California Reverse Mortgage News

Gray divorces are on the rise and reverse mortgages are starting to play a role in how an estate is settled.  In regards to gray divorces, a Bowling Green University study found that the divorce rate among adults aged 50 and older doubled between 1990 and 2010. You can read the study here: https://www.bgsu.edu/content/dam/BGSU/college-of-arts-and-sciences/NCFMR/documents/Lin/The-Gray-Divorce.pdf

But the good news is that overall, divorces are down.

I sat down with Katie Clunen,  a family law attorney with Dion Law Group in Westlake Village, California, and she advised me that there are several factors that need to be weighed before a couple considers a senior citizen divorce.

Clunen tells her clients to first meet with a therapist to see if they can work on their marriage. Second, she suggests the parties meet with a financial planner, preferably one that has experience in divorce situations, or a wealth management advisor that can run numbers for the parties to show what their income and assets would look like in a divorce if one party stayed in the home and bought the other one out or if the house was sold. I would also suggest the parties look into a reverse mortgage as an additional option, which will be discussed below.

Division of assets is usually top of mind, but Clunen pointed out that in a gray divorce there are unique issues.  For example, when it comes to determining spousal support, some of the factors considered are the marketable skills of the supported party and the age and health of the parties.  Public policy provides that a supported person shall be self-supporting within a reasonable period of time.  However, if one of the parties is not able to work because of being out of the workforce for many years or their age, a dispute can arise regarding the amount and duration of the spousal support. 

The division of retirement benefits is also a hot point. Health insurance and Medicare issues in particular.  Once a divorce is final, the person who pays for the medical insurance does not have to continue paying for the ex- spouse’s health insurance.  In fact, health insurance companies will terminate the coverage to the ex- spouse. If a soon- to -be ex-spouse is ill or has a pre-existing condition, this could play a major role on whether or not a divorce is financially feasible for both parties.  Also, financial stability or instability issues, which again goes back to a person that may need to go back into the workforce for the purpose of obtaining or paying for their health insurance if they lose their coverage in a divorce.

Social Security benefits need to be considered since the monthly benefit is calculated by age and when the beneficiaries select to start receiving benefits.  What if there’s a gray divorce and the primary wage earner is working?  Does the ex-spouse get Social Security benefits right away if the other is still working?  These questions need to be answered by a professional.

Then there’s housing.  Does the family have two properties?  If so, it’s possible each spouse gets a property to live in. Hopefully there’s enough monetary assets to run each household.  But what if there aren’t two properties?  Here’s a scenario: A married, retired 75- year- old couple live in a property that is free and clear and worth $550,000.  They are exploring the possibility of a senior citizen divorce but if they sell the home each may possibly get $270,000 (not including taxes and exemptions).  They don’t qualify for a home loan due to their income, and $270,000 isn’t enough to buy a home outright and they don’t want to rent. 

The reverse mortgage in this case is a gray divorce solution.  There is a reverse mortgage for purchase loan option that is seldom talked about.  The senior citizen puts a large down payment say 45% on the new property they would like to purchase and there’s no payments on the balance due on the loan.    Qualifying for the loan is different than a regular conventional or 203b FHA loan. It has the senior in mind.

That means that one spouse stays in the home and buys out the other.  The spouse buying out the other applies for a reverse mortgage to get funds from their home equity, and the soon- to- be ex-spouse takes the funds they receive and uses another reverse mortgage for purchase loan for a large down payment and buys their next home and without monthly payments. 

To clarify the above situation, since both people used a reverse mortgage for their transaction, neither of them have monthly payments on the balance of their mortgages for the rest of their lives.

Clunen’s firm, the Dion Law Group, has a unique refreshing litigation approach for divorce.  It’s called limited scope representation. This form of representation coaches the client on doing some of the simpler things themselves, with the more difficult tasks handled by the attorney. The client is billed only for the tasks where the attorney was needed. This keeps costs down.  However, if the client wants full representation and doesn’t want to handle any part of the transaction, then the Dion Law Office can do that as well. 

It is important to note that not all law offices offer limited scope representation and only licensed attorneys, not paralegals, can give legal advice when it comes to filling out court related documents or negotiating settlements.

Katie Clunen with the Dion Law Group is located in Westlake Village, California. She can be reached at 805-497-7474 and her webpage is http://dionlawgroup.com/katiec.html.

A HECM Reverse Mortgage can help fund a senior couple's gray divorce.
Many senior couples do not think they can carry thru with a divorce due to not having enough income to afford to live on their own, or if they have a home, they may not be able to qualify for a home loan to buy out the other spouse's share of equity.

A HECM Reverse Mortgage can help solve some of those problems.
On a property with an abundance of equity, a lump sum of cash can be distributed to the one spouse vacating the property (after the existing mortgage balance is paid off) and the spouse remaining in the property doesn't have to make any monthly payments on the new Reverse Mortgage loan.

This way the vacating spouse has capital and funds to work with and the remaining spouse staying in the property has cash flow as well.

It's unfortunate that we even have to think in these terms, but senior couples are not exempt from divorce and they do need options.

To read more on the gray divorce click here to read an article.

For more information on qualifying for a reverse mortgage or how they work, please visit www.californiareversemortgage.biz

Best,
Kevin Walton
Reverse Mortgage Specialist
800-506-0632 ext. 0

     Here are the top 5 reasons Financial Advisors are starting to favor the HECM
     Reverse Mortgage and here's a hint, it's not because of the reasons you hear
     about on t.v.

1. The HECM Line of Credit growth factor.  The unused line of credit grows over time 
    on the growth rate attached to it, so as interest rates rise, the amount of available credit
    rises as well. So it serves as a hedge against a rising interest rate market.  A Financial
    Advisor can build other strategies for their client on top of that.

2.  Even in a declining home value cycle, the amount of usable available credit on the   
     HECM Line of Credit increases.  The growth rate is not tied to home values.  In theory, 
     your amount of available credit to use can be greater than the home value itself and if
     the home needs to be sold and property is up side down, there is FHA mortgage
     insurance that will cover the gap.  Plus the lender can't close the line of credit if home
     values fall, whereas on a bank HELOC they can close the line.

3.  Having a HECM Reverse Mortgage standby Line of Credit, gives the senior citizen an
     option to delay taking Social Security benefits.  The senior can let the SSI ripen on the
     tree and take monthly tax free advances on the HECM Line of Credit and delay taking
     SSI benefits until a later time when their monthly benefit will be greater.

4.  The HECM Reverse Mortgage Line of Credit will also give the senior an option for
     monthly income advances to avoid dipping into other liquid assets in a down market
     and provide a cash reserve to weather market turmoil.

5.  You can buy a home with the HECM Reverse Mortgage purchase option.  A large down
     payment is needed on the new owner occupied home, and than no payments
     are due on the balance of the loan. This means that the senior citizen can keep more
     money in their pocket from the sale of their existing home, since they don't have to pay
     all cash, and after making the large down payment, not have any monthly mortgage.

     The HECM Reverse Mortgage is no longer a loan of last resort, it's for savvy seniors 
     who want more options on how to handle their money and the options above aren't 
     mentioned in the television commercials that we see.
     Plus with the newly passed legislation, the product is much safer and friendly to 
     seniors than in the past.
     Feel free to visit our website for articles and videos on for more information.    
   
     Best,
     Kevin Walton
     Best Capital Funding
     www.californiareversemortgage.biz
    

JP Morgan is creating an investment fund where it selects companies with an eye on technological innovation when it comes to helping senior citizens stay in their homes and improving their lifestyles.
AARP is partnering with JP Morgan in this venture, and the fund is to be called, The Innovation Fund.
Guidance from AARP will help target companies in which the Innovation Fund will have $40 million in funds to invest.
To learn more about this unique fund click here.

When long term interest rates increase, reverse mortgages take a direct hit.
How? The prevailing interest rate is among the criteria that's used to determine your principal limit factor, or how much of a loan you qualify for.

This increase affects all reverse mortgage loan types.
The amount of equity in your home, the age of the youngest borrower, demonstrating your ability and willingness to pay monthly property expenses (tax, insurance h.o.a.) are the other major factors that go into qualifying for a reverse mortgage.
A half percent increase may not affect qualifying all that much, but anything up over a cumulative one percent increase, go take a bite out of the funds you would receive.

However, if you have an already existing HECM reverse mortgage line of credit, an increasing rate may be a good thing because of the growth rate.
As rates go up, and you have a standby HECM reverse mortgage line of credit, so does the growth rate on your line of credit which means more funds for you to access since the available line of credit grows at a monthly rate over the life of the loan.
If you have questions on the HECM reverse mortgage line of credit growth rate, feel free to call Kevin Walton. 800-506-0632 ext. 0 or visit our website, www.californiareversemortgage.biz

Best,
KW