Unlock the Hidden Benefits of Reverse Mortgages: A Comprehensive Guide

Stephen S. (00:00.941)
Welcome back to the real estate pros podcast or welcome to the podcast This is Stephen Schmidt your host and I am here today with Michael Banner and today we are going to talk about several different things but specifically we’re going to highlight on a somewhat little known product in the mortgage industry which Michael is a 40 plus year veteran of And we’re going to talk about purchase reverse mortgages

as well as Michael’s passion for helping Americans prepare for longer lifespans so they don’t end up broke by the time they’re retired. So at Investor Fuel, we help real estate investors, service providers, and real estate entrepreneurs, two to five extra businesses to allow them to build the businesses they’ve always wanted, to allow them to live the lives they’ve always dreamed up. So with that being said, Michael, thanks so much for being on and welcome to the show.

Michael L Banner (00:52.35)
I’m just so glad to be here, Stephen, as preparation for being here, I listened to a lot of your podcasts and as a mortgage dinosaur, just loved every one of them.

Stephen S. (01:04.299)
Glad to hear that. Well, we’re super excited to have you on and to talk about this topic today. I know as we were sharing a little bit in the beginning, you’ve got a really big passion in your heart to help people that are going to be living longer actually be able to enjoy that life. So tell us a little bit about your background and what got you into the real estate industry in the beginning and then kind of what you’re passionate about now and today and in today’s climate.

Michael L Banner (01:29.834)
I appreciate it. I got into being a mortgage person in the early 1980s. you know, it was just it was a great time. was a fun time. Don’t laugh. when I got in two years after I went into business, Jimmy Carter became president and fixed rates were 18 percent in Florida. They were 21 percent in Georgia. So I laugh now when people complain that they’re in the sixes. I’ve been through the rough times, but almost 20 years ago,

One of my favorite relatives ever called me up and she’s in her 90s now and still with us and said, Michael, I need a reverse mortgage. And at that point, I was the president of our family, father and son mortgage company licensed in a few states. And and I actually said to her, isn’t that that terrible mortgage where they take your house and that and.

My company was an FHA lender and I still said that with 20 years experience. Stephen, you might have to edit this out, but she called me a Jewish bad name. She said, Schmuck, you need to look into this because no, they don’t take your house. I went, So I did my first mortgage, my first reverse mortgage with Anne Iris, and it had a staggering effect on her life. And it’s kind of had.

a staggering effect on my life. went, wow, why would one of my relatives need to take a reverse mortgage? And we’re going back 20 years. And when I looked into it and looked into reverse mortgages, I saw that at that point, the greatest generation, which is my favorite generation of all time, you those are the World War Two generation. And a lot of people think that’s just a nickname, the greatest generation. But it’s not. They are and always will be the greatest generation.

that they had only made one mistake in life. And what was that mistake? They lived too long. They really didn’t plan on living to be in their 80s and 90s. When they retired in their 60s, know, average lifespan was in their early 70s. So many of them had just outlived their savings. And it was just unbelievable. Quality people, the best parents in the world, the best veterans in the world who saved America.

Michael L Banner (03:52.172)
and they just live too long. And the reverse mortgage touched my heart as a product that could help that generation have a higher quality of life by using their equity that they had built up in their home by tapping into that equity, yet not having any related debt service while they were still alive. Because in the traditional reverse mortgage, although we’re here today to talk about the purchase reverse mortgage,

the traditional reverse mortgage is a refinance for people that are equity rich and cash poor. And I kind of became addicted to it at that point and now bring us 20 years forward. And there’s only a few hundred thousand of the greatest generation left in America. That generation is going not be with us. Most of them are in their mid 90s right now. And but you have the generations that

succeeded that. Also great generations. again, as they prepare to live longer and longer, they realize that they’re running out of money a little too soon. So reverse mortgages became the passion for me. Then in 2009, as part of HERA, the Housing Economic Recovery Act that President Bush brought to Congress and President Obama signed into law.

Stephen S. (05:01.389)
Hmm.

Michael L Banner (05:16.046)
You know, that was the act that was going to save America in early 2009 from from going down the tubes. Well, we know how what a great job that did based on the real estate market of 2009 through 2012. But part of HERA, part of that seven thousand page bill was 11 pages that created a specific reverse mortgage for people 62 years old and above to purchase a home without the obligation.

of a principal and interest payment for as long as they lived in that home for the rest of their lives. And at that point, real estate experts, economic experts, one Nobel Prize winner said, oh, my God, this is going to change the way America retires. And here it is. You know, that was in 2009. Here it is 16 years later. And it has not done that. In fact, it has failed miserably. And I’m one of the.

Reverse mortgage people, sometimes my mortgage brothers and sisters get mad at me when I say this. It’s because the mortgage world, specifically the reverse mortgage world, has done such a terrible job at conveying this product, teaching this product to the two million realtors that sell all the houses in this great country. We just haven’t got the message across. And there’s a handful of us that have been trying, but not many of us. But it is a life changing product.

And then through that metamorphosis of always taking care of people 62 and above, I got old, Steve. I don’t know when that happened. It probably happened sometime in the last 20 years. And now I am one of those people. So the passion went further when I started my podcast, 62 Who Knew, that is not about reverse mortgages, but about the double edged sword of longer life spans. That was a long answer. Sorry about that.

Stephen S. (07:10.739)
No, not at all. was great. just just for people that are listening that might be newer to this world, let’s say, can you just in a simplified way explain like the difference between a reverse mortgage and a purchase reverse mortgage?

Michael L Banner (07:13.244)
just ask.

Michael L Banner (07:26.382)
Okay, the purchase reverse mortgage, can use existing money that you have to all our relative brothers and sisters out there. Usually the money from your exiting home. Like I live in Florida, which is the retirement capital of the United States of America. I think the last time I checked the average age of a person in Florida was Stephen, I think it was somewhere around 112. I’m not sure, but it’s, you know, it’s up there. Well, you can use those funds from your exiting home.

wherever you’re moving to as the down payment. And then you can add more purchasing power to that. In fact, up to 40 percent. So by doing that, you are now let’s just say you sold your house in Pennsylvania for, you know, five hundred thousand dollars, which is a great thing. You know, but you owed a hundred grand on that house. OK, so you netted four hundred and now you’re moving. Let’s use my area.

the Tampa Bay area of Florida, which is a beautiful area like many areas of Arizona and the Carolinas and places like that. But we’ll use Florida as an example. And you want to live in a certain area and you want to have a certain quality of home and your favorite real estate agent or your real estate agent that you just met has to deliver that terrible message that is being delivered in real estate companies all over the world every minute of the day. I’m so sorry, but thanks to inflation.

the $400,000 that you have isn’t gonna quite buy you your dream retirement home. This isn’t 10 years ago. It’s every $400,000 house from 10 years ago is 600,000. Every $500,000 house is seven. And suddenly this 62, 65, 68 year old client’s gotta go, oh wow. You know, I dreamed of moving to Florida or wherever they’re moving while I was shoveling snow in Michigan or.

or Pennsylvania for all these years and well, I guess I’m not going to get my dream retirement home. I’ll get a nice home, but it’s not going to be everything that we thought of. Now, of course, you have two other options. You can get a mortgage. Well, I really didn’t want a mortgage payment during retirement. Well, you can go into your portfolio, take out an extra couple of hundred thousand.

Michael L Banner (09:52.782)
as if 98 % of America has a portfolio with couple hundred thousand. So that’s not usually a good idea. Or you could get a purchase reverse mortgage, which would allow you, I’m gonna use the age of 65, because our loan amounts depend on age. If you have 400,000, multiply that 400,000 by 140%. That’s 160 grand. You could take your $400,000. I can now show you a-

$560,000 house. You’ll put 400 grand down. The purchase reverse mortgage lender will come to closing with 160. You now have a $560,000 house, which is probably what you dreamt of with the right amenities, the pool, the big kitchen, the spillover hot tub. But you still have no payment, no principal and interest payment for the rest of your life.

That’s the purchase. Whereas conversely, the traditional is for that person living somewhere now. And they’re very happy. And they paid $200,000 for their house 20 years ago. Now they owe $100,000. But it’s worth $600,000. Isn’t that great? They have a half a million dollars in equity. What a country. They haven’t taken a cruise in a year.

They have to wait for their pension and social security checks before they go to the drug store to get their pharmaceuticals. Maybe they haven’t seen their grandchildren as much as they want because they’re equity rich, but cash poor, which is most of America today at any age. The traditional reverse mortgage says we can go in and you can tap into that equity. You’re not buying a house. You love your house. You want to stay in your house for the rest of your life. Let’s get you some equity out.

so you can start living the quality of life that you thought you’d live in your 60s, 70s, and 80s, but again, without obligating you to a principal and interest payment for as long as you live. So that’s the two difference. Both products are tapping into equity, but the purchase is using that money to buy a more expensive home so you can live in your dream retirement home.

Stephen S. (12:12.877)
That’s a great explanation.

Michael L Banner (12:15.842)
Thank you.

Stephen S. (12:18.005)
So when you are…

Helping the clients that you get are you doing a lot of those that are coming to Florida to retire specifically? Is that most of your business?

Michael L Banner (12:30.894)
Oh yeah, yeah. I mean, of course we’re skewed down here. I mean, we’re Florida. This is where people dream of retiring. But yeah, and the look on their face when their favorite real estate agent, you know, it says, well, you have 500,000. My God, that’s incredible. I six years ago, that would have bought you a mini McMansion. Today, you know, it gets you a house that hasn’t been remodeled in 20 years.

Stephen S. (12:37.835)
Yeah. Right.

Stephen S. (12:53.484)
Right.

Michael L Banner (12:58.218)
And that’s sad to say, Stephen, again, in this great country. I never thought I’d live long enough to say that a half a million dollars wouldn’t get somebody their dream retirement home. But it just does. It does it in Florida. It does it in the Carolinas. It doesn’t in Arizona. My God, in California, you probably get somebody’s storage garage for 50000. But yes, so it’s a very timely and relevant product that’s been ignored. But I think its time has come thanks to inflation.

Stephen S. (12:58.295)
Yeah.

Stephen S. (13:02.049)
Right.

Stephen S. (13:18.102)
Right.

Stephen S. (13:26.101)
Right. What do you think needs to happen in order for people to find out more about this product before it actually becomes something that most people know about?

Michael L Banner (13:38.638)
Well, the reverse mortgage world, and boy, am I going to get a lot of bad emails on LinkedIn after I say this. The reverse mortgage world has to do a much better job at dealing with real estate agents because I am a dinosaur mortgage person. I have had a very nice life thanks to my real estate agents. I’m a purchase guy. Now, every three to five years, do I love doing those refis? yeah.

That’s when I buy jet skis and I go to Vegas more often. And yeah, it’s so much fun when rates go down and you can refi the world. But professional mortgage people know that if you’re going to make a great living and help the most amount of people, you’re with realtors, you’re doing purchases. the reverse mortgage business has never been good at purchases. Your average reverse mortgage person who, I got to tell you, Stephen, is a wonderful, wonderful human being.

ex-social worker, ex-school teacher, burnt out realtor, burnt out mortgage person. They entered this with a whole heart, reverse mortgages, to help people, to help people 62 and above have a higher quality of life. But as you know, and all your listeners know, a refi and a purchase are two different worlds. You know, I’m refinancing grandma and grandpa, and we’re scheduled to close on Wednesday, and I call them and…

or my title company or my processor calls them and says, I’m so sorry, there’s a slight delay with the survey and we’re not going to close on Wednesday. Can we close on Thursday? Well, in the reverse mortgage refi world, the client goes, well, of course, I mean, I live here. What’s the difference? You and I know in the purchase world, you’re going to miss your contract date. The movers are hired. The new electric company is the kids are changing school. And how about the poor seller that needs his money that day?

to go buy another house. The reverse mortgage world has never grasped, God, am I gonna get in trouble saying this, how important it is to meet that contract date. You’re ruining lives if you don’t close on time. And when you do refis for a living, whether you’re refi a conventional mortgage or reverse, you’re helping a lot of people, you’re saving the money, but the pressure isn’t there to make that contract date.

Michael L Banner (16:06.786)
to get that letter of explanation, to get that last bank statement. Quite frankly, to keep your realtor happy. So he keeps sending you more loans, because that’s how you make a living. And the reverse mortgage world has never wrapped their arms around that urgency. Except for a small group of dinosaurs like me that do a really good job at it. And that, you know, so the way I want to change this is by coming on podcasts like yours. So, I mean, I know you have realtor listeners right now that are going,

the hell is he talking about purchase reverse mortgage? I’ve never even heard of this. Yet it’s been here for 15 years.

Stephen S. (16:45.721)
And what do you think would change for people if their real estate pros actually were utilizing this more often? Like, what do you think that would actually change?

Michael L Banner (16:58.476)
Well, again, since we’re talking about my age group, it’s a very different type of satisfaction. Number one, it’s the satisfaction for that age group that they have worked as I have and my friends and my cousins, you know, the last 30, 40 years to provide for our family and do well. And now we thought we were coming to a point in life where we’ll retire. We may not downsize. We might right size. You we downsize upside.

to live in that place that we’re going to be happy in and to think that after 30 or 40 years of working that hard that, well, sorry, you you’re just because of inflation, you’re not going to have that dream retirement home. And of course, in our market today, Steven, just the last six months to a year was so used to this being a seller’s market for years, not a seller’s market anymore. In fact, in some incredible areas, values are going down. So suddenly, mom and dad,

Grandma and Grandpa, not only are they coming, can they not afford their dream retirement home after four decades of working, they just sold their previous home for a lot less than they thought they would when they started planning retirement a couple of years ago. So I think the direct answer to how is it going to change lives for the people that utilize it, it’s just going to make them happy during retirement because they’re going to have a beautiful home and no payment.

Stephen S. (18:26.381)
Sure. Do you think the reason that more people don’t know about this product is because it was suppressed or was it just something that got missed and it’s an ignorance factor? What do you think is the real kicker behind it?

Michael L Banner (18:37.186)
Well, there’s, there’s a, wow, you put that question great. There is an ignorant factor, but it did get suppressed and it did get, well, because the two words reverse mortgage, kind of how you feel about it personally, please feel free to tell me. They usually strike fear in the average consumer, realtor, financial planner world. The reverse mortgage has been around since the early sixties.

Stephen S. (18:46.496)
Why is that?

Michael L Banner (19:06.222)
People don’t realize that it’s been around 60 plus years. They think it’s like a 21st century kind of thing. And I got to tell you that the first 30 or 40 years, it was a really bad product. It was an overpriced product of last resort. mean, oh my, I’m not talking about the purchase that didn’t come to us until 16 years ago. I’m talking about the regular reverse mortgage. Oh my God. Mom and dad are broke. They can’t even, you know,

They’re having trouble going to get their medicine at the drugstore or going shopping. I guess we’ll get one of those damn reverse mortgages. And you know what? They were a bad product. They were overpriced. The closing costs were too high. I got to tell you right now, that wasn’t the greed of the mortgage world. That was HUD and FHA who regulate reverse mortgages. They didn’t ever really plan on this product doing so well.

It just was a terrible product. It had people losing their homes before they died, which, by the way, cannot happen in today’s reverse mortgage. It had people outliving their mortgage. I’m sorry. We lent you this money for 20 years. Statistics said you were supposed to die. The hell happened? Stephen, you didn’t die. Now your mortgage is due. Excuse me. I took this in my 60s. Now I’m in my 80s.

and I’m getting hit with a demand letter from a mortgage company. So the words reverse mortgage do not have a good image to people. And that’s probably one of the reasons why when somebody goes, hey, do you ever hear about the purchase reverse mortgage that your average real estate agent or consumer goes, I don’t want to hear about it. My grandmother lost their house. But that was yesteryears reverse mortgage. The reverse mortgage has been a great product now.

I’d have to say for a good 15 to 20 years. 40 years of bad history, 15 or 20 years of good history. There it is.

Stephen S. (21:12.781)
Right. So now, when would you, when would you utilize this? Obviously, you’ve got to be a certain age to qualify things along those lines, but why would somebody do this versus something like a HELOC, let’s say?

Michael L Banner (21:23.566)
It’s a

Michael L Banner (21:29.038)
Well, now you’re talking about traditional because a HELOC would be a refinance. Well, obvious reason. A HELOC comes with payments. A lot of times, you know, and I didn’t even learn this till I’m embarrassed to say 20 years ago of my 40 year career. I’m broke. I’m not broke. I need money. So I go out and borrow money. Well, the only reason I needed money was because I couldn’t meet my monthly obligations.

Hey, let’s go borrow money and increase those monthly obligations. Feels good for a little while until it smacks you in the face. It’s kind of like the principle. It’s the principle of consumption, which I learned about later in life. I can’t afford a 70 or an $80,000 car. I’m talking personally now. But if I finance it over seven years, I can. But now the $80,000 car is a $110,000 car when I get that payback. Did I help myself? Well,

Probably because I like getting in my car every morning. Did I help myself financially? No, I didn’t. Well, it’s kind of the same thing. HELOCs are wonderful things, but they come with a payment. And if you already need the money, why would you want a payment? But people don’t think like that. They really don’t. A HELOC will, let me for my HELOC people out there, a HELOC will lend you more money than a reverse mortgage.

Key Lock’s closing course are less, a lot less, but they come with a payment. And at 70 years old, the last thing you want is another payment.

Stephen S. (23:04.077)
Hmm.

Stephen S. (23:12.235)
Yeah, that makes total sense. For sure, yeah, definitely. Yeah, that definitely seems to be the mindset of most folks is if I can’t afford it, I’ll just go make payments on it and pay way more than I otherwise would if I had the cash, for sure. And I know I’ve been guilty of that myself, right, you know, when I was younger, so.

Michael L Banner (23:15.246)
It’s weird when you think about it. Yeah, we need the money. So I’m going to go out and get another payment. What? But that’s, that’s America.

Michael L Banner (23:31.662)
Yeah.

Michael L Banner (23:36.93)
Yeah, the American dream.

Stephen S. (23:38.829)
Definitely, definitely. So what would you say are some challenges that you face in this world?

Michael L Banner (23:45.56)
Well, the challenges in the reverse mortgage world are never ending. And we laugh about it in the industry. mean, sometimes I’m flying somewhere to do a vacation or just to give a class to realtors to teach about the purchase reverse mortgage. And you’re in the airport, you’re there an hour and a half early and you say hello to the person. And go, what do you do for a living? I’m a realtor. what do you do for a living? I work in a factory. I’m a restaurant. What do you do?

I do reverse mortgages. mean, you can literally see the recoil in their, you know, in their face. I don’t want to talk to this guy. So it’s the neverending battle is telling people that today’s reverse mortgage, whether it be the purchase or the refinance, is not the reverse mortgage of 20, 30 and 40 years ago. HUD has taken the program, ripped it apart several times, put it back together to make it into a safe.

products. And that’s a constant challenge.

Stephen S. (24:46.189)
Thank

Well, we are coming up on the end of our scheduled time here together for our recording. But I feel like there’s definitely a lot more juice with the squeeze that we’ve got currently that we could just go on for a lot longer. And I’m sure other people are going to feel the exact same. So where can people find you, learn more about you, what you’re working on? Where should they go for that?

Michael L Banner (25:16.846)
Well, if they would like to learn, if you’re many, many, many real estate agent viewers, if you’d like to learn about purchase reverse mortgage, I am affiliated with one of the best independent mortgage companies in the country, American Pacific Mortgage, licensed in 50 states. So we would be able to help you with your purchase reverse mortgage needs in all 50 states. Please reach out to me at mbannerapmortgage.com.

If you’re a real estate agent and would like to just learn more about the product itself, OK, and how you could offer it, how you could take every 62 year old cash buyer that you have and increase their purchasing power by 40 percent without obligating them to a monthly principal and interest payment. Same email and banner at AP mortgage dot com. But if you’d like to learn about the double edged sword.

of longer lifespans and all the other ways you need to be prepared from long-term care insurance to Medicare to life insurance to annuities to all the other things that you could be doing in your 50s and 60s. So you could get to your 70s 80s and 90s with a high quality of life on that one. Go look at 62 who knew just Google 62 who knew our podcast is on Facebook. Of course YouTube.

Spotify, iHeart, every platform that you can imagine. That’s the one that I hope unlocks a lot of usable advice, practical usable advice to go, hey, he’s right. I don’t have that and I need that. That’s a little more broad strokes for living a higher quality of life to get to 90.

Stephen S. (27:09.565)
Awesome well Michael Banner thanks for joining us and as always y’all we will see you in the next one. Thanks so much for listening.

Michael L Banner (27:16.578)
Thank you, Stephen.