Why you need to understand reverse mortgage and probate
Reverse mortgage and probate is a combination that stumps heirs, attorneys, and real estate practitioners alike. Who gets the house in a reverse mortgage? Do reverse mortgage and probate timelines depend on one another? How can heirs keep or sell a house with a reverse mortgage and probate case? And, most importantly, how can reverse mortgage and probate be avoided altogether by educating seniors and heirs ahead of time?
Jason Eichmiller has helped more than 450 (and the list is growing) seniors and their families learn about and get reverse mortgages. He’s educated scores of financial advisors, attorneys, CPAs, realtors, and other folks on the reverse mortgage pros and cons.
His goal for clients: “I’m going to make 110% sure that you can afford to live in your home.”
And today, we are so excited to share this Ask The Expert episode where Jason dispels the myths of reverse mortgage loans and shares how beneficial a basic understanding can be for families in real-world applications.
How Certified Probate Experts can positively impact the reverse mortgage and probate landscape:
If you market to probates and/or vacant properties, you’ve likely come across a reverse mortgage and probate situation: The heirs inherited a house with a reverse mortgage they didn’t even know about, and they’re sitting on their hands losing equity. Reverse mortgages are misunderstood, and even worse, most seniors don’t consult with their children on their financial situation. It’s extremely common for reverse mortgage and probate situations to end in foreclosure because heirs don’t know what to do, and believe the government gets the house after death anyway.
This isn’t true. In fact, financially savvy families use reverse mortgages to their advantage as a powerful vehicle for end-of-life planning. As you listen to Jason and Chad discuss options for using a reverse mortgage or selling a property in probate with an outstanding reverse mortgage loan balance, remember that you, the real estate practitioner, have the biggest opportunity to connect with and educate seniors before death, and heirs after death about reverse mortgage options.
How can reverse mortgage lenders and probate real estate experts work together?
Have you ever been speaking with a probate lead, and everything is going great, but then they mention a reverse mortgage and you both feel deflated?
Reverse mortgages are deeply misunderstood, and time after time agents and investors shy away from them as if they’re dead opportunities.
When you’re done with this episode, you’ll understand reverse mortgage and probate better than most attorneys do and know exactly how to help heirs move forward with selling an inherited property.
Avoiding foreclosure, preserving equity, and paying off that reverse mortgage balance is a huge reason for reverse mortgage lenders will want to work with you.
But beyond a lender sending you a referral when selling a house and moving to assisted living makes more sense than taking a reverse mortgage loan, knowing how to speak to heirs about reverse mortgage and probate timelines, options, and necessary actions to take can position you as the trusted real estate professional.
You’ll learn exactly why having a strong reverse mortgage lender on your team can be a value-add in your marketing, and learn what to do when a reverse mortgage comes up during your probate prospecting conversations.
Become a Certified Probate Expert – The person lenders want to work with.
EPISODE SEGMENTS: Reverse Mortgages in Probate
0:00 The truth about reverse mortgages
5:30 Who are reverse mortgages good for?
7:06 Reverse mortgage explained: what is it and how does it work?
8:07 Reverse mortgage loan: Who can get one and who owns the house?
9:05 What happens to a reverse mortgage after death:
9:19 Amortization in Reverse mortgage vs. Conventional mortgage monthly payments
11:01 HELOC vs. Reverse mortgage rates and benefits
14:50 Reverse mortgage real-world applications
17:27 How to talk about reverse mortgage and probate without scripts
20:46 How to get real estate referrals from lenders that specialize in reverse mortgages
21:59 Combining life insurance with reverse mortgages for end of life planning
25:04 What happens to a reverse mortgage when the owner goes into a nursing home?
27:26 Selling a house with a reverse mortgage timeline (Or keeping and refinancing mom’s house)
30:31 Timeline for a reverse mortgage after death: When are bills due and what do heirs need to do?
34:52 Jason’s ‘reversed mortgage script’ for talking to heirs about a parent’s reverse mortgage
36:29 Including reverse mortgage services in your probate marketing
Connect with Jason Eichmiller: Since 2008, Jason has helped more than 450 seniors and their families learn about and get reverse mortgages.
He’s educated scores of financial advisors, attorneys, CPAs, Realtors, and other folks on reverse mortgage pros and cons.
His goal for clients: “I’m going to make 110% sure that you can afford to live in your home.”
Jason Eichmiller President/Reverse Mortgage Expert
NMLS 297995 Key Home Lending, LLC
Understanding reverse mortgage and probate as a real estate practitioner
The truth about reverse mortgages [00:00:06]
Chad Corbett: Today I’m excited to bring you Jason Eichmiller, who is a reverse mortgage originator lender and the expert. So Jason is licensed in six different states. He was introduced to our community by Duane Olson. One of our newest students was actually on last week’s group coaching call and he’s like, I got the guy.
What I’ve found over, over the last seven or eight years of coaching people in this space is: reverse mortgage and probate is oftentimes intimidating because they’re misunderstood or some practitioners aren’t even aware of them. So I wanted to take the opportunity.
Jason and I got to know each other last week and had a great discussion. I wanted to give you guys access to him as an expert in this space. So today we’re gonna cover kind of what, as a macro view, what are reverse mortgages? What are some of the common struggles we see Realtors have with a reverse mortgage and probate, and why that’s not such a big deal, and not such a hard learning curve to beat? And also how you can use reverse mortgages as tools in your business. Even if that’s not in the probate niche.
Chad Corbett: A lot of you are working with seniors you know, people in transition. So how do you use reverse mortgage loans to help the clients or the prospects or customers you’re already working with?
Jason, welcome to the community and I appreciate you being here.
Jason Eichmiller: Chad, thanks so much for having me, man. Can’t wait, excited too, to get some knowledge going before.
Chad Corbett: Yeah. So as you guys watch this, as Jason tells his story if you want to connect with him, we usually say this in the end, I’ll go ahead and say it.
In the beginning, Jason is a member of our Facebook group, which is an Estate professionals mastermind. If You can communicate with him in there. In the show notes, we’ll give you links to his probably LinkedIn to the website and the 17 or 28 other ways we all have to get in touch with each other, right.
Jason Eichmiller: 38 ways.
Chad Corbett: We forgot about your Tik Tok channel, we’ve got to do that.
Jason Eichmiller: Never. I can’t dance.
Chad Corbett: Wait till you got to see this reverse mortgage dance.
I’m curious for everybody to get to kind of know: What brought you into this space? Why reverse mortgages and what was your journey into the reverse mortgage space?
Like what’s that experience been and where are you now?
Jason Eichmiller: Cool. Yeah. So without taking 17 hours to go over a boring story I’ve been doing reverse mortgages since 2008. And in that time, I think that helped a little bit over 450 seniors learn about and get reverse mortgages. Any of that time, you know, you, you don’t just work with the senior once you, once you get to a place where I am, you’re working with their family members, I’d say more than half of the folks that I help are referred by a family member. I’m also, work on educating attorneys and financial advisors, CPAs. There’s some cool stuff you can do with reverse mortgages to mitigate taxes and, and so on. We do it for home health care and a Partridge in 17 pear trees. I got into the reverse mortgage field just kind of the same way as most of us get into a field that we’re good at by complete accident.
I was living in Baltimore, Maryland. I moved up to Philly. This is in 2008. I was chasing a girl, fast forward she’s now my wife got three kids, and two dogs. So it worked pretty well. So moved up there, we were happy kind of kicking it and having a good time. But I didn’t have a job and, you know, to continue to have a good time, unless you want to go to a dollar beer night, uh, you have to have one of those job things. I kept seeing reverse mortgage commercials on TV with this guy named Robert Wagner as their spokesman. And I didn’t know what the heck it was. I’d never done a mortgage before, but the message sound bite, I guess sounded, sounded pretty cool. So then when I was looking for jobs, I saw that uh, the company that has Robert Wagner as their spokesman was hiring in Philadelphia.
So I went in one day when I was bored and talked to the guy and he schooled me on what reverse mortgages are and what they aren’t. It boiled down to how you can help seniors without hurting their kids. And you can make a decent living doing.
So I was like, well, not doing anything else with myself, so let’s go ahead and do it.
That was in December of 20 0 8. And by February I led the branch in sales. I ended up running the branch and then kind of went out on my own because I felt like I was doing running the branch. You’re doing too much, too much support stuff.
You’re yelling at salespeople to pick up the phone, where I want it to be helping seniors through the process and creatively thinking about ways to help them.
So that’s me! Now I live outside of West Palm Beach, Florida in a little town called Wellington, and I help as many seniors as I possibly can.
And that probably took too long, but…
Chad Corbett: That’s great context! You know, as a member of the community, this is an opportunity for all of those other community members to build a relationship with you and begin to interact. So I think it’s important to kind of know where we all came from.
One thing I want to comment on is that Jason Drees a friend of mine who is, was a Tony Robbins coach, but now he’s on his own. Very high level. He had a post the other day that said: “You know, you don’t choose a niche, your niche chooses you.”
And that couldn’t be more true for me. I just got off the phone. The reason I was late for this call with a prominent divorce real estate trainer in the real estate space and her second listing, as she had no strategies: she got licensed, she took a listing, it worked out. Her second one was a divorce deal. She’s now trained thousands of practitioners in real estate, mortgage, law, financial services. So it’s good, for people to get to know who you are, but just like you didn’t choose reverse mortgages. They chose And about what we find is you got into real estate, chose me first.
I got into it for money and I stayed for people. And I tell everybody I got in for the wrong reason, stayed for the right ones, because I realized just how much, how good of a fit it was for my personality, like loving to contribute and give. And like that customer satisfaction has always been the best currency, the cash is pretty fun, but seeing the impact that you make is a way more valuable, lasting currency.
Who are reverse mortgages good for? [00:05:37]
Chad Corbett: Let’s talk about your ideal customer. Like who is the person that when the phone rings, you’re like, yes, this is the one I can help. And I know they’re better off having this conversation with me than not.
Jason Eichmiller: So yeah, there’s a million different ways you can use reverses. What I find the people that I can help very, very well are folks with higher value homes. And you can tell, I mean, depending on where you are in the country I’m in Southeast Florida house values are skyrocketing.
I do a lot of work in California, around the Jersey shore, like areas like that. These seniors are on a fixed income. They’ve got higher value homes. They’ve got a lot of equity because they’ve done some things right in their life.
Side note, reverse mortgages aren’t the best things if you’re dead broke: Number one, you probably can’t qualify.
Number two, it’s not going to give you a ton of money. So if you’re dissolute, probably not the best thing in the world for you. But for people who have some equity, and they plan, too: they’ve got them, they might have their 401ks and their investments. They might have an annuity, but if they’re as they’re planning their retirement, they’re afraid that they’re going to outlive the money that they have, those leaves on the money tree.
If you will, they’re going to be plucked dry. So where we do a killer job is finding those people and helping them just to turn their house into really just another branch of their money tree that they can pluck when necessary. Then we can go into strategies. I’m like, okay, when do you take the reverse mortgage first?
And when. Take money out of your assets first? How can we use a reverse mortgage to avoid taxes? Blah, blah, blah. That kind of gets a little granular,
Chad Corbett: Let’s start with the high level. Like I can, something I did not ask you to ask should have in the beginning, let’s, let’s just define what a reverse mortgage is and how reverse mortgage works.
Reverse mortgage explained: what is it and how does it work? [00:07:12]
Chad Corbett: So that if for anyone who might not be familiar with that, or have any experience, what is a reverse mortgage? What is the legal instrument and what Value does it provide to them? And as you said, let them access their equity without costing the kids anything.
Jason Eichmiller: I’ll give you the very, high-level I say 10,000-foot view on what a reverse mortgage is and isn’t and, and yes, you if you’re listening maybe do take some notes on this because I feel like even when I’m talking to attorneys and financial advisors, most of them get some part of this wrong.
So a reverse mortgage is just a program that allows a senior to take part of their home’s value out in tax-free cash without being forced to make monthly payments on the mortgage. So for a lot of these people, if you’re on a fixed income, I could give you a lump sum of cash. I can do a mortgage for you.
I do regular mortgages too, a big part of my business, but for seniors, it doesn’t make sense because you’re getting this money. What if you need it for home health care? Right. You’re getting this lump of cash and you have all these big expenses and you’re on your fixed income. So making this monthly payment month after month after month doesn’t make sense.
Who owns the property in a reverse mortgage and who gets paid? [00:08:13]
Jason Eichmiller: So really we just give you some cash. It’s not the whole value of the house. The reason why it’s not the whole value of the house – this might be a misconception that one of you has, but you’re not selling us the house. We’re not buying it. All we’re doing is just throwing a mortgage up there. The amount you can qualify for is based on your age.
So for seniors with high-value homes and I’ll define that as any houses worth about 800 or more, you can get a reverse mortgage at age 55. Everybody thinks 62, but some new programs allow you to get it at 50. You can’t outlive it, can’t be too old to get it. The oldest person I gave it to is 103, so you can get it.
And that was a home health care case. By the way, I love doing these for home health care. It’s so rewarding when your money is the reason why somebody is going to live the rest of their life in their home. It’s like chicken soup for the financial soul or something like that. So the senior stays on the title.
They have full ownership of the house. They want to sell it down the line. Go ahead. Whatever is owed gets paid back. They get the rest.
Reverse mortgage after death [00:09:12]
Jason Eichmiller: If they pass, if they live in the house the rest of their lives, the house will also go to their kids, whoever they wanted to go to it will go to them, they’ll get the house. Then it’s just a mortgage. So whatever’s owed, it’s gotta be paid back and it gets paid back…
Reverse mortgage and negative amortization [00:09:26]
Chad Corbett: Summarize or explain the reverse amortization aspect of it. So where if we get a conventional mortgage, we have X amount of money, and then we pay an interest rate on that in monthly installments. This is just the opposite of that.
So explain what that amortization looks like.
Jason Eichmiller: The way the amortization works is let’s say the interest rates are about 4%, which is about right in this, in this world.
So 4%, let’s say you get a hundred thousand bucks. You already understand from what I told you, if you believe me, which you should, you don’t have to make monthly mortgage payments on it. So where does that money go though? Because it’s not free money. And if I say, Hey, I’m going to give you some money.
You don’t have to make any payments. Just sounds too good to be true. So here’s what happens in a reverse mortgage. 4% of a hundred thousand dollars. I think you all agree with me without getting out your calculators is 4,000 bucks. So when you’re not making mortgage payments at the end of the first year, 104 is owed. At the end of the second year, a little bit of over 108 is owed because this is compounding interest.
At the end of the third year, 113 is owed or something along those lines. And that balance keeps creeping up by about that 4% mark until you either sell the house or you die.
Chad Corbett: It’s a simple concept, but I think a lot of folks have trouble wrapping their head around that. And your industry gets accused of being predatory because of that. When you compare it, I mean, if you look at the interest rate on the senior citizens’ credit cards, they’re typically really, really good ones.
Like 11.99, I would say an average is probably 23.99. The lack of understanding and the reverse mortgage or the HECM space has resulted in a bit of a smudge on the reputation of the industry, just because of the misunderstanding, the lack of financial savviness of the people who are your biggest critics.
HELOC vs. Reverse mortgage rates and benefits [00:11:07]
Chad Corbett: So I think it’s important that you understand that now I would like to play the devil’s advocate here. And as somebody who’s not 55, that doesn’t qualify for a reverse mortgage, one of my strategies for self banking is I acquire homes at as low a price as possible. I get them into top shape, get a good appraisal, and then pull an 89.9% LTV.
So that gives me access to 90% of my equity at no interest costs. On some of them. I pay fees. Other times you get it during promotional periods where it’s a free closing desktop appraisal, quick deal. Within days, I have access to 90% of my equity. So when, when you’re talking with a senior citizen, how do you, do you, do you discuss with them the option to do a home equity line of credit versus the reverse mortgage?
Is it more beneficial and why?
Jason Eichmiller: Yeah. So great, great question. So a lot of times, number one, I go over there are other options because honestly I just want them to be comfortable and confident in it. They’re going to get the numbers.
You can’t sell the mean maybe somebody sells it, the call centers certainly do, I remember being part of that. But to do it the right way, you got to mold this program and whatever programs are available, you mold it around their needs. That’s the way you get it done the right way. Every single senior who does a reverse mortgage, also, talks to a government counselor who is required by law to go through the other options.
So here’s my. Not a HUD employee. It’s a counseling agency. That’s they got their license from HUD. So they passed the test and HUD said, okay, you get it. You can teach these people about reverses and make sure they understand. So that’s a little bit different, but actually, it’s probably better that they’re not HUD employees.
IQ is a little bit higher, probably
Chad Corbett: …less bureaucracy.
Jason Eichmiller: Oh my goodness. I like we could go into a sidebar conversation about that one for a while. So the diff the main difference between reverse mortgage vs. HELOC: HELOC you’re right. You can get more money with a HELOC, the problem is when you need to use it.
If you’re a senior and you’re on a fixed income, you get some cash from a HELOC and you need to start using it. Well, then you’ve suddenly got some cashflow implications.
Chad Corbett: Typically the HELOC structure I’m most used to is a 10-year accumulation where you can make interest-only payments.
And then a 15-year full amortization. So if I get a hundred, that same, a hundred thousand dollar line of credit, typically that’s prime plus a quarter is competitive up to about prime plus one and a half. So I think that the 4% rate still applies like I just originated one at 3.49, but that was right before all Jerome Powell has to do is get behind the podium, and rates spike.
Right. So I originated at 3.49 right before the Fed rate increase just in the last couple of weeks, I had access to my money on day one and I can choose to make interest-only payments. So instead of paying principal and interest, the difference here, and the contrast I’m trying to demonstrate is whether a reverse mortgage that same 4% is accruing. Instead of making interest payments, the note balance is growing, the payoff is growing. Wherewith the home equity line of credit, you have to make cash interest payments to not get that note called and it’s going to be recorded typically in a, well, not, it doesn’t matter. It can be in the first or second position. But that’s the difference is the exchange of actual cash is required. If you’re going to draw down on a HELOC balance, where on reverse, it’s not. So…
Jason Eichmiller: Exactly.
Exactly. And yeah, that’s where I like a lot of these people. I don’t want them to. And again, nothing is for everyone. And I will, I don’t recommend reverses for everyone. Although I will say that there are a lot more people who don’t have reverses that should get them. What worries me is when you’re a senior, you don’t know when, when, when Murphy’s law hits, it sometimes hits hard and I’ve seen it from working with them.
Reverse mortgage real-world applications [00:14:56]
Jason Eichmiller: A lot of them come to me reactively where they’re saying, well, I was doing good. But now we have healthcare issues. We have some bad stuff. And some expensive, bad stuff has happened. So the reason why I like, and again, I can do, I don’t do HELOCs but I can do a traditional mortgage for seniors. And sometimes I do if it’s the right thing for them.
My issue for a lot of these people is like, how do we protect you? How can we give you some cash? But then make sure that if that, that big old refrigerator Murphy’s law comes down from out of the sky and hits you over the head, and you’ve got all these expenses now that were unforeseen, at least you don’t have to worry about losing your home.
Now they do have to, I will say with a big asterisk, with the reverse mortgage, you do have to pay your property taxes and your homeowners’ insurance. So that’s a big thing that you got to keep upon. And another thing that we do to kind of like make sure that these people can afford it is will not a lot of people know this, but we’re going to run your credit.
Bad credit is okay. Sometimes. Like we can sometimes get around it, but we’re going to look at your credit. We’re going to look at your income. We’re going to make sure that, Hey, like with all their senior living expenses, they still have enough to, to kind of get by.
Chad Corbett: Curious, Jason so one of the things that we teach, and I think almost anyone in this community, that’s watching this prescribes to it.
You know, my, as an investor, as a real or as a real estate finance guy, w when I connect with a family, I try to remove all the labels. So I’m not Chad, the realtor, Chad, the broker, Chad, the investor, Chad, the finance guy, anything I’m just Chad, I’m letting the conversation organically develop so I can understand their needs, their goals and, and what role I might be able to play to help out.
Ultimately, I bring that to a point in what we teach in the probate mastery course is to, you know, you choose your strategy in the last one minute of a very deliberate process. And in that, you layout options. So option one is you sell the home. You know you sell the home cash quickly.
Option two is as is, whereas. Option three, conventional. Option four creative financing, option five joint venture with me, let me drive the equity through the roof as, and then I’ll do all the work I’ll manage the construction and I’ll sell the house. There’s a variety of options. And the way we know that comes with ultimate trust from the prospect.
They’re like, holy crap. Cause everyone else was just trying to get their oneself sided offer through so they can get paid and move on to the next one. So I’m curious about your process, it sounds like you’re taking a consultative approach to this. You’re slowing down.
You’re not that bullpen Salesforce salesperson on the phone, hammering the phones, trying to play the numbers game. You’re looking these people in the eye you’re understanding their needs, qualifying them based on, it sounds like on your set, your morals, and ethics as well as underwriting standards, but is this the right fit for you?
How to talk about reverse mortgage and real estate without scripts [00:17:33]
Chad Corbett: All that said. Whereas you know, and just to point to this audience, I mean, we have a selfish interest in creating inbound business for ourselves. And we do that by, with a benevolent approach of providing value to our vendor team so you want to give us referrals because we’ve given you referrals and where I’m going with this is so I would like for you to kind of show them what that, that consultation looks like, do you put the option of Mr. Mrs. Smith. I think it might be better if you just go ahead and sell the home and move into a more affordable living situation right now, because that, to me, even though I’m not going to earn a commission, that seems like the best outcome for you versus do you provide those options?
And if you do, like how, what, how can a realtor clear your bar where you’re like, “Okay, that’s the kind of person I know will take care of these families. So if I’m not going to get paid, I’m going to send it to them to sell the asset. And I know that they’ll be sending me a referral back.” Is that, that kind of how you approach it.
Do you, do you discuss selling the home was one of the options,
Jason Eichmiller: Man, it’s funny. I think by doing that, it’s the right thing to do and it’s also a little self-serving as well. So I’ll kind of explain what I mean. Every single conversation, the first time we speak, I asked, Hey, first of all, what do you want this reverse mortgage to do for you?
Like money aside? What does it need to do? Cause we don’t have to talk dollars and cents unless they say, all right, my credit card is at 24.9, 9% and I owe a hundred thousand dollars and I’m just bleeding man. And I’m like, okay, that makes sense. But big picture, what do you need it to do? Where do you want to be?
I almost always bring it up. Do you want to live in your house? Do you want to move in with your kids? What are the options you’ve thought about? How long have you, how long have you been thinking about a reverse mortgage? So we’ll go down the rabbit hole on any of them. Yeah. I mean, it just depends on the situation and everybody’s different.
So I don’t have a reverse mortgage script or anything like, I left those long ago.
Chad Corbett: Yeah. You probably haven’t heard my soapbox rant about real estate scripts but if you’re providing a high level of valuable service, I can get you off your cold call script and two seconds of it. Right. I
Jason Eichmiller: have one maybe it’s that 32nd elevator. Here’s what a reverse mortgage is.
It’s just the mortgage you don’t have to pay back. That’s it. And Hey, tell me about yourself. You’re way more important than this little financial tool. But anyway, like one thing I do discuss with them is there’s nothing in a lot of their situations, there’s nothing perfect outside that. Like, there’s Powerball,
so Powerball, it’s great. It’s a lot of money, but it’s kind of hard to do. Here are the options. Here’s the stuff that you can do. You can stay in the home and if you qualify, you can get a reverse mortgage. It’s going to give you about this much money. That’s one thing you can sell the house, get all this money.
And where are you going to go? You can move in with your kids if you’re not going to slit each other’s throats and if there’s room. So there are, and it just, it absolutely depends, but I always feel that if a senior knows what their options are because they’re going to be the ones who decide, I’m not going to say, sit on the phone and say, Mr. Grayson, you have to do this. And then he’s going to say, oh yeah, well, this guy Jason tells me I have to do this, so I must, right?
It doesn’t work that way. It’s what is, what is the best thing? So I think that’s part one of your question.
How to get real estate referrals from reverse mortgage lenders [00:20:52]
Jason Eichmiller: Part two is, do you refer deals out? I’m a big fan of anybody who is in BNI will tell you the slogan givers game, I give out way more referrals than I ever get. The referrals I get, they do pretty well if they close, but I’ve always felt that if you just continuously give and -so I like to surround myself with people who are as good at what they do as I am at what I do. And I also realize, I just know nothing. I’m an expert at this little niche. I’m great at mortgages. I’m an expert at reverse mortgages.
Anything else? I don’t know. So I want to make sure that there’s somebody who can help people at the same level. That I hope. I hope that makes sense.
Chad Corbett: That’s awesome, man. I swear guys, I didn’t pay him to give that answer. I mean, this, this isn’t scripted.
Jason Eichmiller: Jesus,
Chad Corbett: anyone who’s been part of this community for a while knows that like they just saw that your, your values are very much in line with who is watching this. So that’s awesome. Thanks for sharing that process.
So now that’s kind of the front end. We’ve talked about the origination. I want to dig into the part that’s most intimidating, confusing, and turns people away from reverse mortgages specifically in the probate space.
Combining life insurance with reverse mortgages for end of life planning [00:22:05]
Chad Corbett: So let’s talk about the fine print in the note and what happens when they die or move out of the property. What is that specific language that starts the time clock? What are the options while that clock is ticking and the consequences when the clock strikes 12 and no action was taken?
As death occurs, or an illness occurs that makes that person move out of that as their principal residence, what is the ideal way that families should handle it?
And for most of them that don’t handle it that way, how can we as practitioners bring value to the situation?
Jason Eichmiller: Cool. All right. I’m going to give you, you might have to ask the question once or twice. Cause as you’re saying it, I’m thinking of like different ideas in different ways too, like you said, this is not scripted.
The biggest thing that you guys can take from this. And this is a big myth and misconception about reverse mortgage and probate and inherited property. A lot of people think that you get a reverse that’s okay. The senior gets some money and then the government or the bank takes the home in the end. So they don’t get the kids don’t get anything out of it.
When I first went in to see the guy at guardian first funding group in December of 2008, that’s what I thought. So if I thought it, then you all think it too. Like I said before, the title stays in the senior’s name. The balance of the loan does go up year after year, but a lot of times there’s a decent amount of equity leftover in the house when the senior dies.
Chad Corbett: like in, in the more affluent families, there’s, there’s always insurance that that can cover this. So if they have a comprehensive estate plan, like if they’ve, if they’ve done, you know, if they have a whole life or even a term life insurance policy, that’s a good example of how this can, you know, be a very responsible financial decision for an elderly person knowing damn well that the death benefit is going to kick in and cover the note. So the property can remain in the family and that tax-free death benefit can cover the tax-free money that they enjoyed in their end-of-life phase. So it can be a really useful tool and part of a more comprehensive end-of-life plan.
Jason Eichmiller: I am a huge, huge, huge fan of combining reverse mortgages with life insurance and with the new entities at some point in time. Again, what’s the right solution. I have no idea how you got to talk to the person and figure it out. Right. The government doesn’t like to talk to guys like me talking about it that much.
So I’ll leave that at a 10,000-foot view. Don’t use a reverse mortgage to invest in financial products. Oh yeah. Why not? So one thing I’ve learned from the more affluent. Is that they don’t care so much per se about passing the house down to the kids. When you hear somebody talk about, oh, I’m leaving the house to my kids, I can’t touch it.
That sort of thinking, these people are already kind of in financial disarray. The smart people think, “Hey, I’ve got this, I’ve got my 401k. I’ve got my investments. I got my life insurance. I’ve got me. How can I use all this stuff together just as tools to get me through where I need to go so I’m living in good retirement and then the kids get what they get in the end and I’ve put them through school and I’ve done some really good stuff for them.”
And they’re reasonable, good people. And they don’t even expect anything anyway. Right. All right. That’s my soapbox right there.
Assisted living and reverse mortgages: What are the rules if the mortgagee moves or dies? [00:25:10]
Jason Eichmiller: Getting back to kind of what happens, how do we know what’s going to happen when somebody inherits a reverse mortgage and probate, first of all, the rules.
Chad Corbett: Like what if they get sick? What if they just move in with a family member? Or what if they pass away?
Jason Eichmiller: Yeah, exactly. So to keep this thing going, they’ve got to keep this home as their primary residence. They’ve got to keep paying the bills, which are the property taxes and the homeowners’ insurance.
They say to keep the house in decent shape, but it’s a very gray line and there’s no reverse mortgage police out there. There are too many of these things written. Nobody goes out to the house afterward to say oh are you taking care of the oven in the kitchen?
So live there, primary residence. Pay the property taxes and you’re good. So what happens when somebody gets sick? What happens if they move in with their kids? Technically this house has to remain the principal residence, right? So in some cases, it may, I think it might differ from state to state. I always, what I always tell people is that to be safe, live in the house six months a year, how do they know that?
Nobody’s peeking in the windows. So they don’t know. But normally the reverse mortgage servicers do it once a year, normally on the anniversary of the date of the loan funded, they send these people a letter saying: ” do you still live here, sign and send back if you do.” And if they sign and send it back, well, then by golly, they still live there.
Okay. When somebody does vacate the primary residence or principal residence, and you know, let’s say they permanently live in a nursing home. Now they can go to continuing care. They can go to short-term rehab, they can move with their kids. But once this house has ceased to be their primary or principal residence for at least 365 days, then they are technically in default.
If the reverse mortgage servicer finds out. Again, how do they find out? It’s kind of tough, but if they do find out or if they’re notified, then they will call it.
Chad Corbett: Does that timeline can be 180 days, correct?
Jason Eichmiller: It can, but there’s loose language. So the issue with HUD programs is that you got stuff kind of floating all over the place.
So there is language stating that they have 12 months to that they have to occupy a once in 12 months, which allows you to go to a short-term nursing home, for 12 months. Once they found out let’s, let’s skip and say that mom either died or say she’s moved to a nursing home for a year.
Selling a house with a reverse mortgage (Or keeping and refinancing mom’s house) [00:27:33]
Jason Eichmiller: And statistically, I don’t know the exact statistics, but normally if you’ve been in a, if you’ve been in a nursing home for a year, you’re probably not going to come back anyway. What the kids should do at this point, obviously, depending on the situation is maybe they sell the house, stop the interest from accruing.
As soon as you know that mom isn’t going to be back right. Sell the house. Pay off the note through the sale. They want to keep the house. They can, but almost nobody wants to keep the house, especially when it’s been kind of in grandma’s name or mom’s name for so long, they want the cash. If they can get the cash.
And again, that
Chad Corbett: if they want to keep it, it’s in the family, that’s usually in their best interest to look for a refinance to take out the reverse, right?
Jason Eichmiller: As quick as possible, because that, that interest at 4% interest is accruing, but then you’re paying the 4% interest out of pocket.
So almost tomato, tomato except for compounded interest on one end. So yeah, that’s it. In a nutshell, they have six months to sell it. So HUD gives six months to sell the house. You can petition HUD for up to two, three-month extensions after that six. But again, HUD is kind of like a black hole.
So I wouldn’t expect anything special from them. Sorry. If anybody is involved,
Chad Corbett: This is the point and the timeline where most often reverse mortgages find their way back to our calls. They will say, you know, I spoke to the family. There’s a reverse mortgage and probate case to deal witih.
Chad Corbett: They didn’t know that their mom and dad did it, or they, they knew that they did it, but they didn’t, they weren’t part of the conversation.
There’s no, no lender to be found. They don’t have a payoff statement. They say, there are no letters in the mailbox. And they, as you pointed to earlier, they probably thought when mom and dad originated that and told them about it. Well, great. There goes our inheritance, you just gave the house to the government or, you know, whatever, whatever that, that preconceived notion is.
So like our community members are looking for, you know, how do we serve them? How do we make them understand it? And how do we step in and get the payoff, especially in a marginal equity situation, which isn’t as big of a deal right now, as it was when I first learned this in 2011, 2012, you know, they, they, they just, it was marginal or negative equity because of the interest accrual and the drop in market value.
Not necessarily as as much the case right now. I think that’s where we’re headed. I think I’ll try to stay off of that my economic soapbox, but I think, you know, these aren’t real asset prices. These are asset prices with the Fed tools deployed at the highest level in history. So there’s some, there’s some wind that needs to come out that will come out of the sales of real estate asset values. And I know everyone points to, you know, how my, how healthy the home equity market is in 2022 vs 2008 but real estate values are subject to many other macroeconomic factors and those are about to be disrupted in a big way. So let’s just agree that there could be a situation coming ahead of us. There will be real estate always corrects. There’s no, no, short-circuiting a cycle forever,
Reverse mortgage in probate conversations: How to speak to heirs about the house [00:30:37]
Chad Corbett: but in those low equity environments where equity is dropping and the interest is accruing.
So your equity is reducing every month. Like how can the practitioner wrap their head around this know exactly how to step in and take fast action, get the family out of their way. If they’re procrastinating are sticking their head in the sand and preserving that equity for the heirs, what’s the best way for them to educate themselves, order a payoff statement, is it through an authorization to release and contact the servicer?
And if none of that is found, if they’re just no idea where to start, where would you recommend this? To kind of do the due diligence to help the family get in contact with the servicer and figure out what the timeline is, what the payoff is.
Jason Eichmiller: So the first thing you mentioned is mail, and I’ll just tell you like, kind of the mechanism of how servicing statements work with reverse in this reverse mortgage world.
So every single senior gets a statement every single month dropped right in their mailbox. That’s not the kids. Normally not the kid’s mailbox. It is the seniors’ mailbox. Okay. If there’s a power of attorney involved, it might be different. The servicing statement might go straight to the power of attorney, but let’s just assume there isn’t for simplicity.
Mom’s got it in her mailbox. God knows once it gets from the mailbox to the coffee table, it’s in the trash cause it’s junk mail. But it is there. So do
Chad Corbett: very, very, very common. And I try to drive that point home. I’m like “they have a payoff statement. They get one every month, they get a statement. That statement has a phone number on it.
We need to find that.” And oftentimes it’s Nope, Nope. They don’t have it. They said nothing shows up in the mail and it’s like by law, I think it has to be delivered or you have to opt-in for electronic delivery.
Jason Eichmiller: I don’t think they do electronic delivery with these things. I could be wrong. I’m not a servicing guy. It’s just, to be Frank with you and everybody, Chad I’m a front-end dude, but I come across this stuff all the time.
Help as well as I can. They have, there is a statement, mom just ignores it
So with that said, what they have to do is if they’ve passed away, normally I’m not a hundred percent on this, but I think this is the way that it works. I believe they run social security numbers in some way.
And as soon as a social security number flags as deceased, then
Chad Corbett: what happens is a funeral home has a legal obligation to report the deaths to the social security administration database. It’s called the death flag database.
Social security owns that database. HUD manages the database so it goes through funeral homes, a social security administration to HUD database, and then nonprofits and creditors have access to that database. So oftentimes, and it’s every day there are more and more companies that are cross-referencing the data, our postal service,
they apply a death flag. And it gets, it works in conjunction with their vacant property flags, but other like savvy attorneys, debt, collection attorneys, anyone who has big accounts receivable, they will typically at least once a month, some of them even on a, daily they will do a match and append augmentation to their, their database, to their receivables to see if any of the flags, this person is in the social security, death database. And I think that’s the most common way that servicers identify death. It’s not that they sent a letter and it didn’t get sent back.
They didn’t self-certify that it’s their primary. I think the most common trigger for servicers to move to recover the assets or call the note is that social security death database that originates at the funeral home. So there’s no real way other than bureaucracy and inefficiencies and data mistakes.
There’s no real way to manipulate or fudge that, you know, so the family could just hold the, hold, the home and perpetuity. Eventually, it’s because, of data sharing in today’s day and age, it’s eventually someone’s going to run that social security death database against their, their receivables or their notes.
And they’re going to say, oh, looks like X percentage of these. We need to work these out. And that’s when that, that clock starts. I think, in, in most scenarios.
Jason Eichmiller: That’s awesome. Never knew to school me, my man! That’s. That’s awesome. So like my thoughts, like how you, how do you proactively find these people and how do you proactively help them?
I’ve always thought I’ve never got anybody to take it on,
Jason’s not-a-script for talking to heirs about mom’s house with a reverse mortgage [00:34:58]
Jason Eichmiller: but I always thought that being able to contact family members, say the living relatives of the senior just to educate them and say, Hey, mom’s still alive. We love mom. You love mom. Hope she lives forever, but here’s the deal.
This is what’s liened up as long as mom’s comfortable with you talking with them, Hey, this is what’s liened up against the house. Here’s how it works. It’s not stealing mom’s house or anything, but the equity, the balance of the loan is growing. So here’s what your options are. If you’re in a position.
If you can refinance it out right now while mom’s alive and still allow her to live there, great. Perfect. If that doesn’t work, at least, you know, then when mom passes away, Hey, look at this. So here’s mom’s mortgage statement and here’s a Zillow search. We all hate Zillow, but better than just completely throwing darts up against a wall sometimes.
Here’s an approximate idea of what equity is left there. Now you probably think that the government’s just going to take the house, but believe, trust me, I’m a professional. You’re wrong. It looks like you’re going to have some equity in it. So my question is, do you want to easily get some of that?
Or do you just want to give it up and do nothing and not get any money? Most people would say, you know, what, if it’s an easy process, I don’t get to do much then yeah. I want to get my money. So I think that’s, it kind of starts there as it’s identifying these families or identifying the seniors, maybe sending out direct mail to them or calling or whatever you can do whatever you’re comfortable with to get in touch with them and start having that conversation.
With their loved ones. I think that, and I think it would be a fairly liquid lucrative thing to do. Do you know anybody in your communities that are trying to do that?
Including reverse mortgage services in your probate marketing [00:36:36]
Chad Corbett: No probate is the most common space that I have uncovered these you know, they, they come to you, the families who are in this situation oftentimes will respond to your marketing because they just that’s the first thing that they need help with.
and they’ve, they’ve come up short. As much as I hate to admit it, a lot of really. You know, a lot of real estate practitioners don’t understand reverse mortgages either. I think that’s why our probate community finds a lot of these scenarios is because they weren’t finding help with the realtor they go to church with, or the one that lives across the street.
So they were reaching out to someone that they thought, but I don’t know of anyone who’s proactively targeting. I, I mean, I would imagine there’s gotta be a bunch of refi lenders that aggressively target that.
Jason Eichmiller: Absolutely.
Chad Corbett: And in the last 24 months, in this low rate environment with rising equity levels, it would be foolish to be an originator and not be targeting that for, for a refi business.
Jason Eichmiller: I have one of them closing tomorrow. So we do that. Hey, if you need more money, we can give it to you. That’s the thing, that’s the spiel right there. The whole science, Hey, need more money. Maybe you can get it. If your house is worth it. Please do something good with money?
Chad Corbett: Well, so we’re approaching the top of the hour and I do wanna respect your time.
And this has been great, man. I think this is, you know, our goal is kind of a macro-level conversation about this. They’re just like with real estate, all aspects of real estate and as you dig down into niches, like probate and divorce, I mean, you know, some of the things we haven’t talked about are what happens if seniors get divorced and they’re both on the note?
Then what? And so I think there are some of those more micro conversations that we can have, and maybe in a live format, like we can invite you to one of our, our group coaching calls where people can bring real-life scenarios and kind of say, Hey, you know, I’m always in that hot seat, transaction engineering, figuring out solutions engineering.
So maybe I’ll sit back and we’ll, we’ll do a cocktail hour. I’ll drink a beer while they hammer you. But
Jason Eichmiller: Yeah. Yeah,
Chad Corbett: the bourbon hot seat hour. I want to remind everybody, that Jason is in our community estate professionals mastermind. You can message him there. Jason, I would, if I were you, I would post and introduce yourself.
And then when this gets posted in the group, please keep an eye on that. And, you know, ask if, if anyone has any questions you can engage with them on that post or on, on a private message.
Let’s make it easy for them to find you what’s the easiest way.
Jason Eichmiller: Yeah. Easiest. You can just shoot me any I’m old-fashioned, man. I just shoot me an email. Jason@keyhomelending.com. It’s K E Y H O M E. lending.com. We do have work in progress, a website it’s right up there, newreversenow.com, and working on some YouTube videos for that. They have reversemortgagereality.com.
You can find me through that. But just any questions you want to start a conversation, just shoot me an email. And I, sometimes I can just answer if it’s a quick couple bullet, I can just answer it in an email. I’m pretty good at doing that. If not, if you want to jump on the horn and we can certainly schedule the time to do that.
Chad Corbett: Well, listen man. thank you so much for letting us you know, leverage your experience and knowledge and uh, welcome to the community and Duane Olson, thanks again for, for making the introduction. We’ve been looking for Jason for quite some time, so happy to have you here, Jason.
And I look forward to, oh, and by the way, guys drop in the comments. Anything that you feel like we glanced over too fast, you’d like to hear us expand on anything you were hoping to learn here that you didn’t. Or just comments on how valuable was this? Was this general knowledge to you or is this holy crap?
I didn’t even know that! They didn’t teach it in real estate school I’m betting, but anyways.
So thanks so much for being part of this. And Jason, thank you for being here and being a great guest. We’ll see you guys in the community soon. Yeah.
Jason Eichmiller: Thanks so much, Chad. Thanks guys. We’ll see you soon.
Nice post so far. Thanks for sharing your amazing blog.