Your Questions About Mortgage Loan Officer

Michael asks…

Are there any legitimate reverse mortgage companies that wont screw you over?

My mother is struggling financially and has been seriously considering getting one of these reverse mortgages to get a loan so she can pay off her past-due debts and survive for the rest if her life and not have to struggle again. The problem is, I have a really bad feeling about these types of companies. I think they screw people over all the time, especially desperate people like my mother who lives alone and is naive. Another problem is that, from what understand, the beneficiaries in her will wont receive the house when she passes away, is that true? Is there any way around that?

So are there any legitimate reverse mortgage companies out there that aren’t all about screwing people over and are actually “on the up and up”. And are there any message forums anywhere that have discussions about reverse mortgages? I need to hear directly from people that have personal experience with reverse mortgages, like they themselves got one.

Any and all information regarding anything I’ve asked or mentioned about will be greatly appreciated.

Thank you.
Sorry for the delayed responses, I posted this earlier and went to work and just got home to see the answers. I never expected so many wonderful and informative responses!

@Gerald: She is going to see her lawyer to see what he says about reverse nortgages but I’m just hoping he knows all about them and can give her an educated response to help her better understand how they work.

@Casey Y: Wow, you gave me a very thorough response and I appreciate the time you took to do so. Her credit is shot now (she’s 68) and has refinanced the house but not she’s unable to get a loan at her bank or another bank she tried so that option is out of the question. She’s got o/a 35K in past due debts that she’ll never be able to pay off given her only income is social security checks each month.

Now you had said, and I quote “Generally, any difference between the loan value (with interest) and the sale price of the home would be returned to the estate. So, if that $100K loan e
(Continued)
So, if that $100K loan ended up with an extra $25k of interest, the heirs would get $75K back.”
I didn’t understand that. Does that mean the beneficiaries would receive something?

I agree with her not going with the lump sum, she would spend it all and end up being in a predicament all over again down the road. She would never sell the home, she wants to live there til the day she dies, And going into a seniors home would be out of the question for her, unfortunately.

John answers:

For full disclosure, I am a loan officer specializing in reverse mortgages but I also helped my parents obtain one 7 years ago – and no one has regrets, neither the seniors or us, the heirs. The intent at that time was to pay off the mortgage, and now it has also begun to help pay for LTC insurance. My siblings and I had no problem recommending a reverse mortgage to them since we all accepted that it was their home to do as they wish, and it made financial sense for them. We received our “inheritance” a long time ago when our parents sent us to the best schools they could afford.

There aren’t very many programs to choose from and lenders mostly differ in the rate and closing costs – but still highly competitive and regulated. All the lenders have to pass FHA approval. But like with anything, it is for your Mom to shop around. While the program and lenders are FHA approved, it doesn’t guarantee that all the individual employees will offer her the best available, or take the time to do a financial analysis to make sure it is the best choice for her. This is where your mother needs your help. Nothing necessarily wrong with the program per se, but for your mom’s particular situation, she well may be better selling and downsizing or renting. That is why she needs you to educate yourself and be there for her. Assuming she doesn’t have a spending problem, it sounds like your mom may be a perfect candidate for the program. A lot of the “scams” tend to happen after the fact, when relatives and “good” friends take advantage of the money that is supposed to help the senior live out their life in their own home.

It is not true that you won’t inherit the home. Like with any loan, it will eventually have to be paid so when she passes away you will have to pay off the current liens on the property, either by refinancing it into your own name, or selling the property and keeping the difference. This would happen regardless of what type of loan there was on the house. The good thing about reverse mortgages, though, is that it is a non-recourse loan so only the home stands for the loan. If the home is upside down, the lender cannot go after the heirs or any other assets, like others loans can. The bad side of a reverse mortgage is that it is a negative amortization loan, so the longer your mom has it without making monthly mortgage payments, the loan balance increases. With an economy like these past 4 years, many heirs recently have nothing left to inherit because of the major drop in home values – but neither are they liable.

Your mother (with you, so you can educate yourself) should go through the counseling and work through the financial analysis to see if it makes financial sense for her. You need to look at her age, life expectancy, her health, her long term goals, etc. A reverse mortgage might be enough to provide her the income she needs to live out her life at home stress-free – if that is the goal. Even though it may mean that she uses up all the equity in her home and there is not much left to inherit when she passes away. On the other hand, if your mom has a problem with shopping and spending, then all she is buying is time and it won’t solve her problems.

A reverse mortgage provides several options for receiving the money; I usually only recommend a lump sum if there is a large mortgage balance on the home. I would not recommend buying an annuity (it would be like buying an annuity with an annuity – and at her age, it is typically not recommended by FHA). I would not use the reverse mortgage to pay off credit card balances either. She can continue to make the monthly payments, but let her estate pay off the balances if there are any assets left when she is gone. Otherwise, she can draw from a Line of Credit as needed, or she can opt for the guaranteed monthly payment for as long as she lives in the home.

I am not aware of any message forums. But you can educate yourself by going to FHA HUD or researching on the NRMLA (trade association) website.

As for some of the comments provided, I need to make some corrections. As a whole, the fees on a reverse mortgage are no higher than any standard loan. What makes the closing costs for a reverse mortgage high up front is that FHA requires Mortgage Insurance (2%) on all reverse mortgages, regardless of the amount of equity in the home. Also, you can do a reverse mortgage even if there are existing loans on the property. There just needs to be sufficient equity. The reason why this program is only for seniors is because FHA realizes that most seniors would not qualify for a regular loan because they are on a fixed income, but many times have a lot of equity in their homes that has no other way to be tapped except with a reverse mortgage.

Sandra asks…

Anyone know what the work life of a reverse mortgage loan officer at American Advisors Group is like?

I got an offer to work there and I would like to know the entry base pay, the commission pay scale, and also the average loan contracts an typical officer gets a month. Long shot I know.

John answers:

Not specifically at AAG, but this might help you with what questions to ask at your interview. Most loan officers are commission-based with their own licenses, working the “streets,” so to speak.

This job looks like it is in-house phone-based, with no face to face contact at all. Similar to working for a bank, in that you don’t need your own license and you wait for them to come to you, but banks do have face to face contact. Some firms make you work the lead through closing, while others just want you to do the initial application and then someone takes over and you never see it through. All leads are generated by their TV / marketing efforts, or what they buy from the internet.

I used to work for a firm like this, but we got a salary only if we reached a minimum quota, and then commission started only after another quota was reached (e.g. You get $1k bonus if you hit 5 closed loans per month); it wasn’t per loan or per sales volume or even a percentage of the origination fee. AAG advertises a lot and generates their own leads, so their leads may be of better quality than what I got. When they are bought off the internet, they are expensive, low percentage qualifies (mobile/manufactured/underwater homes), and many are sold multiple times and you get disgruntled seniors being harassed on the phone. If the senior is shopping online, they aren’t necessarily looking for service or quality, just the bottom last dollar – and there is always someone else out there who is willing to work for next to nothing to make that quota.

Also, if not careful, you start getting a lot of internal fighting because if your commission is based on closed loans, you start fighting with your processors if you feel they are not working your loans equally over someone else and they are not closing by month end so you make your quota. Or if the phones are not being rotated equally. Or folks that send out applications for all calls hoping one of them sticks; numbers look good up front but they don’t close. The company starts to lose sight of the customer’s needs.

Let us know what you find out, if you wouldn’t mind sharing. I would be interested to hear. You can email me privately.

Jenny asks…

what is the license for loan officers called?

John answers:

Mortgage Broker is the term used in Arizona. The broker employs the loan officers. Lincensing varies by state. In Arizona, the broker is licensed and the loan officers work for the broker. Loan officers in Arizona do not need to be licensed.

Ruth asks…

What is the difference between a loan officer and a mortgage broker?

John answers:

Loan officers typically work directly with a bank or lender, while a broker sells products from a variety of different banks.

Example: a broker sells loan programs from Citibank, Wells Fargo, and Chase.

A loan officer works at Chase, Citi, or Wells Fargo.

One caveat: a loan officer can also work under a mortgage broker’s license.

More here:

http://www.thetruthaboutmortgage.com/mortgage-brokers-vs-banks/

Joseph asks…

Loan Officers?

Is it secure to leave my job as a restaurant manager to became a loan officer?? I have bills to pay and I’m concerned with the fact that loan officers only get commissions and not salary.

Please help me out…. SHOULD I LEAVE MY JOB???

John answers:

No way. This is not the time to be in the mortgage industry. Just pick up any newspaper and you will probably see a story about it. Most mortgage companies are closing their doors completely or laying off.

Also you don’t need to be a licensed real estate person to be loan officer. Not sure where that info came from. The laws vary from state to state.

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