In California reverse jumbo mortgages account for only 10% of the reverse mortgages approved in the State. The reason being that HECM (Home Equity Conversion Mortgages) reverse mortgages provide borrowers with the most money possible when they own more modestly priced properties. Below we have two case studies for retired residents in California who were approved for reverse jumbo mortgages. One mortgage in San Francisco and one in Los Angeles. Both mortgages approved were reverse jumbos. While you are reading these cases notice how much money the borrowers were getting depending on the value of their homes.

Case Study 1: Reverse Jumbo Mortgage in San Francisco California

Dennis Altman of San Francisco was just over the age limit for approval of a reverse mortgage, and his property value was approximately $1,000,000. He was 71 years old (you have to be over 62 years old to be approved for a reverse mortgage). Dennis had to get two appraisals carried out on his property. This is often the case when jumbo reverse mortgages are considered by banks and private lenders. If Dennis had chosen an HECM mortgage he would have received $212,085 dollars, and if was approved for a jumbo reverse mortgage he would receive $360,223. So which jumbo do you think he negotiated? The latter one of course for well over $300,000 dollars, which he took in monthly payments instead of a lump sum. You can choose either payment method when you negotiate a reverse jumbo.

As always, remember that the reverse jumbo mortgage lender has first lien (usually the only lien) on the property when it sells. The bank gets all their money back after the elderly home owner passed away. It’s simple trade-off actually – a better lifestyle in your golden years for the equity you have built up throughout your life. I remember seeing some of the first reverse mortgage ads on T.V. about 20 years ago, and you are likely familiar with Robert Wagner’s ad for reverse mortgages on T.V. Some would say that it’s a sleazy deal, and that the lenders and banks are taking advantage of the elderly person’s vulnerability. There is another way to look at though – why not enjoy the years you have left, and let the kids look after themselves. I agree with the latter.

So Dennis Altman got his reverse jumbo and lived in great comfort for his remaining years. When he finally passed away (died at 82 years of age and in his sleep) he still left over half of the equity in his house to his children all still reside in California.

Case Study 2: Reverse Jumbo Mortgage in Los Angeles California

Charles Henderson wanted a reverse mortgage, but it was hardly a jumbo by any stretch of the imagination. His house only needed one appraisal and property was given the blessing of being worth $200,000 at fair market rates. Charles was 73, and he had always had a clean record with his bank. It was a no-brainer for him to go with a standard HECM reverse mortgage for a total of $119,849 in funded payments. If he had tried to get his reverse mortgage at jumbo rates, he would only have received $72,738 in cash.

So Charles got his reverse jumbo mortgage in 2008 and is still collecting on it today. He received monthly payments and will do so for the next how many years he is still alive. He travels more and he has been able to help his children and grand children with his money. When he passes away he may not have a cent left of inheritance to his children, but he has decided to help them now instead of later.

Just like Dennis from the first case study, all of Charles’ children live in California. They are spread out from the north to south of the state. Sacramento, San Diego, Los Angeles, Bakersfield, Long Beach, Riverside, and Fresno are just some of the areas his children now raise their families. Charles has 9 kids.

When Applying for a Reverse Jumbo Mortgage California – Some Facts

If you are applying for a reverse jumbo mortgage, you may want to understand some of the facts involved in doing so. The following are some facts on reverse mortgage applications and jumbo reverse applications.

The HUD (FHA) Reverse Jumbo Mortgage Application Process – Cert of Counseling

In both examples above, these California residents had to receive a certificate of counseling from an approved HUD counselor. This HUD counselor must give a 1 hour (required at least forty five minutes) training session on the financial ramifications of the mortgage. They have to make sure the elderly person fully understands the legalities of a reverse mortgage. It doesn’t matter if the applicant is applying for a reverse jumbo or a standard reverse mortgage, the same rules apply. This is law to protect the elderly from predators who may wish to take advantage of their age or lack of knowledge.

When a Reverse Mortgage in California is Done

In lenders and banks in California are the same as the banks in any other state when it comes to the laws governing standard and jumbo reverse mortgages. There only two situations when a reverse mortgage is finished and the final tally is made:

• When the borrower has passed away: when the borrower dies, the property is sold and the first installment of the proceeds goes to the lender. All interest is calculated and paid at the time of sale. This of course means the owner does not have to pay any interest on the loan while alive – only makes sense right.
• When the borrower sells and moves to a new location: when the borrower sells their property and moves into a old folks home, or into an assisted living home, the proceeds from the sell of their property go first to pay back the lender. As the first example, all interest on the loan is paid at this time.

What Does the IRS Have to Say About Reverse Mortgages? Taxes.

As far as the IRS is concerned recipients of reverse mortgage payments may be taxed slightly on an annuity style pay out. For standard lump sum payments from the lender to the bank there is no taxes involved. any interest that the borrower pays is dealt with at the end of the loan. Furthermore, the mortgage insurance money that is moved is completely tax deductible.

The NRMLA and Reverse Mortgage Practices in California

The NRMLA (National Reverse Mortgage Lenders Association) was founded in 1997. This is a new thing folks. The NRMLA provides data on reverse mortgages nationwide and of course California. Headquartered in Washington D.C., the NRMLA conducts conferences and supports lobbying groups who support their agenda.

Reverse Mortgage Terminology

Reverse mortgages go by a few different names. You may have heard those in the banking and lending field describe a reverse mortgage as “Equity Release” or “Lifetime Mortgage”. No matter what you call it, it’s all the same thing. All the normal rules of law apply for and equity release, lifetime mortgage, or a reverse mortgage. Jumbo reverse mortgages are as above, and in California, these terms apply of course.

Calculating Your Reverse Jumbo Mortgage

You can calculate your jumbo reverse mortgage by using the HUD website. Go Home Equity Conversion Mortgage Payment Calculation Formula page on the HUD site.

In Concluclusion for Senior Citizens Owning Property in California

A jumbo reverse mortgage requires that you have 2 qualified appraisals of your property or real estate holdings, and you must complete the HUD counseling process as described earlier in this piece. Outside of these three tasks, you should be good to go an apply for your jumbo reverse mortgage. There are some hefty initial fees that banks charge for your reverse mortgage, but that is made up for in the low interest charged for your term – when you pass or move. Discuss all of this information with a trusted friend or family member who has some knowledge in the area of lifetime loans and jumbo reverse mortgage approval. Make sure to read the HUD web site for even more information before you even make an appointment with the lender(s) in the state of California.