The Truth About Reverse Mortgages: A Seniors Guide to Financial Freedom

Stephen S. (00:03.642)
Welcome to the show where we interview the nation’s leading real estate entrepreneurs. Welcome back to the show. If you’re joining us for the second, third or hundredth time, it’s your host, Stephen Schmidt. And today I’m here with Damahco Ousley. And today we’re going to be talking about reverse mortgages specifically for purchase term that I actually just learned myself. I’ve heard a HELOC and all the other acronyms, but HECM is what I have just learned from him in our pre-show conversation here. And we’re going to get right into it.

Demaco has been in the service industry to seniors for over the last 15 years and specifically been working in the mortgage industry for over two years. And we’re going to learn all about reverse mortgages today. So just remember before we get into it at Investor Fuel, we help real estate investors, service providers and real estate entrepreneurs, two to five X their businesses to allow them to build the businesses they’ve always wanted to allow them to live the lives they’ve always dreamed of. being said, Demaco, welcome to the show.

Damahco Ousley (01:00.832)
And thank you so much for having me buddy. Glad to be here. Absolutely.

Stephen S. (01:03.266)
I’m grateful we were able to do this.

So tell us just a little bit about yourself and how you got here in your current position and what you’re excited about with education that you’re giving to seniors and how they’re able to use reverse mortgages for purchasing homes.

Damahco Ousley (01:22.19)
Well, so a little bit about my backdrop. Went to the University of Tulsa here in Tulsa, Oklahoma and play a little bit of sports, a little bit of football there specifically. And so, but when I finished my bachelor’s degree, I finished in sociology. And as I was telling you a little bit earlier, you know, when you finish with sociology, you’re either gonna become a teacher.

or you gotta figure out what you’re gonna do, how you’re gonna get a job. Well, that led me into becoming a salesperson. You go get a sales job and you can’t get hired anywhere. And so I sold final expense burial insurance for several years. And then after that, sold, I sold that to seniors specifically. I didn’t work with any other demographic. I sold that to 65 up seniors who wanted to get, you know, 10,000, $15,000 worth of burial insurance. I then later sold walk-in tubs and walk-in showers.

Stephen S. (01:53.676)
Mm-hmm.

Damahco Ousley (02:14.99)
wheelchair ramps and things of that home modification for seniors so they can have that idea of aging in place staying at home and Modifying their home so that way they can get older there I then leveled up a little bit and started selling in home care services So that’s private duty aids that will come in to help mom and dad Who was in there? Maybe? 70s days whatnot and may could use a little help around the house cooking cleaning housekeeping

little bit of activities helps with normal activities of everyday living, cooking, cleaning, dressings and things of that nature. But all that led to everyone always asked me, what do you guys think about this reverse mortgage? What do you think about this reverse mortgage? Meaning they were looking for some funds to pay for that walk-in tub or those 20 hours a week service that they were needing. And so at the time, know,

If there was one to buy a tub with it, I used to tell them hey You probably want to look into that if it’s gonna help you buy this walk-in shower and so But over the time I started doing my own research in this thing called reverse mortgage and it is the ultimate Retirement game changer that’s totally misunderstood That now I’m just on a rampage. Hopefully to just educate people about this new FHA

program called Reverse Mortgage. And so I was approached by a branch manager and he told me I should do very well educating people across the country about this reverse mortgage. And so here I am.

Stephen S. (03:45.218)
Wow. Now let me ask you this, because you mentioned reverse mortgage and FHA in the same sentence, but correct me if I’m wrong here. Who is a reverse mortgage not for?

Damahco Ousley (03:56.123)
It’s not for anyone under the age of 55 and younger.

55 and younger.

Stephen S. (04:02.69)
Right. And so when you say FHA, these are for people that are in that category of starting to become a senior or in that category of getting close to that retirement demographic who are also buying their first home. Is that accurate?

Damahco Ousley (04:18.734)
Well, so the FHA, people use it as a first time home buyers program because it is, it does that. So FHA is just an insurance program that ensures the lenders for them to make said loan. So typically when we’re to call it forward mortgage and reverse mortgage, those are the only two. Okay. We’re to go forward mortgage typically or forward mortgage you refer to as FHA. Those are people that’s first time home buyers or things of that nature.

And usually they have lower credit, they have lower income, different things like that. And so the FHA still want lenders to lend to these individuals. So they insure that loan. Okay. And so they may have a 620 credit score. They may only have 3 % down. So the guidelines are all different, but the purpose that lender makes that loan is because it’s insured.

Okay. The FHA government insurance is protecting that lender and also protecting that consumer. have to go through HUD counseling calls and things of that nature. So how to flip that with the reverse side is individuals 55 or 62 and older, depending on your state. This is a FHA program that allows seniors to tap into a portion of their home’s equity.

with all the protections of the FHA, meaning you never come off title, you always own your home. Different things like that, it’s major protections.

Stephen S. (05:47.926)
Yeah, yeah, that’s great information. I wanted to make that wanted to make that. Clarification a point, because I think reverse mortgages statistically over the last 20 years have have a really bad rap, right? But a purchase reverse mortgage, which is what I think you’re specifically referring to here, of course, like there’s a lot of misconceptions about how they actually work. Correct me if I’m wrong here. I’ve actually interviewed someone else.

I know little bit about this topic, but tell us a little bit about some of those misconceptions specifically with the purchase reverse mortgage that people may not realize when it’s the actual right product for them to be using.

Damahco Ousley (06:31.362)
Well, some of the misconceptions is an individual was going to lose their home or they sign over their home or the bank takes their house. Now, I hear that so much, but I’m then challenged to say, okay, mortgage companies doesn’t really want homes. They want to make home loans. And so reverse mortgage is simply a mortgage that doesn’t require any monthly mortgage payments. Okay. So they’ll give you a loan against your home.

Just like that traditional HELOC, they’ll give you a loan against your home. Difference is that traditional HELOC is required a monthly mortgage payment as soon as you use any of the balance. With me, because I’m a product strictly for seniors who is going to be retiring and on a fixed income, we do not require any monthly mortgage payments. So that’s simply the biggest difference. Why does it have a bad rap? I think, truthfully, because

When you take out a reverse mortgage and you doesn’t require any monthly payments, what happens is some people in the past before FHA got involved, still didn’t even pay their property taxes in a homeowner’s insurance. But if you don’t pay your property taxes in your homeowner’s insurance, it’s not the lenders coming after for a foreclosure or anything. It’s who? The county. The county is now gonna be seeing what’s going on about that house because the property taxes are behind three or four years.

You gotta ask yourself, a bank is not gonna foreclose on you if they’re not expecting a monthly mortgage payment. So why would they foreclose on you? How do you lose your home? Well, I just think it’s more embarrassing to say, hey, I haven’t been paying my property taxes in the last three or four years and I lost my house. And then the lender that lend me some money on it, interceded and had to step in versus saying,

Hey, you know what? got one of those reverse mortgages and they bank took my house. See that that’s easier and more socially acceptable to say because no one knows anything about how the reverse mortgages work. And so you can get away with saying that it’s a little bit more embarrassing to say, Hey, honestly, I just haven’t been paying my property taxes because that’s the, that’s the stipulation. You do have to pay your property taxes and your homeowners insurance to stay compliant with utilizing the reverse mortgage. So that’s the biggest misconception is the bank is going to take my house.

Damahco Ousley (08:58.422)
And that’s really the triggering one.

Stephen S. (09:03.542)
Yeah, that makes sense. Now, so with this specific type of mortgage, you mention and I know this, but for our listeners sake, you mentioned how there’s not going to be any mortgage payments. And the natural thing that people probably pick up and I’m sure you get this a lot is, well, how does how do they make any money then? Like, how are they actually? Because obviously they know that the loan companies are out to actually make a profit at the end of the day.

So how am I not gonna have a mortgage in Democo and yet I’m still gonna have my house? How does that work?

Damahco Ousley (09:38.978)
Well, theoretically, most reverse mortgages on average stay on the books as a loan for 7 to 10 years. If I was to ask you how many years does a person live after they retire, what would you say? On average, have you heard? Ballpark.

Stephen S. (09:55.458)
Well, I used to work at a funeral. So, mean, I would say after retirement, it’s like five to eight years, generally, depending on the age of retirement.

Damahco Ousley (10:06.306)
There you go. Perfect timing. That’s exactly it. That’s usually how long a reverse mortgage stays on the book. Of course, you have those that stay on 20 years, right? And you have some that stay on a year, right? Because an individual might have died or something happened where they had to permanently leave the home. But on average, the average reverse loan is about five to eight years in an average time frame. So how does the bank make money? Well, one, let’s use an example as easy to understand.

Let’s say you have a $300,000 house, okay? And it’s fully paid off, free and clear, and we’re to call this the reverse line of credit, the reverse line of credit, which is different from the reverse for purchase, two different programs. But the reverse line of credit, and you pull, you call me and say, hey, I want to get $100,000 on my $300,000 house, and we loan you that $100,000. We’re looking at that to grow at the current market rate, just used today at 7%.

Over the next seven to ten years Okay, and that’s that’s directly enough it goes Really extreme and you’re just living you’re a hundred years old That’s what a finch FHA stepped in and insured and protected me the lender protected you the house to where? The loan didn’t get out of whack you guys are always going to be protected But theoretically a person is going to tap into their home equity and use that Funds to age in place. That’s the real hot topic. So they’re gonna

Do some home remodeling, do some fixing up and things of that nature. And up on death, you will still, your children or your heirs or your trust will still inherit the property because you always stay on title. That’s why you have to pay your property taxes. And they still inherit the title. And then now your heirs have this home. They don’t have to worry about the loan if they don’t want to keep the house. But usually 99 % of people will call that realtor, put the home for sale.

For easy math, they’ll sell that home for 300,000, pay off the $100,000 that mom and dad use, and then the kids will get the other $200,000. So it’s very simple. It’s just a loan. It’s allowing you to use a portion of your home’s equity and converting it. That’s why it’s called home equity conversion mortgage. It’s converting your home equity. That’s the tool to convert your home equity into cash that you can actually utilize without

Damahco Ousley (12:31.976)
ever surrendering the ownership of your home.

Stephen S. (12:35.776)
Mmm, so it’s a furry house. There’s no catch

Damahco Ousley (12:42.294)
Well, you get cash. Well, I don’t think that there’s a catch necessarily. It’s just a, it’s a different product. I mean, you got to think credit unions and banks and are the, is what people familiar with. Cause they’re on the corner of the, they’re on your local corner and they’re right there, but they don’t offer the product. That’s why they don’t tell you about it. So I mean, they’re, they’re a sales company. They’re looking to sell a product. They don’t offer it. So therefore they’re not going to talk about it.

Stephen S. (12:42.646)
What’s the catch, Tamako?

Damahco Ousley (13:11.372)
right? mean, just being honest, they’re to tell you about a cash out refi. They’re going to tell you about a home equity line of credit, but they won’t talk about the reverse. All of my products that I sell as a reverse mortgage specialist with Fairway Mortgage and the Mortgage for Seniors team, you can check us out on the mortgage for seniors.com, the mortgage for seniors.com. But all of our products are non, we do not require any monthly payments. It’s a non recourse loan.

I deal with seniors. It’s a non-recourse loan. We do not deal with any monthly payments. Any product you get from your local branch or your local credit union, bank or credit union, all of those products, when you tap into it, still against your house, the balance has a monthly mortgage payment. Now here’s why that’s dangerous, because in your 80s, you may lose a spouse, but you qualified for that loan with both of your social security checks. You lose a spouse in your 80s,

Stephen S. (14:08.898)
Mm-hmm.

Damahco Ousley (14:10.19)
You’re down to one social security check. You lost your spouse, you’re down to one social security check. Well, you took out a second mortgage or you took out something that requires a monthly mortgage payment. What are you gonna force to do? Inflation’s been going up, eggs are over 10 bucks. You’re making less than $2,000 a month on your social security check, but you have this payment that you have to make. And if you miss three in a row, they will come foreclose on that house, regardless if you’re a widow or not.

So our program is a lot safer because we do not require any monthly mortgage payments. We kind of have that in mind. If you lose a spouse in your 80s, you still live in your house. You still use the funds to fix it up. And it did not require any monthly mortgage payment. Well, who pays this house back? The house. When you die, your kids will inherit the house. And they have the option to pay off that balance. Or they can just call the realtor and tell them to sell the house. And most usually just call the realtor and just have them just sell the house.

pay off that balance, then the kids inherit the difference. But the thing is, it allows you not to have any monthly mortgage payments throughout your retirement years. And that’s the powerful catch.

Stephen S. (15:19.989)
Sure, like how you framed that that thing the catch is actually a good catch

Damahco Ousley (15:21.87)
.

Damahco Ousley (15:25.358)
Absolutely. Absolutely.

Stephen S. (15:26.722)
I love that. It’s almost like using your house as a paid up whole life insurance policy that you’re then able to use the value of to live essentially quote unquote for free that then by the time you pass,

The loan of you living there for X amount of years is then just basically taken out of the equity and then sold and the balance is completely wiped clean and either way your family gets something at the end of it. Tell me if I’m wrong there, if I’m framing that.

Damahco Ousley (16:04.51)
Steven, that was a perfect analogy. I try to use that analogy as many times I can with individuals that can relate, but that’s perfect. And notice the same thing. You fund your whole life policy or your permanent life insurance policy, the IUL, whatever you do, you fund that thing all to utilize tax-free income in your retirement years and still have a death benefit. Meaning you’ll use it through funding it.

You’re not paying it in anymore. You’re done funding it. Now you’re in retirement years. The way it’s set the situator and set up, and I’m not a financial advisor, although I work very closely with them. They have it where you get distributions from your life insurance policy that you’ve already pre-funded and then you live off of. And then when you die, your death benefit pays off what you use as a loan tax free. this difference still go to your heirs. Same thing. You funded your

your mortgage, you funded this property, you pre-funded it. Now you’re in retirement years, you can now take distributions. And then after you pass, the property still goes to your kids, pays off your loan because you took the funds tax free. And the difference still staying with your kids. And life insurance will be the death benefits staying with your kids. that’s exactly, that’s a perfect analogy. That’s exactly what the product is. It’s another, this is why

with my team, we do also encourage for sure, a Ford mortgage. Definitely buy your house in your 20s and 30s so you can have this retirement vehicle called the Reverse in your 60s and 70s. Do you see what I’m saying?

Stephen S. (17:44.224)
Right. 100 % Yeah, it makes total sense. Now, so what what got you into doing this from the last thing that you were doing? Like, when did you hear about it? And what was that moment where you were like, wow, this is such a great product that not a ton of people actually realize is available to them. And what got you excited about about getting into the business in this regard?

Damahco Ousley (18:08.59)
I’m excited about just continuously helping a demographic that I’m most familiar with. So I got, I fell in love, you know, with in-home sales, dealing with directly with my clients and the seniors from final expense or walk-in tubs, walk-in showers and things of that nature. started hearing about it all the entire time where there was asking, you know, even a final expense client asking what, what is this thing called reverse mortgage? I see it all the time. This gentleman on TV, a famous actor, Tom Selig talks about it all the time.

Stephen S. (18:14.421)
Hmm.

Damahco Ousley (18:39.222)
They asked me about it. And at that time, I didn’t know anything about it. You know, I didn’t know anything, you know, what to say. It wasn’t until the walk-in tub area where we home modification where they’re really trying to revamp the whole home so that way they can live in their home after a major fall and things of that nature. And so I did some research and I and I did more and more research and the whole time I’m looking for the catch.

the entire time I’m looking for the downside because that’s all I’ve been told. You don’t get it because it’s a cash, you don’t get it. Well, the FHA got involved in 1988. that immediately made me say, well, it can’t be a scam or anything, know, proprietary lending in that way. And so, or predatory lending. So I was like, hmm, well, that’s good. And so then I was like, well, how does it work? Well, they don’t.

Max out like a traditional HELOC, they’ll take out 80 % of your home’s value and can give it to you in the line of credit, call it due, have monthly payments, things of that nature. Reverse goes up, we go up to probably about 50, 60 % depending on your age. So there’s plenty of equity there to work with, because we’re only gonna do a max loan limit, principal limit of about, just say 50%. So once I started realizing, okay, so they can use this funds, they can do their home remodel.

and they can still live in the house and own their house and they just pay the property tax and homeowners insurance? Yeah. So what happens after they die? Well, kids still get it and then they usually call the realtor. The realtor sells it, pays off what mom and dad used, and the kids keep the difference. Just like you guys. I’m asking what’s the catch?

It’s not necessarily a catch. mean, there’s closing costs. There’s everything is normal. It’s the closing cost is about equivalent to a purchase. The difference is there is FHA insurance costs that’s built in. But that allows for those protections. it’s just, again, it goes back to your understanding of how the life insurance works or even think of a term policy called the return of premium. Okay. And you pay into something.

Stephen S. (20:48.341)
Mm-hmm.

Damahco Ousley (20:50.668)
and you’re expecting to use it in your retirement years. You pay into your IRA all your years and you expect to use it, utilize it without surrendering your IRA in your retirement years. You pay into your 401k. You expect to use it in your retirement years. So just like your home. And two thirds of people’s wealth is tied up in their home. And so for them to get through retirement safely, they got to figure out how to tap into it and take a look at it.

Stephen S. (21:18.026)
you bet. That’s awesome and great great information and we appreciate it a ton. Super interesting product to me personally obviously I got a few years before I could use one myself but if anyone wants to connect with you learn more about you or what you’re working on where should they go for that?

Damahco Ousley (21:29.474)
Absolutely.

Damahco Ousley (21:36.024)
Well, you can find me on Facebook, Instagram, you can just use my name and it’s spelled D-A-M-A-H-C-O underscore Ousley O-U-S as in Sam L-E-Y. And that’s on Instagram, Facebook, you can kind of hit me with that way. But themortgageforseniors.com is another good place where you can find me. Themortgageforseniors.com.

because that’s exactly what it is. This is a product strictly for seniors. It’s like going to the movie theaters and saying, no, no, no, I don’t want the senior discount. I want to pay full price, you know, and it’s of silly, right? If you’re a senior, get the senior discount. Well, this is a mortgage strictly for seniors to where real quick, I’ll touch on the purchase. So if a senior needs to right size or move into a proper house, they got stairs or whatever, and they’re selling their house and they’re like, well, I can get 200,000 for my house and

And, I can’t find any house around here, you know, for $200,000. But the right house they need to move into is maybe a $400,000 house. I always tell them, said, well, you don’t want a mortgage payment. You don’t mind having a mortgage, is that right? You just don’t want a mortgage payment. That’s fine. Yeah. I didn’t know the difference, you know? Well, how about you sell your house, put down that $200,000 on this $400,000 house. And then I’ll step in and finance the difference through the reverse for purchase. And then you still live the rest of your life.

Stephen S. (23:01.633)
right.

Damahco Ousley (23:03.17)
with no mortgage payment for the rest of your life. And so it’s like, it’s a no brainer. So if you’re in Denver, you’re trying to get to Florida, you’re in Florida, you’re trying to get up to Maine, you’re in New York, you’re trying to get to Texas, and the house prices are different. You’re trying get over to Arizona. The reverse for purchase is perfect. So go ahead and sell that house that’s not the perfect house for you and contact me and we can finance the difference. Again, I’m with Fairway Mortgage, themortgageforseniors.com, DeMarcoOusley.

Stephen S. (23:07.106)
You bet.

Stephen S. (23:32.07)
There you go. Go connect with them for more, y’all. If you’re in that demographic and you’re somebody who can help. Outside of that, hope that you enjoyed the show here today and we will see you in the next episode. Thanks again for being here, Tomako.

Damahco Ousley (23:44.77)
Thank you, my friend.