Will You Have Enough Money in the Last Third of Your Life? With Kevin Guttman

0:02 One of the purposes of reverse mortgages is to make sure you don't run out of money at the end of your life or more importantly to enjoy money along as long as you can. If you will be watching the Reverse Mortgage Podcast, this is a return guest. We've got in Kim Curtis, and he's just done a great job for us in the past explaining the product and in particular today we're going to talk about some different ways focusing on accessing equity and some new products that come out. Kim, I thank you for joining us again. Hey, great to be back. Thanks, Bill. And so Kim, let's talk about you know we've had you on and we'll go back and talk about kind of the overview, but let's start off with some new information. What are some of the newer products or newer ways that have come up for homeowners who have equity in their homes and maybe have difficulty qualifying or older to access that equity? Yeah, great question. You know, the majority of Americans have most of their wealth tied up on their home and there's only three ways they can get to it. Sell, pay the Realtor® fees, etc. And then they have to live somewhere.

1:01 Yeah. No, I grew up in a real estate home, so I'm all for that. But then they have to live somewhere, right? Or second, they get a mortgage with a payment, either a cash-out refinance or a home equity line of credit. We'll talk about a couple new products that just came out in a second. And the third way is reverse mortgage. So what I ask people is do you want a payment or no payment? So that's the first thing we try to find out where people are at. Reverse mortgage obviously is no payment. But it's not for everybody. Not everybody feels comfortable with giving up equity each month with a reverse mortgage. So, the new products that have come out in the last couple months, one is it's a first position HELOC and there's an interest-only payment. The term is for as long as you live in the home, so unlike a HELOC which is tied to like a 20-year term, 10-year draw, 10-year repayment, this is for as long as you live in the home. So if you live there for the next 40 years

2:01 With this all the time. Let's make sure we go through terms. HELOC, home equity line of credit. Yes, sir. So the current products available are lines of credit. You go to the bank on and you said 20-year though, that's even a better loan. Many are just 10 years or 15 years where you have a period a draw period where you can access the equity, 5 10 years, and then from that point you no longer can draw and have to begin paying out the next 5 or 10 years. And so you mentioned a 10, we can draw for 10 years equity out and then it's no longer value to you in that regard. You have to start making payments. That's the most traditional home equity line of credit or HELOC. Okay, go ahead. Right, and that's what most people think about. So what just came out a few months back is a line of credit for seniors, 62 years and older, where the term is for as long as you live in the house. It's not 20 years or 10 years, it's for as long as you live in the house. The payment's interest-only. The interest rate is better than what a HELOC offers. And it's so easy to qualify. So there's some people that still get turned down with HELOCs, right? For whatever reason, usually it's income. But this is so easy to qualify. People get an answer back within hours. Wow. The income and the assets are verified I don't want to say automatically, but electronically. So people don't really need to provide that. We go use a system that goes in and verifies their bank accounts and their income and such.

3:30 And within hours we're getting approvals for people. They can borrow up to 75% combined loan-to-value. Wow. So this can be a first position or second position. So it's just a great product and it just has been out for a few months. So

3:47 If someone isn't comfortable break that down cuz there's a lot of there's a lot there to unpack. So you've done when somebody, you know, is interested in this, you say within hours. What does that mean? They fill out a form electronically and then you submit it and you get back kind of like a I mean underwriting and ver you know, subsequent verification of course, appraisal and all the other things, but you

4:05 We use an We use an automatic valuation model. There's no appraisal. Wow. Wow. And so perhaps that's how you set 75% loan-to-value. I guess it depends on the market and the area and you such. What kind of income do you need to qualify? I guess one of the challenges of lines of credit for seniors is if they're telling you your career or self-employed business, you may not report enough to qualify for traditional mortgages. What's the qualifying look like on this product? Yeah, good question. So they look at bank statements and they look at deposits. And so somebody could literally apply in the morning and get approved in the afternoon and close within 5 days. Wow. Wow. Okay. So and then there's a I imagine a variety, but when you said lower price, lines of credit traditionally are higher priced because they're not securitized, they're done by banks, they're kind of like you know, very profitable to you. You go to Bank of America or Wells Fargo, they're going to charge you prime plus a couple points and they're getting the money at 0%. They're going to call prime, you know, something higher and then charge you on top of that. What kind of rates are people looking at in these kind of products? I'm sure it varies on credit scores and such and loan-to-value, but Yeah, this is a fixed rate loan. Doesn't the rate doesn't change through the life of the loan. Oh. It's one to two points less than a HELOC.

5:24 Interesting. So it's fixed for the life of the loan, which is a whole 'nother advantage because lines of credit typically vary based on the prime rate. And for people don't remember cuz it's been fairly steady, I remember in the times of the '70s and '80s where prime rate jumped up 1 2% you know, in a month or two. And that could be a big bite out of your payment if it's a regular loan you need to make a payment on. So on this one, are you needing to make payments on this one or is this It's an interest-only payment Okay. Each month. So the summary of it would be easier qualification, longer term, better rate. You can You can get it within a day, maybe 2 days. And it's just an easier It's just an easier process than a HELOC. I mean a HELOC now is really a full underwrite, right? Didn't you used to You needed an appraisal

6:24 And you'd fill out the application, the branch manager look at it and it'd be yes or no and you'd have it in 5 days cuz really it's that it was designed to be that kind of product. And now it's, you know, 2 or 3 weeks, full appraisal, fees are more, full underwrite, looking at income, etc. So this is one product we just have now. It's a HELOC for seniors. Another one that just came out in November, so what was that, 4 months ago, 5 months ago? Is it's a neg am first or second position HELOC. In other words, again, it's a longer term, 40 years. The interest rate's competitive to what HELOCs are in the eights right now, high eights. You can borrow comparable to what a HELOC LTV-wise. The payment though is less. So more people can qualify because the payment's less. How do they do it? They charge a lower payment, which is a neg am, negative amortization, and the equity subsidizes the interest-only payment.

7:37 Makes sense. So let's say, I'm going to make up a number. Let's say the payment is 250, but the actual interest charge is 500. So they take another 250 from equity to make the full payment. You know, when I started in real estate, this was the main product of banks and savings and loans. Loans. In those days, Great Western Savings in those days, Home Savings of America, American Savings. And the products were great because for first-time buyers, they could not qualify for a full payment. They qualified for a portion of payment, but the bank knew the property would go up in value over time. A house might go up on average 2 3% per year. And so rather than have the customer pay 2 or 3%, they could they would know the equity would cover them. And for this worked until the banks got so greedy they went broke and caused the global financial crisis. It's not because the product was bad. It was because the product was being misused at a, you know, Wall Street global corporate level. But the product was great and I'm starting in this business where first-time home buyers would get negative advertising loans with the idea in a few years in a in a good real estate market they could refinance into a fixed. And then for then forevermore be off of that process.

8:55 And here's kind of like interesting, that's the on-ramp and then we don't have that on-ramp anymore, which is a problem. But now you have this off-ramp, which is people instead of being in houses they have to sell, they can use their equity to not make no payment and maybe not to make interest-only payment, but to make a little less and use the equity to subsidize. So that's a very smart concept and it makes sense as long as it doesn't get abused by Wall Street and global corporations. Yeah. There is a third one I want to mention that's been out for a couple of years. It is a second position HELOC. Again, it's a longer term and there's no payment required. So let's say somebody has a first mortgage they don't want to touch. Maybe they got a low interest rate and they're comfortable in making the payment, but they need some equity, but they don't want another payment. This is a perfect This is a perfect option for them. It's called HomeSafe. And I will say this, Bill, you know, and I know you have a lot of people on your show and they're all helpful and good. I think it's beneficial to work with a mortgage broker because a mortgage broker has all products or more products. We're not just locked into a mortgage company or a bank's products.

10:13 We have everything. So these three I just mentioned, they're three different companies. So if I just work for let's say Finance of America, I would only have the last one I just mentioned. Or if I just worked with American Senior, I would only have the second one I just mentioned. Or if I just worked for Longbridge Financial, I would have only the first one that's mentioned. But because I'm a broker, I have all of them. And we can listen to the client and match what they need. We're not trying to jam them into something that we have, right? We can listen to them and actually give them what's best for them. It's funny you say this because again, go back to my starting the business and this product to me is one of those things where the industry is starting to respond to customer needs, which is important. When I started business, I started Great Western at the time Savings later bank. And my brother was there doing negative amortizing adjustables primarily first-time home buyers. And we would refer out the fixed rate mortgages to another lender because we didn't do them in house at competitive rates. We decided, you know what? I'll go to the meaning me, the fixed rate lender, and my brother stayed at the adjustable lender and that way we worked at two different banks. We focused on that product that's always sold. If it was adjustable, I would send it to my brother. If it was a fixed rate, he'd send it to me. And I think the problem with some brokers is they don't know either product very well and end up being a master of none. If you work at a company, you know, at least start I think that for sure starting, you at least learn one product really well. But I think it makes sense as a career path for more experienced originators like yourself. We don't need a company to push you. You can open up more options for customers sometimes by having more flexibility in your delivery. So again, it varies, you know, in your career path where you are in your career. But for customers, of course, you know, these loans are all like tools. You want the right tool. While you can hammer a nail with a screwdriver, you're better off pulling a hammer getting it done more efficiently, I think. Yeah, excellent point. There is something that I feel I want to warn your listeners about. Maybe you've seen these

12:14 We're here for. Maybe you've seen these ads for these home equity investment loans, HEI. Have you seen those? Yes. So the way that works is a lender It's not even a lender. Right. Although they're being sued by several states because they are lending, but they're not they're not licensed to lend. So now there's lawsuits around these companies. But short story, you've got these companies that will say, "Okay, Mrs. Jones, you're 80 years old, we will become your partner. We'll go on title. We will lend you X dollars up front and then we're going to take X percent of future appreciation." So there was a recent lawsuit in California, actually. A lady in San Francisco did this and she ended up having to pay $800,000 back to the HEI. And they think the reason these are risky is it's open-ended. You don't know how long the loan's going to be in place for the or the contract's going to be in place for. They don't call it a loan. And the interest rate's ambiguous cuz it's really a future appreciation that you're offering. And the fees are also the way the contract's written, it's all very ambiguous. It's hard to pin down.

13:32 Actually did train for this for our company C2 Financial. We have 1,200 loan officers. I did the training on HEIs and I looked at all the different ones out there. And these are the common characteristics. One, they become your partner on title and will get future appreciation. They'll give you a certain amount up front for exchange for a future appreciation. Two, the contracts are always ambiguous. They're written in favor of the company, not in favor of the homeowner. Three, the fees are high and you end up paying a lot more than they initially disclosed. The illustration they just they disclosed to you end up paying a lot more than what they show you up front. So I would really encourage people to stay away from these. I don't think they're going to be around much longer because like I say, states are suing these companies. And if it were my parents, I would say do not under any circumstances do this agreement because it's going to end up good for the company and bad for you. You know, this is reminds me to go back again to when I started real estate. You know, this has this is why negative amortization loans were taken out of the market because com- companies were not being held to explain to the customer disclose properly. I worked in a branch office of a bank of a save at the time savings loan. And customers walk in with their statement say, "I don't understand. I borrowed $200,000, but my statement here says I owe 278." Not as bad as your as loans you're talking about, but still it was a lot of money and I would explain to them how the loan worked. Not that it wasn't my loan. It was something it was done by somebody else, you know, before me, years before me. Not our company in many cases.

15:19 And they'd just start crying. Cuz it was so much money and you feel, you know, how bad is it? You might say, "Well, the guy bought a house for 200,000 and it's worth 400 and now he owes 270. How bad is that?" Well, $70,000 is more than that person made after taxes in a year. That's a lot of money to people. And it's the same with this program and the reason why it's done through these shady little companies that can evacuate tomorrow and re- re-sign up with another name and just hire another actor is because they're not held accountable to the standards that mortgage lenders are with all the regulations that we have and so, you know, this is this is the kind of program that has given reverse mortgage a bad smell even though it's not reverse mortgage. It's still that's it's kind of like I didn't do it in the room, but the smell's bad anyhow. Somebody did it and you're there. This product is really when I talk to people to consumers or even accountants, this is the product that they're that they steer the customers away from and won't talk to somebody like you about other products that can really save the customers a lot of money. That's why I do this podcast because if we can get customers talking to you and originators like you and the ones that you have on this podcast, they'll find the right answer, not the wrong answer. And I think that's I think you really I appreciate bringing that forward because it is we should be doing 10 times as many reverse mortgages as we are as an economy, but for the bad smell from prior business and I think lack of commitment to education. And that's why I'm committed to education. I know you are as well. And so I appreciate, you know, you walking side to us today.

16:53 And that brings me to another point. We talked a minute ago about choosing the right company a broker. I think it's also important to choose the right loan officer, the right

17:04 Yes. Mortgage professional because not everybody's a specialist in what whatever they're talking to you about, right? So if somebody isn't versed in these equity programs, reverse mortgage or these lines of credits or HELOCs, whatever, and they're just looking to get a deal, they're not serving the client's best interest. Right. So I think people need to ask questions like, "How many of these have you done? How long have you been doing this? How many lenders do you have that you can look at for my situation, right?" These are all valid questions that a consumer should be asking. And if the loan officer can't answer, they should keep going. They should look for somebody else who actually does these on a regular basis, Right. Full-time, isn't part-time, this isn't a hobby, and they know everything that's out there and can say, "Based on what you've told me, Mrs. Jones, I these are the options I can offer you." And then not try to force them into something that they think is good for the client. Let the client decide what's best for them. People are smart. They don't they don't need to be sold anything. You just hit it. If we educate them and listen to them, they're going to find the right path, the right program that's going to make sense for them.

18:25 Yeah, I always feel like customers have sufficient processing power. They just may not have the data with which make a decision. My job is to present the data in a way that they can understand it and then they will make the right decision. They know what risk they'll tolerate. They know they're better equipped on their life expectancy than I am. They're more equipped to how important is the equity to their kids or not. And so these are things where when we educate our clients, I always believe they'll make the best decision rather than us trying to make it for them and then there are companies who make it for them because it's more profitable and that's good for the company, bad for the customer. That doesn't last. One thing I've learned about this business, after decades in it: Companies who focus on profit rather than customers, they don't last. They go out of business. Agree.

19:10 Agreed. Agreed. Companies that start being customer focused and lose that taste and end up out of business. I mean, that's where Great Western Bank went when I was at a savings and loan. They got, you know, greedy at the corporate level. They started as companies that were local savings and loans serving customers. So it's very tempting to get off the tracks and that's why and that's why I like industry organizations like the one, you know, I met you let's say met you, but I found you through your company, your management introduced me as to some of the top people in the company because they wanted to give you guys exposure. I don't get paid for this. I'm trying to educate my clients. But your CRMP, Certified Reverse Mortgage Professional, I have to tell you, I've been in real estate for decades. I don't know of a designation in real estate that's of a value. Meaning there's classes you can take and get, you know, little letters after your name in real estate. They're not really worth the value in my experience cuz they don't really create They don't teach you how to create value for customers. They teach you how to market to new segment. CRMP really requires you guys to be mortgage professionals. I mean, it is it is a tough qualifying and they continue to educate you and I really admire it. That's why, to be honest, I would just went to the website to call the members cuz I knew I'd get a good quality originator as I was looking to build up this podcast.

20:28 Yeah. It's true. It's a vigorous process. You know, you have to be in the industry enough years and close enough deals to even sit for the test. You have to pass the test, which only 25% of the people pass the first time. You have to commit to continuing education and abide by the National Reverse Mortgage Lenders Association Code of Ethics. Maybe that's why there's only 220 nationwide. You know, I've had the privilege, I think, of interviewing three or four of them last when to the regional meeting in Irvine last year and met bef- before I really launched the podcast. What's fascinating to me was at that event, there were like five or 10 that I met who were attending the event who had not qualified but had taken the test and failed the first time or second time and they're working on learning more because they knew how important learning was, not the designation, but the learning to be able to be more valuable to your customer and that's right where I try to focus on my business is to be an expert in real estate. That's why I got involved in this program because more and more of my clients had reverse mortgages past and the kids are, "What do we do now?" I want to be the expert in answering that question. What do I do now? Well, how do you do that? I meet people like you who are experts in how to get the mortgage and make sure we all are working together and trying to take care of our customers and their families.

21:50 And if I could just put a plug in for our company, C2 Financial, Yeah. The principals have been together for 30 years. Wow. The there's been a couple name changes along the way, but the core leadership 30 years. Family-owned business. A+ rated with the BBB. We're the largest reverse mortgage broker in the country, 1,200 loan officers. Wow. And you mentioned CRMPs. We have more CRMPs than any company in the country. So, we really have a concentration of well-skilled or highly-skilled, committed people that several authors that in our group, too. So, yeah, I just I just want people to know that, you know, we're not some fly-by-night company, right? We're solid. You know, I'm just looking at I was as I was talking to Kevin, looking at my notes and I definitely have reached out and talked to a number in your group. I want to say I've interviewed seven or eight on this podcast. Shane Irwin, who I don't know his exact title, but I know he's management like a regional manager or sales manager. Yeah, he leads our channel. I'm sorry? He leads our channel, the reverse mortgage channel. Right, which means he the all the reverse mortgage people kind of come through him for training and recruitment and such. And he I've been, you know, invited to join in on the training he gives to you and the and his team. It's first-rate. Like they're really talking about how to explain things to customers, how to present things to customers that they can understand it. It's not just about how to get more business, but knowing if you serve your customer, you get more business. So, definitely first-rate.

23:29 Shout out to Shain. I had him on the podcast. He's made some great introductions for me and C2's been a good for the program. I don't get any money from it. What I do get though is the privilege of learning and meeting people like you to learn to be better in referring people from my platform to get better service. So, thanks to C2 and thanks to Shane and Kevin and as well. So, let's talk about just kind of to wrap up a little bit. Again, I started this podcast a little over a year ago. My premise was we should be doing 10 times as many mortgages as we are. We've had new product come out in the last year. I think more new product in last year than the prior couple years. The real estate market is improving slightly nationally, the general real estate market, though I know reverse mortgages are not, you know, you know, purchase-dependent. There's a piece of it, but that's not the driving force. But there's more people older, more people needing this kind of money. How's the market overall in reverse mortgages and what do you see in the next year in the reverse mortgage industry? Yeah, good question. I'm busier than I've been in 5 years.

24:32 [cough and clears throat] Excuse me. What I'm seeing is people are realizing although inflation's come down, life is still expensive and they're trying to find ways to pay for it. So, it's interesting. I've been getting more and more calls from children of seniors in the last few months, first quarter of this year, where the kids are like, "Hey, I We got to help our parents. We got to help Mom and Dad because they're running out of money. They can't afford to continue to live the lifestyle that they're living and they're in a position where, you know, the kids are raising their own families. So, they can't really take on helping Mom and Dad. So, Mom and Dad have to find another revenue stream, if you will, or access to capital.

25:22 [cough] Excuse me, to cash flow so that they have enough money to live. Right. And then the other thing I'm seeing is people are looking how where to find money to upgrade their house, remodel their house. Where to find money to pay for medical expenses or long-term care insurance. Where to find money to pay off debt, you know, people during COVID, people got into debt even though we couldn't go anywhere. We went online and we shopped and we bought stuff. So, now they have this high credit card interest debt that they're trying to get rid of. So, these are the main reasons I find that people are looking to unlock equity so that they can have more cash flow. They can enjoy their house. Most people, as you know, most people don't want to move. They want to stay in their home, but they want to make that house livable for this season of life. Grab bars, ramps, wider hallways, walk-in shower, walk-in tub. I mean, so these are the things that we're seeing why people are starting to look at tapping equity. There are a lot of reasons to and I think the key is the more tools we have, the more flexibility we have, the more we can customize solutions to customers, the better outcomes they're going to have. And I think that's the key to our building business is finding a way to help our customers get through what problems they have.

26:46 Kevin, it's always a privilege talking. I hate to cut off. I know we're up against the time that I committed on this. So, thank you for making yourself available again for our call. Those who are interested in getting in touch with Kevin Gutman, on the screen is the contact information. He's a reverse mortgage specialist and mortgage broker, C2 Financial. He has the phone number as well as his email. His website is reversemortgagerevolution.com and you can see the revolution happening right online right there at the website. So, thank you Thank you so much for your time. I really appreciate you being with us and sharing with us again insights to this product and continue success for you and your team. Thanks, Bill. I really enjoyed it. Thanks for having me back. If you're interested in this Reverse Mortgage Podcast, we get together every week with new episodes, most commonly with top originators like today with Kevin. Often times with management, vendors to learn how to use this product to help our customers and for us to be more effective. If I can help in any way, reach out. You can like this, subscribe, put a comment in, reply in email, reach out to me at @BillGrossProbate on social media. As always, make today your best day ever.