 Good afternoon everybody. Thank you for joining us for another weekly edition of Condo Insider, which is put on by Hawaii Council of Community Associations. It's one of our education avenues and that we do, we've been doing it for, I want to say seven or eight years now. So I'm one of your hosts. And today I have with me, I'm really happy and lucky to have with me, Bruce Marveres, who is with Long Bridge Financial. So part of my role as a host is finding, I'm helping to find solutions that could help us in condos. And we all know that one of the big issues that has been the last couple of years are the rising maintenance fees and a lot of it is related to the LSE as we know. So there's about 300 buildings that were impacted by the life safety evaluation that brought in some additional costs. And also with that came the humongous rise in our insurance premiums related to fire sprinklers and also related to the LSE. So, you know, some of us were facing like triple digit increases in our condo master policy insurance, which really wasn't planned for. So there are some condos that were facing special assessments or humongous increases in the maintenance fees. And a lot of the big comments that I always hear from from board of directors is like, but we have a lot of people here on fixed income. So we really are shy to raise maintenance fees, but that's really something that you really can't not raise maintenance fees because of that reason. Because eventually down the road, you're going to get stuck with a special assessment. And to me, that's going to be worse. Because how many people do you know that really have a healthy savings account that they can draw from, you know, even a senior syllable we're living from their monthly check to monthly check. It's just like we live paycheck to paycheck sometimes. No. So I was looking for other ways that we could help and encourage some people to really think financially sound and start planning financially for the future if they're going to age and live out their golden years in their condominium. And this can also apply to single families as well. But our focus today is trying to help ease the burden when it comes to condos. So I want to introduce Bruce Ramirez with Long Bridge Financial. So Bruce, thank you for joining me today. Hello, all right, Leings. Thank you so much for inviting me to your show. And I'm very happy to be here and hopefully provide some insight to regarding the seniors that we're discussing about here today, especially in particular the condo associations that you deal with. And you brought up an interesting point here regarding seniors and rising costs. And we really have a retirement crisis in America these days. You know, when you have, you know, seniors which are living longer, 90% of seniors, 65 and older prefer to stay in their homes as long as possible. Yet only one in three seniors feel like they can adequately provide the necessary features that they need as they age. So here's a real crisis in terms of how do they afford the upkeep of their existing property? How do they make enhancements to it? And when you look what's happened in the last couple of years in terms of the retirement accounts, you know, with this economy, and you mentioned earlier that fixed incomes and what's happened social insecurities are referred to it. This is a double-edged sword is hitting all of the Americans at one time or another. So it's a real crisis. And again, I'm really thankful you brought me on here today. And hopefully we can provide these one or two solutions here for those seniors where there might be an absolute need and desire to improve the quality of lives. Okay, so let's start off talking about the reverse mortgage. So we typically everybody knows what a heck of is the home equity conversion mortgage, which is an FHA product. So tell us a little bit about the heck of. So the other word, as you mentioned, reverse mortgage, and basically it's just a lien on your property. What it does, it pays off your existing lien and allows you to no longer have to make a monthly mortgage payment. An average mortgage payment is $1500 a month. That can be a huge savings to a senior. But in a lot of cases, there's also an available line of credit. That's the seniors will have access to as well. So therefore, by limiting that possible monthly mortgage payment, and then having access to a lot of credit that can really supplement their monthly income. So another way looking into what with this market, how it's taken a major dip. Imagine having the sell off assets right now, as the market has been dipping there, and that may not be the most effective way of managing their funds and taking into consideration a line of credit right now is growing out about 8% can be a huge boon to a senior. Imagine paying off a lean of $50,000 and maybe have an access to line of credit of $100,000. And if it doesn't need to be touched at this point, you know, I'd have growth rate around 8%. That means in about nine years, $100,000 line of credit will double to $200,000. If you're a 62 year old senior, and are not needing to touch that until your early 80s, that can be around $400,000. Sit in there and then accessible. Because when you look at it, just look at long term care insurance, only about 13% of seniors have it. The majority of them cannot afford roughly $125,000 in long term care. Most people will realize Medicare doesn't uncover long term care. So let's kind of go that. So basically you have to be 62 years and older. You have to live in that property. So it has to be your primary residence. Six months and a day per year. Right. And it works best when you have a little bit of a mortgage balance. You know, if you have a huge mortgage balance against what your appraised value is going to be, it may not work. Depending on the age and other criteria, right, the loan of value, obviously the older you are, the more that could be loaned to you. Okay. So the higher balance, it's easier to pay that off, you know, higher. So at age 62, maybe about a 30% LTV, you get up higher and upper 80s could hit upwards of around 70, 75% LTV. Okay. And then you brought out about the line of credit. And I think that's where some people may not understand the beauty part of a reverse. If you can put some of those funds into a line of credit versus taking the whole cash out and doing whatever you're going to do with it. But if you put that into a line of credit, it's going to draw interest at the rate of your reverse mortgage. Correct. Okay. It's going to be compounded so it's going to grow and grow tremendously faster if you put it into a bank savings account. The beauty is you can take out, if you want to set up a term payment where each month you want to take out $1,000, you can set it up that way. You want a lifetime payment where you have longevity in your family and everyone lives to 110. You want to set up a lifetime payment to far exceed your life expectancy and the funds will always continue to be paid to you. Or you can sit on it and take a lump sum at your convenience. If you feel like you need to make some improvements to your property, take a vacation, maybe help the grandchildren help with college, take a trip, various options at your discretion. And I think that's where doing the line of credit versus taking out a lump sum is the one that is going to be the most advantageous to any senior, especially when they're on a fixed income, that could be their emergency money. Yes. You know, and we also have to remember and remind our audience that you may not have a mortgage payment, but you're still responsible for property taxes and insurance. And upkeep of your property. Upkeep of your property, very important as well, too. Right. No difference in a forward transaction, forward loan, property tax. Right. And the one thing about a reverse that I noticed is, is if you don't make your property taxes and insurance payments, I mean, they can call the loan due. Unlike a forward or a regular mortgage, but on a reverse mortgage, the lender, if you don't make those payments, they can call that loan due so that that's a big kind of worms. So you're telling me, let me ask you this in the forward world, which I've never been a part of. What happens if you don't pay your property taxes and insurance there, what we're telling you? In the for the insurance, they give notice to the borrower that they don't have insurance. So they give them time to provide proof of insurance. If they don't get that within that timeline, then the lender can do forced place insurance, forced place insurance only covers the lender. It does not cover like the contents of the house or anything like that. It's only going to protect the lender on the mortgage. You know, when it comes to property taxes here, we're kind of unique. Not like other states where they really are pretty aggressive. If you, if you are late on your property taxes, I mean, I've known some people that were like years late and still not a whole lot of activity happened. They're pretty much they would just pay something, you know, but still that can create that lender to call that more reverse mortgage due, you know. Or speak out those issues there too. Yeah. So you got to think about your, if you are on average eliminating a 1500 hour month mortgage payment, funds really should be there to pay the property taxes and insurance if you're making them prior. And you can also set up an impound account when you get the reverse mortgage where actual funds are actually holding your line of credit. They also crew interest at the same rate as what your line of credit does. Therefore, you have more funds in there to cover your property taxes and insurance on your behalf. So borrower can actually request that and therefore they don't have to worry about that anymore. Yeah. And the one thing too that I know with the companies I've been with before, one of the rules of thumbs that we have when it comes to reverse is to make sure your siblings, your children are aware of this reverse. And I know that was one of the biggest complaints up to the federal government is when the seniors had passed, the parents, the kids did not know that they had parents have a reverse mortgage. So essentially they thought they were going to get something clear and clear. So they're surprised to have this big debt and what they're going to do with, you know. I'm surprised how many seniors did not want their kids to be involved whatsoever. Okay. And they're financial affairs. And that happens quite a bit. Then there are plenty of times where you do have the kids which are heavily involved and trying to do the right thing by their parents as well too. And therefore should be brought into the loop with the communication. So it's an individual basis in terms of which direction that is going to go. Right. Right. But it's always best at least. You really need to do it correctly. It's always good to get a trust attorney involved so that there's, you know, that part of it done. Absolutely. We have to see the trust. Right. Okay. So that will be reviewed with our trust attorneys. Absolutely. Okay. And also one other thing too about the light of credit, it will draw, it will gain interest. Right. And it's compounded and the IRS has already made it known that the proceeds from a reverse is cannot be considered income. So you're not having to report that light of credit income or gain as well on your income tax returns. Correct. That's correct because all you're doing is tapping into your existing equity. Yeah. Right. So it's a plus plus if you plan it correctly. If the bars plan it correctly and try to take advantage or put into practice what is available out there to help them age friendly, age healthy, healthy, and age with like a couple seniors that they said, I don't want no stress as I grow old. Sure. That's why it should be part of your financial strategy. Okay. The time to really think about getting reverse is when you don't need it. And to your point, because of the growth of line of credit, you have it available for rainy day. For example, when you have sequential risk, what's happened to a lot of people's investments. The last thing you want to be doing selling off the assets and therefore you're losing the financial, you know, the money coming out monthly basis. And therefore on the down years, being able to access, of course, shows a line of credit to supplement your income until your assets start performing better. And the studies have shown that by the end, you know, nearly 85, 90 years of age, there's typically a lot more available in your assets by using that combined strategy. Okay. So we talked, yeah, that's the basic, pretty much the basics of reverse. And usually the most common one is a heck of. But with Longbridge, you have other products that might be even, even suitable because with heck of it has to be if you're in a condo, you have to get that sonado project FHA approved. Or some of us here in Hawaii that could be a challenge because we need an agent company a lot some documentation that sometimes be a challenge is getting that information. So use that product, we can kind of bypass that route. Right. But going back to the hack comes a bit of a situation where the condo association is not FHA approved. Longbridge does work with a third party vendor in terms of trying to get them approved. So we definitely trying to system that standpoint. Okay. If it's a situation where that can't happen, we do have other solutions. And one is called a platinum jumbo product with the situation that property values need to be a minimum of $450,000. And then we have it a limited review process that we can utilize and to go ahead and get a jumbo reverse. Lynn Cage. Who pays for the cost because that's one of the other miss knowlers is I know for the for company we worked with that have a license with. When we were trying to get it FHA approved. The management company had told them oh no but there's a cost to it that the condo has to pay and we're like no, you don't pay it. We're paying that cost that's. So we pay FHA that their cost or whatever it is. And so, you know, we want to kind of make it clear that the board or the condo does not pay for that typically for that FHA costs it does not come out of their pocket. Right. Okay. Because we want to kind of get that out of people's heads because I've heard it repeatedly over the years like oh no you're you've got misinformation in your head. Correct. And that's where it's important to work with a loan officer that's skilled in reverse and to be very aware of that. Yeah. Okay, so what other things can you educate our our our seniors our audience on I mean for condos is your policy the same for townhouses. Because we do have a lot of townhouses here. No, you don't have to go for the same approval when it's a townhouse. It's specific towards the condos. So much easier on the townhouse, which is beneficial. Now in terms of getting back to you had a question there. No. Okay. Getting back to the general product. There's some differences there. There was no mortgage insurance required. Okay. Which which is big with it with the gentleman sitting with a heck of reverse mortgages. There is more regions charge there, which is a protection designed for the borrowers or it keeps the loan non recourse. Meaning they can never owe more on the property than what it appraise or and also think about when when COVID hit for those that had he locks. What happened to them? Got closed. They went away. You know what happened to reverse mortgages. Nothing. We were still doing them. You still had the line of credit growth. That's a protective page that borrows receive due to the mortgage insurance premium. Now for the jumbo product, we actually do not incur a mortgage insurance premium to the borrowers there. Okay. So it's factored into the loan. The loan devalues a little bit less, but we can actually loan up to $4 million with that product for your higher end homes. Okay. We got a very high end condo. Okay. So it was smaller in the fees there and we do have both fixed and line of credit options there as well too. The growth of line of credit is much smaller. It only grows for seven years, but you have 10 years to utilize that line of credit with the heck them. It's indefinite. If you have the funds available on line of credit, whoever forever to tap into it will never go away. This product's been around for about 35 years in our FHA insured. And heck it's been around for, since before 1989, because I know it was signed into law by President Reagan. Yeah, in 88. So the first one actually occurred I think around 1961. But Reagan started making changes to the program in 1988 made it official and actually I think it's 1991, about three years later. So for our audience out there, it's really not something new. It's been around for a long time. So it's, it's gone through it's, it's caught through it's finding whatever, as I want to say Pukas, you know, to get it to the way it is today. So it's not something new. It's, it's tried and true. And if it's been there that long, it's got it's, it's something that has survived and is well deserved and it serves its purpose. So we don't, I don't want people to think that, oh, but, you know, it's, it's new. And, you know, it's been around since this, the late 80s. That will actually 60s, you know. So it's, it's been around and they will not take, when you died, they will not take your house. Well, that's the beauty part of the reverse. So the last part has passed, right? Let's address that. If the errors are your kids, they can go ahead and get a new loan on the property. And take it over. They have up to a year, they can either sell the property and take the equity out of there. And they have up to a year to go ahead and do that. And the beautiful thing is, since the loan of values are lower than a typical forward loan, those loans are typically not going upside down when you factor in the home appreciation. So you've got a situation where borrowers taking funds out on a monthly basis and still turn over large inheritance to their kids. It's just that, you know, the parent passes on just for the kids to notify the servicer as soon as they can. And then again, they have six months and they can ask for two, three month extensions have up to a year to go ahead and either sell the property or to get a new loan and then take. So let me ask you this question, you could explain this to our audience. So what happens if the loan balance is say 500,000? But the property is only worth and it only sold for 300,000. So if the market dropped out and they had that loan for really long time and now what's upside down? Well, that goes back to the beauty of the non-request feature of this loan. If that property is appraised for $300,000, the borrowers that they would like or excuse me, the errors that they would like can purchase that property for 95% of the appraised value. So for $285,000 plus any realtor fees associated with that, the difference between that amount and the 500,000 owed is covered by the mortgage insurance. So that one would only qualify under a Hecum, but not your other proprietary. That would qualify for a Hecum, but we have the same built-in benefits with their general product. If it's upside down, they will not owe more than they're appraised. And you know, that to me is the beauty part of a reverse mortgage because we all know in Hawaii, home ownership is just like, is gold. I mean, it is your gold bar, you know? So if the whole intent is to try to keep the home and the family, and that's one of the things too in creating a trust so that you can determine who's going to be the one or the most responsible one that can potentially buy it out at the end so that they can keep it in that family. And when you look at the numbers, if you're upside down and someone can qualify to buy it out, I mean, it really makes sense to try to keep it in the family as much as you can. Because I did have one scenario where it was two brothers. They didn't want to keep the one brother could qualify with his existing mortgage. She qualified to maintain that debt. And I said, why don't you rent it out? You can rent it out for double of what your mortgage payment will be, you know? Like, oh, your son's 17 years old, that could be his house in a few years. But they ended up selling it. I was kind of disappointed about that. I loved that house because it was in a cul-de-sac. Something else for senior borrowers to consider. I'm worried about the loan amount growing over time, the interest of crewing. Make interest only payments. This is the beauty of the HACM, the HACM Flex. You have the ability to make partial payments. Maybe you want to take a break three months over the holidays because you're spoiling the grandkids. Or maybe you're just like, you can't afford a $1500 a month, but you can handle the 500 monthly in terms of the interest amount. And therefore, that balance is not a crew. So, yep, you can be very strategic in terms of how you utilize this. Yep, actual flexibility, forward loans. You have to make that payment every single month regardless. Okay? With rewards. You have the flexibility with it as necessary, as needed. This is something that I said to one couple. We were sitting on their deck as we were looking out at the beach because they have an OSHA front property. And I've known them for a long time. And they said, and they're very diligent on maintaining their house, making sure everything's taken care of in the upkeep and all of that. And I said, and they're retired now. They've been retired now for six years. And they're aging. They're in their 70s. And I said, you know, you have guys have worked hard to maintain your house. You've done everything you're supposed to maintain your house. Now it's time for the house to take care of you. What are you going to say? Yeah. And they sat for a minute. They go, yeah, that's right. I go, you've got this equity, you know, everything's paid off. You've got this equity. You're fairly debt-free, you know, but they just want to live stress-free without having to worry about money, you know. So, and theirs is probably going to be a jumble, but that was their thing. And so that kind of set them into a little bit less of a stress mode, you know. And really, when you think about it that way, you know, you have everybody. Everybody has worked hard to pay their mortgage, to maintain their properties, you know, in their golden years, it's now time for something where someone to take care of them and that potentially could be their house. I agree. I agree. I had this conversation with my father. He's 93 years old this year. Doesn't have a mortgage. Last year he told me, when I pass on you kids and you can get all the money. It's like that. That's your money. I don't care. Do something with it. And once the last time you've seen a verse telling you all, it just doesn't happen. Yeah. You know, but this mindset, you know, the great generation there is to, I, you know, I want to keep it for the kids. It's like, we're okay. Okay. Yeah. Well, have a better quality of life. Right. Right. Yeah. Yeah. Consider. Yep. Well, we're hitting near the end time. So Bruce, I really would love to have you on another segment where you can do a reverse word purchase, which is another opportunity to, to do a reverse mortgage and to even gain wealth that way. But maybe in the future that we can schedule another segment where I would love to. Yeah. Yeah. It'd be better if you actually convinced my boss to fly me out here to do it in person just like this. I love dryland. Okay. Thank you, Bruce. And again, anybody has any questions, they can always reach out to us and we'll be happy to answer any of your questions. And everybody have a good rest of your week. Good weekend. There is a long weekend coming up. I think. Yeah. Labor day weekend coming up. So be safe out there. It's the weather is kind of really weird. So be safe with the weather and be really, really safe out there. Several catastrophes happening around the world, around the country and even in Hawaii too, with all these fires and things of that nature. So Bruce, I want to really thank you for being on the show with me today. And thank you for your time. Pleasure. Thank you so much. Mahalo.