Business Innovators Radio - Interview with Brian Wilbur Co-Founder of Bingo Reverse Mortgage

Episode Date: August 29, 2024

Brian Wilbur is a dedicated marine with a passion for financial education and strategic planning. His professional journey began in the insurance industry, where he honed his skills and expertise. However, it was his discovery of reverse mortgages that truly captivated him. Brian fell in love with the product and its potential to empower clients to achieve their financial goals.Currently, Brian thrives on educating realtors and financial advisors about the strategic utilization of reverse mortgages. He believes in the transformative impact these financial tools can have on clients’ lives, guiding professionals to effectively integrate them into comprehensive financial strategies.Outside of his professional endeavors, Brian loves 4-wheeling, camping, sailing, and being with his family.Learn More: https://www.BingoReverseMortgage.comElite Real Estate Leaders Podcasthttps://businessinnovatorsradio.com/elite-real-estate-leaders-podcastSource: https://businessinnovatorsradio.com/interview-with-brian-wilbur-co-founder-of-bingo-reverse-mortgage

Welcome to the Elite Real Estate Leaders Podcast, brought to you by Trailstone Insurance Group, bringing you interviews with the best real estate and mortgage professionals, empowering you to understand the current trends in the housing market so that you make the American dream your reality. Enjoy today's episode. The Elite Real Estate Leaders Podcast, today we have with us, Brian Wilbur, who's the co-founder of Bingo Reverse Mortgage. Brian, welcome to the program. Thank you for having me on today. Hey, you're welcome. And I know that reverse mortgages is a topic we can spend about nine and a half hours on and still be scratching the surface. So we want to, you know, learn from your years of experience. But before we dive in to that, give us a little bit of your story and background. And how did you get into the industry?

Yeah, sure. So I, I grew up ready to do reverse mortgages right out of the womb. So this isn't necessarily something you necessarily forecast in your life being a part of. But I was fortunate enough to spend a little time in the Marine Corps, if you're out in Colorado, and came back and got involved in the insurance industry originally. That's how I got first exposed. And through the years, I did a few different things for a few different companies working in spaces, both in the insurance space as well as in the financial services space. But ultimately got out of it and did some work with some different builders and developers. and then what I realized was, after doing a little bit of research,

reverse mortgages are so misunderstood, and they are such a pivotal piece of the upcoming retirement, a crisis that we have facing us. And I was originally exposed to that by my father-in-law. And so, anyway, I discovered reverse mortgages, began to learn about it, became kind of interested in them with 10,000 seniors turning to. 62 every day. It's, it seemed like an opportunity. What I discovered, though, my Ketia is,

my family actually was impacted. Their estate was impacted by a reverse mortgage and allowed them to do so many things with me as a grandchild with my grandparents that I wasn't even aware of it. Through that process, we discovered how this product could make an impact and I've become a student of it and I have a passion for it. So that's kind of my background, our start out awesome I love when you can hear personal experience like oh I had this or I noticed this or this was a problem and there was no solution so I you know dedicated myself to figuring it out so let's just dive right in and I think a great place to start is define what what is a reverse mortgage because I think that a lot of times people might have a wrong misconception so let's define it and then talk a little bit about how people are using them like you were saying financial planning or just different different ways that they can do that Sure, absolutely. Well, first of all, a reverse mortgage. Reverse mortgage is actually just a nickname for this product. The actual term for this product is a home equity conversion mortgage or the acronym Heckel.

All right. So the reverse mortgage is the popular term that we're all used to hearing, for better or for worse. Now, anything that's kind of been around since 1961, you know, it's probably got a little bit of history, even a little baggage with it. So it's been through a lot of iterations through the years, a lot like a colleague of mine makes the analogy about a cell phone. You know, remember your first cell phone back in the day? Yep. And through these years.

It was in a, mine was in a bag with a zipper, and then I upgraded to having it hardwired into my car. Okay, okay, you weren't messing around. And so from a posture standpoint, simply making a phone call, you can see all the different iterations through the years and how the product is improved. A reverse mortgage is very similar to that. It's been through various changes, various regulations through the years. I'm not typically one to advocate for a tremendous amount of government regulations, but I can tell you that this space is the most highly regulated financial service product that I'm aware. of. And I'm talking about any type of portfolio products out there. And the reason is because we're not only dealing with regulations that were put in place after 08, got hurt when this product originally came out. So changes were made to protect both the client as well as the investor

and then changes were also made in 08 to the lending process in general. But on top of that, this is a protected class. Yeah. Seniors are really the treasure of our community and the backbone. And because of that, there are laws to protect. And this is highly, highly looked over. And it's a place where I feel very comfortable understanding where we can bring value. And I also feel comfortable saying that the product is not for everyone.

So a reverse mortgage is really nothing more than a mortgage. It's just a mortgage. And isn't it kind of like the name implies reverse? So like in a regular mortgage, when you make payments, it slowly but surely goes down. But in a reverse mortgage, you're getting money out of your house and the balance of the mortgage slowly but surely goes up. Well, you just did my job right there. You just as clearly as you can't. You pay a traditional mortgage payment with a reverse mortgage it pays you and that negatively accruing balance goes up.

That's correct. Yeah. That's exactly how it works. There's a couple more. I think that a lot of people feel like, yeah, but you're sucking out the equity. And, well, like you've already said, and we'll get into it in a little bit, but it's not for everybody. It's not the solution for every person out there. But in a situation where maybe there's this husband and wife that just don't have two nickels to rub together so their house rich but cash poor, maybe in that case, it's like, well, it's fine to eat up some of that equity because now it's giving you the quality of life you need right now.

that is definitely one scenario that we see in an overwhelming majority of reverse mortgages are for situations like you just outlined. Here's a common scenario I like to share with people when I teach these classes for real estate agents and advisors as well. We have three different clients that we typically see. One's grandma and grandpa, and they've done well. They've had a very good life, but they're in their end of their years. Typically, Grandma outlives Grandpa, and he passes away. She loses his pension,

as well as his social security, not to mention her husband and like a mate oftentimes, right? And what we often see in his grandma then owns the home and can't afford to really go do much with grandkids or go do movie night because she's, just like you said, house rich and cash for. So we can come in.

and make an impact where she can either set up term payments or a lump sum or some type of revenue stream coming in in a way that allows her to make sure she has enough money to be comfortable and cover her needs, maybe even improve the quality of your life a little bit, right? So that's the typical scenario that we see. We also have clients who are simply trying to manage tax brackets. You know, we've got client, well, let me give you a quick example here. And this is not nearly as common, but typically when you have clients that have, and let me give you a more common scenario, would be like a Roth IRA conversion. When you get into retirement age, you start thinking, obviously, about a lot of different things, but longevity risk is the most important.

Are you going to outlive your money? That's the most important thing you're thinking about when it comes to those retirement years. Reverse mortgages have been studied by Texas Tech and MIT. and Cambridge University. They've run the 10-year models out. And even FINRA, the financial advisors and insurance, the National Regulatory Agency FINRA, changed their position on them in 2013

because reverse mortgages are actually a fantastic way in some situations to hedge against inflation, preserve a portfolio. And like I said, do those Roth IRA conversions, pay that tax on that conversion, and allow that money to grow tax-free in a Roth. Now, if you don't understand what a Roth is, you're probably a little younger like I am,

but essentially everybody's trying to move their money into tax-free a bucket, right? And the tax components of a reverse mortgage, especially the growing line of credit, I'll say that again, especially the growing line of credit that's available. The tax components are not insignificant. So to answer your question,

we do help people that are definitely struggling and need a little extra income and have a little breathing room. But we also help people manage tax brackets and keep more money in their pocket. Does that make sense? Totally. Yeah, that was great. And I actually did have a quick question when you mentioned the spouse, the surviving spouse. Am I correct? And I might just not remember it well. So you might just have to refresh everybody. But does the spouse have to be the 62 years old if they're the surviving? spouse or how does that how does that whole thing work? Great question here.

So back in 2013 is when this changed. And this was one of the reasons why people got a little bit spooked about reverse mortgages. So the way it worked back in the day was only one person had to be on the deed. So if you had mom and dad or a husband and wife who owned the home and the way you're able to draw money out of a reverse mortgage is based on three things, interest rate. the equity and the value of the home. Okay.

And then the interest rate, the value of the home, and then the other component will come to me in a moment here. But once you calculate how much money you're able to get out, it's essentially because of the age of the oldest person. Back in the day, you didn't have to put both people on the deed or on the note. So you'd use the older person's age oftentimes so they get more value. Well, what happened fast forward is dad would pass away. and then the newspaper read Big Bad Bank kicks Grandma out of house.

She wasn't on the know. So what they did is they changed the law. They do not have to be 62 barring spouse protections. It's one of the biggest changes that were made. And it's part of the reason why this product is so safe. So you do not need to be 62 or older to be the non-barring spouse. You just need to be over the age of 18. And should something happen and the qualified borrowing spouse,

should pass away. That non-barring spouse has the right to live in that home and stay in that home and control all the equity until they make a decision to leave themselves. So big changes came in 2013. Yeah, that's great. If I may and let me know what other questions you have. Some people think the bank owns your home or the government owns your home. And I can assure you the bank does not want to own your home. The bank wants the mortgage payment paid. So when there's a moment of maturity where nobody's living in the home anymore, all right, the estate or the heirs, typically to children, right, they remain in control of all the equity in the home. Now, whatever is owed on that balance needs to be paid just like any other mortgage. But they have

up to 12 months to decide the kids, do we want to keep this house? Do we want to keep mom and dad's house? Okay, how much of a mortgage is there on there? What do we need to do to come up with that balance. They can pull that money from anywhere or refinance it traditionally themselves. Do you guys want to know what the reality is, 97% of the time? Yeah. They sell it. They sell the home. Yeah. That's what I would think. Yeah. And just to be clear, too, Brian, isn't it true that when you do a reverse mortgage, no one else is on the note or deed or title. It's just the mom and dad or husband and wife or whatever. There's no other entity on there. And then the lien holder is the bank. And then like you just said, if you want to refinance or sell, then you just need to get a payoff. What do we owe on this? And boom,

you paid off whether it's refi or cash or sell. Just like any other mortgage. You're exactly right. But I think what we're going into, Brent, what if it sells for less? Yeah, great question. What if for some reason in Colorado, not as big a concern here, but let's say we're in Missouri or Texas, right? And we have concerns about home value fluctuation. We know in Colorado we got pretty steady home belt, but let's say the home went upside down. Or let's just say more realistically, somebody opened it up at 62,

because that's slowly becoming the common wisdom, is turn this on as soon as possible in a line of credit that grows. And don't touch it unless you have to. That's another show we'll talk about sometime. But let's say you set it up at 62, and you took as much money as you could out, and you did that for 30 years. And now you're 92 and you pass away.

your home's upside down in value and your estate and your kids inherit the home, right? Do they owe the difference, right? That's the question. This is a non-recourse loan. And what that means is that no errors or the estate would ever be responsible for the upside down value of the home. In fact, we haven't had it happen often, but I've had colleagues where they've said, hey, we've inherited this home. There's a reverse mortgage and it's upside down. You know, it's a home up in the mountains and is the market's just not there? and they've had it for many years and what do we do? How do we sell it? How do we do it?

And why would you try to sell it? Just call up the bank, leave the keys under the mat, go inside and do what most people do. And they get their specials, the special things through the years they want from their family, but they can literally walk away from it because the errors are never responsible for any upside down amount. So not a common scenario that we see, but it's important to know that protection is there. It's one more way that this product is safer, protects the family. So you're absolutely dipping in to the estate that could be left behind to the errors by tapping into some of the equity.

But what you'll find is at the end of running the numbers. And when you look at the tax component, sometimes, not always, but sometimes it makes sense to use this as a buffer asset to preserve a larger portfolio elsewhere. So there's a strategy involved. It's holistic. It's really kitchen table. You really need to sit down and talk. How are your other income in retirement structured? How are your life insurance and annuities and things like that structured?

What is your retirement income plan and how does this fit in? Does it even fit in at all? If it's a hand-built cabin, you want to pass on to the kids, might not want to do this. However, if it's a home that you think is going to be liquidated at the end and you want to leave a nice nest egg or not nest egg, but you want to leave a nice state to your children or to your heirs, rarely is real estate the most financially sound way to transfer that when you look at capital gains tax. So I talk with the financial advisor. We often sit with an estate attorney as well, and it really is kitchen table. And how do you respond to people who, sorry, Mike. we're probably two very different questions going on, but I was going to say, how do you respond

to people who are like, well, why couldn't I just pull out it? Helock for 80%. What would you, what would kind of be the cost analysis, really, for those two scenarios? Well, first of all, that's a scenario we look at. We have a responsibility on our end to make sure that we look at all the different options that are available. And one of the reasons why, and one of the reasons why I do like, as I mentioned, being a piece of this space is because there's HUD counseling involved, housing and urban development. Everyone that looks at a reverse mortgage takes the quote and sits down with that exact quote from their broker lender with a certified HUD counselor for about an hour, maybe a little more,

a little less, depending on questions where they go line by line and they go through every single So have you looked at a heat lock? Have you looked at cash out refi? Have you looked at pulling from your IRA or your other qualified accounts? You know, are there other scenarios that make sense? Why do you, what are you trying to achieve? And is there a net benefit for the client? So not only do you have somebody on this end talking about whether it's a benefit or not, but you also have a third party. I call them a Fed that has their eye on as well. It's just one more safe piece. But to answer your question is with a helock, or any other type of loan, there are times where those are more benefit. However, with a HELOC, you always have a payment. Yep. With a HELOC that can be canceled at any time. And I personally know people in 2008 who are relying on a substantial HELOC line of credit, and those can be turned off at any moment by the lenders.

All right. On top of that, they're often for a certain amount of time, 10 years or whatnot. The benefits of a reverse mortgage is you could typically tax. into a percentage of the equity of your home based on your age, interest rate, and value. But let's say, for example, you were able to tap into $250,000. The difference with a reverse mortgage line of credit specifically is that line of credit sits there just like a HELOC available and it grows at the same rate as the loan. Can you, you guys have had a little experience in the financial services industry.

Can you name another line of credit that you're aware of that grows? I would say no. Yeah. Nope. The closest thing would probably be an annuity. So there's a lot of pieces to this. A lot of people don't understand. It's not a last resort, although it can be a fantastic way to come in and recover a situation that has been eroded by inflation specifically.

But it's also a tool for the middle class to manage their tax brackets and for the upper class to put themselves in a position. where they can avoid drawing out of their qualified accounts and taking that financial hit. Let me give an example. I'll give you one quick one, and this is not very common, but I know these numbers might be staggering, but at the end of the day,

it's just zeroes on the ends of numbers. But I had a client, all right, a colleague who got a client call, Northern California client, they got hit with a $7.2 million capital gains tax bill. And they called up, they owned a $10 million home outright, 100% paid off. They were qualified by age and they asked my colleague, hey, can I pull out $7 million out of my reverse mortgage out of my home and pay that capital games bill? And he said,

no, you cannot do that. What you can do, you qualify for around $4 million or so. So he was able to take $4 million out of his reverse mortgage, doesn't have a payment on it, right? And so he's able to pay $4 million of the capital gains. He renegotiated payment terms on the rest of the balance to the IRS and you know when you make that kind of money they expect those payments pretty quickly but this individual's only other option would have been to pull around 15 million dollars out of his qualified count in northern California to net 7.2 million. So this is an extreme case. We deal with a more grandmas wanting to take the kids on a cruise or help with a down payment or things like that. Or just put food on the table. Yeah. To put food out of that. That's much more common. But

But this will be a mainstream product in 10 years. It's just, it's really the eighth wonder of the financial services world. So, Brian, I know that for me, what little I know about reverse mortgages, I have heard that one of the misconceptions slash, you know, red flags is, oh, well, it's just got high fees. Yeah. Clarify that for us. Yes. So the closing costs are higher, significantly higher on a reverse mortgage. And that's part of that kind of holistic.

sit down and does the end number make sense. But the reason it's so high is because of the MIP, mortgage insurance premium. I'm sure you're all familiar with that. MIP is 2%, which is not insignificant. We see closing costs sometimes $15,000, $20,000, all right, which is very, very high. And that can be some people. Now, when you look at what actually it costs to not do the reverse mortgage, that's a conversation that has to be had as well. What's important to understand is in the net number is it's not out of pocket. Typically, the only out of pocket costs is appraisal and that HUD counseling, which is about $200.

And so all those closing costs are rolled into the loan. Now, let's be clear, those are absolutely going to get paid at some point by somebody, whether it's the estate or whether it's the homeowner when they sell the home, downsize, upsize, relocate, whatever. All right, so those fees definitely don't go away, but they are rolled into the back end. But every time the mortgage payment is not made, that loan balance negatively accrues along the way.

Now, there's one other thing I need to mention, and I do want to be clear on this, there are four or five things you need to do with the reverse mortgage that's incredibly critical. And if you meet these five things, then the sailing should be very smooth. Number one, you have to pay your taxes. Okay?

Yeah. The majority of people that got into trouble early on in the early 80s before Reagan brought it on. of the purview of the FHA is people didn't think they had to pay their taxes. Listen, if you don't pay your taxes on a forward mortgage, they're going to come knock on your door. So you've got to pay your taxes. You have to insure the property.

You got to keep it insured. You have to maintain it. Okay. Has to be your primary residence. That means you got to live there six months in a day. Okay. But you got to make sure that you pay those HOA fees as well. So HOA fees, taxes, insurance.

Very simple. But these are the details that people. people need to understand. The same with a traditional mortgage. They're exactly right, Mike. Yeah, exactly right, Mike. So let's kind of wrap up with this, Brian. What do you see as the future of reverse mortgages in the overall financial landscape

of mortgage lenders and retirement planning? What are you seeing coming up in years to come? Well, the reality is having been in the educational space for real estate agents for some time now, is the reverse for purchase, which we haven't even spoke about, that essentially allows people to buy a home for about 60% down. So we're talking about cash buyers here. Instead of buying a home for $800,000, maybe you put $600,000 down, keep $200,000 in your pocket with no mortgage payment. That's going to become much more common. But what else is going to become common is this is going to be a conversational at the financial advisor level. There's enough education out there now to

where fiduciary responsibilities are going to be kicking in. And people need to understand and they can go do their own research. But at age 62, everyone, everyone should take a look at a reverse mortgage growing line of credit and try to eliminate it from their retirement plan. That's my opinion. Well, I think it's neat to see that there's options out there, that there's opportunities to open up the harder and equity you've built up, over the years. Is it right for every single person? Nope. But when it's right, it's available

to really give some of that peace of mind like you were saying. So I think that is spectacular, Brian. If someone is listening and thinking maybe I should check into this and learn more, how can they learn more and then also reach out and connect with you? Absolutely. One of the easiest ways, attend one of our CE classes. We got one coming up Tuesday, September 10th, from 10 a.m. to 130, hosted by First Integrity Title and Cherry Creek. and you can find more details and talk to me or reach out to our amazing team at bingoreversmortgage.com. Excellent, Brian. Thank you so much for coming on.

It's been a real pleasure talking with you. Thank you, Mike. Thank you, too. Thanks, Brian. All right. Thank you for listening to the Elite Real Estate Leaders podcast, brought to you by Trailstone Insurance Group. To learn more about the topics mentioned on today's show or listen to past episodes, visit www. dot elitreelestateleaders.com.