As a lay person, I thought this segment was great. A Republican, a Dem., a media person (she was fantastic), Peter Bell and a consumer group. Well done, VERY positive.

Great! A very positive piece. Still, two of Susan Montezemolo's comments are just flat-out wrong and also very revealing about some misconceptions that lead the consumer advocacy folks to take steps that can actually harm consumers and limit the effectiveness of reverse mortgages.

The first statement is that HECM counselors are financial counselors. That is false, counselors are merely independent parties who passed an exam about one financial instrument. Even though we have an understandable push to get counseling to look at the borrower's overall financial situation, no counselor, no counseling agency, and no licensing Federal agency is prepared to have counselors assume the liability that comes with taking on fiduciary roles and giving direct financial advice. What they should be telling folks is, “These are the risks to watch for if you do x or y.” If they're going to get into financial planning, they need a lot more training, more licenses, and Errors & Omissions insurance. The cost would be enormous and counseling itself would slow down dramatically.

The other statement was that it is never a good idea to use reverse mortgage loan proceeeds to buy any kind of insurance product. Baloney! That's one of the options that Ken Scholen and the other designers of reverse mortgages deliberately left available as a potential use of HECM loan proceeds. We even had Federal proposals that FHA mortgage insurance premiums would be refunded to borrowers that used reverse mortgage proceeds to buy private long-term care insurance. Now because some jerks got over-heated about unsuitable sales of one type of one insurance product (deferred annuities) to reverse mortgage borrowers we are hearing equally boneheaded contrarian statements about the use of any and all other insurance products. Medicare health plans can increase healthcare coverage and improve cash flow, long-term care insurance protects their assets against disastrous future healthcare costs, life insurance leverages current premiums into a larger death benefit payout that can offset the reverse mortgage's reduction of net worth for a spouse or beneificaries, hybrid products can blend and enhance health and life policy benefits. Sometimes even immediate annuities make sense.

I got started in reverse mortgages years ago because they are simply a unique funding tool. For folks who have one financial goal, one financial instrument may suffice. But if they have more than one goal, or if their goals conflict, you generally need a plan with several complementary pieces. That way they can use the strength of one element to offset the weakness of another instrument and the resulting overall plan is stronger and avoids more risk than any one single piece of it.

What reverse mortgages are allowed to fund should stay open and flexible. Otherwise, reverse mortgages actually become the “measure of last resort” that critics have long campaigned to assign them.

Yes, reverse mortgages are expensive. That's because they have to do things that no other financial instrument does. Some folks see only risk and potential for fraud; it sounds as if they think inexpensive failure to achieve your financial goals is preferable to potentially expensive success.

Finally a balanced presentation of the Reverse Mortgage. With all the bad press of late it is nice to see something truthful out there. Even with the mistakes Susan made, the presentation was excellent and hopefully was seen by everyone possible.

I never thought I'd say it but, “Thank you, AARP, for a balanced, positive, and informative presentation about reverse mortgages. Thanks too, to Peter Bell for representing our industry in a positive, non-confrontational manner that should go a long way to dispelling the negative image of our industry. And hey, how about that Barney Frank! Almost as good as A-Rod for hitting the ball out of the park.

Look Dduck, because people like me, who really care about our fellow Seniors, get concerned about unscrupulous commission driven salespeople
who prey on some unfortunate Seniors, sometimes changes are made in laws or regulations to protect others. Like Barney Frank said in the TV
program, if you wish to sell annuities, go sell folks in their fourties or fifties
.

I have mixed feelings about this video. First, I think it is fantastic to have an accurate unbiased piece on reverse mortgages and their benefits as well as some negatives to consider. But I really dislike how the general tone of everyone involved is that these folks need so much protection. There is a large portion devoted in this video to whether we are protecting people enough through accurate and capable counseling. The 62+ population is being talked about as if they are all idiots and are completely incapable of making a decision on their own. Most people eligible for the product are taking their time and educating themselves on this. It is almost never a product someone just jumps headfirst in to. Please give these seniors a little credit. They didn’t get to be 62 year old homeowners by making terrible decisions their whole lives.

dduck: How do you know I haven't? Of course with an alias you could
know me but I doubt it. When you interface with Senior Clients, I hope you have the common sense and simple courtesy to give those folks your true name.
I will never understand people who don't give their real names on this web site. This leaves a lot to be desired in terms of quality, in my opinion. Your stated position on annuities for FHA HECM owners is admirable, dduck.

Counselors as financial advisors:

I do have a bigger definition of financial advisor than The Critic, and much of the discussion on blogs that seems more like arguments stem from the different meanings that different people apply to what each thinks are self-explanatory terms and phrases. I’m not the only one who differentiates between a financial advisor/planner responsible for drawing up a multi-purpose plan and someone who reviews the potential financial impact of one piece of the plan as it affects some of the larger issues. That’s plain in another RMD article today submitted by Mr. Yedinak regarding Hunch.

Ms. Montezolo’s comment about financial counseling and California's Assembly Bill 329 scare me because some folks seem to think that counselors have some magical powers just because their pay does not depend upon the transaction. I'm worried that they are not going to be able to do what CA wants them to do, particularly when we are talking about out-of-state telephone counselors counseling CA residents. This stuff can get complicated quickly, so I hope it never morphs into a time-consuming comprehensive audit requiring professional legal and tax advice to yield constructive answers or a certificate.

HERA & Cross-Selling:

The bulk of the trouble came from cross-selling one variety of one type of insurance product, so a blanket prohibition on all insurance or other financial products seems not just excessive but unwarranted by past evidence of harm. I’d prefer that sanctions for cross-selling be judged upon the suitability and advisability of the sale at the time it happened, which would make the scrutiny more of a math problem than an investigation into motives, but I doubt we would ever get back there now. Prohibition is just easier to enforce and it would prevent conflict of interest for cross-sellers that have no predatory intent but are ignorant of larger consequences.

Unfortunately HERA’s language is so broad that while it prohibits the same-person cross-selling, it also prohibits “association” with another licensed professional who could offer another type of product that might not only be suitable but even advisable. Even with no shared compensation or referral fees exchanged between the two licensees, does a long-term referral relationship constitute criminal “association” because it involves potential commissions from ongoing cross-referrals? We have no guidance on this or the required “firewall” for companies employing people with other financial licenses yet as far as I know.

I’d hate to find out that referring a borrower to a specific independent professional with another license, expertise, and that I have reason to trust to act in my borrowers’ best interests is now a criminal offense. Likewise, what would we need to do to be able to hire multi-licensed people and demonstrate that no cross-selling by these individuals will take place? Some lender contracts already appear to prohibit the hire regardless of safeguard steps we take.

Laws were already on the books in the states to govern suitability of deferred annuities sold to seniors and punish violators, but I can personally attest that as far as regulatory entities have been concerned, complaints from their licensees do not carry anywhere near the weight of consumer complaints. Professional complaints can get treated as sour grapes disputes even when I have tried to alert them to a developing problem, just like regulators ignored the Madoff whistleblower. Several states plainly told me that they would not take action without resident consumer complaints. My questions and comments to legislators since 2006 have never yielded more than a form letter response, and while NRMLA has better means to engage in such discussions, as the Lenders association, they do not necessarily address Broker issues. The brokers’ association, NAMB, is too busy fighting for its broker members’ lives to do much specific reverse mortgage work. I still try to have an effect through persistence, but on this point, I’m becoming the cynic.

Counselors as financial advisors:rnrnI do have a bigger definition of financial advisor than The Critic, and much of the discussion on blogs that seems more like arguments stem from the different meanings that different people apply to what each thinks are self-explanatory terms and phrases. Iu2019m not the only one who differentiates between a financial advisor/planner responsible for drawing up a multi-purpose plan and someone who reviews the potential financial impact of one piece of the plan as it affects some of the larger issues. Thatu2019s plain in another RMD article today submitted by Mr. Yedinak regarding Hunch.rnrnMs. Montezolou2019s comment about financial counseling and California’s Assembly Bill 329 scare me because some folks seem to think that counselors have some magical powers just because their pay does not depend upon the transaction. I’m worried that they are not going to be able to do what CA wants them to do, particularly when we are talking about out-of-state telephone counselors counseling CA residents. This stuff can get complicated quickly, so I hope it never morphs into a time-consuming comprehensive audit requiring professional legal and tax advice to yield constructive answers or a certificate.rnrnHERA & Cross-Selling:rnrnThe bulk of the trouble came from cross-selling one variety of one type of insurance product, so a blanket prohibition on all insurance or other financial products seems not just excessive but unwarranted by past evidence of harm. Iu2019d prefer that sanctions for cross-selling be judged upon the suitability and advisability of the sale at the time it happened, which would make the scrutiny more of a math problem than an investigation into motives, but I doubt we would ever get back there now. Prohibition is just easier to enforce and it would prevent conflict of interest for cross-sellers that have no predatory intent but are ignorant of larger consequences.rnrnUnfortunately HERAu2019s language is so broad that while it prohibits the same-person cross-selling, it also prohibits u201cassociationu201d with another licensed professional who could offer another type of product that might not only be suitable but even advisable. Even with no shared compensation or referral fees exchanged between the two licensees, does a long-term referral relationship constitute criminal u201cassociationu201d because it involves potential commissions from ongoing cross-referrals? We have no guidance on this or the required u201cfirewallu201d for companies employing people with other financial licenses yet as far as I know. rnrnIu2019d hate to find out that referring a borrower to a specific independent professional with another license, expertise, and that I have reason to trust to act in my borrowersu2019 best interests is now a criminal offense. Likewise, what would we need to do to be able to hire multi-licensed people and demonstrate that no cross-selling by these individuals will take place? Some lender contracts already appear to prohibit the hire regardless of safeguard steps we take.rnrnLaws were already on the books in the states to govern suitability of deferred annuities sold to seniors and punish violators, but I can personally attest that as far as regulatory entities have been concerned, complaints from their licensees do not carry anywhere near the weight of consumer complaints. Professional complaints can get treated as sour grapes disputes even when I have tried to alert them to a developing problem, just like regulators ignored the Madoff whistleblower. Several states plainly told me that they would not take action without resident consumer complaints. My questions and comments to legislators since 2006 have never yielded more than a form letter response, and while NRMLA has better means to engage in such discussions, as the Lenders association, they do not necessarily address Broker issues. The brokersu2019 association, NAMB, is too busy fighting for its broker membersu2019 lives to do much specific reverse mortgage work. I still try to have an effect through persistence, but on this point, Iu2019m becoming the cynic.rn

Mr. Peters,

You may view your definition of financial advisors and planners as bigger. I think most would call it narrower. In fact it is so narrow it seems only you can define it.

You seem to want to tie financial advising to rules of thumb. Investment strategy is a not mathematical strategy. It is a strategy based on risk tolerance and analysis that many times can be facilitated through a mathematical model. One only has to be involved with independent fee based pension investment advisors to realize how significant economic changes many times require an investment strategy change based on the risk constraints of the board of trustees. It seems you do not want to provide a service but rather a lawsuit proof strategy whether it matches the risk concerns of your customer or not. But that is why it is called financial planning and not investing using financial safe harbors.

Too many times so called financial planners are so steeped in the product lines they sell and how those products are similar to other investment opportunities (which sounds great but generally proves out to be only marginally so) that they lose all sense of the true needs of their customer and the risk tolerance of that customer. Financial planning is not a science; it is an art.

I share your concerns about a lack of guidelines in cross selling but from there our views diverge. Personally I believe that HUD has irresponsibly put off for far too long its duty to provide guidance. Enough said. This is my expressed view and my expressed view alone.

What I should have said is, there are too many snoozing regulators. I was thinking more the Wyatt Earp type sheriff that would actually do something. I agree, there are too many regulators doing too little.

dduck12,rnrnYou believe there are far too few sheriffs. It seems like every department, agency, and other government related entity has its own Inspector General but nothing seems to get done. To me there seems to be far too many sheriffs but far too few investigators, detectives, deputies, and prosecuting staff. But I get your point. rnrnBut as to recommending another professional let me introduce you to California Civil Code 1923.2(i)(2) which states: “(2) Refer the borrower to anyone for the purchase of an annuity prior to the closing of the reverse mortgage or before the expiration of the right of the borrower to rescind the reverse mortgage agreement.” I guess if one does not view the seller of an annuity, a professional, there is nothing that I am aware of that restricts one from recommending another professional except legal liability concerns that attach to that recommendation.

Hi Cynic,

I'm not so sure our views diverge with regards to the meaning of financial advisor. Most of what may seem questionable or even argumentative in blogs is just due to the different meanings for words and phrases that the different particiants each think are self-explanatory and well-established. Some of my most heated arguments ended when we discovered that we were each using different terms and language and personal experience to say very similar things.

Until I can find the time to author some articles on the topic, which might give you more evidence to decide if I'm completely off base with regards to the meaning of financial advisor, would you grant some benefit of the doubt? It is very difficult to maintain a real-world client-centered focus that surpasses the suitability standard; each industry has its pressures to fall in love with what's in the toolbox and to deal only with the tools that come from the center of it.

It is an art, but much of the art lies in responsibly quantifying risk and/or uncertainty and then minimizing or offsetting it. I sometimes get in trouble for using figurative speech when others think I assert the literal interpretation; my “math problem” comment is probably a good example. That doesn't mean I don't keep some calculations in the files to show some evidence of a good faith effort to understand, quantify, and minimize the sources and size of downside.