Category Archives: Age In Place
For many seniors the equity in their home is their largest single asset, yet it is unavailable to use unless they use a home equity loan. But a conventional loan really doesn’t free up the equity because the money has to be paid back with interest.
A reverse mortgage is a risk-free way of tapping into home equity without creating monthly payments and without requiring the money to be paid back during a person’s lifetime. Instead of making payments the cash flow is reversed and the senior receives payments from the bank. Thus the title “reverse mortgage“.
Many seniors are finding they can use a reverse mortgage to pay off an existing conventional mortgage, pay off debt or help pay for home repairs, remodeling or long term care needs.
“The lender could take my house.” The homeowner retains full ownership. The Reverse Mortgage is just like any other mortgage; you own the title and the bank holds a lien. You can pay it off anytime you like.
“I can be thrown out of my own home.” Homeowners can stay in the home as long as they live, with no payment requirement.
Virtually anyone can qualify. You must be at least 62, own and live in, as a primary residence, a home [1-4 family residence, condominium, co-op, permanent mobile home, or manufactured home] in order to qualify for a reverse mortgage.
There are no income, asset or credit requirements. It is the easiest loan to qualify for.
The amount of reverse mortgage benefit for which you may qualify, will depend on your age at the time you apply for the loan, the reverse mortgage program you choose, the value of your home and current interest rates. As a general rule, the older you are and the greater your equity, the larger the reverse mortgage benefit will be (up to certain limits, in some cases).
The reverse mortgage must pay off any outstanding liens against your property before you can withdraw additional funds.
The loan is not due and payable until the borrower no longer occupies the home as a principal residence (i.e. the borrower sells, moves out permanently or passes away). At that time, the balance of borrowed funds is due and payable, all additional equity in the property belongs to the owners or their beneficiaries.
The most popular reverse mortgage plan is the HECM. (Home Equity Conversion Mortgage) Over 90% of all reverse mortgages are HECM contracts.
You must participate in an independent Credit Counseling session with a FHA-approved counselor early in the application process for a reverse mortgage. The counselor’s job is to educate you about all of your mortgage options. This counseling session may charge a fee to the borrower and can be done in person or, more typically, over the telephone. After completing this counseling, you will receive a Counseling Certificate in the mail which must be included as part of the reverse mortgage application.
You can choose 3 options to receive the money from a reverse mortgage:
The most popular option, chosen by more than 60 percent of borrowers, is the line of credit, which allows you to draw on the loan proceeds at any time.
Keeping money in a reverse mortgage line of credit in most states will not count as an asset for Medicaid eligibility. It is best to get an opinion from an Elder Attorney in your state.
Tom MacDonald, in his article on “ReverseMortgageconsultant.com”, makes the following statement about Medicaid, Med-Cal or SSI requirements:
When it comes time for a child or parent to begin making plans for the beloved but aging senior in their life, the myriad of choices, paths, options and steps to take can seem endless and overwhelming–so much so that many dejectedly assume that nursing home care is the only option. But this isn’t always true! While some healthcare needs will eventually require the long-term care that a nursing home can provide, for others the goal is to stay in the comfort of their own home as long as possible. Fortunately, it IS possible to receive care at home and obtain Medicaid benefits. Medicaid application for a nursing home and for home-based care are somewhat different processes, but we regularly handle both at our Firm. In fact, home-based care is slowly becoming more popular with our clients as a means of staying in their comfort zone for as long as possible.
With this in mind, the Farr Law Firm is excited to announce a new relationship with American Care Partners @ Home Inc., a locally owned and operated at-home care agency based in Falls Church and serving the Northern Virginia area. This group offers a wide array of in-home care services, from a few hours of care a day to 24-hour round-the-clock supervision; from something as basic as simple companionship to assistance with household chores and errands. American Care Partners is unique in that their staff of physicians will conduct house calls to their patients right in their own homes, at no additional charge–“the 1940′s are back!” is what they say! And best of all, America Care Partners @Home Inc. are Medicaid approved and we look forward to working with them to attain the best possible care for our clients under Medicaid.
Another home-care company that we often recommend is HomeWell Senior Care, a nationwide organization with a very successful branch here in Virginia. HomeWell was founded by a caregiver in 1996 and focuses on “maintaining independence with quality home care for seniors.”
We at the Farr Law Firm enjoy working with these companies because they have a complete understanding of the Medicaid billing process, which makes things run smoothly. We strive to make the process of finding the best possible care for your loved one as stress-free and streamlined as possible for you and your family, and American Care Partners @ Home Inc., and HomeWell Senior Care are our integral partners in achieving that goal. If you have a parent or spouse in need of home-care, please contact the Farr Law Firm at www.farrlawfirm.com or by calling 1-703-691-1888 for your complimentary initial consultation. We can help you determine your financial options for long-term care and create the best possible care plan for your loved one.
For more information about American Care Partners @ Home Inc., visit them online at www.americancarepartnersathome.com or call at 703-261-4146.
For more information about HomeWell Senior Care, check out their website at www.homewellseniorcare.com or call 1-888-9-SENIOR.
“Getting old is not for sissies” goes the quote. Perhaps one of the biggest challenges people face as they age is a seemingly inevitable and impending change to their living situation, whether it be due to health concerns, financial circumstances or both. This feared transition may not be so inevitable after all. With the right plan, seniors can qualify for Medicaid, take advantage of today’s latest elder care technologies, and protect the assets which otherwise could be drained by the catastrophic costs of long-term care.
Most people are familiar with care options such as In-Home Care, Assisted Living, and Nursing Homes. But now, a fourth option is gaining popularity: Aging-in-Place . . . a care option that allows individuals to continue living independently in their own home without the need for a live-in caregiver.
Drug compliance is the most common issue for those living alone. For those with memory issues, pill-reminder services and gadgets can issue daily visual and audio alerts to take medication, dispense the correct pills at the right times, and can even send a confirmation message to a caregiver once the medication has been dispensed. If a dosage is missed, an alert is sent to the caregiver and appropriate action can be taken. The TabSafe is one such product; you may visit their website here.
Falling is the leading cause of injury and death among those ages 65 and older. For those with a high fall risk, monitoring devices like eNeighbor use unobtrusive sensors to monitor a resident’s daily routine. If the resident were to fall and not be able to get up or reach the phone for help, the device would trigger a phone call to a list of contacts as well as a 24-hour call center.
“Remote monitoring” is an in-home technology that measures vitals such as heart rate, body weight, blood pressure, and blood glucose levels–making it useful to patients with a variety of health concerns, from cardiovascular disease to diabetes. Check out the HomMed Genesis.
These latest technological advancements are not necessarily cheap. One of the goals we at the Farr Law Firm seek to accomplish through our Level 4 Planning is to protect assets from the disastrous expenses of long-term care, so that some of those assets can be used to enhance the standard of living with goods and services not covered by government financial assistance, such as the ones I’ve described. Of course, if Aging-In-Place is not the ideal option for you, we can help you prepare for and decide on your other long-term care options.
If long-term care planning is a relatively new subject area for you or your family, I suggest you take a few moments to watch this segment from the National Business Series.
If you have been contemplating you or a loved-one’s long-term care options, we can provide the solutions that you may be looking for. Achieving long term peace of mind is an invaluable asset that we are honored to assist you with. Please do not hesitate to call us at 1-800-399-FARR to schedule a free, initial consultation.Images from: http://www.TabSafe.com
http://www.hommed.com/Products/Genesis_DM.asp Resources: Centers for Disease Control and Prevention
The Farr Law Firm’s Levels of Planning
*Virginia has no procedure for approving certifying organizations
Since 2007, my opinions on reverse mortgages have been mixed. Today, I re-examine my previous articles and prior concerns, due to Bank of America’s monumental announcement Friday that it is exiting the reverse mortgage industry.
Initially, I was strongly optimistic about the use of reverse mortgages by senior citizens. However, over the past year I have been forced to retract much of my praise due to problems (and possibly discrimination) faced by some of my own clients.
In my first article, back in 2007, I explained why I thought (at the time) that many seniors ought to familiarize themselves with the basic advantages of a reverse mortgage. My second article came almost three years later in early 2010, in which I took the previous article a step further. Using a Reverse Mortgage to Pay for Home Care expounded upon the possible benefits to seniors who elect to take advantage of a reverse mortgage. But my enthusiasm was short-lived.
My feelings towards the reverse mortgage industry turned for the worse by the time I wrote my third article, Huge Problem with Reverse Mortgage Industry, in which I stated my concerns with a seemingly industry-wide practice of second-guessing the legitimacy of crucial power of attorney (POA) documents. I wrote about how two of my clients’ agents, both of whom used a different reverse mortgage lender, were met with a lender’s refusal to honor the POA needed to commence the application process. They were told to go on what could be referred to as a scavenger hunt – to obtain a letter declaring the mental competency of the applicant when the POA was signed, and a second letter stating the applicant is now not mentally competent. By the end of the article, I concluded that because of the arbitrary and capricious roadblocks imposed by the reverse mortgage lender in connection with the use of the POA, a child acting as the parent’s agent may be more likely to sell the home and place the parent in a nursing home. This result is a far cry from the user-friendly tool I anticipated.
In my most recent article, Reverse Mortgage Rules Changing Again, I reported on more problems – this time on new laws which would increase expenses for seniors including an increase in the Mortgage Insurance Premium. Today, I would like to follow up and comment on these concerns. I also think it necessary to offer my thoughts on a tell-tale strategic move, announced by Bank of America on Friday, that it will withdrawal from its once-thriving reverse mortgage business.
My first concern – second-guessing POA documents at the expense and delay of law abiding clients – has hopefully been remedied, at least in Virginia, by way of enactment of the Uniform Power of Attorney Act, codified by Virginia Code Section 26-71.01. The law creates safeguards to keep the POA flexible yet effective, balancing flexibility with prevention of financial abuse. Below I have outlined some important changes:
Durability: A POA is now considered automatically “durable” unless it expressly states otherwise. “Durability” is desirable in most cases, because it allows the POA to remain effective even in the event of incapacity.
Photocopies: Photocopies of an out-of-state POA will be treated as an original. The purpose here is to encourage acceptance of POA documents both in Virginia and elsewhere. This public policy underscores the importance of incapacity planning as recognized by the Commonwealth of Virginia.
Protection to Accept: If a notarized document is accepted in good faith, then the person who accepted it is protected from liability so long as they possess no actual knowledge relating to a problem with the POA, or the agent’s authority. But note: the principal’s signature must be genuine for this protection to be operative. Businesses are protected so long as they use “commercial reasonableness” with regard to employer-employee communications and POA-related instructions.
Accepting/Rejecting a POA: If a third party refuses to accept a POA and the refusal does not fall within the safe harbors provided by the law, then the third party can be ordered to accept. More significantly, there is potential liability for costs and fees. If a third party is presented with a POA, he or she has seven business days to take action. By taking action, I mean the third party must accept it or request a certification, translation, or opinion of counsel. After the request is satisfied, five additional days are granted to the third party to accept.
In my last article, I quoted a Reverse Mortgage Consultant with MetLife Bank, noting that “HUD’s ongoing Mortgage Insurance Premium will be increasing from 0.5% to 1.25% (a 150% increase!), and that the size of new HECM reverse mortgages will shrink anywhere from 1% to 5% depending on the applicant’s age.”
Unfortunately, this issue persists. According to Money Watch, “[L]ast year’s annual audit . . . revealed that the [Federal Housing Administration] had fallen below the 2 percent capital reserves required by Congress.” As a result, the FHA proposes to increase the mortgage insurance premium from 1.75% to 2.25%, and will seek approval to raise the annual mortgage insurance premium from its 55% level. This affects millions of Americans, as the above article notes that the “FHA has become the only lender available for many Americans. Over the past few years, FHA has gone from insuring around 3 percent of loans to more than 25 percent.”
While the problems associated with POA acceptance may be eradicated if entities abide by the laws and understand its safe harbors, the problems of rising expenses for seniors and the uncertainty of the industry live on.
Doug Jones, Consumer Sales and Institutional Mortgage Services executive for Bank of America Home Loans said the Bank made a “strategic decision to exit the reverse business due to competing demand and priorities that require investments and resources [to] be focused [elsewhere].” At least for existing Bank of America Reverse Mortgage customers, this decision will not affect their service, as Jones explained, “[Bank of America] fully understand[s] the critical sensitivity of ensuring that our senior customers are provided with the same level of excellent customer service that we have provided in the past.”
Bank of America Home Loans entered the Reverse Mortgage Business five years ago in 2006 and grew quickly after its acquisition of Countrywide Financial and Reverse Mortgage of America, but that growth has now been hampered by bigger problems within the bank.
“What’s really going on here?” The Bank of America decision comes in the wake of bad press related to its conventional mortgage business, and peaked recently when a temporary restraining order was issued January 20 of this year against ReconTrust, a subsidiary of Bank of America. “ReconTrust is trustee on thousands of loans that are in some stage of foreclosure and approximately 8,920 of such loans have already been directly affected by this injunction,” reported the Las Vegas Sun. The order was issued based on a woman’s suit against Bank of America for “fraudulently trying to foreclose on her home,” as reported by The Street. According to a motion filed by the bank, “[The order] has created enormous upheaval and confusion in the foreclosure process across Nevada and immediate review is required.” The order forbids the foreclosures of thousands of Nevada properties until a hearing takes place, scheduled for February 28. Is the Bank allocating resources away from reverse mortgage operations in order to ensure that its larger, conventional mortgage business does not falter amidst this corporate crisis?
To give credit where credit is due, this past September, Bank of America became the first loan servicer to voluntarily suspend foreclosure sales in the United States while it evaluated its procedures. As a result, it promised to improve its “staffing, customer impact, and quality controls,” reported Mortgage Professional Magazine.
Not shockingly, the Bank of America ruling is producing conflicting views and will continue to do so until the issue is resolved, as evidenced by some noteworthy public comments. Some are calling for more responsibility on the part of borrowers, echoing rhetoric that has been commonplace since the start of the recession: “Pay your obligations and you would not have these problems. I am tired of everyone blaming the banks,” one person posted.
Mortgage Electronic Registration Systems (MERS) have been pointed to as potential vehicles to commit alleged tax and recording fee evasion. This system for recording was “[c]reated by the real estate finance industry, [and] eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.” But in response to the consumer-responsibility argument above, one commentator blames seedy practices related to MERS instead:
The big point you are missing is that all of these banks used [Mortgage Electronic Registration Systems] as a method to not pay taxes and recording fees in every county and state in the United States. So even if you are paying your payments on time, you could still have a clouded title to your home because your mortgage and deed of trust were never properly recorded by any of the major banks that used this system.
Chris Dodd (D-CT), Senate Banking Committee Chairman, has been actively searching for answers, as indicated by the November oversight hearing titled, “Problems in Mortgage Servicing from Modification to Foreclosure.” The purpose of the hearing, according to National Mortgage Professional, was to hear from industry representatives, state representatives, and consumer protection experts on how modifications and unjust foreclosures could have been prevented.
The problems addressed at the hearing: servicers that struggle to meet demand, cases of lost paperwork, allegations of self-dealing, failure to record transfer and ownership of notes and mortgages, failure to maintain custody of title, and failure to establish or administer mortgage trusts lawfully.
Virginia Lawyers Weekly noted on its blog today that SB 837 remains a possible foreclosure reform bill, and it would create a civil cause of action against those who knowingly use a false document in support of a foreclosure. But other bills failed miserably.
A reform with more teeth, SB 798, sought judicial review of foreclosures. Virginia’s current deed of trust system allows for a trustee to foreclose on a property without supervision of the court. Don McEachin, D-Richmond was patron, and was unwilling to allow a group created by Gov. Bob McDonnell to control the bill’s future. Why no trust? VLW reports that according to at least one consumer lawyer, McDonnell’s group does not represent homeowner or consumer interests, but instead represents banking interests. McEachin requested an up-or-down vote and the bill is likely going nowhere.
Also going nowhere is SB 838, which relates to the mentioned Mortgage Electronic Registration System flaws. The bill would have called for stricter recording requirements.
With Bank of America out of the reverse mortgage equation and with the new Uniform Power of Attorney Act in effect in Virginia, only time will tell if the battered mortgage industry as a whole will fully recover in the foreseeable future. For now, I can only advise individuals to ask as many questions as they can and to potentially consider other alternatives.
Options such as refinancing a mortgage, obtaining a home equity loan, or taking personal loans come to mind as alternatives to a reverse mortgage, but the major drawback to the above three options compared to a reverse mortgage is that they are associated with income and credit score qualifications and must be paid back within a given time period. I will provide updates as they develop and can only hope reverse mortgages become the efficient, user-friendly tool they once were.
You may be taking care of elderly parents now or looking at that possibility in the near future. According to a report from USATODAY/ABCNews/Gallup Poll, 41% of baby boomers are helping take care of elderly parents by providing personal help or financial assistance or both.
If financial planning and long term care planning have not been done previous to the need for care, the burden falls on the caregiving family member. Decisions about how care will be paid for, who will be responsible for managing the estate as well as how the long term care will be given can cause stress and contention among family members.
It is best for parents and all family members to be involved in planning for future financial needs. The financial resources being used today could change drastically with the occurrence of a stroke, illness or onset of dementia. In order to plan financially for long term care, you need to know what the costs are now and what they will be in the future.
Every year MetLife does a survey of long term care costs. Their 2010 survey shows that the average daily rate for private nursing home is $229 which is up from $219 in 2009. Assisted living monthly base rate cost rose to $3,293 in 2010 from $3131 in 2009. Home health aids average $21 an hour.
Planning financial needs can be very difficult, considering you do not know when long term care will be required or how long it will be needed. You can determine what will be needed in certain living situations. Staying in your home for care will require Professional Home Care assistance, travel accommodations to doctor appointments, help with shopping, meals, medical supplies and medication and possibly a 24-hour attendant. Even if a family member is doing most of the care, eventually professional care will be required or a move to a nursing home facility will be necessary.
When evaluating your present income and assets consider how they would work for future needs.
- What are my care options?
- What type of long-term care can I afford?
- Do I have long term care insurance?
- Are there assets I can sell?
- If I stay at home how will I pay for care?
- Do I have to sell the house to pay for other living arrangements?
- Are there other financing alternatives?
- Do I have life Insurance or the means to pay for a funeral and burial?
- Will my spouse be cared for financially?
- Should I do Medicaid planning?
- Do I have the legal documents that may be needed?
An article by Thomas Day, Director of the National Care Planning Council, titled “Paying the Cost of Care,” reviews some of the financial options that can be used.
“Tangible assets that might produce enough income to pay for long term care might include investment property such as rentals, commercially leased property, land, a farm, second home or a business…”
“Some individuals are heavy into real estate and short on cash. If the intent was to cash out of the investment at some future point, then a sale is warranted. But, it seems a shame to sacrifice in early years to establish an investment only to throw it away to long term care. It would make more sense to use income from the investments to buy long term care insurance.”
Long term care insurance is one option for paying for care. Long term care insurance helps pay for the care you need when you can no longer care for yourself. It can protect your family’s financial future and your own investments. There are qualifications that need to be met with health and age. This type of insurance is more expensive the older the person and almost impossible to get if age related illness has already occurred.
Senior Financial Planners, Elder Law Attorneys and Veteran Benefits Consultants can assist you in evaluating your needs and future planning.
Senior Financial Planners are expert in working with seniors and their families to set up long term care plans. They usually work with an Elder law Attorney and Care Manager (Professional) to give you all options and resources for care.
Elder Law Attorneys help with Medicaid Planning and Asset protection as well as legal documents needed for final requests.
If staying in your home is a desired option, a Reverse Mortgage can supply the funds to pay for home care.
Another option for veterans who served during a time of war is the Aid & Attendance Benefit. This benefit provides extra income up to $1,949 to help pay for home care, assisted living and medical costs. It will also pay for widows or widowers of the Veteran. To learn more about qualifications for these benefits contact a Veteran Benefit Consultant in your area.
Knowing your needs and financial resources is paramount before making any long term care decisions. Working together, both parents and family members can ease the stress and burden of elder care needs. Evan H. Farr on Google +