Senior Life Discovery

Announcer (00:00)

Hey, did you know most Americans have their largest chunk of wealth sitting right in their driveway, but they’re terrified to touch it.

What if I told you your home isn’t just a place to live? It’s a financial planning tool that can you to stay put. Today, we’re debunking the myths and revealing the magic thing that changes retirement forever, reverse mortgages. 

You don’t want to miss this.

Donna Stancel (00:25)
Hello everyone, I’d like to welcome to the Senior Life Discovery Podcast and today we have Dennis Cooper, is the Senior Vice President of the Hecum Division of Federal Savings Bank. You’re located in St. Louis, aren’t you Dennis?

Dennis Cooper (00:39)
Been here for about 40 some years. Well, practically a native at this point, but I actually grew up in Pittsburgh. Very similar to town.

Donna Stancel (00:43)
Native?

I’m a native of St. Louis myself. Tell us a little bit about your background.

Dennis Cooper (00:55)
As I said, I was born and raised in Pittsburgh. to college in Western Pennsylvania and graduate school at Kent State. Joined the Air Force, four years in the Air Force. I like standing in lines and don’t like taking orders from other people. So after four years, I got out, went to Pittsburgh. I was an insurance company and spent about years with doing employee benefits.

They sold their business to another company. Actually, that’s what brought me to St. Louis. I had been promoted to Home Office and Director of Sales. One of my jobs was to decide where we were going to open new employee benefit offices. And I spent two weeks in R &D trying to figure out where there was a market share we didn’t have. Went into my boss’s office and I said, okay, we should open an office in Birmingham, Seattle, Washington, Charleston, West Virginia, and St. Louis. And I want St. Louis.

And he looked at me very strangely and said, you know anything about our history in St. Louis? And I said, no, I couldn’t find any history in St. Louis at all. And he said, Bob, I dealt in the 60s. Bob was our regional director in Los Angeles, very well thought of. And he failed. And then we tried to open the 70s and that man failed to know who he was. I said, no, I don’t know who he was. And he said, that was me. Both Bob and I failed. What makes you think you’re going to succeed? I said, my hyper personality.

So about two weeks later, I was in St. Louis trying to open an employee benefit office and stay there until they sold their business to another insurance company. And finally acquiesced to be going to financial planning, which I did 10, 12 years. I thought I was going to retire early and figured out I can only play golf twice a week. So I got involved in this magic thing called reverse mortgages. That brings you up to date.

Donna Stancel (02:43)
So all the financial services back then, is that what prepared you for doing reverse mortgages?

Dennis Cooper (02:50)
I’m one of those people that have the philosophy that everything you do in life prepared you for the next step in life. And I honestly believe that the financial planning history certainly prepared me for using a financial planning tool that’s wrapped in a mortgage label. Yes.

Donna Stancel (03:09)
So, how long have you been doing reverse mortgages now?

Dennis Cooper (03:13)
15 years.

Donna Stancel (03:16)
So you’ve got a little bit of experience.

Dennis Cooper (03:18)
I have fell in love with the people I get to deal with and solved an incredible number of problems for people. yeah, it’s… When you find something you truly love doing, you really don’t work a day in your life. That couldn’t be truer about somebody like me.

Donna Stancel (03:35)
Yeah, they’ve always said if you find something that gives you joy, that is your niche. certified to do market, these reverse merges and where.

Dennis Cooper (03:47)
50 states. I worked for the Federal Savings Bank which is certified in all 50 states which makes me certified in all 50 states. So I’ve done them in about 17 states still looking for the other 33.

Donna Stancel (04:05)
How does the reverse mortgage differ from a home equity land with credit?

Dennis Cooper (04:10)
Glad you asked.

If you do a conventional mortgage or a home equity line of credit, you bar X amount of money for the bank, and each month you’re expected to make a payment, and each payment, your balance goes down. With a reverse mortgage, or actually the technical name for the project is a home equity conversion mortgage, you bar X amount of money for the bank, but you never have to make payments. It’s up to the borrower. And if you don’t make payments, interest accrues and the balance goes up.

Just the reverse of a conventional mortgage, hence the nickname reverse mortgage. But we refer to it now as a retargetable line of credit, probably the best home equity loan that a senior, someone 62 years of age or older, can get. There’s a number of reasons for that. One, as I said, the borrower decides whether to ever make a payment or not. Two, it’s lifetime. It’s five or 10 year heel, 15 or 30 conventional mortgage. Three, it’s fully insured.

So, the heirs can never owe any money on the reverse mortgage even if the balance is upside down at the end. The other nice thing about it is if you choose the line of credit which is one of the options we guarantee the unused portion of the line of credit will grow by 7 to 8 percent right and there’s something called the rule of 72 if you can get a 6 to 7 percent increase in your money in 10 years your money done you start with a hundred dollar line of credit.

Didn’t tap into it until 10 years, age 72, you’d have a $200,000 on it. If you could put that off until age 82, you’d have a $400,000. So people refer to reverse mortgage as the last money you should spend. It may well be the last money you should spend, which I don’t personally believe, but it should be the first money that you initiate and monetize the value of your home. You have the dollars later in life.

Donna Stancel (06:11)
So how long have these reverse mortgages been around?

Dennis Cooper (06:13)
They’ve actually been around about 42 years. Oregon, and it’s probably the one federal program that I believe in most. It’s a very well designed product that has evolved over time to become truly one of the best assets seniors, if you think about it. Probably the majority of Americans, their largest asset is their home. Unfortunately, the children of the depression and the children of the children of the depression all think you have to.

Pay off your mortgage before you retire. It’s a tassel that you have to take up. It’s nothing more than asset you’ve accumulated in your life. No reason why you shouldn’t monetize it. Simply like you do a 401k or a 403b. It’s money you’ve earned in your life and you put aside.

Donna Stancel (07:04)
So what are some of the misconceptions about this? And I’ve heard about reverse mortgages myself ⁓ for years, I understand that they’ve changed over this. How are they different than they used to be?

Dennis Cooper (07:13)
Oh, great deal.

Actually, about 42 years ago, the first reverse mortgages, the lender’s name was on the title. So something to the senior, they couldn’t pay their property tax or something. The lender actually had a right to take over the house. It lasted about six months until he figured out what a bad idea that is. It evolved over time to the product that is today where the, obviously the lender’s name isn’t on the title.

One of the misconceptions seniors seem to think is somehow the lender is going to take their house. Nothing could be further from the truth. The lender will work with the senior to stay in the home as long as possible. Not because they’re nice people. It’s simply because the longer you stay in the house and don’t make payments, interest accrues, and the lender is going to make more money.

The other question the seniors have is, well, it’s more expensive than conventional mortgage. And I agree, it is more expensive. It’s a fully insured loan to get your heirs. Forgotten insurance and paid for the insurance.

Donna Stancel (08:21)
and you lost the insurance if you did.

So what about, you talked about seniors, what about if it’s a husband and wife and one outlives the other? How does that work out for them?

Dennis Cooper (08:34)
Oh my goodness, it used to be everyone on the title and everyone in the reverse mortgage had to be age 62. I’d get these calls from gentlemen who just turned 62 with a 42 year old wife thinking that was a good idea. As it turns out, it wasn’t that good an idea. In order to do a reverse mortgage on the 62 year old, you’d have to eliminate the wife or the spouse who was younger from the title and then from the reverse mortgage. And as odds would happen, the older person would go first, and the younger person was left holding the bag. 

Nine and half years ago, HUD came up said, as long as one person is 62, you can do the reverse mortgage. And the other person isn’t kicked out of house, the reverse mortgage isn’t called on the younger person. So it’s a viable product, even if the spouse is younger than 62.

Donna Stancel (09:28)
so they can stay in their home. And that stays in effect until what? They’ll pay. So they pass on.

Dennis Cooper (09:34)
Exactly. Well, the events, the reverse mortgages in force until the home is no longer your primary residence. That’s the key. I love telling stories. One of my favorite stories is I was contacted by a man in Kansas. He told me, I know I can a $60,000 modular home for 40,000 because it’s in foreclosure.

So, we did a reverse to purchase. I’ll get into that later, but we did a reverse to purchase and I showed with a while. I provided a check for 25,000. He provided a check for 15,000. He purchased a $60,000 modular home for $15,000 of his own. Out two years later, he contacted me and said, put a roof on, I built a garage, I put fence around the house and I painted inside and out. I know it’s going to appraise for 80,000, and I want to do a reverse to a reverse to purchase. 

We did that. It did qualify at 80,000 closing. I gave him $15,000. So in essence, owns an $80,000 module home with only sweat equity in it. Two years later, it was back before they made the change to the reverse mortgage product. Two years later, he contacted me said, I want to bring my wife into the reverse mortgage in case something happens to me. 

I didn’t take a commission on the third one. At closing, I gave him a check for $1,500. He thinks I walk on water at this point. 

About two years later, she calls me and says, you know, he passed on. What happens to me? I told her nothing. Do you stay in the home as long as you want because of the title and on the reverse mortgage, though. It was a perfect scenario for a reverse mortgage, using the product the way it should be used.

Donna Stancel (11:31)
Another question that I have is what about real estate taxes and homeowners insurance? How does that play into it?

Dennis Cooper (11:37)
Typically, the responsibility of the individual doing the reverse mortgage. Those are two other requirements. If possible, you can establish an escrow account of a life estimate set aside. The client wants that to taken care of, but typically it doesn’t make sense to hold money back that they could pay in the future on their own. We can deal with that one way or the other.

Donna Stancel (12:03)
What happens if something changes in their life and they decide that they need to move to a different home?

Dennis Cooper (12:10)
What would happen if you had a home equity line of credit on your house and you had to move? You’d have to pay it back. Same thing is true of the home equity conversion mortgage. If you decide this is no longer going to be your primary residence, you would sell that property, pay back the reverse mortgage, and walk away with the excess.

Donna Stancel (12:29)
Is there any chance that they would ever be underwater on that?

Dennis Cooper (12:32)
It’s a I mean, if you’re in the home for 20, 25 years, which isn’t impossible today, you do a reverse mortgage at 62, 25 years, make it 87, quite possible you might have to leave at some point. As I said, it’s a fully insured loan. So if the loan is upside down, all that’s owed is 95 % of whatever the house can be sold for. Let’s use an example.

$200,000 house, I lend $100,000. 25 years later, somehow the loan balance has grown to 250. The house is still only worth 200. The heirs would sell the house for 200. They’d owe 190. The difference between the loan balance of 250 and the 190 the heirs pay comes from the insurance it’s built in. So people who do the reverse mortgage have the money tax free. The heirs can’t lose money.

Ultimately makes all the interest that’s owed, either from the heirs or from the heirs and the insurance.

Donna Stancel (13:38)
It like since you were talking about somebody who had a modular home that this might be, is it applicable to all sorts of homes?

Dennis Cooper (13:46)
Really, modular homes, duplexes, triplexes, fourplexes, townhomes, the only thing we really have trouble with are condos in condo associations that FHA approved. Causes some problems.

Donna Stancel (14:04)
So what about somebody who’s buying a new home? Can a reverse mortgage be used for somebody who’s getting into a home for the first time?

Dennis Cooper (14:13)
Oh, definitely. Basically as I alluded to about nine and half years ago, HUD came out and said you can use a reverse mortgage to purchase a home. In the past, people owned a three-story house and had needs like mine, didn’t like going down the steps all the time, they’d sell that and create a bucket of money. And they wanted to buy, say, a $200,000. Around 70, I can lend 50%. So I should be closing for with a hundred thousand client shows up with a for a hundred thousand purchase move into a $200,000 bill having paid a hundred thousand and have to make a mortgage payment as long as either one of them lives in the home. Told that story to a retired vice president of HUD here in St. Louis. His question was, four days after that, he called me and said, instead of that $200,000 bill you were, my wife and I put an contract on a $400,000 house.

At the time, I was able to give them more than 50%. I showed up a closing with a check for $253,000. He showed up with a check for $125,000. They purchased, moved into a $400,000 house, having paid $125,000, and will never have to make a mortgage payment as long as either of them live in Why would you buy real estate any other way?

Donna Stancel (15:38)
How much equity does someone have to have in their home in order to get a reverse mortgage?

Dennis Cooper (15:43)
If we’re talking about using the reverse mortgage on their current home, we have to have at least enough to pay off their current mortgage or lien. The reverse mortgage has to be the only lien on the house. So, 51%, 52%, somewhere in that range.

Donna Stancel (16:00)
So, say for instance somebody had a house that was $400,000 value and they owed $375 on it. That would work?

Dennis Cooper (16:10)
How much was the house worth?

Donna Stancel (16:12)
400.

Dennis Cooper (16:13)
I don’t think that would work. Because we’re not going to give them $375,000 or $400,000.

That’s a little over and above. This is a ludicrous example. If they had a $400,000 house and they wanted to eliminate the monthly payment and they showed up with maybe $175,000 of their own money so that we could pay off the $375,000, you could do a reverse mortgage. That’s an extreme example that I wouldn’t recommend any time. Say, they owed $10,000 more than what you can actually provide with a reverse mortgage and they decided they wanted to contribute $10,000 to it. We could pay off their mortgage and if they were paying $1,500, $2,000 a month obviously it will work out that in a year they’d be head of the game from that point on they wouldn’t have a mortgage. The project is incredibly flexible and there’s a lot of things you can do with it.

Donna Stancel (17:17)
Since the homeowner that goes into reverse mortgage doesn’t make a house payment, does their credit rating have anything to do with this? 

Dennis Cooper (17:28)
We’re more concerned about their credit history than we are their rating. Potentially, we can go a little lower than conventional mortgage can, but we want to do a reverse mortgage with someone who’s going to stay in the house and pay their pretty tax and their home mortgage insurance in the future, because the lender wants them to stay in the house as long as possible. So the way they’ve paid their bills in the past is a little more important to us than the actual credit score.

Donna Stancel (17:57)
You mentioned something called an HECM for purchase. you go over that again and tell us how that works? OK. Or have we already? Yeah.

Dennis Cooper (18:06)
HECM is a home equity conversion mortgage. It’s typical name for the it’s referred to as a reverse mortgage. someone wanted to sell their current house, a villa, they had two choices. They could sell the previous house, a bucket of money, and use that money to outright the new villa. Or they use part of that down payment and that of a mortgage.

But any financial planner worth a salt will tell you you shouldn’t use all your liquid capital to purchase a home because you’re burying your liquid capital in a house really doesn’t provide for you during a return. And nobody at 62 years of age or older wants to have a mortgage payment. So, utilizing the reverse mortgage to purchase a home allows the individual to hang on to a lot more money in the money that they have for other things, at the same time not have to worry about a mortgage payment.

Donna Stancel (19:10)
Okay, well it sounds like this is good. Is the minimum age on this a 62? I’ve heard you mention that several times.

Dennis Cooper (19:17)
With the typical home equity conversion mortgage product, it’s age 60. At least one person has to be age 62, but we do have some products that go down to age 55 as well, depending upon the size of the house, where they’re located in a country. Approved at all the states.

Donna Stancel (19:36)
Is there anything else you’d like to add that we haven’t touched on yet?

Dennis Cooper (19:41)
It takes me about 10 minutes to put together an illustration if somebody has questions about reverse mortgage, I’m happy to answer the questions. If somebody has a reverse mortgage and I can’t contact the person that they were working with, I’m more than happy to answer questions. I believe in this project. I’ve done them for my fraternity, because I’ve done them personal friends. 15 years, I’ve never had anybody call me and say, gee, I wish I hadn’t done this.

I call all of my clients on their birthdays are actually happy to hear from me, which I think is okay. I think my financial planning background really helps me understand all the different ways the reverse mortgage can be utilized. As I said, it’s a financial planning tool. It’s in a mortgage laid back.

Donna Stancel (20:30)
I know I remember talking to you several years ago when I first came up with this idea of podcasting. I was intrigued at that point and I felt like I needed to make you my very first podcast. Yeah And I’m really glad that you’ve been with me and I will be putting this out Is there anything you can offer to people who are members of our site because they’re the ones are have a back-end access to something whenever they decide they want to shape that.

Donna Stancel (21:00)
Listen to your podcast and see what it’s all about.

Dennis Cooper (21:03)
We’re in a situation in this country right now, we’re all living longer than we expected. Everything costs more than we had. Pension plans have gone away. And no matter where I am, ask, has anyone overfunded a 401k?

Why would you not tap into another asset you’ve accumulated in your life to help you get through it?

Donna Stancel (21:28)
So, if somebody was interested in doing business with you, and you’re in St. Louis, and say somebody like myself is in Florida, how do you work with a customer that way?

Dennis Cooper (21:39)
Zoom meetings, email. It’s not that difficult to work remotely today if you’re dealing with somebody who’s going to be around in another year and a half.

Donna Stancel (21:50)
So you don’t have to be in the same room with each other.

Dennis Cooper (21:52)
We can have a document signed to close the application. One of the things of reverse mortgage is that I am not aware of any other project like this. In order to do an application, the individuals, everyone on the title, have to have counseling from an independent counseling agency. And it does weed out people who probably shouldn’t get into a contract when they don’t understand the contract. So it’s a safeguard to public, and it’s the only mortgage program that I know that insists on that before he could do an application.

Donna Stancel (22:27)
So it means that somebody has to be cognizant and aware of what they’re actually doing before they get into it. 

All righty. So, I wanted to thank you for your time. I hope that this podcast will be beneficial for you. And maybe if we figure out something else that you might want to do in terms of a podcast, you can just let us know.

Dennis Cooper (22:49)
Okay, sounds fine. Be here.

Donna Stancel (22:52)
All right, Dennis, thank you for your time. was really great talking to you again. Bye-bye.

Dennis Cooper (22:56)
You take care.