The Truth About Reverse Mortgages Part 1

Speakers: Bruce Hosler, Rob Kanyur, & Jon Gay

[00:00:00] Jon Gay: Welcome back to Protecting and Preserving Wealth. I’m Jon JAG Gay. I’m joined as always by Bruce Hosler of Hosler Wealth Management. Bruce, we’ve got a special guest today. 

[00:00:12] Bruce Hosler: Thank you very much, Jon. We have Rob Kanyur expert in reverse mortgages with Fairway Mortgage. Rob is a great professional in the field of reverse mortgages, and we’re very lucky to have him today.

Welcome, Rob. 

[00:00:25] Rob Kanyur: Oh, thank you Bruce. Glad to be here. 

[00:00:27] Bruce Hosler: I am so happy to have him join us today to talk about reverse mortgages and what you folks should know. Rob, just as we get started here, I’d like to update our listeners on the options for using reverse mortgages, and I wrote about reverse mortgages in my book,

Moving to Tax Free. Rob, today I want to talk about any updates that have happened in the reverse mortgage industry. And how reverse mortgages can be used for financial planning. And in this part one, we’re gonna have a two-part series. So this part one, we’re gonna explore using reverse mortgages to stop making a house payment for people that are in retirement.

So Rob, let me ask you the question to get started. What are the requirements to qualify for a reverse mortgage? 

[00:01:17] Rob Kanyur: The homeowners have to be aged 62 or older in most cases. They have to own the property as their primary residence. If it is a married couple, only one spouse has to be age 62.

Thirdly, they need to have ample equity in the property and, lastly, be able to qualify for the loan, as well as the house has to qualify. 

[00:01:45] Bruce Hosler: Let’s just explore a couple of things there that you said. So first of all, only one spouse has to be 62. That’s a change in the last few years because they would, you would have one spouse that would do it if they were 62, if the other one was below.

So now you have an exception so that if one spouse is 58 and the other one’s 62, we can still get a reverse mortgage. Is that right? 

[00:02:08] Rob Kanyur: Yes. And that you, brought up a great point, Bruce, that was not always the case. That changed literally in, in 2014, so about 10 years ago. A couple would come in to see me and they would say, since you lend more on the older borrower, we’ll leave my younger spouse off of the reverse mortgage so that we can obtain more funds from FHA.

And that turned out to not be so good because if the older spouse predeceased the younger spouse, then the younger spouse was, in many cases, left in a very precarious situation. And that left somewhat of a bad, black eye for the industry. And so FHA, basically came back and said, hey, we need to protect the surviving spouse.

So they put safety features and guardrails in 2014 and then again, 2015, 2017, and 2020, to where now the underage borrower can remain in the home as long as they want, as long as they continue to pay their property taxes, homeowner’s insurance, HOA and maintain and upkeep the home. So that was a huge change in improvement that should have been done, quite frankly, a lot sooner than 2014.

This loan, home equity conversion mortgage, started, it was implemented by FHA in 1989, so a lot of improvements in safety features. The good news about this loan, Bruce, is that it’s safe and secure and insured by FHA, and the bad news about this loan is that it’s safe and secure and insured by FHA (laughter).

So we’ll get more into that as we progress through this. 

[00:03:47] Bruce Hosler: Absolutely. Let’s talk about the two qualifications you talked about. So one is the homeowner has to qualify. Number two, the home has to qualify. What does the homeowner have to do to be able to qualify for a reverse mortgage? 

[00:04:01] Rob Kanyur: Great question.

That was another, feature or mortgagee letter that FHA implemented in 2015, referred to as financial assessment. Prior to April 27th, 2015, a homeowner age 62 or older, literally did not have to qualify from a credit worthiness standpoint. That was another major, had a major impact, on borrowers, homeowners that had a reverse mortgage.

So in April of 2015, FHA implemented financial assessment. To where we’re not credit score driven, we don’t look at debt to income ratios. However, we do a 24 month look back; we run a credit report. Now we do require supporting documentation to show FHA that the borrower can indeed afford to live in the home, whether it be social security, pension, annuity, income, IRA distributions.

We have to show enough income in a clean 24-month history in order for them to obtain a reverse mortgage, which a lot of people, were not a big fan of that were originating these reverse mortgages. But quite frankly, personally, I think it was one of the best things that they ever did and should have done a lot sooner.

[00:05:17] Bruce Hosler: it’s not like they have to have a lot of income to make a house payment, but they have to have enough income to cover the property taxes. The homeowner’s insurance, which homeowner’s insurance is going crazy right now, on the pricing, right? Because of the fires in California, especially here in Arizona and that.

But they have to be able to afford the maintenance. And the property taxes and the insurance. That’s what they’re really looking for. And the other thing I happen to know about is they’re also looking to see if they owe any back taxes. 

[00:05:48] Rob Kanyur: We have a client like that right now, in New Mexico, that has back taxes.

She let me know that, made me aware of that last week. So part of the proceeds from her reverse mortgage will go to get her caught up on her back taxes. So yeah, you bring up a great point there. But yes, we use a residual income calculation to make sure that they have a clean payment history.

We have a lot more flexibility with qualifying the homeowner because as you mentioned, they no longer have a mortgage payment, so we’re not hitting them with a mortgage payment. We’re not credit score driven. We’re credit history driven, and we also look at to make sure that the house qualifies as well.

[00:06:28] Bruce Hosler: Okay, so what is the qualification for the house now? It can’t be like a mobile home that’s on wheels still. I know that, but are there other qualifications that our listeners need to know about for their home to be able to qualify? 

[00:06:40] Rob Kanyur: We bring that up with them in the initial consultation with you, Bruce, and basically it has to be their primary residence, meaning they have to occupy it for six months plus one day out of the year.

it can be a single-family home, town home, Plan Unit Development, which is referred to as a PUD, a double wide manufacturer, which I’ve done, a lot of those up in northern Arizona, on a permanent foundation with the fixtures. 

[00:07:03] Bruce Hosler: So if they have the stem wall up, that’s what they have to have.

[00:07:06] Rob Kanyur: Yeah, and we are doing one right now for a client in Maricopa where it’s required that they have a engineer cert completed as well. There’s some additional requirements for manufactured, condos are a hot commodity right now, or a lot of our clients are looking to do a reverse mortgage on a condo, age in place, or they want to purchase a condo in retirement.

We have to make sure that it is on the FHA approved condo list. My company here at Fairway, if it’s not on the approved list, we, and we’re working on a couple cases right now, we can get it approved within 30 to 60 days, which is fairly quickly when you’re dealing with a condo project and FHA.

[00:07:46] Bruce Hosler: Yeah. Yeah, Jon, I know you have a question for, Rob, why don’t you go ahead with your question. 

[00:07:51] Jon Gay: You just mentioned not being on that FHA list. Rob, what other challenges do you run into when you’re trying to help people secure a reverse mortgage? 

[00:07:59] Rob Kanyur: Their equity position can be a challenge.

As far as, making sure they have at least 50% equity in the property. We do have some clients that have less than 50% equity in the property that’s referred to as a shortfall, and they’ll actually come in with funds at closing to complete their reverse mortgage transaction.

[00:08:16] Bruce Hosler: So if they have other investments, they can pay down the mortgage, essentially. It means when you close, they pay down that mortgage a little bit, so they get within your numbers of 50% or 40% or 30%. loan to value, right? 

[00:08:31] Rob Kanyur: Correct. Yeah. I say probably one out of every five cases. they’ll come in with funds at closing to pay down the equity position to complete this because it makes sense for them to do that.

If they’re eliminating a $1,500 a month mortgage payment, they’re gonna cash flow by 15 to $20,000 a year. And if that’s their forever home, then we look at the numbers and, make sure that they do plan on that being their forever home. And then the long-term cost is gonna outweigh them continuing to make a mortgage payment for the next 30 years.

[00:09:01] Bruce Hosler: That’s very great that you bring that up, Rob. That in my book, Moving to Tax Free is the first topic that I talk about is I see the reverse mortgage as a great tool for people that are in retirement and still have a mortgage payment. So think about it. Let’s say they are making a $2,000 a month payment.

And after that money, the $2,000 a month is freed up. That’s $2,000 a month that’s tax free because they have been paying taxes on that and using it to pay their mortgage, but they’re not really getting a deduction because the standard deduction is so high, it’s not really helping them. So this $2,000 is tax free income to them now.

Sometimes this can help keep them in order to make the $2,000 a month payment, they might be taking distributions out of their IRA and increasing their income, subjecting themselves to higher income taxes. And number two, it could be affecting them with what’s called IRMAA. Income related monthly adjustment amount. That is the Medicare premium amount that you have taken out of your social security or you have to pay.

So now they have IRMAA penalties because their income’s so high, because they have to make the payment and take distributions out of their IRA. If we use a reverse mortgage, they don’t take the distributions out of the IRA, they don’t fall into the IRMAA penalties and the difference they could have as tax-free income to spend on travel, on visiting the grandkids, home improvements or other fun things like this. For some people a reverse mortgage can be an amazing financial planning tool. 

[00:10:40] Jon Gay: Bruce, I’m really glad you said that because Rob, I know there’s been a lot of negative information and sometimes, to be honest, false information about reverse mortgages.

What are some of the incorrect things that you’ve heard or clients have come to you with misperceived notions? 

[00:10:58] Rob Kanyur: That’s a great question, Jon. There’s four or five different objections to a home equity conversion mortgage, the reverse mortgage insured by FHA, which has been around since 1989.

We have to bear in mind that the reverse mortgage, was born- the first reverse mortgage in this country was done in 1961, in the town of Portland, Maine. And from 1961 to 1987. in many cases, or in some cases, I don’t know the actual numbers. But at the end, when the last surviving spouse moved outta the house or passed away in some cases, the bank did take the house away.

[00:11:32] Bruce Hosler: Yeah, that was terrible. 

[00:11:34] Rob Kanyur: So 37 years later, that’s the number one objection or concern is that: I’m gonna lose my house. The bank owns the home and takes the house away. Sure. At the end it’s still on the internet. It’s still on Google. It’s still horror stories about… 

[00:11:46] Jon Gay: Well if it’s on the internet, it must be true, right Rob?

[00:11:49] Rob Kanyur: That’s what Abraham Lincoln said (laughter). But the only way someone can lose their house with a reverse mortgage is the same way that they can lose their house with a traditional mortgage or no mortgage. You have to pay your property taxes. You have to pay your homeowner’s insurance. We have some clients that have free and clear homes that aren’t carrying homeowner’s insurance.

You have to carry homeowner’s insurance, pay homeowner’s insurance, pay your homeowner’s associations dues if you’re lucky enough to live in an HOA, maintain and upkeep the home. And as long as you do that, the loan does not become payable and due until you reach age 150.

[00:12:21] Jon Gay: Wow.

[00:12:22] Rob Kanyur: So it, it really is a failsafe program.

So that’s the number one objection is fear of loss. I’m gonna lose the home, the bank’s gonna take the house away at the end. That was my parents’ concern when we did their reverse mortgage back in 2016 and I insured them. I go, no, that is not the case. That hasn’t been the case since 1989 when that FHA took the program over.

The second concern or objection, Jon, is that these are too expensive. These are a rip off. These caught an arm and a leg to do, and they are more expensive for a reason. There are 20 different ways that you can utilize reverse mortgage as a coordinated strategy in retirement. Dr. Wade Pfau who’s the top retirement researcher in the nation.

Who’s been studying, done studies and research on this for the last 10 years. Basically said it’s cost versus benefit. It’s not the cost; it’s the benefit and the benefit of this loan, the benefit of a reverse mortgage far outweighs the cost. In fact, he went on to further say that the cost of a reverse mortgage is not doing one at all.

So cost versus benefit. So if they plan on this being their forever home, yes, it’s gonna cost them three to four times more than a traditional mortgage or a home equity line of credit that doesn’t cost anything. But those are dangerous and risky in retirement based on what retirement researchers, are, finding, in their studies, that they’ve done with, Dr.

Wade Pfau, Dr. Barry Sacks Harold Devinsky, Shaun Pfeiffer, the list goes on of the studies and research done out of Texas Tech Center of Retirement Research, Boston College, and most recently Ohio State University. 

[00:13:56] Jon Gay: I believe you mean the Ohio State University?

[00:13:58] Rob Kanyur: Excuse me. The Yes,

[00:14:00] Jon Gay: I said sarcastically as a Michigan fan.

[00:14:02] Rob Kanyur: There you go. I’m with you on Michigan. Thirdly is that the kids get left holding the bag, that the kids are, left with, nothing or no equity and, that’s simply not the case. This is a nonrecourse loan with no personal liability. So the most important thing in retirement, and Bruce, correct me if I’m wrong, is cash flow, portfolio longevity, paying less in taxes, and leaving being a larger legacy to the heirs.

So 95% of the time, including with my own parents, the reverse mortgage holder at the end, is going to leave a larger legacy for the heirs in many cases. Mom and Dad’s net worth from 2016 to 2022 was $250,000 higher by them taking out the reverse mortgage early when they didn’t need it or want they want.

It was a want-based loan of first resort, versus a loan of last resort. It’s more efficient to leave the kids cash or a life insurance policy at the end than it is to leave equity and if we have a declining market where values are going down. 

[00:15:06] Bruce Hosler: Oh, you mean what’s going on right now? Or kind maybe, or maybe kinda staying just level?

Yeah. And the stock market. The stock market’s going up? 

[00:15:14] Jon Gay: As we record this as a note on June 24th, 2025. 

[00:15:17] Rob Kanyur: Exactly. And it, so it is inefficient, and this is not coming from me, this is coming from top financial advisors like Bruce and his colleagues and retirement planning professors that don’t have a horse in the race per se.

That it is not efficient to leave equity to the children. It’s more efficient to leave them cash or a life insurance policy, so on and so forth. So those are the three main objections. And then the fourth would be, fear. And, what is fear? Fear of the unknown. I just want to get facts from someone that actually knows about these, that has done these, that teaches on the subject.

I teach continuing education too. CFPs and two real estate, agents. I was just down in Tucson last week teaching CE to realtors down there with regard to FEAR: false evidence appearing real. They’re getting their information from erroneous resources. I won’t mention any names of a lot of, top, retirement radio show hosts that are syndicated across the nation that may have initials DR that are giving out inaccurate information they do not understand.

The importance of leveraging home equity in retirement. 43% of homeowners age 62 and older are still making a mortgage payment. Social security check comes in, mortgage payment goes out, social security check comes in, mortgage payment goes out. So what do they do? They call up Bruce and they, pull more money out, on top of their RMDs, their required minimum distributions. And they’re gonna run out of money sooner, in most cases, by not leveraging a portion of their equity in the property. 

[00:16:57] Bruce Hosler: it’s just lazy money is what it is., It is just lazy money. Rob, this has been a great conversation. As a tax guy, I am always interested in the tax angle, but I’m gonna put my next question into our part two series about paying off the reverse mortgage line or loan and the tax benefits for that.

We have a second, part two, folks that is coming up. I’m very excited about it. Rob, thank you for joining us today. 

[00:17:24] Jon Gay: Rob, you mentioned educating. That’s why we’re talking to you today. If one of our listeners wants to talk to you, how do they best reach you? 

[00:17:30] Rob Kanyur: best way to reach me is via email or cell phone.

my email is RobK@home.com. Or they can call, (602) 361 1587. my website is www.reverserob.com. 

[00:17:49] Jon Gay: And we’re gonna put your contact information in our show notes, as we always do with Bruce’s. What are the best ways to reach you at Hosler Wealth Management? 

[00:17:55] Bruce Hosler: Hey, you can reach us folks, at https://hoslerwm.com, or call either one of our offices in Prescott (928) 778-7666, or in Scottsdale (480) 994-7342. 

[00:18:10] Jon Gay: Bruce, you teased the tax piece of this. I’m looking forward to starting the second part of our conversation. With that, we’ll talk to you both next time. 

[00:18:16] Bruce Hosler: Thank you.

[00:18:17] Rob Kanyur: Thank you.

[00:18:18] Disclosure: 

Investment advisory services are offered through Mutual Advisors, LLC DBA Hosler Wealth Management, a SEC registered investment adviser. Securities are offered through Mutual Securities, Inc., member FINRA/SIPC. Mutual Advisors, LLC and Mutual Securities, Inc. (collectively “Mutual Group”) are affiliated companies. Forward-looking commentary should not be misconstrued as investment or financial advice. The advisor associated with this podcast is not monitored for comments and any comments should be given directly to the office at the contact information specified.

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