Ades: Hello, I’m Brian Ades and welcome back to primetime. This is a city watch series about getting older. In each episode were going to introduce you to experts who deal with the issues that boomers and the generation before them faced every day. I believe that to make good decisions you need good information and that’s what this series will attempt to provide. In this segment we have with us Warren Buck. A former high school teacher, financial planner, and advocate for senior care, and an expert in reverse mortgages.
Ades: Tell me what it is that you do.
Buck: In a nutshell, I’m trying to help seniors use some of the available equity in their home to supplement the income that they have been losing or to cover any expenses. I’m also connecting them to other services that may be a benefit to them, whether it’s healthcare or medical needs.
Ades: What would you say the determining factor is that a senior would need to make that decision. That they need to tap into something like that.
Buck: Well what I’m seeing more and more, people are relying on credit cards or relying on their home equity or selling their investments currently and when they’re depreciating their assets to cover their expenses, that’s the determining factor.
Ades: So essentially what happens in a reverse mortgage is the bank is granting payments monthly for 20-30 year periods depending on the equity in the home. Is there a limit to how much money can be given?
Buck: Ok, well let me be more clear about that. You’ve got the equity in your home as a homeowner your pledging to the bank part of the equity of your home so that you can utilize that, and you can utilize it as you see fit. So you can get part of the money up front or multi-payments. Now, when the loan is done that’s when you decide to pay back that portion of the loan.
Ades: When the loan is done.
Buck: When the loan is done. When you sell the property, when you change towns, or when you pass away.
Ades: Is the funds you receive monthly taxable?
Buck: If you receive it its tax free.
Ades: Tax free. That’s a great gain, a positive thing for people.
Buck: So rather than selling something that may have more growth to it, or rather than selling something that’s going to cause you a taxable debt. You can withdraw some of these funds and it comes to you tax free. Now, if you invest that money and that money is taxable and many people don’t realize that.
Ades: You were a teacher. What were you teaching? What were your topics?
Buck: I taught chemistry and physics to incoming 9th graders at the high school system’s here in Los Angeles.
Ades: Were you discouraged by the Los Angeles school systems that prompted you to get into another profession?
Buck: I was having a difficult time making ends meet each year for my family. It pays well but your only working half the year and you don’t have time to get another job. So what actually lead me into being a reverse mortgage specialist is I saw it happen to my parents. Back when I was teaching I started to look at it.
Ades: So you went from being a teacher into a financial planner?
Buck: Into financial planning yes. My father had actually come down with Alzheimer’s he was diagnosed with Alzheimer’s and I needed to have the flexibility in my job to leave whenever I wanted to. As a teacher I couldn’t do that. I had seen the reverse mortgage I looked at it, I researched it and I felt that it was something I could do very well.
Ades: Are you the only child? Did you have siblings involved?
Buck: I have a sibling but she’s not involved. Usually in every family you have multiple siblings but only one is taking control of matters, the others sort of let things go.
Ades: It seems like you would have done this early when reverse mortgages haven’t been around that long. Have they been around that long?
Buck: That’s a misconception. The reverse mortgages started in the 1960’s. A PE coach saw that a grandmother in need had to have money, they didn’t have any family. He decided to give her a mortgage, take the money out in his name and he paid her income for that.
Ades: Wouldn’t that be a cause for concern for a lot of people and an opportunity to take advantage of seniors?
Buck: There was an opportunity and there was scandals with insurance companies that used to write reverse mortgages before 1987 and yes they did take advantage. Like any loan they would give back the principal and interest which makes sense but it was only the loan before 1987 which they would get some of the shared equity that grew in the property and that’s kind of absurd don’t you think?
Ades: Right, well I think that’s everyone’s concern that that’s still going on even though it was regulated.
Buck: Well in 1978 this was viewed with hud, congress, there were acts of congress that were signed, acts of laws that were signed, endorsed by the president at the time. It’s firmly regulated by the housing and urban development and it’s insured by the federal housing administration.