Bisendra Melaram: [00:00:00] Welcome back to the keys to the castle podcast. I'm your host, Bisendra Melaram 

Jason Marcus: joined with Jason Marcus from Contour Mortgage and Mr. Marcus's neighborhood 

Jason Kleiger: and Jason Kleiger, real estate attorney to the stars. Apparently today we're joined 

Bisendra Melaram: with Michael Bocelli he is a home equity conversion mortgage specialist.

Hi Mike. How are you? 

Michael Bocelli: Um, well, thank you. Thank you guys for having me. Thanks for being here. 

Bisendra Melaram: So today we're talking about reverse mortgages. And I was just informed it's not called a reverse mortgage. Mike told me that's not the name for it. What is the name, Mike? 

Michael Bocelli: The actual official name is a home equity conversion mortgage.

Commonly referred to as a HECM, H E C M. But, uh, the slang term was reverse mortgage that people give it. So, we refer to it as the home equity conversion mortgage or reverse mortgage. Either way, it's, uh, pretty interchangeable. Okay, 

Bisendra Melaram: so why would someone need this?

Jason Marcus: So if you could give us some of just the basic, like, Who you're looking for, like, to try, and like, Kind [00:01:00] of go through just your audience on who really, like, You're looking, and who the perfect person is to try to get.

Michael Bocelli: Sure. So typically when we're talking about reverse mortgages, which again is most commonly how most people would refer to it. We're dealing with, uh, active retirees and, uh, and the senior population, our aging population. So typically people who are 60 years old or older. Uh, specifically here in New York, could actually, uh, obtain a reverse mortgage down to age 60 in New York.

In some other states outside of New York, they actually allow for people as young as 55, uh, to obtain a reverse mortgage. The FHA version of the product, which is the most prevalent, Uh, that program requires a minimum age of 62 or older. So, again, typically we're dealing with, you know, active retirees and seniors.

Um, sometimes people who are retired, not always. Many of them are still employed, working full time or part time. But typically people who are looking to convert a [00:02:00] portion of the equity in their home to be utilized for cash flow purposes, to give them some additional money for retirement, for home improvements, things of that nature.

Bisendra Melaram: So how does that differ from any other product? so why would someone say, Hey Mike, can you help me with this mortgage? I know you just said some of the main points, but what other, The most common things people come to you for. 

Michael Bocelli: So reverse mortgage specifically was put in place to help the aging population age in place, meaning that it gives them the ability to convert the equity in their home without adding an additional monthly payment.

So to compare it to some other mortgages, as you mentioned, um, it has some significant and key benefits over a traditional mortgage or even a traditional home equity line of credit. or second mortgage in that you're not required to make any monthly mortgage payments on the money that you receive, although you're still required to pay property taxes, homeowners insurance, and any HOA.

Um, and it has some other key benefits, too. There's a few different options as to how you can access the money. Uh, you can take the money in the form of a line of [00:03:00] credit or in a monthly payment. Um, but the key really is the cash flow for most people, that it's given them the ability to access a portion of the equity.

without adding a monthly payment. People in retirement, typically, especially if they're on a fixed income, they're looking to access some additional money and some additional cash to add to their overall retirement income or their retirement assets, but they're not looking to add an additional liability or an expense.

Jason Marcus: Okay. Does age have a factor on how much the bank will lend to somebody through a 

Michael Bocelli: reverse? It does. Great question. So actually the algorithms that they use and the way they determine how much someone is eligible to receive is age based. So they're looking at the age of the youngest borrower. Okay, so if it's a husband and wife or if there's more than one borrower on the loan, they're going to take the age of the youngest borrower and they're using actuarial tables similar to those that they would use for life insurance and they're looking at life expectancy.

So the younger you are, the [00:04:00] lower the percentage or LTV, loan to value percentage, you're going to be able to borrow against the house. The older you are, the higher that percentage will be and you'll have access to more money again because they're estimating a shorter life expectancy. 

Jason Kleiger: That makes sense. I didn't even think about that, you know, but it's, it's like a, it is like a loan to value ratio, but based on actuary on someone's life expectancy and life expectancy charge, which is really, really interesting.

I've never, uh, That never crossed my mind all these years. Well, a lot of things don't cross my mind. 

Michael Bocelli: That's how they determine it. So people who are 90 years old or 95 plus, they get the highest percentage available, which typically it caps out at around 75 percent of the value of someone's home. Or if you're looking at the FHA product, it could be capped by the FHA maximum claim amount, which is the max that FHA will lend based off of.

Okay. So, 

Bisendra Melaram: other than the LTV, is, are there any health qualifications [00:05:00] 

Michael Bocelli: for anyone looking to That's a great question, actually. No, they're not looking at health qualifications. I mean, typically what they do want to ensure is that someone is competent, you know, that they're of sound mind. Um, and that's really where the first step typically comes into play, which is the counseling.

So, in order to obtain a reverse mortgage, they do require that the borrowers are counseled by a HUD approved third party agency. And typically, what the goal of the counseling is, you know, they're a non affiliated HUD approved agency. They have no financial interest in the transaction. Their job is to ensure that the borrowers understand the program, how it works, the options that are available, and also, equally as important or more important, they want to ensure that they're not suffering from Alzheimer's or dementia or something like that, where they don't understand what's going on or could be getting taken advantage of.

Hmm. 

Jason Kleiger: Yeah, I was just, uh, thinking about that. Um You know, whenever there's money and family and people getting older, retiring, and having adult children and, you know, do you ever see or, I mean, I guess [00:06:00] this is a loaded question, but you were just mentioning it. Do you ever see that, that influence exerted on older people by certain people, uh, you know, family members or friends, uh, you know, taking, trying to take advantage of certain people.

Michael Bocelli: I mean, sure, over the years of doing this. I mean, I've been in the industry for 20 years. We certainly have seen a lot of different things. We see situations a lot of times where people want to involve their Children or their heirs. We see a number of situations where they don't, you know, they feel like it's their, uh, you know, home and it's their decision to make without their Children's input.

Many of the times, you know, they're they want to get some input from their Children. So we'll be speaking to, you know, the clients with the borrowers was Children. But we have seen it both ways. I've seen people who their Children are encouraging them to do it because they feel that it's truly best and in their best interest.

We've seen situations where the Children are telling them not to do it and are against it purely. You know, in most situations for their own benefit or their own gain because they're more concerned about, you know, inheritance than they are their well [00:07:00] being of their parents, you know, so we've certainly seen the influence on both sides and we've certainly dealt with, you know, a ton of clients over the years who, you know, um, may be on the, on the verge, on the border, you know, of mental capacity, you know, some who certainly have had Alzheimer's, dementia, where we're using power of attorneys and things like that, but they're pretty strict on those requirements, even for POAs.

They don't allow POAs, uh, you know, just for ease of use. Um, you know, so they're not doing it for those reasons, but they do look to require with a POA Uh, for it to be accompanied by a doctor's letter, a physician's letter, you know, so that they understand what's going on. So to go back to your question, they're not looking at health.

Um, but to qualify for it, it is easier and less stringent to qualify for a reverse mortgage in most cases than a traditional refinance, cash out refinance, or even a second mortgage or home equity line of credit. Um, they don't do standard, you know, debt to income ratio requirement and things of that nature.

They do what's called a [00:08:00] financial assessment. So it's more similar to like a VA loan or something to that effect where they're looking at residual income and things of that nature. So. Um, talk 

Jason Marcus: about the disbursements. Like, can they take a one lump sum disbursement or a monthly disbursement? How does that work?

Michael Bocelli: So once we determine how much is available, to the borrowers based on the age of the youngest borrower. They have a few options as to how they'd like to access those funds. They could choose to take them in the form of a line of credit, which works similar to, you know, a traditional home equity line of credit, although it does have some key differences and benefits over a home equity line of credit.

Um, they could choose to take it as a lump sum. They could also choose to take it as a monthly payment, or what's commonly referred to as a monthly tenure, where they'll get a certain amount every month. Or they could do a combination thereof. So under the line of credit option, they have the ability to take a lump sum out at closing.

They could then take monthly distributions. So they could kind of do a combination thereof and still have access to a [00:09:00] line of credit. So they have a few options on how they want to access the money. Is there a cap on the lump sum? There is. So with the reverse, um, generally what they put into place was that, um, the amount of money that's available to you once we determine what's called your principal limit, which is the amount of money that's available overall.

They limit you to being able to access 60 percent of that amount at closing. Okay? And then the rest of the money that's available is available to you. 12 months from closing, then you could have access to the remainder of the line of credit, which is the other 40%. Now, it does depend on a few different things, depending on the scenario overall.

If you have what's called a mandatory obligation, a mortgage, uh, any other type of lien, a tax payoff that causes you to exceed that 60 percent threshold, you certainly can go above that. You can access the full amount. So for example, if someone qualifies for a 400, [00:10:00] 000 Uh, reverse mortgage and let's say they have a 375, 000 mortgage balance on their home presently and all of the funds plus closing is being utilized on the reverse mortgage, they could access the full amount certainly to cover and pay off their existing mortgage.

That's really interesting. Yeah. If it's a mandatory obligation, so a mortgage, a lien, you know, any, any existing mortgages, liens or, you know, anything of that nature have to be satisfied first and foremost. . 

Right. Yeah. A new N 

Bisendra Melaram: The HECM takes first priority, so there's only one. 

Michael Bocelli: HECM takes first priority, has to be in first lien position.

So any existing mortgages, liens, lines of credit, all have to be paid off and satisfied first and foremost. Any money that's available above and beyond that is available to the client to have access to. That's some good information. 

Bisendra Melaram: What are some of the costs associated with entering into a HECM or a reverse mortgage? 

Michael Bocelli: So you have your standard, you know, typical closing costs that you would have on any loan or any refinance for that matter, which is gonna be your [00:11:00] title, charges, your title, search, your title policy, your recording fees, the lender's, you know, attorney's settlement charge.

Um, in New York State, actually in March of 2020. They enacted and changed some of the state laws on reverse mortgages where they require the client to actually have an attorney representation at closing on top of the settlement attorney and the settlement agent. Um, so you have that of course as a, as a fee that's added to it.

Um, you also have, if you're doing an FHA reverse mortgage, which again is the most, the most prevalent product out there today, you have the FHA upfront. or initial mortgage insurance premium, which is calculated based off the value of the home. Uh, and that calculation today is calculated as 2 percent of the home value.

Okay? Um, and then in addition to that, you have, uh, an origination fee, which is the only fee that any lender can charge. HUD and FHA regulate and limit the fees that can be charged. Can't charge, like, a processing [00:12:00] application or underwriting fee like you would see on a traditional mortgage. It's an origination fee.

Sorry, Jay. I know. I know. I'm for the people. Yeah, I know. It's also, it's also calculated based off of the, uh, home value in terms of the origination fee to a maximum of 6, 000. So that's the typical cost that you'll see for an FHA. Um, home equity conversion mortgage. There is also non FHA programs that are available, um, that used to be reserved more so for the jumbo market, but they've changed a lot recently over the past couple of years where you don't incur the FHA upfront mortgage insurance premium.

So the closing costs in many cases can be significantly lower. Um, 

Jason Marcus: talk about where we kind of touch base on this off air, but this to me is going to be hugely important. Talk about, um, the irrevocable trusts because a lot of, um, prepared elderly people start to protect assets and like that's [00:13:00] something that, you know, I'm sure you come across where, um, these houses are in an irrevocable trust.

Can you do the reverse mortgage with an 

Michael Bocelli: irrevocable trust? Sure. So we're pretty heavily involved with the elder law community and, uh, you know, the people again, as you said, the ones that are prepared and did their estate plan or a Medicaid asset protection plan. If they move the house into a Medicaid asset protection trust or an irrevocable trust, we can lend it.

to the property, keeping it in the irrevocable trust. Um, obviously we can also lend to revocable trust, which tends to be the easier one, but irrevocable is really a niche that, uh, we've carved out over the years, you know, as far as our lending options, because most lenders will not lend to a property that's held in an irrevocable trust.

Um, but if the client has moved their asset into an era of trust, we can provide their financing. We can get them a reverse mortgage in most cases. It generally requires us to do an initial review of the irrevocable trust to [00:14:00] make sure it's going to allow for what they're looking to do. I would say we probably approve about 97, 98 percent of the trusts that come in.

Uh, most of them do allow for what they're looking to do. And we have a really good understanding of the irrevocable trust. We've been doing it for, I want to say, close to 15 years now. We do a lot with, uh, New York State Bar Association, Elder law Committee, uh, NAELA, which is National Association of Elder Law.

Um, you know, so we've done a lot. Not just only in New York, but also nationwide, and we're specialists, I guess, if you will, in the irrevocable trust lending department. So to answer your question, yes, people can obtain a reverse mortgage with an irrevocable trust, keeping it in the irrevocable trust. We're not removing it, we're not breaking the trust, we're not resetting there.

Awesome. 

Jason Kleiger: No, that's great. That's actually really good. No, that is great because, you know, with elder planning, um, and then, you know, let's say the unplanned happens and, and this has to, you know, HECM has to come into play for that person to get that kind of, uh, uh, those, those, that [00:15:00] freed up cash, I guess you could say from their equity in their house, but they've already done their elder plan.

Um, you know, that is crucial, um, and, you know, for you to say that 97 percent get approved even in. Irrevocable trust. It's very impressive. That's pretty high numbers. Oh, yeah. Oh, yeah. I didn't think it was that high to be and and 

Bisendra Melaram: 40, 50 

Jason Kleiger: percent max, you know, I see, especially like, I guess you could say for let's, you know, change a tiny little subject here, but like, for example, co op boards, they hate trusts and they don't even want to see the word trust regardless if it's irrevocable, irrevocable, they don't even want to see it.

And that's what I feel a lot of lenders are like, you know, they don't want to see it. They don't want to know about it. But, you know, for, for them to, to approve 97 percent of 

Michael Bocelli: that's A lot of them just don't understand it, too. A lot of them don't understand. I mean, it's something that we've been specializing in.

When I say we, myself and my partner, Frank Melia, uh, we've been specializing in it for, as I said, close to 15 years. So it's kind of a niche that we carved out, you know, realizing the need there. Because a lot of the times, you know, we'll see situations where [00:16:00] we're dealing with people who are in their 80s, 90s even.

And, you know, they're in the home. They may require in home care. You know, a lot of the times when we're dealing with irrevocable trust, we're dealing with the children, you know, who may be the trustees and beneficiaries. And, you know, for example, we have a few now. I'm dealing with a family. I just met with the gentleman today.

The mom is 96. There's six children, you know, and they have an irrevocable trust. And basically, you know, they get to the point where they've exhausted all or most of the liquid assets to pay for mom's care. It's costing them 12, 000 a month to give her, you know, round the clock care and keep her in the home.

And at that age, most people don't want to. Leave the home. You know, they don't want to put them into a nursing home. They wanna stay in the house. The reverse gives them the ability to keep the parents, you know, oh yeah. A parent in the home. And also to access the equity that they need to be able to pay for their care, you know, and give, give the ability to, to age in place and stay in the house.

Jason Marcus: Yeah. De guys like. For our listening audience out there, I can't emphasize enough how important it is to [00:17:00] speak to Jason and Mike on the options on the as your parents start to get older and the Preparation the more I dealt with it on the personal side the more I understand the importance of it and it has become something where I'm seeing how neglected it is where a 96 year old isn't positioned properly and it's like they're 96 years old.

It's like their kids are almost to the point where they're like, 

Michael Bocelli: heck, they need stuff and they don't even have 

Jason Marcus: that. It's like there is a lack of education involved in that. You know, people 

Jason Kleiger: are outliving, you know, outliving. Uh, the gen everyone outlives the generation before them, and the, uh, people are outliving what, you know, the life expectancy was when they were born, and, uh, you know, everyone's just living old, you know, older, and obviously you need more money the longer you live, uh, which is a good thing, don't get me wrong, but, um, you know, it's, it's something important that, Uh, people need to keep in mind for, [00:18:00] you know, uh, not only eldercare, but for HECM and, and having that, that access to that cash, that equity in the house, uh, to take care of mom and dad and uncle and aunt or whomever.

Michael Bocelli: Yeah, and it's key for them. I mean, listen, we're seeing it more and more in you. Hit on a great point. Even with, you know, my own parents putting their plan in place. Whether it's just simple power of attorney, you know, just healthcare proxies, having those things Oh yeah. In line, you know, wills, things of that nature.

But certainly to protect the assets, the people who have done the planning, a lot of times they feel like they're boxed in. If they put the home into an irrevocable trust and now they need to access financing, they can touch it on, can touch it, yeah. Right. And you know, and a lot of times, as I said it, it gives them the ability to accomplish what they're looking to accomplish.

A lot of times what will happen is we'll get people who come to us after they've already gone to a, you know, one of the household name banks, I'm not going to shut up, Amy, but, um, you know, they'll try there, they tell them up front they have an irrevocable trust, they'll tell them we can help you, they'll go through the whole process, you know, sometimes even get them approved, but then what happens [00:19:00] Um, they get to the end, they tell them, okay, we're ready to close and then they say, you know, you have to take the house out of the trust in order to close and then, you know, we've had people who have actually done it without checking with their attorney first.

Yeah, they should always get a second opinion. Or a bad attorney. When they go back to their attorney, a lot of times then they'll call us and say, My attorney told me to call you. I've been going through this process with so and so for the last two months. We get to the end and then they tell me they can't close.

I got to take it out. They're super frustrated by that point already because they've gone through the whole thing. They've already promised them some sort of, you know, conventional rate and whatnot, which we know conventional is not going to lend to irrevocable trust, right? And now they're frustrated.

They feel like they got to start all over again, but it's a good thing they get to us, you know, we wish we can get them sooner, of course, so we try to Educate people and get this out there as much as possible, but, you know, that On that note, that seems to be like our biggest obstacle. I think anyone who is in the reverse mortgage or micro deconversion mortgage space, um, the biggest obstacle is people just opening [00:20:00] themselves up.

Like you said, to make sure that they open up enough to do the proper planning and just to be open minded to, you know, some of these options that can really be advantageous for them. Because, you know, I've I've had many conversations with clients where, you know, they tell me their whole situation and I know that a reverse mortgage is probably ideal for them and maybe even the only thing that's going to help them, um, you know, and then you mentioned, well, have you considered a reverse mortgage?

And they're like, Oh no, no, you know, I don't want to, I don't want to get into that because they hear all the misconceptions, you know, and then you tell them, have you heard of a home equity conversion mortgage? No, what's that? And then they give you the opportunity to educate them and explain the whole thing to them and you're on the phone with them for 45 minutes and they're like, yeah, that sounds great.

That's something I'm definitely interested in, you know, and then you're like, well, Mr. Smith, Mrs. Jones, whoever it is, that's a reverse mortgage. You're like, wow, I never realized that. You know, I thought that it worked this way. I thought the bank owns your home and all these misconceptions. So let's get into 

Bisendra Melaram: some of the popular misconceptions about reverse mortgages.

I'm going to deliberately use the incorrect term, [00:21:00] right? Because the one that I normally get is. Oh, they're gonna, as soon as I die, they're gonna take my house. So let's get into stuff like that. I like to let's hear a good horror story That you were able to convert into a success story. Well, so 

Michael Bocelli: I mean it's kind of what I was already You know explaining and alluding to I mean I've had a lot of conversations with clients who they hear the term reverse It does have some negative connotations associated with it, you know, but 

Bisendra Melaram: tell us why you've been in the industry long enough, Mike, tell us why that, 

Michael Bocelli: you know, the product originated many, many years ago, people don't even realize, you know, how long it's been around for.

And a lot has changed, especially in the last, you know, 10 or 15 years, they've added a lot of protection features and, you know, other advantages and benefits to the program. that maybe it didn't have initially. I mean, a lot of people, the misconception, I think is just, it surrounds people just passing around bad information.

You know, I wish I could really tell you why that's full of it. Yeah. Well, listen, you know what? They speak to their friend. 

Bisendra Melaram: That's why we're [00:22:00] here to clarify. We're the myth busters 

Michael Bocelli: of real estate to dispel some of the myths. You know, a lot of times it's just what they're hearing from others. They're hearing it from their friend and they're all just passing around it.

Bad information, you know, the bank doesn't own your home. Tell people all the time, you know, the government doesn't own your home It's a lien against the house It's a first mortgage on the home just like any other mortgage or a home equity line of credit like when you bought it Exactly, but it just has a lot of advantages to it, you know over traditional home equity line of credit.

For example, today, what we're seeing a lot of, and I've kind of advocated this, you know, for a while now, over the last 5 to 10 years, is that many times people, as an alternative, they'll look to a home equity line of credit first, right, over a reverse mortgage. Again, because a lot of times it just comes out of them not being properly educated on it.

Um, and what we're seeing today is people who have home equity lines of credit, They're calling us and saying, Mike, I've had the line of credit now for the last eight years, you know, 10 years, whatever it is, and it's been great. My rate's been low, it's been 3%, I've been paying interest only, it's been comfortable, [00:23:00] you know, but we took it out, you know, 8 years ago, 6 years ago, 10 years ago, whatever it is, and it's been great.

But now our rate is 9%, and our payment has tripled. And they're like We can't afford the 1, 500 a month, you know, they're on social security. Pensions are far and few in between now, you know, so it's tough for people to be able to do that and what options do they have? They either have to reduce their liability or they have to go out and start working to, to generate additional income to pay for it.

And now they're stuck in a line of credit that they can't afford to pay. And if they go back to the lender, which a lot of times they do, and the lender tells them, unfortunately, in many cases, they don't qualify. to refinance it, which is because they're on a fixed income now, right? Exactly. So a lot of times they take it out, maybe as they're retiring, maybe they were still working when they took it out, or their spouse was still alive, now they've passed, they go back to try and refinance it even into another home equity line of credit, and they get turned down.

And now they're stuck because they can't afford it. So now they're faced with, [00:24:00] well, if we can't figure out a solution for them to get them into a reverse mortgage, they may be faced with being forced to have to Sell the house. Sell the house. Is it that or are they going to be facing default? Right. It's 

Bisendra Melaram: all about reducing your liability at that point.

So the biggest liability would be the property with all these liens against it. So, it makes sense. The reverse makes 

Jason Marcus: sense. Now let me give you guys the after fact because I want to kind of touch on what happens after that person who took the reverse mortgage out dies. So, you guys, like we were just talking about, dispelling that misconception that the house just gets taken by the bank.

With the way that these reverse mortgages are structured, like there's always, with the exception of maybe what happened back in 08, where like there were places where Generally speaking, you're not going to see these major decreases in equity that's going to make it so that way the, um, mortgage balance [00:25:00] outperforms the value of the house.

So, almost any time I've gotten called in on the mortgage side, where it's my parents passed away, we had a reverse mortgage, the reverse mortgage company is now saying that we have to do something, and that's where I step in to just give them a warning. Regular loan in most cases to like basically get rid of what that reverses first and foremost The one thing that I've seen over and over again the reverse mortgage bank or the heck I'm sorry, the heckum banks come back.

They give us plenty of time to deal with this Like they're not like sitting there like hammering us Obviously there are people that are procrastinating and they will kind of light a fire under them But I have constantly in any situation where I had to have one Cause this happens a lot too. You might have three siblings and one's buying out the other two with what's like, there's a lot of different scenarios that's going to occur with this scenario to inevitably get out of what was a reverse mortgage.

So we're [00:26:00] having these game planning sessions. But the one thing I want you guys to know is you don't panic after, you know, your, your parent. Leaving this world that the bank is just going to expect you to do something within 45 seconds Yeah, give us enough time showing up at the funeral for us to figure this out.

Exactly I just want to also since we're talking about misconceptions I want the audience to understand that there are after plans for what's gonna happen with that reverse mortgage so don't let that be a misconception to you guys or something that creates fear on why not to 

Michael Bocelli: do it. It's a great point.

And you know, there's, there's, you know, time allotments that are put in place, as you mentioned, to give people the ability to act on it. Right. So again, going back to one of the key benefits as to why most people seek A home equity conversion mortgage is because they want to access a portion of the equity and I highlight the word portion of the equity, not all of the equity, right?

The algorithms that they're going to use that are age based, looking at actuarial tables, [00:27:00] they're leaving enough of an equity cushion in the property because they don't want you to exhaust all of the equity in the home. And, you know, as Jay was alluding to, uh, in many cases there is still equity left over in the end.

Um, is it possible where someone could wind up? you know, where the loan balance exceeds the value of the home. It is, and it's a common question that we get. Um, they're still protected there, too. It's a non recourse loan, so the borrower and their heirs, they're only responsible for the fair market value of the home.

They're not responsible for the deficiency, and that's where the insurance, you know, portion comes into play. So even if that were to happen, and I always give people the extreme example, you know, if you were to owe, let's say, 500, 000 on the reverse mortgage, and for some reason, you know, our home values plummet tremendously, which they would have to in order for that to occur, um, and you wind up, you know, the home is only worth 400, the parents are not leaving the children with a debt, right, they're not inheriting a debt, there may not be an inheritance there for them to obtain, but they're not leaving them with a debt, they're not [00:28:00] responsible for the deficiency like they would be, and many people got caught out there with in 08, as Jay mentioned, where you had a mortgages, first mortgages, second mortgages, home equity lines of credit that were either, especially lines of credit, they were reduced down or they were frozen.

People couldn't get access to them anymore, right? And that's one of the key things too. I tell people they can't do that on a reverse mortgage. Even if your balance exceeds the value of your home, you can still continue to draw on the line of credit. You can get more money out of the house. Then the value and you're still not responsible for that difference because the line of credit does have a growth feature associated with it.

So you won't get caught out there with that. And again, just to touch on, you know, people are taking it out, they're doing it to get access to the equity without adding the additional monthly payments. So people say, well, how's it paid back? It's due to be paid back when the last surviving borrower vacates the property permanently.

So either by selling. If they were to leave the house permanently and go into a long term care facility with no intention of going back or when the last surviving spouse passes away at that point, then the [00:29:00] loan is due to be paid back and they will give you time to do that. Typically, they will give you an initial time frame of up to six months to pay the loan off.

Oh, see, there's a misconception because I thought it was 90 days. Yeah. So typically, even then, 

Jason Marcus: I mean, I've got an extension. So even on the sixth month, they understand that yeah. You know, this is a delicate situation, and there's gotta be plans formulated, and just try to figure this stuff out, and they, like, I have, I can't say enough about, like, any of the experiences I had with this, where I'm constantly, like, working with these companies, and they're not They're not working.

They're not threatening me. They understand that, like, I am going to work on this and get them 

Michael Bocelli: to 

Jason Kleiger: where we need to get. And also, you know, if you think about it, it's actually better for the lender to actually not, like, be breathing down someone's neck to do something about it. Um, now, you know, if you have six months and, and you see that someone's diligently working to come up with a solution, either pay it off or, or, you know, sell it or something like that, uh, the house, um, You know, [00:30:00] it's, it works out for the lender, they, they, you know, they don't have to, you know, breathe down someone's neck to the point where that person is like, you know what, screw, well, screw it, you know, screw it, take the damn house and, you know, and that's it.

And when someone says screw it and takes the damn house, throws their hands up. You know, the lender's not winning there. 

Jason Marcus: Right, and you also have this situation where, as you know Jay, like, there's the legal part of when people die, and like, there's, there are people that need to be in place to make these decisions.

Probate Act. Yeah, so we got the probate stuff, and like, there's things that have to happen, so the reverse Banks understand that like they just really want to just be kept in the loop from and just be Understanding where they are in the process. So as long as you're communicating like like I said, I can't emphasize how reasonable I've been through this process on many many occasions and they understand that this is a process and they're just gonna be patient and As long as you're communicating with them, 

Jason Kleiger: they're usually cool.

I mean I've you know I've probated, uh, [00:31:00] wills in Queens County and it's like, you know, you're better off taking a will and throwing it down a black hole. Um, so, so you 

Michael Bocelli: really don't know. 

Jason Kleiger: Queens is the worst, by the way. No offense, Queens County. That's why 

Bisendra Melaram: it's referred to industry wide as the wild, wild west.

Jason Kleiger: Kings County is actually better, believe it or not. But, um, for a while there, Queens was like, you know, you'd take nine months to get through probate. And that's if you did it perfectly. If they want to see more stuff, it's going to take another three months. So, you know, as long as you show that, hey, I got this probate petition for the decedent, and, you know, we paid the filing fee, it's, you know, marked, you know, filed by the clerk and everything like that, and now you can see a lot of it on the New York State website, which is great.

Uh, you know, Look, we're working diligently to do this, and, and, you know, like I've, I've extended this, this six months, and, and, you know, worked with banks on that, and as long as they see that the, the family or the heirs are working to, to get that [00:32:00] authorization to, to act, you know, they're, they're not going to, um, you know, I mean, look, there are outliers, sure, but not in my 

Michael Bocelli: experience, have I seen that.

And you guys hit it on the head too. The two keys really that I always tell people are the communication and the diligence. As long as they're being diligent and they're showing the lender that they're working towards either selling the house, refinancing it, or some other means or way of paying it off, then they're okay.

And again, I've seen them go well beyond that. six months. I mean, they typically will grant extensions at 90 days a clip. So I've seen them go six to 12. I've seen people who are stuck, you know, when people are contesting a will and they're in probate for two, three years and the reverse mortgage has been outstanding all that time and it still hasn't been paid off.

You know, so the main key really is both of you said is that the communication and the diligence, as long as they're working towards it and they're communicating with the lender, letting them know, Hey, our intention is to sell the house. and they see that they're working towards that, they have the house listed and all that, they will continue to grant more time.[00:33:00] 

You know, and again, that's, that's a really big thing, not only for the borrowers, you know, who are concerned with legacy and things of that nature, you know, but they don't want to leave their kids with a hassle and all so forth. the Children, you know, or the trustees or beneficiaries, right? So, you know, it's it's definitely an important thing.

And I've worked through many of those situations with many of the families that we've helped. They call some mom and dad have passed. You know, what do we do? Um, you know, sometimes they're kind of panicked, but calm down You know, the bank doesn't just take the house. They're not just gonna own the home.

Again, common misconception. You guys can sell the house, pay off the balance of the reverse mortgage. Any money that's left over is still gonna be retained in the estate and distributed amongst the heirs. Just like if you had any other mortgage or line of credit on the house. Or If you don't want to give up the house, as Jay mentioned, you know, situations where he's working with clients who want to keep the house, or maybe they want to do a buyout, they want to keep it for investment, one of them lives in it, they can take out a mortgage in their name to pay off the reverse mortgage balance, and they can keep the house, or they can pay it off with other [00:34:00] assets.

The key that I always tell people is that they don't have to give up the house, although most situations The children typically sell and pay it off and then, you know, distribute the rest, but they don't have to do that. So, they can keep the house if they want to keep it in the family. They certainly can.

The other thing is too, you know, for the borrower's sake, when they take out the reverse mortgage, they're not stuck. You can pay off the loan at any time. You can refinance it into another type of mortgage. They could pay it off, you know. If they have the asset, so they hit the lotto. Funny story, actually, I actually had a client, uh, last year who did.

And I always use that as an example. Now I added that to my example when I tell the clients. I had a client from last year who, who hit on a million dollar scratch off this year. Wow. That's crazy. Wow. That's crazy. I always tell people, Hey, if you hit the lotto, you want to pay it off. You can at any time, or if you want to sell the house.

So if you take the reverse mortgage today, it's not an end all be all, you're not giving up the house for the money you're getting on the reverse. If you decide to sell the house six months later, you want to downsize, you want to move out of state somewhere warmer, closer to your kids, whatever [00:35:00] you can do that at any time you pay off, you'd sell the house, you pay off the balance of the reverse mortgage.

Whatever money is left over goes to you. Just like if you're paying off any other mortgage or line of credit. So you're not, and there's no waiting period for that. 

Jason Marcus: Guys, please, if you win Lotto, first find out how much you're supposed to pay in taxes on that money before you pay off the mortgage, okay?

Because all you're going to wind up doing is having to take out a re Uh, basically a heck of a loan just to get the money to then pay the taxes that you should have paid from the lottery. That's 

Michael Bocelli: true. And 

Jason Kleiger: then you come to me for estate planning where I'm the beneficiary, so 

Jason Marcus: Exactly. 

Michael Bocelli: Especially if you 

Jason Kleiger: hear 

Bisendra Melaram: Isn't that how most lotto winners lose 

Jason Kleiger: all their money?

They appoint people who, you know, uh, trustees, 

Bisendra Melaram: shady trustees, and they don't 

Jason Kleiger: pay any taxes. You know what the problem is? They trust lawyers, 

Michael Bocelli: that's the problem. They trust the wrong lawyers. That's right, that's what it is. They take the lump sum, then they get crushed in taxes. Like the guy that just won 

Bisendra Melaram: that huge Powerball?

That was a billion dollars? [00:36:00] I think it 

Michael Bocelli: was 1. 5. 1. 5 billion 

Bisendra Melaram: dollars. He's almost broke. And that happened over the summer. 

Jason Kleiger: There was a, you know, I'm not gonna, I'm getting off topic here, but there was a, an attorney at one of the big two law firms in Long Island who was called the, uh, the attorney to the lottery or something.

And he actually took that money and he would hold it in trust and he would reinvest it. without the client's knowledge. Wait, is this a thing? Oh yeah. And he did hard money loans. He did hard 

Michael Bocelli: money loans. This is for another 

Jason Kleiger: podcast. He gave out to shark, to, to, what is it? Shark, uh, whatever. Shark tank? Yeah, no, no, no.

The shark, uh, The loan sharks? Loan sharks. There you go. He gave, like, to loan sharks that lent to, like, jewelry stores and beat people with bats. Get 12 percent 

Michael Bocelli: a week. Yeah. What the hell? 

Jason Kleiger: So he thought that he was going to, like, get that money from the cash that was being held in, in his escrow account and buh bye.

He was gone. Feds took him 

Michael Bocelli: away. That's crazy. Yeah. That's crazy. That's a lot of violations. That's probably 

Jason Marcus: like seven different like government agencies. I [00:37:00] think he'll be 

Michael Bocelli: disbarred. Oh yeah. That's a good chance. Wow. That's like a RICO case. Disbarred and put behind 

Bisendra Melaram: bars. That's an entire RICO case 

Jason Kleiger: by itself.

Oh yeah. That's wild. Oh my god. So 

Bisendra Melaram: Mike, tell us, now that hashed out alldetails. A family that's in the planning stage, right? They call you up. We're going to leave everyone's contact information below. If they're not in our service area for anyone on this panel, can you offer them a referral?

Michael Bocelli: Sure. So, if they're not in our service area, As far as New York, or where are you practicing? Lending areas. Right, in your lending areas. For Contour. Um, a referral for someone to assist them with 

Bisendra Melaram: So, if someone's not in the New York area, where we all are, Can you offer them a referral for someone of your caliber in their 

Michael Bocelli: state?

To get them a reverse mortgage? For a reverse. I can, and then, you know, as you may know, Contour Mortgage is [00:38:00] licensed, I believe, in 36, is it? Yep. 36 states that we're licensed in. So we have the ability to lend across those 36 states, uh, for reverse mortgages. But sure, if it's in a state that, uh, we can't lend in, and they're looking for someone to do it, Yes, we have other contacts in the industry that we can look to set them up with to still assist them.

Bisendra Melaram: Awesome. And Mr. Kleiger, we know that you have infinite resources and referrals throughout the country. Of course, I'm like a jet setter. Yeah, you and Mr. Marcus, you guys got 

Jason Kleiger: your private jets and stuff. 36 states, right? I'm in two. 

Jason Marcus: I'm in two, but But they're really, really good states. Really good 

Michael Bocelli: states. The main ones.

Bisendra Melaram: So a family that's in a planning state now, where they're working with their Loved one and their property and they're thinking about a reverse. What are some things that they should look for if they can't get to you or they're a little hesitant to reach out? what are some points that they should be looking for when they're [00:39:00] entertaining the idea of a 

Michael Bocelli: reverse?

Um, I guess it depends, you know, on when they're looking at their overall plan. A lot of times they're considering, uh, in many cases selling, you know, or. doing some sort of financing right at home equity line or reverse mortgage. Um, so if a reverse mortgage is a possibility for them or they're really looking to stay in the home, um, if that's really the, you know, their main goal, then it's certainly worth their while, you know, and advantageous for them to at least consider.

A home equity conversion mortgage, you know, and reach out to myself, you know, or someone on our team to find out the specifics of the program and how it works so that they could make a fully, you know, educated decision. I mean, that's what I tell people when I speak to them all the time. I tell families.

It's a great product. Um, it's something that I do for my, my parents, you know, as well, and I have done for other family members. Um, so it's not something I don't believe in. It's something I would even do myself. Of course, I'm not of age. I'd love to do it today. I have to make my mortgage payment. 

Bisendra Melaram: I thought I knew a little bit about reverse [00:40:00] mortgage.

I learned a little bit now that I'm like, wait a second. I'm not that far from this. Yeah. It's crazy. 

Jason Marcus: Yeah. I'm not that number. I'm 

Jason Kleiger: very far from this. Very far. Yes. You're extremely far. I do. I, I've actually, uh, uh, two questions. Multifamily residences. Not a 

Michael Bocelli: problem. Not a problem. As long as it's residential one to four family, um, it can be done even in situations and we've had a couple of these where if it's a mixed use property, we could consider those as well.

Um, generally for the mixed use, they want to see that the residential portion of the property exceeds 50 percent of the overall square footage. Um, but I actually had a client in Astoria who was, uh, 92 years old. She was in a mixed use property and we were able to do a reverse mortgage for her on the property.

So one to four families, uh, and actually it's a great point. Condos can also be done. Uh, and even now in New York State, they are allowing for co ops, um, which they used to allow for many years [00:41:00] ago, and it just recently came back, uh, where now there is an option available in New York State for co ops. Now, condos and co ops, as with any type of mortgage financing, You know, always tend to be more tricky, uh, and there's a lot more involved with them.

If you're looking at a condo for the FHA product, generally it has to have HUD or FHA approval. Um, if it doesn't, there is something called spot approvals, which we could try for. You know, they tend to still be pretty difficult, and it's a pretty involved process to try and get it approved. So we do have to be mindful of that when people are looking at, you know, condos, co ops, uh, things of that nature.

The development of the unit itself does have to be approved. But, very interesting, this year, You know that now we have the ability to offer it to co ops and actually have some clients that we're working with now who have co ops where we're working with them to obtain a reverse mortgage. So that's, 

Jason Kleiger: that's something because co ops are a pain, 

Jason Marcus: obviously like.

Check with your board [00:42:00] before you start the reverse process. Like, make sure that's something that they're going to, uh, allow you to do. Cause boards sometimes, uh, make your life 

Michael Bocelli: miserable. They can block it like instantaneously. 

Jason Kleiger: Oh yeah. But, um, my second question, so, you know, a typical mortgage, uh, you know, they escrow for.

Uh, property taxes, homeowners insurance. What happens with the HECM? 

Michael Bocelli: Uh, so again, the client is not responsible to pay a monthly mortgage payment, but we always do highlight and stress to them that they are still responsible to pay their property taxes and their homeowners insurance and of course any associated HOA.

You know, or maintenance fees, um, that is the client's responsibility. Now, we do have situations where, when they do the financial assessment, where they could do what's called either a voluntary, or in some cases involuntary, it may be made mandatory by the underwriter, or they may require them to do what's called a LESA.

Uh, the acronym is L E S A, and it stands for Life [00:43:00] Expectancy Set Aside, which basically is kind of, I guess, a, a fancy term in the, Reverse mortgage world for escrow, for taxes and insurance. Um, and essentially what that is, is the, if the lender requires them to have a lease up because they don't meet the financial assessment, typically that financial assessment too, what they're looking at is they're looking at.

the history of the borrower paying their property taxes and homeowners insurance for the past two years. They want to see that they've been made on time, the payments have been made on time, that they've carried a homeowners insurance policy on the home. If they haven't and they're looking at all the other factors, uh, and they feel that they don't meet the financial assessment, the lender could require a life expectancy set aside or a client could actually opt for it.

voluntarily. And basically what that means is they're going to look at what the property taxes and homeowners insurance are for the property, and they're looking at that over the client's life expectancy. So they're going to look to hold back that money from the reverse mortgage proceeds [00:44:00] at closing to pay the property taxes and homeowners insurance on the borrower's behalf for, They're life expectancy.

So, you know, sometimes I'm pretty 

Jason Kleiger: cool, but that's 

Bisendra Melaram: a lot. That's a lot. Sometimes 

Jason Kleiger: I get it out. 55 60 60 

Michael Bocelli: years old, especially here in New York, New Jersey, you know, high, high property tax states. Um, it can be a deal killer in some cases for clients because, you know, here on Long Island, average taxes are Probably 12, 000 a year, right?

So, if you have someone, especially if they're on the younger side, you know, if they have 10, 15, 20 years ahead of them, and they have 12, 000 a year in taxes, that number can get pretty large pretty quickly. You know, and then sometimes you're in a situation where if they want to hold back 120, 000 or 150, 000 for the life expectancy set aside, it's either going to take a big chunk out of the funds that would normally be available to the client, or it may knock them out of the box if they have a mortgage we're paying off and whatnot.

[00:45:00] Maybe there's not even enough money there to cover it, you know, so it can be a really big number and in some cases it can actually be a deal breaker for clients. Um, some actually opt for it voluntarily. I have a client now who wants to do it. Because, uh, sorry, it's just 

Bisendra Melaram: one less thing they got to worry about.

The baffled look that they're looking at right now is that I literally just did a search for what the average New Yorker's life expectancy is, and it's 82. 

Jason Kleiger: 6 years old. So if you take out at 60, right, you're 22 years. Right. Of let's say 14, 000. 14, 912 

Michael Bocelli: or 14, 000 a year with taxes and insurance. With taxes and insurance.

It's a big number. It's a big number. It's 200. 

Jason Kleiger: Yeah, it's easy 200. I mean, like, don't get me wrong. It's great that, you know, I don't have to worry about when my, you know, my property taxes are due or, you know, my, my homeowner's insurance. But, you know. It's pretty, 

Michael Bocelli: pretty, uh, some, some clients like that aspect of it just because it's like having an escrow and especially if they had a mortgage or they have one, they're not used to paying the property tax and insurance.

Right? So [00:46:00] they like the idea of continuing that. So some people, if they have enough room and they have enough equity, enough room in the loan, they'll actually opt for that because it's a convenience. It's one less thing they have to worry about. We also have borrowers who are doing it with the main goal in mind of being able to use those funds to pay.

So if that's the case, then it works well in those scenarios also, but you know, if they're doing it for another reason, or they want to get a specific amount to do something, you know, maybe home improvement project or pay for medical expenses, it could take a big chunk out of that money. So I would say the majority of the ones that we do, I would say probably, You know, seven or eight out of every 10 that we do don't have the life expectancy set aside.

Um, but there are some who do, some voluntarily, some are required. Um, so, but you know, it's a great question. That's pretty interesting. 

Jason Marcus: That's why we, that's, that's why, I mean, if you guys don't know by now why we have him on this, 

Michael Bocelli: like, discussion, like, that's [00:47:00] why he's the attorney. That's why he's the attorney, that's, yeah, 

Bisendra Melaram: exactly.

That's exactly 

Jason Marcus: what it is. He passed the bar and then raised the bar. What? 

Jason Kleiger: I'm sorry for everyone who came after me. 

Bisendra Melaram: Alright, so we spoke about a lot about the benefits, right? So what are some potential drawbacks? of having a HECM. Right? Play your own devil's advocate. 

Michael Bocelli: Sure, sure. And I go, I run through this with a lot of clients, you know, all the time.

I mean, we look at the pros and cons. You know, when people ask me, what's the catch? You know, or it sounds too good to be true. Ah, you're a nice guy. We wouldn't ask you what the catch is. What's the catch? Well, listen, I've had clients who ask me that. You know, and uh You know, candidly, I don't really feel that there are, uh, drawbacks or negatives to the product.

What I feel is that it's a great product, as I mentioned earlier, something that I would do myself, my own family, my parents, what not, um, but it's not right for everyone in every situation, right? So I tell them when they're looking at the planning, as you mentioned earlier, it really depends on what their objective is, you know?

So we really try to take a look at their objective [00:48:00] and then figure out if it's going to be the right and best solution or at least give them some contrast to contrast it versus selling the home, taking a traditional home equity line of credit out because a lot of people ask us the differences between the two or maybe a traditional, you know, cash out refinance.

So we're always contrasting those. Um, but I don't really feel that there are negatives to it. I mean, I guess one thing you could say is that, you know, over time, it will utilize more equity in the home. Right. So if someone's objective is they get on the phone and say, Hey, you know, we're in this situation, but our goal is and always has been.

that we want to get the home paid off and we want to leave it, you know, a mortgage free home to our kids. That's our main goal. I would tell them, then listen, a reverse mortgage is probably not gonna be the right solution for you unless you're in dire need of, you know, additional money or cash flow, um, in a situation like that.

But, you know, it has a ton of flexibility, which is why we really love it. And I tell clients all the time, more flexibility that any other mortgage product [00:49:00] or home equity line of credit can ever give you or offer you because of the benefits and the flexibility, but I don't really feel that there's a downside.

I mean, some people certainly feel that the downside, and when I say some people, A lot of times it could be the children or the heirs, right? That, hey, this is going to take money out of, away from us and our inheritance. But I always tell them, too, and I remind them, because a lot of times we're working with the children, listen, depending on why mom and dad are seeking this out, right?

If they need it for their care, the family I spoke about earlier, right? Um, if they needed to pay for the mom's care to keep her in the home, it gets to the point where, okay, once you exhaust the Mom's liquid assets. What's your alternative? You know, sell the home, bring mom in with one of you, maybe to live with you.

That's a possibility. Or you guys are gonna have to start footing a bill of 12, 000 a month. And if any of you, you know, have the means, I don't know too many people personally or professionally who are in their mid, you know, 50s or 60s who have the means to pay 10, a month for their parents in home care when their kids are [00:50:00] in college, getting married at that stage of their life, right?

Who has that money? If you do, God, you know, God bless you, but most people don't. 

Jason Kleiger: Also, you're paying one way or the other. Right, 

Michael Bocelli: right. You're paying an hour. If you're losing 

Jason Kleiger: at the end, like, if you're losing, you know, let's say, you know, 100, 000 of the equity in the house gets wiped out for some reason, okay, for the heck of it.

You were going to spend that 100, 000 Otherwise, yeah, you're going to spend it on the care today and, and next month, next year and next year. Okay. So you're going to spend that anyway. There's really, you know, six in one 

Michael Bocelli: hand, half a dozen. That's what I tell me. If you start incurring it today. Well, you'll get a little less later on when mom and dad go, you know, but that's really, you know, and then a lot of them say, well, mom, dad, I think you should do this.

We don't have the means to pay the 10, 000, 12, 000 a month. So I would say that that's a common, again, I don't really feel that there are. It's not going to have any drawbacks or negatives to the program, but it will utilize more equity in the home. You know, and it could leave a situation where maybe you're not leaving as much to your heirs.

So if that's [00:51:00] one of their main key objectives and concerns is legacy, which is always a valid and an important point to discuss, then a reverse mortgage, you know, may not be right for you. I mean, there is no. Catch where people feel like, oh, well, again, going back to misconceptions. Oh, well, the bank's going to own my home or, you know, they're going to throw me out at a certain point.

You know, there is no term on the loan for as long as you reside in the property as your primary residence. So I say to people all the time, if you live to 120 and I don't know that. Most people would want to do that. We're all going to live to 120. That's the term, you know. If you live to, you know, whatever it is, to the last surviving borrower, that's what it is.

And again, I'm not sugarcoating it to make it sound better. I don't, I really don't feel that there are negatives or, or drawbacks to the product. There may be concerns for certain people depending on what their overall plan is or their estate plan. Certainly, but I don't really view it as a, a negative or a drawback.

If that's the case and that's your, you have a different objective, then it may just not be the right option for you. Right, there's other options. And then we, and then you look at other [00:52:00] options. 

Bisendra Melaram: So I just realized, it, what you guys are saying makes sense. You either get a little less at the end or you front the cost up now.

But the one number that we forgot to factor is 

Jason Marcus: property appreciates. Yeah, 100%. I was thinking about any market, right? It just constantly. Yeah, because I was thinking about this as you were talking about it. I'm like, well, if the house is worth 600, 000 and conservatively, it's going up the price of the house by 3%, which as we know, being in this business is ridiculously conservative.

Like that's 18, 000 a year on that 14, 000 property tax. Like I start to, and just being in the business and understanding the way that asset work and the math and the numbers, you start to realize that banks generally don't put themselves into positions that is going to be costly and not advantageous.

Right, where they're going to lose out. Right. So it's like if all of these things, and the one, the other thing that I talk to people about [00:53:00] it's we don't have. Five years of statistics on this stuff. Oh, no, we got decades and decades of statistics So when people come to us and it's like oh why is of like how did they figure out that?

Based on a 65 year old this is what they were gonna do or any of these scenarios It's because we look at statistics back from the 50s and 60s and all the way like over decades and decades so We understand where you bar like your back end ratio or your debt to income ratio exceeds 50 percent and that has a major impact on default rate.

These statistics exist and we lend based on those statistics. So this is all part of this. So when it comes down to it, it's I understand that you look at and a lot of people are looking at. The bank says the big bad wolf in a lot of cases, and you know, we work for them and we understand those concerns But when you're dealing with trusted individuals like myself and Mike and this side of the fence [00:54:00] like this We're information providers.

We're giving you guys options. We're breaking it down So that way we're educating you on the pros and cons to these things and helping you through the decision. We know I would say more than 95 percent of the time, what the right place and product is for somebody. Because we're doing this for so long and we understand it and we know all the options out there.

So if Mike's having a conversation with you and he's recommending this is the option, I'm pretty sure that that's probably the 

Michael Bocelli: right option. 

Jason Kleiger: I, you know, just to buttress off what we've been talking about, um, I'm horrible at math. But I started thinking about something, which is very rare, because I don't think very often.

But we were talking about, uh, we were talking about, you know, spending 12, 000 a month right now, okay? Now, I'm thinking about the time value of money, okay? Now, would you spend, like, if you're not spending that 12, 000 right now, and you're taking that money and you're investing it. Okay? And then [00:55:00] you get 12, 000 less in the future when you go to sell the house.

That 12, 000 is also now worth more than 12, 000. So, not only are you taking that 12, 000, just hypothetically, are you taking that 12, 000, not spending it on their care, because they have that cash flow, but you're putting that in an investment. As well as, you know, when they sell the house, you can, you know, have, you're going to have a little bit less, okay, tiny bit less, but as you said, that you're, you know, uh, property appreciates, and also the time value of money also appreciates, 

Jason Marcus: so.

And that money that you're talking about is compounding on itself. It's compound, yeah. Exactly. That's what I got. It's all part of this equation, and I understand that we have realized and unrealized losses when it comes down to investing and how we're going to go about doing this, but at the end of the day, like, if we're putting aside, uh, What, and we're doing an example versus example, what you're just talking about, that person who's taking that 12, 000 doesn't have to invest it into their parent's care [00:56:00] and they're sitting there putting it into something that is appreciating and compounding on itself.

I guarantee that person is going to have more money at the end of the day than the person that was selfish, didn't care about their parents well being, and was only looking out for their best, uh, interest after the fact. It's like, it's still a terrible strategy, even if you're being selfish. So don't be selfish and 

Michael Bocelli: listen to our strategies.

Can we just point out my math right 

Jason Kleiger: there? Dude, that was bananas. Hamsters are going here. Hamsters. 

Michael Bocelli: The wheel's spinning right now. For those of you who can't see, no calculator here. Yeah, 

Bisendra Melaram: there's no calculator. We barely 

Michael Bocelli: got a piece of paper and a pen out here. You guys all made great points and actually just to piggyback off them and touch on them for a second.

So, we always remind clients of that too. As Jay mentioned, you know, banks are not typically going to put themselves in a position where They're going to lose out, right? So there's decades of history on this as to how they use these algorithms and how they change the algorithms to determine how much anyone at [00:57:00] any particular age can get, right?

And they're taking a lot of factors into consideration. One of the key factors, you know, when people say to me, well, my balance going to keep growing, you know, if I run, what happens if I run out of equity, right? But the key to always remind them is that the appreciation, you know, that you guys pointed out and historically for the last time.

Yeah. I think just a little over 50 years since they've been tracking that data, homes, the national average is 3. 8 percent on appreciation, right? All appreciation, not depreciation. And national, you're talking about. I always tell my clients, you know, on the East Coast, West Coast, New York, California, Florida, obviously we see much higher appreciation rates.

Um, you know, and people always bring up, hey, 08 where we saw a depreciation, I get it, but that's all factored in. to the last 50 plus years of data where it still shows an appreciation, annual appreciation year over year of 3. 8%. So they use 4 percent for our amortization schedules for the calculations for reverse.

They use a 4 percent appreciation factor, you know, and when I sit with clients and we look at the amortization schedule and we go over it, They say to me, you [00:58:00] know, they look at it, well, in 10 years, 20 years, they think my home's gonna be worth X, you know, a million dollars, whatever it is, based off what it is today, and they're like, I don't, I don't know if that's gonna be the case.

I always remind them, and I say, well, when did you purchase this home? You know, and they tell me, oh, I bought it, you know, 40 years ago. Okay, what'd you pay for it? I paid 35, 000 and it's on my own parents, right? My parents bought their house almost 50 years ago for 42, 000. They sold the last year for 825, 000.

So if someone were to say, you know, to my dad, right, 40, 50 years ago that that house was ever going to be worth 825, 000, you probably would have looked at them like they had six heads. Right. And that's what I always remind them. When you look at that, even with the ups and downs of the market, the home is still appreciating, which is absorbing a lot of the increase.

In the, the balance, the loan balance, right, where I say that it's, it's eating into some more of the equity in the property, but your value's going up as your loan balance is going up, right, and they set it up in such a way where [00:59:00] it shouldn't outpace itself. Could there be some anomalies? Of course. And to speak to the wealth management side, you know, we work with a lot of, uh, attorneys and, and wealth managers as well.

You know, there's a lot of strategies that we've promoted over the years, and there's been studies done on some of them where, you know, People can implement the reverse mortgage to overall, to extend the overall longevity of their retirement assets and their retirement portfolio. And it increases it by a crazy number.

It's like over 80 percent of their overall retirement portfolio, the longevity of it, right? As you mentioned earlier, people are not living. People are living, excuse me, a lot longer than they were, you know, years ago. So we're seeing a lot of clients now that are in their 90s. The eldest client that I ever helped actually was 102.

Wow. If you could believe that. So I've had a 102 year old, 101 year old, you know, generally you're dealing with the children in those scenarios. Right. You just want to keep them in the home, keep them comfortable, right? But we had a 102 year old. She lived to 107. Wow. And I still see the attorney to this day and she thanks me because she attributes most of it [01:00:00] to the fact that we gave her a reverse and kept her where she was with her family, with her friends, rather than putting her into a nursing home where they feel, you know, maybe within six months to a year, she, uh, she might've passed away.

So there's a lot of strategies to offset sequence of returns, risk, and things like that, where you can keep your retirement assets and allow them to keep growing while you're drawing down from. The reverse, you know, so a lot of tax strategies and wealth management, you know, we could maybe have another podcast.

There's a lot to 

Bisendra Melaram: talk about. We'll get 

Michael Bocelli: into all that for next week. Join us tomorrow night. 

Jason Kleiger: Where 

Michael Bocelli: Jason forgets all the math he ever learned. Dude, I don't know where you got that from. He's going to 

Jason Marcus: handle all the math next. He reminded me of Will Ferrell and uh, when he was sitting there and like, all of a sudden went on that rampage with like, how he was debating and like, What just happened?

Did I just say math? 

Bisendra Melaram: Out of body experience. Little 

Michael Bocelli: old school reference. And actually, one other thing that I want to mention too is another benefit, touching on the appreciation. [01:01:00] The line of credit. Right, another advantage over the reverse line of credit over a traditional home economic line of credit.

The line of credit actually has a growth rate associated with it. Meaning that whatever money is still sitting in the line of credit, the money that you haven't drawn out yet, right? It actually will grow over time and it actually grows. Your line of credit so it's making more money available to you in the line of credit over time So if you start out, let's say with a hundred thousand dollar line of credit, right just for argument's sake and you don't draw anything Out the growth rate presently is around like eight and a half percent Right.

So that 100, 000 line of credit is 100, 000 available to you today. If you don't use that and you let it sit in the line of credit next year, it will be 108, 500 that's available to you now in the line of credit. So it's another advantage over a traditional home equity line of credit where you can get access to more money over time.

And, you know, as I mentioned, I mean, without having to make the monthly payment. And again, the reason that they do that is because they're anticipating [01:02:00] appreciation on the property. As the home is appreciating, you can, your line of credit can also grow, making more money available to you. So it's another nice benefit.

Dude, they have that thing. Yeah, it really is. It's a button 

Jason Kleiger: up. They have a bunch of mathematicians. I can't even say it. They have that thing buttoned up nice. 

Bisendra Melaram: I'm trying to think of something to take this sideways, but I can't really. Because it just makes too much sense. 

Michael Bocelli: Take what sideways? I sold you on it.

I take everything sideways, so. No, 

Jason Kleiger: no, no, no. Not like that. That's a different show altogether. That's a different show altogether. That's not this one? This is the other part? That's the 

Michael Bocelli: other one. There are so many scenarios and stories, and I always like to tell people stories and give them scenarios, because I feel like that's what people always remember.

You know, of how we've utilized this, you know, clients that I've had over the years who took out the reverse at 62 to utilize that as a supplement for their income so they could postpone social security benefits to age 70, right? If you do that, it increases your social security benefits by like 88%. So you can utilize the reverse as a hedge to draw on the [01:03:00] money that you may need during that time frame.

to hold off on taking your Social Security benefits. Another wealth management, you know, planning. It could also be an alternative to people who, you know, for long term care, people who may not qualify for long term care. You know, if long term care may be very expensive, you know, in certain instances, uh, or maybe they have, you know, a health ailment that is preventing them from getting it, they can utilize that, obviously, as we've talked about, to access the funds.

to pay for their medical expenses and, you know, in home care and things of that nature. You know, there's a, there's a ton of different uses. There's so many different scenarios and stories that I can give you guys, you know, of ways that we've utilized the product to help the families, you know, to help the heirs.

And as you mentioned, even if they, means getting a little less later on, if they're paying that money today, it's really, Six in one hand, half a dozen in the other. But they're also missing the, the, the value of it. Exactly. Exactly. 

Jason Marcus: So maybe hopefully, like, especially on the wealth management side, one of the things where rates were really low, and everybody's sitting there and, like, they [01:04:00] have that tunnel vision on, to your point, like, if you're sitting there and rates are In the low threes and you're extracting a lump settlement out as you're getting towards retirement And now you're taking that money and putting it into these investment engines, which now even a simple Regular savings accounts making five you're sitting there at three you're earning interest on that money once again to if you're in a situation where you're Cash poor, but equity rich.

This is a wealth management tool to sit there and hopefully supplement what you were talking about your later years in this. So there are going to be strategies where that's something to kind of also talk to your financial planner about in regards to that type of strategy. So that's. Something else that can come out of this that isn't being harped on in this conversation But still there where you'll have a conversation with Mike and that might open the door a lot of times We're opening the door to other professionals [01:05:00] that it's not necessarily Something that we're doing but we can guide you in a manner where we're putting you into a position For success later on because what we try to do Especially like in our company is we try to create value for people.

So our philosophy is they're going to be things where I'm advising people to do. I might not give them the specifics on what to do, but what I pride myself on is trying to. Provide the roadmap to these things and a lot of times we didn't have the luxury We had to learn this stuff and when you have these trusted professionals like the gentleman around this table Where our listening audience can go and have these conversations You guys can't understand the level of value that is So like touch on everybody sitting at this table at some point in time and I guarantee there are gonna be things in your financial future that we're going to, we're going to present to you and make better, which we have no vested interest in you guys, [01:06:00] 

Michael Bocelli: whether you're a client or you're a professional, if you're a wealth manager, if you're an attorney, you know what I always tell them is it's good to just be familiar with this stuff so that if you have a client who asks, you know, you know that you have a trusted partner to refer to, you know, and we have a ton of trusted partners in the space of elder law.

You know, trust in a state wealth managers, you know, and what I tell the wealth managers to is, listen, you may never have a client who needs or wants a reverse mortgage, but it's good for you to at least be familiar with it. If you're not looking at someone's equity position or their home, which is most people's largest asset in many cases, you know, then you may be doing them a disservice, you know, it's not right.

And that's the whole thing. And, and listen, we've utilized it in situations to offset sequence of returns risk, right? People who are losing money in their retirement accounts, and then they're drawing down on them in down markets like last year, you know, this year was still down overall, but it's recovered a little bit this year, but last year when people were down 20, 30%, if you're drawing down on your retirement assets, you know, you're going to deplete those retirement assets much faster.

So if you can [01:07:00] utilize a reverse line of credit to offset that and draw what you need from the line of credit. During those down years, you can allow your retirement assets to recover and come back. And that's going to give you much more longevity overall in your overall retirement picture for your retirement assets.

And hopefully that was not outlive your money. 

Bisendra Melaram: Sorry, I didn't mean to cut you off early, but I was like, Holy shit, that made sense. 

Michael Bocelli: Well, these are some of the strategies, you know, that we promote that we've promoted over the years. And as I said, there's been studies done on these. So, you know, definitely feel free whether you're a professional or client to reach out so that we be 

Bisendra Melaram: sure to.

Hit up Mike Boccelli, his contact information is down listed in the description, and for all your other law concerns, hit up Mr. Kleiger. And everything else. And 

Jason Kleiger: math. Not math. Only math? Not math. Okay, so 

Bisendra Melaram: for math head over to Marcus. He'll help you with all the other math. If 

Michael Bocelli: your children need a math tutor too, you can reach out to Jay as well.

He's obviously a specialist in math. And, uh, if you reach out to me and we hit it off, I might even sing for you. Oh, he's gonna 

Jason Kleiger: sing. You're gonna do quantum [01:08:00] physics. I, I, I'll be honest, I took ninth grade math twice. 

Bisendra Melaram: Boom. In the daytime or the nighttime? 

Michael Bocelli: And that was last, that was last week. Yes. He just finished those congratulations last week.

That wasn't that long ago. 

Jason Marcus: Boom. Good job on that 68 on that region spell. Beautiful. Just passed. 

Bisendra Melaram: Dude, they're getting ready to take that stuff 

Jason Marcus: away. What, 

Michael Bocelli: regions? Yeah. They've been saying that forever. 

Bisendra Melaram: No, but they're actually gonna do it now. I think they're 

Michael Bocelli: actually gonna do it. I feel like they've been saying it forever.

I feel like they've been saying it since we were in school. Ah, no doubt. Ah, 

Bisendra Melaram: well, I wasn't that lucky. 

Jason Kleiger: Well, I got the, I still got the Advanced Regents come. Oh, I got a, oh, it does a lot for me now. Yeah, yeah, yeah. hanging in your wall right next to your book. Stay in School kids. 

Michael Bocelli: Just Stay in school. Jay graduated 

Jason Marcus: from the school of Hard Knocks, just so you guys are

That's 

Michael Bocelli: great. 

Bisendra Melaram: Oh, man. And do you guys have any other questions for Mike? I know you don't. I mean, 

Jason Marcus: it's, unless you do I, I. Unbelievable guest. 

Bisendra Melaram: Great job. I'm glad we had him on. Because I, even I learned something. I mean like, 

Jason Kleiger: you know, I [01:09:00] deal with reverse mortgages and HECMs just very like briefly because you know, uh, when it's closing time and they have, uh, you know, the payoffs we got to get from usually Novad who, and then the HUD payoff and everything.

So, uh. But I think and I feel I know a whole lot more. So thank you, Mike. Yeah, at least I know 

Bisendra Melaram: enough to have a more intelligent 

Jason Kleiger: conversation about it. I can't wait till I hit Mike's number. I can't wait till I hit 60. I can't 

Michael Bocelli: wait for it. No, dude, I'm planning right now. I'm planning ahead. Maybe New York will eventually reduce it down to 55.

Please. I, I appreciate that guys, and I really appreciate you having me. I had a lot of fun. It was great. Yeah. We're gonna have to have Mike back 

Bisendra Melaram: for 

Jason Marcus: Definitely. We're gonna have him do like a 

Jason Kleiger: little, I'm gonna bring, there's a lot to cover. I'm gonna bring, there's a lot of information. I'm gonna bring my grandfather down too.

great. Oh, dude. 

Bisendra Melaram: Boss man. Boss. 

Jason Kleiger: I'm gonna bring Boss. Bring Boss. Be awesome. My grandfather we call Boss, so we're gonna bring Boss down. Yeah, he's 94. That 

Bisendra Melaram: cool is 94, dude. Yeah. And he's 

Jason Kleiger: still doing his last thing. He can, he can recite a tax code wrote [01:10:00] just, you know, from the 1960s and but that's 

Michael Bocelli: amazing. God bless my wife's grandfather is 96 and he's still, he's good man mentally and everything.

He's, he's good physically, you know, mentally though. He's, he's all there. He's still doing it. I've had a couple of clients in their late nineties who actually I sat down with and dealt with them directly, you know, not even a POA or it was still sharp. Um, Some of them, I remember a couple of those very, very short.

You know, 

Jason Kleiger: it surprises you, but, you know, I 

Bisendra Melaram: think most of them are sharper than me too. I'm not going to say it. I hear you. I'm not going to say it. Believe me, 

Michael Bocelli: I hear you. But, uh, yeah, it's been great. Thank you, gentlemen. I really appreciate it. Thanks, Mike. 

Jason Kleiger: Thanks for coming by. I'm going 

Bisendra Melaram: to leave all your contact information below.

Any last words you want to leave the listeners? Any words of wisdom? 

Michael Bocelli: Uh, as I said earlier, I think just our biggest obstacle, not just, you know, for your parents, for your aunts, for your uncles. For yourself, for this country, it's just people to just be open minded enough to allow themselves to just be properly educated on the program.

We don't, we [01:11:00] call ourselves, you know, educators, as we mentioned earlier, you know, I'm here, clients call me and say, listen, I'm here to educate you and give you all the information. And if you feel that it's right, and it fits your objective, I'm happy to help you to facilitate it. If you don't. No worries, you know, no, no harm done.

It doesn't cost you anything but your time. But at least be open to it because people are living a lot longer and they're out living their retirement assets. We're seeing it every day. You know, just make sure you're making the educated decision but you can't do that unless you have all the information.

So, that's what I, that's what I encourage people to do. Spread the good word. Spread the good word. Not the misconception. Not the misconception. Spread the good word. Oh, 

Jason Kleiger: the good word. 

Bisendra Melaram: The bad word is reverse mortgage. 

Jason Marcus: That's right. What's the good word? Hack them. Heck, I don't even know him! 

Michael Bocelli: Boom! That was great.

Pick up the mic and just Tell your, uh, parents and grandparents to spread the good word when they're with their friends at the, uh, the bingo club, the card games, whatever it is, not to, uh, dispel these misconceptions. 

Jason Kleiger: They just gotta heck him from Mike. Heck him, 

Michael Bocelli: [01:12:00] that's it. You gotta get rid of the reverse term.

Bisendra Melaram: That's the killer. Education. Math. Alright, guys. Thanks. Awesome. We'll see you on the next one. 

Michael Bocelli: Thanks, guys. Appreciate it.