Clients: 95-year-old male with 24-hour skilled nursing needs (in-home) & 92-year-old female dementia patient (in memory care outside of home)

Prior to the male’s health needs arising and the female’s cognitive abilities declining, a power of attorney (on behalf of the male) and a court authorized conservatorship (on behalf of the female) were established by the eldest son to allow for medical/financial decisions to be made on their behalf.  Power of attorney and/or conservatorship is not an uncommon scenario to encounter with these loans (as seniors of age 62 and older are the only ones who can obtain them).  This case was unique in that one of the seniors was permanently living outside of the home in memory care.  Reverse mortgage guidelines normally require that all parties qualifying for the loan be residing full time under the roof of the subject property.  In order to allow for the loan to proceed forward, the party living outside of the home was listed as “eligible non-borrowing spouse”.  This meant that while she was eligible to qualify for the loan, due to her living circumstances, she was not included in the underwriting calculations as it pertains to residual income requirements, and borrowing capacity limits, which are based on the age of the youngest party on the loan. 

Choosing the Right Program

Scott and I presented multiple educational presentations, power points, conference calls, etc., over the course of a month to the son holding the POA/conservatorship.  The son determined that 25K per month was needed to sustain his dad’s 24-hour in-home care, and 7K per month to sustain his mom’s memory care.  The standard HECM (home equity conversion mortgage AKA reverse mortgage) program allows a maximum home value of $1,149,825.  The lender then bases the amount they will lend on a percentage of this value.  As our case had a home with a value of approximately 3.3M, and the subject needed more funds to ensure his parent’s continued care than the traditional HECM program would allow, the Platinum Jumbo program was needed.  This program allows for the use of the home’s actual appraised value, rather than capping that value at the aforementioned $1,149,825.  To assist the son in determining a dollar amount of funds to pull out at closing, we stuck to our approach of transparency, honesty, and empathy.  Some of those conference calls included an in-home care manager to discuss the approximate cost of the care needed, their elder care attorney to ensure both seniors were being taken care of, and their financial planner so that the funds taken out were put to use in the best possible manner to see that the care would last as long as the projected need. 

Once the cash needed amount was settled upon, the loan process officially started.  The timeline on that is generally 45 days from application to funding.  The month of education prior to that is not the norm, but is something we are happy to do to ensure all parties (the seniors and their involved heirs) are fully educated and knowledgeable about the program. 

Most of the reverse mortgages that we do for the senior community are primarily to eliminate the current mortgage payment from their monthly budget.  In the case that there is abundance of equity, they may also have the option of pulling a lump sum of cash out at closing, taking a specific amount of a monthly disbursement for the remainder of their lives, or taking a monthly disbursement for a set period of time (5 or 10 years for example).  Seniors can also do a combination of these options, and have the ability to switch the options after funding.  Most of the programs also come with a line of credit attached to it.  This line of credit grows either at 1.5% per year (on the Platinum Jumbo program) or at the same rate as the loan’s interest (on the traditional HECM program).  This allows the senior or their heirs to access emergency funds in the event of an unforeseen health event, etc.  The line of credit is far and away the most popular feature of the program as it gives all involved peace of mind.