, right? Instead of taking $500,000 out of bucket two and purchasing a home, let's leave as much money as we possibly can in bucket number two. And let's and let's use the equity of the home. Let's use that housing wealth. And if we do this correctly, you have to remember every time somebody takes money out of bucket number two,

14:52 What does it do? You got to pay taxes on it, right? Number three, it may bump them into a higher tax bracket, right? The idea is let's find another bucket of money that's taxfree. Let's talk about housing wealth. Let's talk about home equity. Now the reverse mortgage product is only available for primary residences. Primary residents. Yes sir. So if somebody owns a house like in my case I you know live from Los Angeles I'm moving to Florida. I might want to convert my current residence into a rental but there's a lot of equity there right? So that's a whole another way to look at that. Can one move? What are the restrictions as far as calling something a primary residence versus a rental or second residence? Well, primary residence has to be the residence where you live. Are you going to live there more than, you know, six months in a day? And do you have every intention of living there, right? Right. So, you can't have your primary residence and have somebody paying rent, you know, because that means you don't live there, you know, somebody else lives there. So, Right. The idea it has to be your primary residence. You're not restricted from traveling or vacating that home. You know, I have a lot of clients here in the Northeast, you know, and they go to Florida, you know, four, five, six months with a reverse mortgage. They can do that because they have every intention of coming home to their New York property.

16:16 That's their primary residence. Well, I'm sure like New Yorkers, I'm also looking at the possibility of maybe moving my wife into a smaller place here in Los Angeles as a second residence and move my primary residence for business reasons to Florida. I have a lot of I have a real tax advantage. If I can move my business to Florida, I can save quite a bit in taxes. That alone pays for probably pays for the probably pays for the house. I mean, at some point, but we'll see how that works out. Okay. Okay. So, it sounds like there's a lot of possibilities and strategies. There's a very I the way I describe this is complicated doesn't necessarily mean bad. Complicated means there's a lot of possibilities, but there's only one possibility that matters to you as a customer or to your particular customer that you're talking to. And that's why you want to talk to experts. And Tim's not just an expert in reverse mortgages, but in particular, he does quite a bit in the purchase side, which is different. Now, Tim, I know one of the challenges. I'm a listing agent primarily. I'm a real estate broker here in LA primarily listings and you know people call me all the time with offers and they have you know different exotic plans and how they want to buy the property and nine out of 10en times I say that's just not going to work to be honest with you call and I've had phone calls from reverse mortgage buyers and you know one thing I know is this if I talk to a 100 lenders in LA 99% will say they can do a reverse mortgage but about one or two have done one the last two ers. So, imagine I'm a listing agent and you're going to call me or your buyer's going to call me. Are you going to help? What do you do to help them get their offer accepted in a competitive market? If somebody's going to pay a good price, there's some competition. Do you reach out to the listing agents? Are you able to distinguish yourself from just, hey, I'm just some hack loan officer sing. I'm going to do a verse versus I know you're an expert. I know you work for a fine company. Talk to me about what you can do to help get that offer accepted. Yeah. So, it's interesting you say that because that's exactly how I got into the reverse mortgage business, Bill. About 15 years ago, somebody called me up and said, "Tim, do you do reverse mortgages?" I said, "Of course I do reverse mortgages.

18:16 Who doesn't do reverse mortgages?" And the truth of the matter is, I didn't know how to spell reverse. And I fudged my way through it. I figured it out. And I helped this client stay in their home and age in place. And I said to myself, Tim, you got to figure this out. And at that point in time, I did the research. I did my homework. I went to Barnes & Noble. I bought a couple of books and I educated myself on the idea of the reverse mortgage. And then I took it a step further and I figured out how the reverse for purchase worked. And then in 2018, I qualified for my certified reverse mortgage professional designation from the National Reverse Mortgage Lenders Association. In the past two years now I qualify for my retirement mortgage professional designation and yes when somebody calls me up and says Tim I'm over the age of 62 I'm looking at reverse mortgages I'm looking to purchase a home I will reach out to the listing agent and the buyer agent explain to them you know my expertise and as a certified reverse mortgage professional I am one of maybe 200 mortgage loan originators in the country with that designation. Keep in mind, there's probably well over a 100,000 mortgage loan originators out there. And I am one of 200 with that designation.

19:41 Well, and if you just call the phone number on the TV commercial with a fantasy actor, they're not going to call the listing agent. And what I try to tell my customer is then you can't get the house because if you in a competitive environment on a good listing with a good listing agent, you need to work with your real estate agent and your and your loan officer. You need to work together to tell the listing agent, hey, we can close on your deal. Nobody wants to just get the offer. They want to know it's going to close. And so that's why there's a distinction between to me somebody calls me from some company, you know, and I get phone calls from Rocket Mortgage and this company, that company, but some call center, they don't really know what they're doing. And if they don't do a good job, they disappear in the ether versus Tim, I know you're with Movement, fine company. You guys are very purchase focused. Your reputation with real estate agents is very critical. Holds a lot of weight. Now, you mentioned something. If I go back a little bit, I'm sorry. Certified reverse mortgage professional. We've talked on this podcast before. In my experience in real estate, it's the only designation worth anything in terms of the name. Now, there are other programs like I'm a certified probate expert and it was very good training and very good information, but just because you get it doesn't mean you know how to do business regularly in the CRMP. You actually have to do some amount of production and time on task and continuing education. But you also mentioned something else, retirement mortgage professional designation. Tell me about that. That was different. Yeah, so that's a designation that movement mortgage and Dan Hulquist perfected where we have to go through a significant amount of hours of training and take an exam and qualify for that designation. We also have to maintain even with the CRMP we have to maintain continuing education we have to take an ethics course and we need to m maintain that license so that's very important but the idea of the RMP is it's all I do so I am not even in my contract I can't

21:48 Even do forward loans or traditional FHA conventional loans I have to refer those out to other loan officers in movement mortgage I strictly do 247 reverse mortgages whether it's a refinance or a purchase and something I want to say and like you know you mentioned before yeah you get these phone calls all the time movement mortgage believe it or not is the seventh largest independent mortgage banker in the country and the movement mortgage reverse division just recently was voted number one for customer service because when somebody calls, whether it's me or the other RMPs at Movement Mortgage, you know, this is all we do. We are not a phone room like the other companies out there where you're calling a phone room, right? And you're not too sure what they know or don't know about reverse mortgages. This is all we do. And as I said, I've known Movement Mortgage for a long time. I've worked with the company for about six years. I've intimately wor with management and on the forward side with the regular mortgages on the purchase side and I know of all the companies I've worked with unlike Wells Fargo, Bank of America and other lenders who take the easy road when rates are good they do refinances when they're not good they disappear. Movement has always been committed to the real estate community as a partner and working with us helping us get our deals closed. And so for the most part they're well trained and they're cut above. But at Movement, they went a step further, which is only certain loan officers like you, a small percentage are allowed to do reverse mortgages. And so when somebody calls and says they're going to do it, they're really going to have to hand it off to you. You're the one that the Realtor® is going to really interact with. And I think that's I think that's the right path for companies. Now I individual loan officers, again, if you're experienced, you want to be able to do both. And that's a personal decision. But on a company level, the reason why the reverse mortgage has a bad reputation, the stink on the product is from the companies let anybody do it.

23:48 Yeah. Because not everybody who does it does it well. Half the people by definition half are below average. So you know that's right. That just the way the math works on that one. And you guys by definition are the top 10% of your company as far as doing reverse because they only let I think 10% or whatever or less company white do them. And that's to me is a real stamp of approval and movements part that they're that they are wanting to create something that protects reputation of the product and the company. And I think that's really yeah lacking in the industry overall. Well, it's important Bill that when you're discussing reverse mortgages that you have somebody that knows how to do them. Reason being is it's your reputation on the line. When you call me or one of my other retirement mortgage professionals, you know, now you are, you know, you have another real estate agent on the other side of this transaction, you have a buyer and a seller. And if you call the wrong person to do that loan, it's a reflection. It's your reputation. Right. So, you have to make sure when you make that phone call, you're making the phone call to the right person. Exactly. Well, and one of the right people to talk to, one of the companies is Movement Mortgage. I've had great experience with one of the right people is Tim Kennedy. Tim is in New York if you can't tell by the accent but services I think the Eastern Seaboard and as well can refer you to people across the country to help through the movement network to help get those loans done. His conf his information is on our website his website timttalkreverse.com. He actually should be Tim talks reverse with a new yorkaxent.com should be the brother website. I can teach my son-in-law is from Long Island so I'm allowed to tease New York stuff. And phone number [phone number]. Tim, thanks so much for being on the Reverse Mortgage Podcast. I really appreciate your commitment to the industry and your willingness to share and your time today. Thank you so much.

25:30 Hey man. Hey, thank you. And if I could have one more minute just about movement mortgage for a second. Yeah. We are an impact lender. To qualify as an impact lender, we have to donate 10% of our profits back to the communities we serve. Bill, would you believe Movement Mortgage donates back almost 50% of our profits back to the communities we serve? And when I found that out, I was just mesmerized and one of the one of the motivating factors of why I joined Movement Mortgage. I do know about that from the very beginning. I have to say that I think every company's copied this concept on a small scale and but you guys but move mortgage lives this and on their website has they've given over $377 million to date through that program and I'm going to tell anybody who knows movement and you know movement originator they live this our every company including mine exp and color whims they all have some sort of a donation process which is nice and I'm not putting that down but that it's Not 40 or 50%. That's what movement does. Yeah. It's just an amazing phenomenal. Yes. A phenomenal company and your founder Casey is just an amazing Chris Carter is just an amazing person has really created something of tremendous value. So thanks for pointing out Tim. I appreciate that.

26:49 Again, Tim Kennedy with Movement Mortgage and his contact information will be in the description. I appreciate your time today. Thank you so much. Hey Bill, remember a reverse mortgage in four simple words. It's just a mortgage. Thank you. I appreciate it. My pleasure. Thank you so much. And reminder, this is the Reverse Mortgage Podcast. We have a Facebook group if you want to continue the conversation. I have referrals. We do this every week. We interview typically top producers in the business, a few management. I actually have some my own content I add on this as well. But love to have your thoughts, comments, questions. Subscribe if you liked it. Don't subscribe if you don't, but if you like it, love to have you subscribe, but also the comments. Send what questions, comments, what you'd like to see us cover in the future. I would appreciate it. I'm Bill Gross Probate on social media. And as always, make today your best day