Why Financial Advisors Should Rethink Reverse Mortgages, with Mathius "Marc" Gertz of Reverse Your Thinking

0:02 What if I told you that financial players or financial advisors advising against reverse mortgages or even considering them can actually jeopardize your retirement, not make it better. In fact, the difference they make by doing that could overwhelm all the other policies they might do. That's how important this tool is, at least to consider, I think, for every customer. That's my belief. Who do I like to have here today as a guest? A guy who's an expert. He's got more initials after his name, more certifications, education, degrees than anybody I've ever met in my life. And has a radio show that talks about these issues, reverse mortgages, to the public as well as to advisors. Mathius Gertz, aka Marc. Thank you so much for joining us today on our Reverse Mortgage Podcast.

0:46 Thank you for having me, Bill. I appreciate being here. And tell me, how can not considering a reverse mortgage possibly put a borrower or a homeowner further behind than they otherwise might be?

0:56 Well, I think I think before I directly answer that question, I think I think why people advise against reverse mortgages is important to touch base on, okay? Back in the 1960s, there were mortgage companies that came out with their own version of reverse mortgages. Except under their program, the way it worked was you signed the title of your house over to the company. They sent you checks to live on and made your mortgage payments for you and let you live in the house. And then when you died, the lender took the house. Now, when those homeowners started to die in the mid-to-late 1970s, that was the first time a lot of their adult children found out that there was no house to inherit. And all hell broke loose. Big articles in the paper, columnists like Ann Landers writing columns against them, congressmen talking about senior abuse. And by the early 1980s, those programs basically died of their own weight. But the damage was done and an entire generation and their children, all right, who are now 50s and 60s, believed that reverse mortgages were bad. But the current reverse mortgages that were signed into law in 1988 and didn't become permanent until 1998 and were originally designed by the federal government with controls in mind to protect seniors, have absolutely nothing to do with those reverse mortgages from the 1960s and 1970s. But in a lot of areas, professionally as well, the word hasn't gotten out there.

2:40 So, when a lot of people think of reverse mortgages, they immediately go back to their memories from the 1970s. All right? And therefore, they say, "Oh, those are bad." And unless they're educated unless they're enlightened to understand that those reverse mortgages are not the same as these reverse mortgages,

3:06 Right. They think they're protecting their clients. It's a failing of the industry that they didn't they didn't change the name or adequately, you know, set up a division between the past and the present. And that's why many advisors in lots of different ways advise against reverse mortgages. For example, investments, a lot of wealth managers, a lot of financial planners, while not necessarily advising their clients against reverse mortgages, will tell their clients that they're not allowed to invest reverse mortgage money. And that comes down to issues that took place at the turn of the century. All right? And so what a lot of investment houses did was they told their advisors, don't take reverse mortgage money. But many things have changed in 25 years. But that hasn't changed. And I have to educate financial advisors to let them know, you know, there's no law that says you can't invest reverse mortgage funds.

4:19 Right. All right? It's just a custom in your house, in your in your in your business, okay? And you know, you have to get around these things. But that's where this all comes from. That's where it stems from. And you're absolutely right. Because of that, many people in positions of authority with homeowners advise them against reverse mortgages. But this is the reason. They're not They're not doing it They're not doing it because they know what they're saying. They're doing it because they think they know.

4:50 Right. You know, I know all that's true cuz I lived through that. I started in real estate and the mortgage industry decades ago. And along the way, you know, it was hard to learn how to do reverse mortgages, hard to get approved to do them. I did. I got I did a couple of them. And they were amazingly powerful programs. I kind of felt like I was given a laser gun to protect my family. It was an amazing tool. But I could see where if you weren't precise with it, could be do damage. And what was happening was there were unscrupulous more investment people than lenders

5:26 Who would do a reverse mortgage. The old product would go to a higher loan-to-value, like 80% loan-to-value. So they would take almost all the equity. And a distress sale would be all the equity unless the house would be in value. And take the money and invest it in their own business. So they're doing the loan and then they would sell the customer, typically annuities, with like a 10% commission rate at the close of escrow. And so they would get 102% of the mortgage, they would get 10% on the annuity. The annuities were underperforming and now the homeowner really had been ripped off. And that this is cracked down on. There's some very strong regulations against all that today as a result of that mess 25 years ago. At the time, I didn't want to be associated with it. It just to me, while it was a great tool, it was not the kind of thing that I felt like you like you know, selling heroin to people who medically need heroin. I'm sure there are a few people who need it. Yeah. But the problem is reputation so bad, you don't want to be seen as a drug dealer. And so I didn't pursue it. And I look now I look back on the changes. Yeah. As a real estate broker, I learned you know, how these changes are made and how we really do about my estimation, 1/10 of the reverse mortgages we should be doing. We have homeowners who have cash who own a property free and clear who should be able to unlock their equity for investment or other purposes, whatever they want. Their medicine, their travel, their family, their whatever their needs are.

6:51 We have people buy property for cash that should at least consider reverse mortgage and do 10 times as many because why use your cash particularly when you're retirement? So let's talk a bit about the common missed opportunities that reverse mortgages are that we see advisors advising them out of indiscriminately. But I think when you really put on a piece of paper and can walk through, not everybody not everybody should get one, but everybody should think about it because there's enough cases where in this scenario it's a home run. Let's talk about a few of the home runs that people can use a reverse mortgage for.

7:24 You mean some of the positive reasons why people would do it? A couple of examples that you've seen cuz you're talking to people on the radio, you're talking to customers during the loan. So talk about some examples of people who use it and it was a big positive, not just a hey, I got this mortgage instead of that one, but no, this was a tool that unlocked equity that really it me an improved quality of life.

7:42 Well, you know that and it's funny because it there are many different ways of looking at it. But the great majority of my clients fall into one of two categories. They're in they're in reactive situations where something has gone wrong, where they're either they're running out of cash or their expenses have gone up because of the economy or because of they need more help in the home. Or because they need to go into assisted living. Their expenses have gone up. And that's a reactive situation, you know, where they're living longer and running out of funds. And in many cases the single largest asset they have is their home. But they don't know how to access that, all right, without selling the property or increasing their expenses. And that's where a reverse mortgage comes in is that it can it can frequently unlock hundreds of thousands and now millions of dollars for a homeowner to be able to use to maintain the quality of their life, you know, longer as they go on. On the other hand, there are more and more situations that are proactive. And I'll give you an example of what I mean. I had a woman who was in her 80s who was living in a $5 million home that was free and clear.

9:07 And she was but she had no cash assets to speak of. So, she's living basically on a small pension and social security. So, she's living in a $5 million house that's free and clear and living on a pittance on a pittance. And she was consistently getting approached by real estate agents to sell the house. And of course she didn't want to sell the house. And she had like accepted the fact that she was going to be living, you know, sort of hand to mouth. I forget whether it was a relative or if it was an advisor that sat down with her and said, "Listen, why don't we consider this?" All right? And what we ended up doing was we ended up having like a three-way conversation in a Zoom as it happened because this conversation took place during COVID, all right? So, it was it was myself and it was an advisor and it was a adult child and the client in a Zoom meeting, all right? And we talked about it and we addressed her fears, the things she had heard, that she thought about, but we talked about the benefits as well. And here was the upshot. The upshot was that in that particular situation, we were able to un- un- bind about $3 million of the house's equity.

10:38 Boom. With without increasing her overhead. And that's one of the things that older people, 80s, 90s, are most concerned about is increasing their overhead. How are they going to pay for things? In this particular case as it as it comes back to me, it was initiated by a real estate broker. Okay? And her biggest

11:02 Hence why I have the podcast by the way, Marc. That's why I do this podcast because we talk to our customers all the time. Let's help them solve these problems. I'm sorry, go ahead. No, that's okay. I totally agree.

11:12 I'm on a soapbox here. And in you know, and in this particular case, in this particular case, what the real estate broker had been speaking to her about was investing in multi-family property. Okay? And her biggest concern about that was if I get if I get a mortgage for $2 million dollars buy, you know, a $3 million house and all of a sudden I've got vacancies, I'm going to be in a negative a negative cash flow situation.

11:39 For argument, especially given today what's going on in Texas and Florida. It's a great argument. In this particular situation, because we were able to unleash $3 million with a reverse mortgage, and her wealth advisor also was on board with the concept, she was able to take that money and she ended up buying like a nine-unit investment property without giving up her primary residence and increase her standard of living dramatically to the tune of about 8 to 10,000 dollars a month in net rent out of that property. The interesting thing statistically is that nationwide about 80% of adult children sell the family home.

12:30 Yes. But they keep the investment property. And that was part of the motivation here because she fully expected them to sell the home when she when she passed away to save capital gains. But in this particular case, because she was able to buy a piece of investment property, it increased the quality of her life while she was alive and it created an asset that she was able to leave to her family. All right? That they were interested in keeping. So, it's a question of help separating fact from fiction. And my experience has been that once a homeowner separates fact from fiction, once a financial advisor separates fact from fiction about reverse mortgages, the entire conversation changes.

13:25 The truth will set you free. You know, in that example, she also gets the benefit of if she wants to stay in the house, right? There are many people who they have to sell the house.

13:34 Right. Where are they going to move to? Something smaller, something this, something that. And not to say some people shouldn't move or don't want to move, plenty do, but plenty would rather stay where they're at. I'm an example of that. My daughter and my married daughter with our three grandsons live four blocks from us. I don't want to move further away. I might move closer if anything, but I won't move further away. I mean, in your example, the $500,000 property even at a low level, that property goes up 1% a year, that's $50,000 of equity. Just if she received that every year, it would have been life-changing for her. Meanwhile, this equity is piling up and she's living like a pauper and you know, for no reason. And whoever bought the house, maybe her husband, maybe her parents gave it to her, wanted her to live in a nice apartment. They don't want her to live on you know, franks and beans or whatever you have to get by. So, I just think it opens up so many possibilities and as a reverse mortgage originator, you can sit down and show them, "Okay, let's just talk about maybe $50,000 a year. That can be life-changing. Well, how about $3 million and investing it? That can be empowering." There's different options.

14:37 Yes, there are different options. But a great deal of it comes down to mindset, all right? People have to change their mindset. They have to be open-minded to have the conversation. And what I mean by that and what I mean by that is that, you know, when we're in our 20s and 30s and 40s, we fully expect to pay off our mortgage. We want fixed rates, we want them as low as possible because we're raising families, we have budgets and all of those things. But then we get into our 60s and 70s and 80s and 90s and there's really no anticipation that you're going to pay off a mortgage. It really comes down to liquidity. When we're when we go into our senior years and when we're on fixed budgets, all right, fixed income, Liquidity becomes king. All right, and that's the power of a reverse mortgage because there's only two ways to get liquidity out of a piece of real estate. Either you sell it or you take a mortgage out on it. But the problem traditionally and the problem with the way your and my generation was taught in the middle of the 20th century in regard to real estate was that you need to keep your real estate free and clear and if you do take out a mortgage, all right, you want to try to pay it off as quickly as possible. All right, but things have changed. Reverse mortgages didn't exist when we were growing up. We were never educated on them back then. Now it's a question of how do you access those hundreds of thousands of dollars to improve the quality of your life.

16:10 All right, without raising your overhead. And that was always the problem with taking out a mortgage on primary residence to create liquidity for retirement. Is that now it became a race to the bottom because now you've increased your overhead by let's say a $3,000 a month mortgage payment. Now you're going through the cash that you took out at a very rapid pace. The question is, you know, are you going to die in time not to run out of money? Reverse mortgages take that out of the equation.

16:42 So I think, you know, to use your point, I think it's very well taken that, you know, before you get into the technical details, the problem is a mindset problem. Once you deal with the mindset, then people can at least look at, you know, objectively the options in front of them and you can rule them out quickly if you don't like them, but you can't rule them out if you don't even look at them. But so what changes the mindset to me is education and I think you and I share something that we've both have created a platform to attempt to provide or change education. I think really to rewrite the wrong education that's out there. You talk about Dave Ramsey. I'm a big Dave Ramsey fan. And I think his no debt you know, works for 80% of the people as a general rule. I think I think he would admit off the air, "Look, if everybody did had no debt, we'd be better off as a country. Yes, some people who should have debt are going to miss out, but you know, he's trying to speak to a large audience." Our jobs are one-on-one. We talk to one customer at a time. But we have a platform to reach out to them. Mine is this podcast. Yours is being radio. Talk a bit about your goal and your, you know, vision of educating a larger audience. And that's hard because you're not calling you necessarily, you're talking out to them, but then some do call you. So, talk a bit about the idea of building the platform and how that's worked for you and your business.

18:02 Well, you know, but before I before I do, I just want to address what you said about Dave Ramsey. I think I think the number one client that needs to get out of debt is the US government, especially our fiat currency. Because not only would the government be better off, but so would all the rest of us. But that's an entirely different conversation for another for another podcast.

18:26 Preach it, brother. I'm with you on that one. Yeah, okay. As far as educating people, I'm always encouraging people to

18:35 Call me. I you know, people get fearful. People get fearful. This especially older adults when they become frail, and they become targets. And everybody knows that seniors in this country are targeted by a lot of people. And rightly or wrongly, loan officers are sometimes seen as those people that are targeting senior citizens. Because of that, it's hard to get them to reach out to get the information because they're afraid they're going to be sold. Or that they're going to be pushed into doing something that they don't want to do. That's the ignorance is the biggest thing that we have to overcome in my industry. And I'm a and I'm a mortgage broker, so I have the ability to do any type of real estate-based lending, whether it's residential or commercial or reverse or traditional. Although I spend about 90% of my time in reverse, and about 90% of my business all comes to me by attorneys and financial planners and folks like yourself, who want their clients to be educated.

20:07 All right? And that's most of the time the reason that they send them to me, not because they believe that a reverse mortgage is the right or the wrong way to go, but it's because they want them to be able to intelligently consider them. Yeah. And I talk about reverse mortgages. I'm here on this podcast with you. I speak in different types of professional groups. I've spoken to at conferences. And one of the things that I'm actually working on is which is probably going to come out shortly, is I want to do I want to do a monthly podcast that is just a Q&A on reverse mortgages that's open to the public. And we're probably in the going to get that going in the next 60 days.

20:55 And you have a newsletter. I think that's where I where I met you with the sudden newsletter and then I said, "Well, who is this guy?" And all of a sudden I realized he's one of my colleagues trying to write the boat on this thing because, yeah, you know, as you know, I'm lucky that I have a good business. It's provided for me and my family. It continues to. I'm 67. I didn't imagine I'd continue working, but I'm doing something that pays me well and I enjoy. But at the same time, I feel like I can make a difference in people's lives. And you know, in my lifetime, home ownership has become so much harder for new families. I have a young married daughter. And I think it's detrimental to our country people not owning their own house and having the vision to save money and build something together and build wealth together. Explains a lot of the of the tensions that are going on in all of our lives, and the decline of quality of our cities and such. So, talking about this topic as a as a reverse mortgage originator, in my case as a real estate broker, as a financial planner, as an accountant, I think it's really important that we at least look at this tool, learn how to use it when appropriate, and be able to advise it. And the thing I not doing the loans myself, I just say, "You should think about it. And let me get you to talk to somebody who can explain to you." And to your point, I do believe that educated customers will always make the best decision, better than any advisor, because if they're they know their risk tolerance, they know their comfort level and their discomfort level better than we do. We know what's best for us, but we don't really know what's best for the client. We think we do, but I do believe when we lay the options out and explain them fully, that the customer is going to make the best decision. So,

22:27 One of what one of the one of the one of the big obstacles we have, it's an interesting obstacle. Even on I'll call it educated financial advisors, all right? Advisors who've been exposed to the facts of reverse mortgages, many times they assume that this is only a product for people who are in dire straits.

22:54 Yes, destitute. Eating dog food in their house and without this they're going to starve. Yes. Yeah, and that's a big issue. That's really a big issue because these products have transcended that. That's not to say that they don't have application for people like that cuz they do. Absolutely do. But more and more people that are not destitute, by which I mean they own their home and maybe they've got 500,000, a million dollars, a million and a half still in the bank or invested throwing off income. In a lot of those situations in a lot of those situations even though they're not hurting looking at a reverse mortgage with your financial advisor is a great way to take a proactive stance with regard to cash flow and with regard to the fact that whether we like it or not for the great majority of us our health and our physical well-being is going to change. You know, the most important things in our lives seem to be the things that we get the little the least amount of formal education on.

24:22 All right? How to raise children, how to be married how to be divorced, okay? How to invest money. All right? How do you get old? It's the There's almost no education on this unless you look it up. Unless you're the type of person that says, "Oh, let me go find out how to get old." All right? What are the things I have to do? What are the things I have to do if I want to stay in my house un- until I'm in my 90s, until I'm totally unable to move? What are the things that I need to do in my house to make sure that I don't fall because the number one the number one thing that impacts older adults in terms of their health deteriorating is falling.

25:09 And there are things that you need to do in the house that will if not prevent it, minimize the chances of those things happening as you get older if you decide you want to age in place, which is what about 90% of people say they want to do.

25:26 Right. Okay? You have to be able to fund those things. You have to be proactive. Okay? If you're someone that has liquidity, that's that has, you know, a few hundred thousand or a couple of million dollars plus your house, looking into a reverse mortgage in a proactive way is a way to deal with what's going to come 10 or 15 or 20 years from now. Because one of the interesting things about reverse mortgages that many people don't know is that you don't have to take the money. You can simply set it up as a credit line.

26:06 Right. And use it when you need it. Now, a lot of people will say, "Well, I can just go to the bank and get a HELOC." Not so simple. That's right. It's not that simple because you still have to qualify for it based upon income. And if you're on reduced fixed income, very frequently you can't qualify for a home equity line of credit at a bank that also has payments. But, you can qualify for a reverse line of credit because the income qualifications for that are dramatically different.

26:41 Yeah, line of credit, they're going to qualify you based on the full advanced amount with a monthly payment that amortizes versus the reverse mortgage doesn't qualify on the same income in the same way. And so, yeah, it also the line of credit's often for people who don't have easily documentable income. You know, you use example of the lady who lives in a $5 million house and on Social Security, she may not have as much money monthly as the as the HELOC would be. But, she has a house appreciating at 50,000 a year. She has $5 million of equity sitting there. And so, it makes sense. The lender's glad to lend her money cuz she's credit worthy. Well, just not on a HELOC that she's They're going to say, "You don't have a job. You don't have income. We can't really lend."

27:20 Well, the thing about a HELOC is that one of the things that has to be taken into consideration is the payments on the HELOC. Correct. You have to be able to prove that you have enough money to make those payments. With the reverse mortgage, all you have to do is prove that you have enough money to pay your property taxes, to pay your homeowner's insurance, to pay your HOA if you're living in a condominium, and that you, based upon a small formula, that you have enough money to pay to maintain your property based upon the square footage.

27:53 Right. Being able to qualify that way for a loan for a million dollars is dramatically easier than trying to get a HELOC. And with a HELOC, you're not going to get anywhere near that amount of money anyhow.

28:10 It's very difficult. Well, look, Marc, obviously, we can go on and on about this topic. That's why I have a podcast weekly and that's why you have your program cuz there's lots to cover. I really appreciate your time in sharing both what you do on you know, all the time to our to our audience on your platform as well as here today. I really appreciate your time. If you want more information from Marc, it's reverseyourthinking.mortgage. I practiced that five times cuz I got it wrong last time we talked. Reverseyourthinking.mortgage is a place where he has all his resources, information. And also, if you want to evaluate on your own or I'd request really just reach out to him set up a one-on-one where he can walk through your scenario. And the thing I always I always tell people is the reverse mortgage may not be the right product for you, but it is certainly a product you should consider when you have major financial decisions, refinancing, or selling your property. At least put that tool out there and know where you stand. And Marc's a great person to talk to. Thank you again so much for your time. And if you don't have his contact information, if you're listening to this on the audio, feel free to reach out to me. I'd be more than glad I'd be honored to make the connection between the two of you. Marc, thanks so much for your time. I'm sorry.

29:15 It's absolutely my pleasure. Just one last thing. If anybody out there is still fearful, don't call me. Call your financial advisor. Tell them to call me.

29:27 Oh, there you go. That's great advice. And I think financial advisors don't realize that it helps them keep their business. People don't have to liquidate their portfolio. They don't have to use that. And also this should be coordinated with the other things you have. So that's a great piece of advice. Marc, have that financial advisor, wealth advisor, whatever you call them, just give me your child, your son-in-law. Have them give you the call and that way the whole team can get together. And at least again, consider the option, the tool in the toolbox. You don't have to use it, but at least have it with you. These decisions. Marc, again, thank you so much for your time. I really appreciate it.

29:59 My pleasure. It's been a pleasure, Bill. Thanks for having me on. And actually this Reverse Mortgage Podcast, we get together every week with a new episode, usually with mortgage originators, though not often as publicly famous as Marc is. Reverse Your Thinking Dot Mortgage is a great program and his content online. It's a great asset. Hopefully you found this helpful today. I'd love to get your feedback. Like this, don't like this. Send me your comments, questions. Reach out to me at Bill Gross Probate if I can help in any way. As always, make today your best day ever. Thanks so much.