The Federal Savings Bank is a veteran-owned bank specializing in home lending.

The Bank is certified to lend in all fifty states. My current position as a Senior Vice President of the Home Equity Conversion Mortgage division brings together my interest in volunteer work with non-profit organizations such as The Kaufman Fund (a veteran-centric charity that among other activities raises money for other veteran charities) and Aging Ahead (which funds Meals on Wheels and 20 senior centers around the St. Louis area).

The reason I enjoy marketing Home Equity Conversion Mortgages (Reverse Mortgages) is my understanding that we are faced with a dilemma with our senior population today. Everything costs more than was expected, people are living longer than expected, employer-funded pensions are no longer available to the majority and few have fully funded 401ks or 403bs. In this environment, where homes are one of the largest assets for a large percentage of our population, why wouldn’t the equity one has in their home be considered in a holistic approach to financial planning?

When I meet with a financial advisor, I ask them if they had a client that invested in a 401k for thirty years, wouldn’t they recommend the client use these dollars for retirement? I then explain that I work with people that have invested in many cases for thirty years or more, that just do not realize they were investing but thought that they were paying off a mortgage.

The Home Equity Conversion Mortgage product allows the homeowner access to tax-free equity in their home without giving up ownership of their home.
The product allows the homeowner to decide each month whether to make mortgage payments, partial mortgage payments, or no mortgage payments at all. In addition to providing the most flexible payment approach to home equity loans available, it is also a fully insured loan that protects the heirs from losing money on the inherited home when the parent is no longer living in the home. The equity can be accessed as a lump sum, a tenured amount for life or a specific time period, a line of credit, or any combination of these methods.

The product has changed a great deal in the approximately thirty years since it was created. It is administered by the Department of Housing and Urban Development (HUD). One of the more recent modifications made to the program can be most useful to those looking to right-size their home.

  In years past when a homeowner with a three-story house decided that they no longer liked going up and down the stairs, they would sell their home and create a liquid pool of money to purchase a home more fitting to their needs (a villa, a ranch home, etc.). They found that they had two choices, either use the majority of their pool of money to purchase the new home outright or make a down payment and then have a mortgage payment.

Any rational financial advisor would not recommend that their senior client “bury” their liquid capital in their new home and few people age 62 or older want to have a mortgage payment.

 In answer to this, HUD modified the Home Equity Conversion Mortgage product so that it could be utilized to purchase the right-sized home without using the majority of the client’s liquid capital and not necessitating a monthly mortgage payment. The client brings their portion of the purchase price (based upon the age of the younger buyer) to Closing and the lender provides the rest. The new homeowner is in the position of not using the majority of their liquid capital and not having a mandatory monthly mortgage payment.

   
Guest article contributed by: Dennis Cooper, HECM Senior Vice President

Dennis Cooper, HECM Senior Vice President
The Federal Savings Bank | 1623 Forestview Ridge Lane, Ballwin, MO 63021
direct: (636) 334-0001
fax: (636) 334-0000
cell: (636) 675-1267
email: dcooper@thefederalsavingsbank.com
web: www.thefederalsavingsbank.com/denniscooper
NMLS# 525398
Member FDIC | Equal Housing Lender Apply Now: https://www.thefederalsavingsbank.com/hecm/application?BankerID=dcooper 
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