Calhouns Can(n)ons

Show Me The Money!

Have you gotten yours, yet? I got two. I’m betting I’ll get more -- Info packets for Reverse Mortgages. One was weirdly generic and didn’t seem to have any contact info. The other, from True Compass in Paso Robles, offers several free lunches at the Madonna Inn (April 30 or May 5th at 11 a.m.) or a free dinner seminar at the matador Room in Paso Robles (April 28th 4 pm..) They even sent along four complimentary tickets for me and some friends. Show up, get some eats and get some information on Reverse Mortgages.

Why this sudden interest? I live in Los Osos and a whole lot of people who live in Los Osos, if they’re over 62 and are cash poor but house rich, will soon face eviction for non-payment of their sewer bills, so Reverse Mortgage companies are making sure their products and information about their products are available to their potential clients.

I’ve spoken with some folks who’ve gotten these packets who grumble that it’s like the vultures circling in for free dead meat. But I don’t view it that way. It’s smart business and for many people, the “vulture” may turn out to be a saving grace.

Some time ago, thinking I might like to write a column about this, I had a sit-down with Chrys Barnes from Capitol Mortgage here on Los Osos Valley Rd. (541-5353 if you’d also like to chat with her). I was quite surprised with what she had to tell me, since what little I knew about RMs turned out to be, not only way out of date, but the various horror stories I had vaguely heard about usually applied to foolish loans written on houses located in Hog Spit, Nowhereville, but not houses here on the Gold Coast. Not, at any rate, if the RM is prudently structured and used properly.

So, I’m gonna call the number given on this particular Seminar offer (1-800-508-0679) and make a reservation for one of the lunchie-poo dates at the Madonna Inn and go and take notes and report back here. If you didn’t get one of these packets, you could call True Compass, 1502 Spring St #D in Paso Robles. The seminar presenter is Katie Bateman. See if she can send you some tickets.

Some of the things that became clear when talking with Ms. Barnes was that there are a lot of different “products” now than there used to be, a lot of the rules have changed and, best of all, anyone considering an RM must pay for a loan review/audit ”educational class” given by a qualified independent personage. Said review ensures that the loan recipient has the right loan for their circumstances, understands thoroughly how the deal is structured, reviews the pros and cons and costs with a neutral person and has the loan looked at for real-time feasibility, thereby avoiding the predatory shenanigans we’ve recently seen by sub-prime mortgage brokers mugging, fleecing and then tossing their “clients” under the bad loan bus.

When I have mentioned RMs in the comment section of this blog, the usual “anonymous” reply comes in the form of cries about high fees and interest. True. The “downside” of any loan is always points, fees, and interest. However, there are several balancing upsides that people often don’t think about.

1.Compare the overall fees with the cost of packing up your home and moving. If you haven’t gotten a guestimate on what it costs to move an average 3 bedroom home, you’re in for an awful shock.

2. If you’ve owned your home for a long, long time and you sell your home and buy another one at today’s prices, unless you can somehow take your tax rate with you or have that put on hold (another kind of “reverse tax mortgage” with the taxes coming due when you die or sell the home or you forget to file the paperwork each year at which point all the taxes come due putting you into another pickle), the amount you’ll pay in increased property tax will likely come close to what you would have had to pay for the sewer you couldn’t afford in the first place, which is why you’re moving.

3. The loss of friends, family nearby, community connections, with the stress of pulling up stakes and starting all over again, is particularly hard on elderly people, with often devastating health consequences. And devastating health consequences also cost a whole lot of money as well.

4. Even though the overall housing market has dropped, Los Osos is part of The Gold Coast. The sewer is being sized to limit build-out here to a set rate, the town is ringed by green-belts, there is no water for additional homes, so the result is that whatever homes are here is it. This town has been gradually Yuppifing and aging (there’s a reason Sunnyside school is closed; Baywood elementary school will likely follow in a few years as younger families are priced out of the market, with the $200+ a month sewer fee helping that process along). This Yuppification will continue as wealthy Boomers retire, sell their very pricy homes in L.A. and S.F and look around for a little bit of Paradise to settle down in. And what’s not to love about Los Osos?

For many seniors (over 62) who bought their homes years ago, I have no doubt that a (prudent, conservative) reverse mortgage would enable them to live out their days in their homes with the eventual resale value of that home re-paying for that loan or at least a portion of it (the sewer’s scheduled for a 30-year pay back rate, so new home buyers will be picking up that cost as part of the cost of that home, yea unto the end of time), still leaving the RM holder/sellers (or their heirs) to still walk away with a nice bundle.

As I said, the cost of money is always the cost of money. But that should be weighed against other costs for any seniors who have sufficient equity in their homes, who may be house- rich but cash poor, and who are facing eviction and loss of their homes because they don’t have the income needed to pay for this sewer.

So, I’ll wander down to the Madonna Inn, notebook in hand, and report back. I suggest some of you might want to do the same.