US News: Firms Must Develop More Innovative Home Equity Products for Retirees

March 1st, 2012 | by John Yedinak Published in News, Reverse Mortgage | 3 Comments

WIth so many Baby Boomers getting ready to retire, the need to use home equity as part of an overall retirement strategy has never been more important. But as US News reports, after five years of home value declines, many seniors have growing concerns about what to do about not only their homes, but their overall retirement plans.

The National Council on Aging (NCOA) believes the use of home equity will be on solution and recently rolled out the Home Equity Advisor with the support of the Financial Industry Regulatory Authority (FINRA).

“What we’re seeing from the reverse mortgage world is that people are in a lot of debt,” said Barb Stucki, vice president of NCOA’s home equity initiative during an interview with US News. “A lot of people are thinking about trying to tap the equity in their home, or perhaps downsize to a smaller home to save money … Our big concern is that if people do tap the equity in their home that they have access to a broad range of possible solutions and not just a single option.”

Stucki stresses that people must think more strategically when it comes to their home equity, especially now since the options to utilize it are so limited.

NCOA would like to see “the financial services industry develop more innovative products” involving home equity. One example Stucki cited would be a more targeted product that ties the use of home equity funds to a single spending need, such as paying for long-term care expenses.

Smart Ways for Seniors to Tap Home Equity

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Anonymous

Here is a prime example of limiting HECMs to loans of last resort. So many claim that HECMs are not loans of last resort but just ask them their favorite illustration of how a HECM has helped a senior and for 90% (and more), it is a heart felt story about a senior being bailed out of financial trouble.

Ask those same individuals for a heart felt story about a senior who used the HECM as a loan of first resort and the stories trail off. There is little doubt that Dr. Stucki has good intentions for a segment of seniors; however, our industry must have a broader reach not a more restricted one.
http://pulse.yahoo.com/_WHCHUERH3QJA7SJHEEGSUIKFLA michael w

many people wait until it is too late to solve their finanical problems . Using a reverse should be the first resort not the last. The Journal of FP has a great study showing how much more time their investments last if they use the reverse as a first resort
Anonymous

Dr. Stucki has been a long-time advocate of ways to fund retiree health care needs, but I don’t think she is necessarily advocating a single-use reverse mortgage. She may well be thinking about a new kind of hybrid financial product that offers some insurance-type return of funds or growth guarantees while funded by home equity.

We’ve been down the single-use reverse mortgage path before in the early days, and some not-so-nice terms of these loans helped boost the HECM Program toward becoming the dominant model. Many municipalities and Redevelopment Agencies used to offer their own community redevelopment and remodeling loans, many of them reverse mortgages, to help low income retirees upgrade their homes with no out-of-pocket expense. The kicker was that repayment after occupying the home for another 10 to 15 years involved signing over title to or shared equity with the city or housing entity.

That doesn’t mean that we couldn’t or shouldn’t revisit the underwriting guidelines and calculations for limited purpose reverses to introduce a modern design, but that may not be where she’s headed. The kind of flexibility boomer retirees are likely to need probably won’t be best-served by a single product that fits neatly into the licensing categories where regulators and regulatory entities want them to stay.