Navigating the Reverse Mortgage Landscape with Michael Pankow, CEO of Veterans Mortgage of America

Summary

In this conversation, Janet Engel interviews Michael Pankow, a retail mortgage executive and CEO of Veterans Mortgage of America with over 20 years of experience, focusing on the benefits and misconceptions surrounding reverse mortgages.

Michael shares his personal journey in the mortgage industry, the importance of planning for aging in place, and how reverse mortgages can provide financial independence for seniors.

He discusses the challenges of educating older adults about reverse mortgages, the criteria for qualifying, and the non-recourse feature that protects borrowers and their heirs.

The conversation also touches on Michael's work in the film industry and his passion for helping seniors navigate financial products.

Takeaways

Michael Pankow has over 20 years of experience in the mortgage industry.

Reverse mortgages can provide financial independence for seniors.

Education is key to overcoming misconceptions about reverse mortgages.

The non-recourse feature protects borrowers and their heirs.

Planning for aging in place is essential for seniors.

Accessing home equity can help seniors live more comfortably.

Qualifying for a reverse mortgage involves a financial assessment.

Reverse mortgages can be used for downsizing or purchasing a new home.

Michael's personal experiences shape his passion for helping seniors.

The reverse mortgage market has a low penetration rate, indicating a need for education.


Sound Bites

"Congratulations, you are mortgage free for the rest of your life."

"Reverse mortgages are not just for the desperate."

"There's a level of independence that they gain."


Chapters

00:00 Introduction to Michael Pankow
02:05 Michael's Journey in the Mortgage Industry
06:42 Understanding Reverse Mortgages
09:43 Challenges and Misconceptions of Reverse Mortgages
11:51 The Importance of Planning for Aging in Place
15:10 Accessing Home Equity for Seniors
19:23 Qualifying for a Reverse Mortgage
25:20 Using Reverse Mortgages for Downsizing
32:12 The Non-Recourse Feature Explained
36:10 Education and Awareness in the Reverse Mortgage Industry
47:13 Michael's Work in the Film Industry

How to contact Michael:
Email: michael.pankow@clearmortgage.com
Web:  https://www.mikepankowmortgages.com
916.705.8282 Office
916.296.7765 Cell

 Schedule Appointment with Me:
https://calendly.com/michaelpankow/30min

Transcript

Janet Engel (00:01.954)
Hello everyone.

Thank you for being with me today. Our guest is Michael Panko. He is a retail mortgage executive with more than 20 years of experience. He serves as a CEO for Veterans Mortgage of America and is also the president of its reverse mortgage division. Michael also has many diverse interests. He is a pilot and has owned several airplanes and he

He also is in the film industry. Michael, thank you for being with us today.

Michael Pankow (00:39.49)
Yeah, good morning, Janet. Wow, it sounds cool the way you talk about it. I'm like, wow, I do some of that stuff.

Janet Engel (00:43.182)
It is cool. I'm doing great. It's a beautiful day here in Atlanta, Georgia.

Michael Pankow (00:49.571)
How are you today?

Michael Pankow (00:56.43)
Good, good. think I was telling you my son's actually coming out here and he's actually, he just kind of passed over you guys here about an hour ago. So I'm excited to have him arrive here today.

Janet Engel (01:04.222)
Okay, well great, great. So Michael, tell us about your career and specifically all of the work you've done in this space selling financial products to clients. And I also wanted to tell our listeners in case

Some of our listeners are also professionals that will be at the National Aging in Place Council Conference on October 11th 12th that Michael will also be there and he will be hosting the dinner on October 11th. No, you're hosting the dinner on October 12th, right? Yes, yes. And so you will have a chance to meet Michael at the NAIPC Conference.

Michael Pankow (01:45.166)
the twill, right? Yeah.

Michael Pankow (01:53.58)
Yeah, I'm excited. That's going to be a great event in Orlando. It's going to be great. It's going be fantastic. So yeah, so you're

Janet Engel (01:59.692)
Yeah, so Michael, tell us about how you got started in this area.

Michael Pankow (02:05.838)
So kind of an interesting story, and I'll keep it high level and quick, but back in 2004, I actually entered the mortgage industry as a loan officer. And prior to that, I had a company, started with three guys, didn't know what we were doing, but it worked within the mortgage industry, but we weren't doing loans. And the company that I landed at after we shut that down, we ran it for three years, but FHA made some changes so we couldn't continue with the group. But when I landed as a loan officer, I landed with a group.

that I'm here locally in Sacramento. And one of the principals was into reverse mortgages. And I don't know why, but it stuck with me, probably because my relationship with my grandmother when I was in high school, especially after my grandfather passed. for whatever reasons, the reverse mortgage product stuck with me. And so I kind of dabbled throughout the years. And then when I got into a position to really support reverse mortgages, when I was running a fairly large group, we had a retail reverse mortgage division. I didn't run it, but I supported it.

And as my career progressed, I got the opportunity then to start reverse mortgage divisions and then actually provide the training, the certification. And so it grew from there. And I see the reverse mortgage opportunity for me personally is very fulfilling. Again, that relationship that I formed with my grandmother at the age of 16 when I was taken her to and from the hospital, the VA hospital in San Diego every day when my grandfather...

became ill and never made it out of the hospital. I saw what she went through and so I've got a soft spot for seniors and I'm a senior, I'm 57 and so as I get older I get a little bit more authentic in this space and so I see the benefits of the reverse mortgage. think to myself, reverse mortgage for me, absolutely 100 % right when I get there and I see the benefit of it. So I'm passionate about it. When I talk to seniors,

and we'll talk a little bit about this later, but I see the impact it makes. And one of my favorite things and most touching things that I can do at the end of the process when a senior gets a reverse mortgage is, I say, congratulations, you are mortgage free for the rest of your life. And some seniors have mortgages, some seniors don't, but the ones that do, they finally realize they no longer have a mortgage debt hanging over their head.

Michael Pankow (04:24.482)
that has a huge impact, especially when they're on a limited cash flow or fixed income. So I just, really enjoy that. Maybe that's selfish of me, but it's, I just really enjoy that.

Janet Engel (04:34.498)
Well, it makes sense because you've fulfilled your purpose. It's what you do for a living. And so now you've used what you do for a living to help others. I relate to that as an occupational therapist. I remember when I was actively seeing patients, I would come home and I would tell my husband,

Michael Pankow (04:41.581)
Right.

Janet Engel (04:56.712)
I know that every day that I go to work, I make a difference in people's lives. Even though I get paid for what I do, I still, I offer more value than really what I'm receiving payment for. And so I always thought of it as an opportunity for me to give and be of service to others. And it made me feel like,

I have purpose every single day.

Michael Pankow (05:27.64)
Right, right. Yeah, and that's what I think is very, if you could bifurcate between doing traditional mortgages where you get a first time home buyer, which is great, nothing wrong with that. But wow, at the end of life, in that fourth quarter of life, where you're facing different challenges in our professions, and I'm talking to you and I now, in our professions where we can really make a difference and have them ease into that fourth quarter and live just a much better life. To me, that's so satisfying.

Janet Engel (05:37.507)
you

Janet Engel (05:57.538)
Yes, I agree. I'm very excited to have you on the show and really learn about the reverse mortgage. I know it's also called HECM or HECM and I want you to...

demystify it, educate us on the different programs that are available to older adults, and help us understand how people can benefit from this financial product. Considering we have about 10 ,000 baby boomers turning 65 every single day until the year 2030,

Michael Pankow (06:30.595)
Absolutely.

Janet Engel (06:42.399)
How do you see reverse mortgages playing a role in helping people age in place?

Michael Pankow (06:53.614)
Yeah, it's a big number, isn't it? That's a big number, per day, right? It's not per month, it's per day, right? And I think that, you know, I always like to reference Tom Selleck. you know, Tom Selleck has been involved with reverse mortgage space for a long time. And, you know, as we see these 10 to 12 ,000 people a day turning 62 and above, is that...

Janet Engel (06:56.118)
Yes! For every day.

Michael Pankow (07:18.59)
Hopefully we have a greater acceptance. And I think that also people are worried about their entitlements. Entitlements meaning their medical benefits, social security benefits, dwindling pensions, inflation. And I see the reverse mortgage product as a hedge against all of those. I always say the reverse mortgage is coming to play whether it's a need, a lifestyle, or a plan. And we can talk about how the three of those impacted.

Reverse mortgages are not just for the desperate, and we'll probably talk about that later. My motto is if you waited too long, maybe you are desperate when you get the reverse mortgage. But I like to look at reverse mortgages as a form of an insurance policy. If you can take insurance out today prior to having a car accident, that's what you're going to do. Because after you in the car accident, you can't get into auto insurance. You're a little too late. Same thing with health care benefits. So I like to talk about reverse mortgages as a plan.

And it can be a lifestyle. I was sharing with you earlier about a client in San Antonio. I think he's going to use it to travel and that's perfectly okay. But again, with this generation that's coming up, I think that some of the cultural norms of pay off the house, secure the house, don't touch the house for the rest of your life, which is a non -liquid asset. I think that the generation that's coming up today doesn't quite have that mindset. I'm seeing a little bit of a shift, which is, how do we tap into the equity of our home, especially it's tax free?

and let's build the moat around our property and ourselves and we can talk about that later too. But I think there's going to be a greater acceptance around the reverse mortgage product and it's only going to happen through education.

Janet Engel (08:56.121)
with you.

Currently, you've told me that there's only a 2 % market penetration with reverse mortgages. What factors are contributing to this? Why are older adults not taking advantage of reverse mortgages?

Michael Pankow (09:14.127)
Yeah. And you know, back in the 80s during the Reagan era, when the reverse mortgage just kind of came into their own. And there's a discussion on when the first reverse mortgage was done. And that goes back to like 1961. But if you go back to the 80s during the Reagan era, there was some bad players in the marketplace, right? Just like any industry, when it first comes into its existence, kind of the Wild Wild West. And these bad players, they took advantage of seniors. between FHA and HUD, they didn't have some of the consumer protections in place as well.

which we're going to talk a little bit later, which involves counseling and the financial assessment. So reverse mortgages kind of got a bad rap. And so there's that. Let's also just be honest. Reverse mortgages, the name itself, reverse, you have to think in reverse. You don't have a traditional mortgage where you pay it down and your mortgage balance goes down year after year after year. With a reverse mortgage, it's just the opposite. So it's a complicated product. can boil it down and make it easier to understand, but it's more of a complicated product.

Lastly, I think as an industry, and I'm a big advocate with this, you can ask the National Reverse Mortgage Landowners Association, I'm very vocal about it, is I think we need to make the process easier. Some of the things involved with counseling. Counseling is very important, but there's some steps involved in the counseling that I think we can make easier. Same thing with making it easier for the senior who doesn't have access to email, doesn't want to use their email. So there's those three components. There's the myths versus the facts. There's the

the bad reputation that kind of came out of the 80s that we're turning around. And then of course it's a reverse mortgage product. What does that mean? How does that work? And so it's educating the senior about what that's all about.

Janet Engel (10:57.974)
Okay, well, I agree with you. Education is key. And what you were saying about planning, I also liken that to planning for aging in place. It can either turn into an emergency when you suffer a traumatic event like a fall or let's say a cancer diagnosis. And then you don't end up with the modification that.

you would like or could have had if you would have hired someone prior to this traumatic event happening and being able to plan for a remodel that not only is going to make your home safer and more comfortable and functional, but will also be beautiful at the same time.

Michael Pankow (11:42.03)
Yep, yep, agree 100%. If I can share an example, my of the poster child for, waited a little too long. My father took a fall. Matter of fact, I was at the National Association of Realtors event last year, literally sat down on the plane to come home, got the call. My dad took a really traumatic fall. Probably shouldn't have made it out of that, but he was found.

Janet Engel (11:52.025)
huh.

Michael Pankow (12:05.966)
Because of that, lots of modifications to the house had to be made, right? There's carpet, there's tripped hazards, there wasn't a zero threshold shower. There was a lot of modifications that needed to be made the house. Mom doesn't have the money for that, but they have a home that's worth 700 and something thousand, owned free and clear. And through the reverse mortgage, my mom is now able to make all of those modifications, pay off any debt that she had.

and just live a better life. of fact, she was still working. My mom was one of those gals that's never gonna stop working. And at that point, she had to stay home to take care of my father, who also suffers from dementia and probably early Alzheimer's. And so she couldn't go back to work. So she got a $300 ,000 line of credit, which made all of this possible. And we did something also which is very special and available through the reverse mortgage product, which is we set

We call it a lease up, a life expectancy set aside. And my mom benefited from that because that is basically, let's call it an impound account for her taxes and her insurance. So from that line of credit, we also set aside enough to pay her tax insurance for the foreseeable future, which is probably over the next 15 to 20 years. So there's lots of benefits to that and that ageing of place, but that allows my dad to stay home much, much longer by the home modifications that we're able

Janet Engel (13:27.32)
Did he have any permanent injuries from that fall?

Michael Pankow (13:33.886)
No, well, I mean, he's using a walker now. So he's using a walker now, which he didn't before, which I think is part of the problem, which is why he took the fall. But what he basically did is he was walking towards the TV and he fell into the TV and impaled himself right here and was found by my nephew. And thank God, because I'm gonna get too graphic, but it was pretty traumatic when they found him because the head bleeds quite a bit.

But yeah, so he's fairly impaired now terms of his walking and the Alzheimer's has set in. He's probably in that latter stage of Alzheimer's now. So he's 88. But you know, he still gets on the phone, he still talks, and we still have good conversations. So I look forward to seeing him. I'll be in San Diego next week.

Janet Engel (14:22.808)
Good. And yeah, so most falls result in one of two injuries, either a hip fracture or a traumatic brain injury, which sounds like that's what your dad had, which is terrible, especially if he already had cognitive impairment, it's certainly not going to help him to have a head injury.

Michael Pankow (14:40.419)
He did.

Michael Pankow (14:44.684)
Yeah, absolutely. Yeah, absolutely.

Janet Engel (14:48.366)
There's an estimated $3 trillion, which that's a huge number, in untapped equity tied to the homes of older adults. How could accessing this equity benefit both the individual as well as the larger economy?

Michael Pankow (15:10.254)
Yeah, so it's 13 trillion, right? It's 13 trillion, which is a huge number. And I think that accessing that equity by seniors who qualify for the reverse mortgage. Not all seniors will qualify for a reverse mortgage. But the seniors that do qualify for the reverse mortgage. think what I'd like to say first is that there's a level of independence that they gain, number one. That's number one. Number two, when we talk about the aging in place,

initiative and the aging in place mentality and you know what is it 90 % of all seniors want to stay and age in place well

Janet Engel (15:46.606)
It depends which research data you look at, but yeah, it's between 77 % and could be up to 90%.

Michael Pankow (15:56.91)
Right, right, those are the same figures I've heard as well. So you know, when I look at the average senior that I work with, usually it's a female. Usually in that age bracket between 74, 73 to 80 years of age. They're living in a three bedroom two bath. They're usually widowed or divorced for very long time. Their kids are out of the house, obviously.

and they're living on a very limited income. It's a fixed income at Social Security. Maybe some retirement, maybe they work for the school district or something like that, but it's very limited funds. They've got $150 ,000 in a line of credit that they could tap into if they got a reverse mortgage. And some of them are still working part -time, which is incredible, right? I think we're seeing that growing trend as well with seniors. What I like about the reverse mortgage product is whether they had or didn't have a

a mortgage payment as in that specific scenario where we can come in and we can get them a line of credit and we can pay the line of credit out in a couple different ways which I won't get into today. But that line of credit which is tax free gives them the options to make different choices quite honestly. To make the home renovations that allows them to age in place, right? The handrails, the lighting, the ramp, the zero threshold showers, making sure that the furniture, right?

Janet Engel (17:12.108)
It could be new furniture. Yeah, which is amazing. And people don't realize that furniture actually does keep people from being able to function to their full abilities. If you have a sofa that is too deep, too low, the cushions are too soft, then people are going to have a harder time getting off of that sofa.

Michael Pankow (17:31.298)
Mm -hmm

Michael Pankow (17:38.669)
Right.

Janet Engel (17:38.678)
and then may need assistance. I've had many patients that were restricted to one chair in their house and it wasn't even a comfortable chair.

Michael Pankow (17:48.373)
Right, right, right. Yeah, things like lighting, voice activated lighting, right? So they can do that while they're sitting down or when they're walking. mean, lighting is huge as our eyes degrade. So it's, again, going back to that need, lifestyle, and plan. mean, some seniors have another client who's 88 years of age and she's very spry and she wants to travel. She owns her home free and clear. She actually has some money in the bank. She's in pretty good shape, but she still qualifies.

And her line of credit is again in that 300 ,000 range and she wants to take a cruise to Tahiti. She wants to do a whole bunch of different things with the money because she doesn't have any heirs to give it to at this point. She's not concerned about that. So it's independence, it's a sustainable solution for seniors that qualify. And again, that agent in place conversation, that's where I really like to take the conversation because a lot of people, even in their 60s, most people in their 60s as you know,

don't think about aging in place. They don't think about what's this look like? Do I have long -term health care in place? Do I have the necessary reserves? What if my spouse and I are relatively the same age and they have to be put into a full -time care community, whether that's a memory care or some kind of assisted living, how do we pay for that? And you see this all the time, the sticker shock involved with that is fairly high. It's fairly high. And a reverse mortgage in that example can be a great way.

to mitigate the impact of that and help that senior with a spouse that needs greater assistance, whether that's in -home care or it's that assisted living community.

Janet Engel (19:23.17)
You've mentioned the word qualify a few times and I want to ask you what is the criteria around qualifying for your reverse mortgage?

Michael Pankow (19:35.79)
Yeah, for an FHA reverse mortgage, and the acronym you were using earlier, is the HECM, HECM, we call it a HECM, which is a home equity conversion mortgage, has less of a negative stigmatation around it, but we use the term reverse mortgage because people understand what that is. So the minimum qualifications are the following, is that for an FHA reverse mortgage, and there are other products where you can go lower in age, but for an FHA reverse mortgage product, it's 62 and above.

has to be your owner -occupied slash your principal residence where you live and reside. Can't be a vacation home, can't be a rental, right? It's gotta be where you reside on a daily basis. Now, does that mean you can't travel? No, you can travel. No, can you go on a cruise for six months? Yes, you can. We can work around that. But it's your primary residence. You have to pass a financial assessment, right? Which is, again, one of the reasons why reverse mortgages got a bad rap is because of financial assessment in the past.

wasn't as thorough as it is now. And I can get into that a little bit later. And then lastly, you have to go through counseling. You have to attend, and it's over the phone, with an FHA approved counselor. You have to go through. It's about 30 to 45 minutes. Every counselor is slightly different. And the counseling is important to make sure that the senior A has a cognitive ability to understand what it is they're getting into, what kind of mortgage.

B, that there's no elder abuse, no one's pushing them to get a reverse mortgage to get to those funds, which has happened in the past as well. And then lastly, to make sure that we on our side as professionals, we're doing our job and educating them. And the counselor does that through the questions, through the Q &A, and also they get access to the transaction through a code so they can see exactly what the senior's signing up for. So again, it's 62 and above, it's principal residence, they gotta meet the requirements for the financial assessment.

and then also they gotta get through counseling. Those are the bare, that's the minimum for a reverse mortgage.

Janet Engel (21:33.77)
And the financial assessment piece is, is that the cognitive piece or the safety piece that verifies that someone's not trying to take advantage of them or if they are cognitively able to make this financial decision?

Michael Pankow (21:53.656)
That all occurs in the counseling. So that occurs in the counseling. Yeah. The financial assessment is there's really three buckets that we look at, right? One of the reasons why reverse mortgages got a rap or reputation is because the financial assessment wasn't in place the way it is today. So there's three buckets that we look at. The first one is we pull your credit, but it's not a FICO driven program. That's the great news. You don't have to have a good FICO score. Typically most seniors

Janet Engel (21:55.447)
in the counseling. Okay.

Michael Pankow (22:21.422)
have a decent FICO score somewhere in the six plus, but it's not the requirements, not what we're looking for. What we're looking for is what debts do they have on the credit report that they're currently responsible for, and that's the minimum payment. So if they've got three credit cards and all the credit cards require minimum payments of $25 each, that's $75, and then maybe they've got a car payment. So 75 plus maybe $100, so let's call it $175 from their debt on the credit report. That's one bucket.

The other bucket is we look at, okay, what are their living expenses? What does that look like? And at a really high level, we take the square footage of the property, let's say it's a thousand square feet, we multiply it times 14 cents, that's $140. There's some other factors that go into that, but that's the second bucket. The last bucket is, and this is where most seniors got in trouble, is we wanna make sure that they can continue to pay their taxes, their insurance, and their HOAs.

Because what's true of taxes is that whether you own the property free and clear, or you have a forward mortgage, or you have a reverse mortgage, if you don't pay your property taxes and or your HOAs, guess what? Three to five years into not paying that, the county can come in and take your property if it's property taxes. We know the homeowners association can be tough sometimes. So that financial assessment, again, the debts on the credit report, the living expenses, and then also in addition to that.

What are their their chargers charges monthly and annually on the property with taxes insurance and HOA? Put all that together if after they get the reverse mortgage whether it's because we're eliminated mortgage payment But we look at their Social Security benefit. We look at their pension. We look at imputed assets That's another thing that we look at too to make sure they qualify imputed assets are what do they have in their retirement accounts? What do they have in their 401k their IRA their savings accounts their checking account?

So all that comes together, we want to make sure that they can continue to pay their living expenses, whatever's on the credit report, and then also their taxes insurance. And so that's why the financial assessment is in place. And we can use a line of credit too. So like my mom, if my mom didn't qualify for the reverse mortgage based on her income alone, that $300 ,000 that she got in the line of credit would be used as part of the qualifying. So we can get a lot of people qualified because they get that line of credit as well.

Janet Engel (24:41.294)
So can you have too little income or too much income with what you were saying with the imputed assets where you have too much money in the bank or not enough that will prevent you from qualifying for reverse mortgage?

Michael Pankow (24:55.822)
No. No, there's no maximum on the income level whatsoever. It's not a program that's driven like that. None. You can have too little income to cover some of those things. And we do bump into that. But in terms of maximum, no, you could have literally, just as an example, you could have $10 million in the bank. You could make $100 ,000 a month, and you could qualify for a reverse mortgage.

Janet Engel (25:02.562)
Okay.

Janet Engel (25:20.568)
How can someone use a reverse mortgage to downsize or right size, whatever you want to call it. I know several older adults, my mother -in -law being one of them, that would like to live part -time somewhere else or would like to not have the maintenance that she currently has in her home. But with

taxes with interest rates and home prices being high, unless you move somewhere where the cost of living is far less than where you currently live, there is no advantage to moving.

Michael Pankow (26:09.262)
It's a great question.

Janet Engel (26:09.304)
How can someone do that using a reverse mortgage?

Michael Pankow (26:14.095)
Yeah, so there's, we haven't talked about this in our prior conversations, but there's what's called a reverse mortgage for purchase. So in the case of your mother -in -law, she could sell her current residence, she could then take the equity from the sale, she could then use that and put that down on another property using reverse mortgage for purchase, and we would do the math, and I could do that example here for you today, it doesn't take more than 30 seconds, and that would tell us what,

what mom or mother -in -law would need to put down and then she would live in that property just like if it was a refinance reverse mortgage or traditional reverse. She would live in that property mortgage free for the rest of her life and just responsible again for the property taxes, the insurance and if there's an HOA but that's a great way for seniors to downsize. know a lot of empty nesters are living in a two -story you think about the aging in place conversation. Well I'm entering into my 70s now.

And I'm thinking, got this two story, like my mom and dad, my dad never goes upstairs anymore. Right? He can't do it. It's just not gonna happen. So they theoretically should have, you know, 10 years ago, 20 years ago, they probably should have downsized and gotten to a single story. So for seniors, it's a great opportunity to get rid of the house they had where they raised the family, they had the kids, it was a two story, maybe it was too large for them, they don't need 3 ,000 square feet anymore. They wanna go live in a senior community where there's activities that they can participate in.

They can list and sell their property, take the equity from that, and then they can use that to buy using a reverse mortgage for purchase.

Janet Engel (27:44.844)
love for you to give me an example, a real -life example.

Michael Pankow (27:47.98)
Yeah, let's do that. So I go on my app here, my phone. Is it OK if we use your mother -in -law?

Janet Engel (28:00.076)
Sure.

Michael Pankow (28:01.614)
Okay, just, and we don't have to have names or anything like that, but what would be, how old is she?

Janet Engel (28:10.734)
78.

Michael Pankow (28:12.43)
She's 78, okay. And here's the great news with a reverse mortgage. The older you get, the better it gets. Meaning you get either more money out of your home, right? And I always say this to the ladies, okay, I have to ask for your age. I know you want to be 29, but the older you get with this, the better it gets. So give me your real age. And they always smile. Let's say that she wants to, where do you, let's see. If she was to sell her current home, what do you think she'd, what price range do you think she'd want to get into?

Janet Engel (28:17.866)
Okay, great, that's one of the few things.

Janet Engel (28:42.574)
Do you mean the sale of her house or the future purchase? Future purchase? I would think it would be below 250 ,000 or below 200 ,000.

Michael Pankow (28:47.254)
purchase. Yeah, yeah, the purchase. Yep.

Michael Pankow (28:59.822)
Okay, let's put it at 225. We'll split it. So based on mom's age of 78, and if your mom is within six months of turning 79, we could bump it up to 79, right? But home purchase of 225 at the age of 78, she would have to come in with a required investment of 126 ,000 roughly, plus or minus. So if she sold her current residence, if she has enough equity that comes out of that, she could take that equity.

Janet Engel (29:01.783)
Okay.

Michael Pankow (29:29.294)
and move it over, in most cases it's a lot less than that, especially at 78 years of age, she wouldn't have to use all of that cash. We hear so many times, well I'm gonna sell this house and I'm gonna take all that money, 100 % of it, and I'm gonna put it down on the next house. Well, do you really need to do that? You can accomplish the same thing with a reverse mortgage for purchase. Keep some of that money in your pocket for a rainy day when you need it, put it into another investment and grow your investment accounts there.

But yet you move into the property and you own it, you're on title, and you don't have to make a mortgage payment on it, just take care of the property charges and your current other debts, and you're good to go. So yeah, for your mother -in -law, it's about $126 ,000 she'd need to come up with to buy a property at $225 ,000 at the age of 78.

Janet Engel (30:17.942)
and then she would still have money left over that she could use for her living expenses, travel.

Michael Pankow (30:27.054)
Yeah, yeah. mean, again, we didn't talk about what the current property she owns and how much equity she has if she owns it free and clear, has a mortgage or not. But yeah, foreseeably, if she sells something for $300 ,000, she owns it free and clear. If she walks out of there with $250 ,000, right, she'd have considerable reserves left.

Janet Engel (30:47.022)
Okay, all right. Well, I'm forwarding her this episode as soon as we finish.

Michael Pankow (30:53.634)
Yeah, it's a great opportunity. I get to geek out on reverse mortgages because it's not just for, people like to say it's for the desperate. Well, I like to say if you waited too long, maybe it is, but with people that have got millions of dollars of assets under management, there's strategic reasons when you talk to financial planners about mitigating sequence return risk using a reverse mortgage line of credit and all the aspects of that. There's the gray silver divorce, right?

and why reverse mortgages can be a valuable tool in that scenario as well. So I love the reverse mortgage space because there's so many different possibilities that exist for reverse mortgage in addition to the aging in place conversation which we're having today that we can talk to different professionals in different lines of work and how a reverse mortgage can be a viable tool and asset for them.

Janet Engel (31:44.686)
I am loving the information that you are educating us on because I've never heard so many details about all of the benefits and things to watch out for and how we can make sure that people are not taken advantage of. I want to ask you about the non -recourse feature of reverse mortgages and why it's important for borrowers and their heirs.

Michael Pankow (32:12.686)
Yeah, the non -recourse feature. So the non -recourse feature, what that basically means is that you'll never owe more than the property's value. So let's say, for example, let's talk about, if we can, let's talk about my mom. So my mom, her home was appraised at $730 ,000. She got a line of credit for $300 ,000. Let's say my mom's a healthy 77. Let's say in the next five years she goes Viva Loca and she spends all the money, which, that's okay.

She could do that. She still gets to live in the house, right? She has no mortgage payment. She still has her social security, some of my dad's benefit from being in the military and from his federal job. So she goes, she lives large, but more power to her. However, let's say that 10 years from now, there's a black swan event and the property value is not where it should be, maybe in the 900 ,000 range, but it's in the 300 ,000 range. Just complete wipeout, right? Well,

10 years from now, my mom's reverse mortgage is probably gonna be, the balance of that is probably gonna be in the five or $600 ,000 range. Because again, reverse mortgage, it's deferred interest, it's added to the loan balance. Well, the non -recourse feature says that if my mom owes $600 ,000 on the reverse mortgage, but the value of the property is only $300 ,000, all that she'd ever have to pay back is the $300 ,000. That same non -recourse feature

extends to the family and the heirs as well. They're never responsible in the event that something, God forbid, happens to my mom 10 years from now, if my sister and I decide, hey, we just want to sell the property. Well, there's a black swan event. We're upside down. my gosh, we're responsible for the reverse mortgage debt. No, we're not. We're responsible to sell the property, and if we get $300 ,000 for the property, that's what gets paid back to FHA and HUD against that reverse mortgage balance of $700 ,000 in that example.

So again, you never owe more than the property's value with a reverse mortgage. And that's the non -recourse feature.

Janet Engel (34:18.061)
Did this non -recourse feature exist years ago?

Michael Pankow (34:24.334)
That's a great question. one of the, I'll back into that. So one of the misconceptions about a reverse mortgage is that they're expensive. Yes and no. So why there's a non -recourse feature is that the, what we call IMIP, initial mortgage insurance premium is 2 % on the value of the property. So my mom's was close to $15 ,000 that

was the fee for the initial mortgage insurance premium. Well, that initial mortgage insurance premium, or let's just call it MIP, Mortgage Insurance Premium, what that does is that puts a moat around the property, right? And FHA doubly insures the property. So that means that if you get your roof done and you don't like the way the roofer does the property, right, or does the roof, you don't pay him their final payment until they get it right. They put a mechanics lien on the property. They're behind FHA. They won't penetrate that. They can't get to it.

but that upfront mortgage insurance of 2%, it goes into a fund and that fills the gap when there's a shortfall between what's owed on the property and the value of the property. So where people say, gosh, that 2%, that's expensive. It is, and there's some talk around for the higher priced homes or for the higher valued homes of bringing that down slightly because again, in my mom's case, that was $15 ,000.

which she didn't write a check for, that came out of the proceeds, just like when you do a refinance, so she didn't have to write a check for that. So there's some talk around that. But again, the non -recourse feature is there because of that mortgage insurance premium that's charged on every single reverse mortgage, which we can't control. It's an automatic 2 % on the value of the property.

Janet Engel (36:10.058)
Okay. Do you think that that is a major reason why more older adults aren't taking advantage of this financial product?

Michael Pankow (36:22.062)
Honestly, I don't think so because people don't talk about the mortgage insurance premium too much. All they hear is, they're expensive. Well, my response to that is that, well, how long you going to be in the home? Right? Well, I plan on being here for 10 years. Well, okay, take, my mom's case, 15 ,000, divide that by 10. Okay? And that's not a lot per year to pay for all the rights, protections, the free money, right, that you get access to. If you're going to be in the property for a year,

Janet Engel (36:30.423)
Okay.

Michael Pankow (36:50.924)
I would say to my mom, probably not a good idea to get a reverse mortgage. It's a little bit too expensive for just that one statement.

Janet Engel (36:55.266)
because you won't make your money back in terms of the amount of time you're living there, you are making some of that money back just because your property is increasing in value.

Michael Pankow (37:05.356)
Yeah, yeah. The other thing I'd like to say too about the mortgage insurance premium and the investment that you make in that, rather than it being a cost, switch the mindset to an investment, is because of the rights and the protections of the non -recourse, how that extends to not only yourself but to your heirs, The availability of the funds, never having to make a payment on those funds, you can, but there's no requirement. The fact that that line of credit can never be taken from you. It can never be pulled back. It's not like a HELOC where the bank makes a phone call and says,

Hey, the market's down, we're restricting access to your HELOC by 50 ,000 or we're just eliminating, we're freezing those funds, you no longer have a HELOC. That's not the case. With a line of credit with a reverse mortgage actually grows over time at whatever the prevailing interest rate is associated with the reverse mortgage. And it doesn't move with the property. So if the value of the home comes down, the line of credit continues to grow at whatever that interest rate is. So when I talk to financial advisors and I share with them how the line of credit works, which...

We have three products within the HECM reverse mortgage space that we can use, is a, we call it a monthly five cap, it's an adjustable. 98 % of all reverse mortgages are the monthly five cap because of the line of credit and the flexibility with it. Then we have a reverse mortgage, which has a higher interest rate, which doesn't give you as much access to your equity. And then we have an annual adjusted reverse mortgage, which again,

is mirrors the variable five cap, but again, it doesn't give me the flexibility. And I can get into the line of credit if you want me to, because that's a significant benefit on how you can access the line of credit and the different ways and the different strategies, like delaying social security using the term payment, or taking out a 10 -year payment, which is basically like a fixed annuity, right? And that's for the life. So my mom at 77, if she was to do hers, I think hers was 2 ,000 and some change per month.

That would go on a perpetuity for my mom. And again, that's tax free. So you can access the line of credit in a lot of different ways. But it never gets taken away, never. And it always, and whatever the unused balance is, it always grows.

Janet Engel (39:16.952)
And that unused balance when the person who took out the reverse mortgage dies, does that unused balance transfer to their heirs?

Michael Pankow (39:28.846)
It does, so it's just consider that equity. So if you think about a credit card, let's say you have a high limit of $20 ,000 and you use $5 ,000 of that and you stop using the credit card. Well, now you still have $15 ,000 you didn't touch. So the debt on the credit card is $5 ,000. Well, $15 ,000 was untouched. Same thing with the house. So in mom's case, let's say it's 10 years from now and let's say theoretically the reverse mortgage balance is $10 ,000.

$500 ,000, right? If she didn't use all of her line of credit, that just stays in the equity piece because it didn't flow over to the debt side. So anything she uses out of the line of credit flows over to the debt side, right? So 10 years from now, based on an annual appreciation of 4%, which HUD says is the average, you know, my mom's property, I could figure it out here pretty quick, but you know, 730 plus 4%, 10 years, it's going to be well over a million. So we'll have substantial equity.

in the property. And there's a silver lining with that too, is for the heirs, and they always perk up when we talk about this, because that's where some of the resistance comes in. When you do a reverse mortgage, not just mono -e -mono me and the reverse mortgage client, a lot of times there's financial planners and CPAs involved, and then there's also the family members, and everybody's got a different stake in it. Everybody has a different stake in it, and they've heard different facts, fiction, myths versus reality, and I've got to get through that.

you know, in some cases with, you know, lots of different stakeholders. But for the kids, you know, any remaining equity after the sale of the property and commissions of fees and taxes are paid, that goes to the kids. And then also the silver lining is because there's what's called the deferred interest, right? That deferred interest, when it's paid, that becomes a write -off for whoever pays it off. So if I'm an heir and I pay up that deferred interest, that becomes a write -off. So just like

you and your husband make a mortgage payment, well, every year you get a 1098 and you get a portion of your interest, you get to write off on your taxes. Well, with a reverse mortgage, you don't make a mortgage payment. Again, you can, but most don't, and so there is no interest deduction. But when they sell the property, if they have a reverse mortgage and they sell it, or if they pass it on to the kids, and God forbid when something happens to them,

Michael Pankow (41:50.862)
and that interest is paid, that's when the write -off occurs. So for the kids, I always say, okay, yeah, this is dipping into the equity a little bit, but here's how much equity you have based on the forecasted 4 % appreciation rate. Here's what it looks like when mom uses, or dad uses the line of credit. Here's what the overall debt is. And then, by the way, here's the deferred interest projected over the next 10 years. And if this event occurs 10 years from now, this is how much deferred interest you'd be able to write off. And they go, okay, so this is not as bad.

Again, it goes back to what we were talking about earlier. It's an education, right, for all stakeholders.

Janet Engel (42:25.836)
I also want to ask you how does that MIP insurance work when someone wants to take out a reverse mortgage to purchase another property?

Michael Pankow (42:37.198)
Same exact thing. So that factor, so when I gave you that number for your mother -in -law, the 126 ,000, that included the MIP in that factor.

Janet Engel (42:48.864)
Okay, well great. I'm a little young for the reverse mortgage, but I'm sold.

Michael Pankow (42:55.948)
Right? Yeah, it's a great product. It really is. It really

Janet Engel (43:00.398)
Now, tell us, going back to that, having only a 2 % penetration in this reverse mortgage market, and then considering that as many as 90 % of older adults say that they want to age in place, but yet, even though most older adults, they do own their homes and most of them have no mortgage,

they may still have limited income, such as my mother -in -law and your mother.

What is the reverse mortgage industry doing to educate older adults? And I can ask you specifically, what is Veterans Mortgages of America doing to try to have a bigger penetration and educate older adults?

Michael Pankow (44:00.536)
Yeah, well this is where I think we can do a much better job, all of us. And I think that by getting involved with people like you that focus on aging in place, I think the participation of the CEO by Longbridge at the NAIPC conference, where I'm also going to be there with you, working with AARP. I've got the most recent edition of AARP that I stole from a coffee shop the other day. And I looked through it, and there's not one mention.

of a reverse mortgage in the AARP magazine. And I think the challenge that we have on the education side, goes back to the myth versus the facts. And there's so many misconceptions like you lose title to the property. No, you don't lose title to the property. It's just like any other mortgage. You are on title. It is your home. I have to my own free and clear in order to qualify. No, you don't have to own your home free and clear. It's a calculation based on age, interest rate, and the value of the property.

Right? My heirs don't get the property. The bank takes the property when I pass and the kids lose out. Absolutely not. There's four ways that the kids can actually maneuver with the property and move and declare what they want to do. They can buy it, refinance onto it. They can sell it or they can do a deed in lieu of and walk away from it if in fact there's not enough money in it to make sense for them. They're not on the loan so there's no impact to them negatively.

The other one is a big one, right? Especially as we see, you know, there's a lot of marriages where couples where you've got one that's 10, 15, 20 years older than their spouse, male or female. Well, they're going to take the home from my spouse. Now, that's not true either. So it's called an eligible non -borrowing spouse. And we do have a non -borrowing spouse as well. But for the eligible non -borrowing spouses, as long as they meet the terms of the loan, meaning they're married to the individual at the time the loan was.

the reverse mortgage was done, they stay married to the individual, they live in the property, and then they reside in the property after that more older spouse passes. As an eligible non -barring spouse, they're protected as well, and they get to live in the property in perpetuity, as long as they take care of the property charges and the taxes and the insurance. But from the get -go, they're an eligible non -barring spouse if they meet the loan criteria. So those are some of the biggest hurdles that I face, which is the kids,

Michael Pankow (46:24.974)
the spouses and gosh, title or I don't know the home free and clear, that's not true. That doesn't need to do it. That's not the way it works. So it's about the education. It's about turning the tide with the National Association of Realtors about the reverse mortgage repurchase that we talked about, right? And educating folks. mean, what I'm sharing with you today and your listeners is that after they listen to this podcast, hopefully, they will know more, they will know 90 % more.

than anybody else out there. And that's always my goal. Just based on these little tidbits that we've shared today, right, which is really high level stuff, but that's all they need. That's all they need.

Janet Engel (47:03.958)
Yeah, that's great. Before we end the show, Michael, I want you to tell us about your work in the film industry.

Michael Pankow (47:11.854)
So I took a break from the mortgage industry back in 2018 and I was a very small investor in this group that was doing a documentary on a true story of two individuals back in the Vietnam War and their names are Al Boyer and Doug Hagan and it's a true story and these guys were best of friends growing up and again this is during the Vietnam War era.

One went off to college to ROTC, the other went into the Special Forces. Well, the one that went into Special Forces was doing missions into Cambodia and Laos. That was with the MACV SOG. We didn't even admit that we were doing those until the 1980s. Well, long story short, he went missing in action, as many of them did, and his buddy who graduated from ROTC went into the same kinds of units, the same theater of operation. Well, he was, unfortunately, he was also killed in a firefight. He was awarded the Medal of Honor.

He was brought back to the US and buried at Arlington Cemetery. So our story tells a story in a journey of 46 years where we follow the family of Al Boyer, who's the one who went missing in action. And long story short, through the magic of DNA, a little piece of his themer bone was found by a woman who walked out of the jungle in Vietnam and said, think I've got something here that might belong to an American service member. Well, that little piece of themer,

through DNA, they were able to match it to the survivors. And long story short, he was brought back and he was buried within 50 feet of his best friend at Arlington Cemetery 46 years later, which is a pretty magical story. So from that documentary, I was executive producer and I traveled the country for about two, three weeks doing the filming of that. And then I said, you know what, I really enjoy this. I love movies, love to watch movies and documentaries. And so we started a film production company.

Janet Engel (48:50.06)
That's a great story.

Michael Pankow (49:05.87)
and we've got about 17 screenplays. It's a long road. It's a long road, but we've got one that's a true story that we're really pushing hard right now, and we're excited about the development of it over the next 60 to 90 days, and hopefully that one's gonna make it big. We're really excited about it.

Janet Engel (49:23.662)
Well, I hope so and I have a suggestion for you since we are talking about educating the public both older adults and their caregivers or their adult children on reverse mortgages, aging in place, how they can improve their quality of life. I think that would be a great documentary.

Michael Pankow (49:30.242)
Okay.

Michael Pankow (49:48.258)
Yeah, yeah, I agree. I agree. Yeah, especially it can be almost educational.

Janet Engel (49:55.114)
It will be educational and it will be a great story and many people will be able to relate to that story.

Michael Pankow (49:57.154)
Right?

Michael Pankow (50:03.778)
Yeah, well we should talk about that.

Janet Engel (50:05.568)
Yes.

Michael Pankow (50:07.436)
We should talk about that. We're gonna see each other in Orlando and I think you're gonna be also at the other event in Wichita, right?

Janet Engel (50:13.386)
Yes, and that is for listeners. That's the equip conference Which is being hosted by the senior home coach platform that is headed by Katherine Ambrose Which Katherine will also be a speaker at the National Aging in Place Council. She's this very energetic magnetic woman. She has a show on PBS has had one for several years

Just super eloquent speaker and very passionate about helping people age in place and so her conference is October 21st through the 24th and Yep, and it's gonna be a lot of fun Yeah, so thank you so much Michael I would love well, I will include your email and

Michael Pankow (50:55.746)
Yep, and Wichita, Kansas.

Yeah, I'm excited about it. I'm excited.

Janet Engel (51:10.86)
the link to your website so people can contact you. Is there any other better way that you'd like to tell us about for someone to contact you?

Michael Pankow (51:20.43)
I'm a big fan of the phone, so if somebody wants to reach out to me on phone, right, and if you're a text or I love to text, that's a great way to do it too. So you can share that or if you want me to share it now, I can do that now, but if you want to share that on, okay. So my telephone number is 916 -296 -7765. That's 916 -296 -7765.

Janet Engel (51:31.736)
Yeah, go ahead.

Janet Engel (51:47.106)
All right, great. And again, I will include all of Michael's information and his website, email, so you can contact him yourself. And then hopefully, if you're going to either of these conferences, say hello to him. You'll know exactly who he is because he will be presenting the awards the day of the dinner on October 12th.

Michael Pankow (52:10.38)
Yes, so Catherine and I will actually be doing that. That's right. That's right.

Janet Engel (52:13.12)
Yeah, Catherine, you. All right, Michael. Well, thank you. This was great. I learned a lot and I'm sure everyone else did as well. And it's just wonderful to have this information because unless you have information, you can't make good choices. And we should keep that in mind is all of us for everything. I think it applies to everything in your life is keep an open mind.

Michael Pankow (52:31.758)
That's right.

Janet Engel (52:40.691)
educate yourself so then you can make a good choice about that situation or product whatever it is that you're thinking about doing.

Michael Pankow (52:50.826)
Absolutely. Well, thank you for having me on. I'm really honored, as I told you yesterday, really honored to be here.

Janet Engel (52:56.642)
And I wanted to tell our listeners that Michael is in preparation for creating his own podcast, which is going to be ultra focused on financial products available for older adults. So we will be on the lookout for that. So you can listen to a lot more of Michael and his knowledge and experience in this market.

Michael Pankow (53:03.874)
Yes.

Michael Pankow (53:15.16)
Yeah, thank you.

Michael Pankow (53:21.954)
Yep, and you're going to be one of our first guests, just so you know.

Janet Engel (53:24.052)
Yes, I would love to do that. All right, thank you.

Michael Pankow (53:27.662)
Awesome. All right. Thank you, Janet. Thank you, everyone.