Financial Planner Provides Insight Into FINRA’s Reverse Mortgage Announcement

image Certified Financial Planner and Times Herald contributor Al Benelli recently wrote about the Financial Industry Regulatory Authority’s warning earlier this year about reverse mortgages.  Benelli feels that the strong warning makes him wonder if the regulator of the securities industry had more up its sleeve.

FINRA’s announcement was meant to warn investors to be aware of individuals who propose reverse mortgages to fund a particular investment.  “We believe these (reverse mortgages) are being promoted more and more and investors need to understand what they’re purchasing,” said John Gannon, FINRA’s senior vice president for investor education in Washington.

Many people in the reverse mortgage industry felt the announcement was entirely one sided and did more to scare investors rather than inform.  You can read one RMD readers reaction here.  


Being a financial planner, Benelli is able to provide some more insight into the announcement and gets some reactions from other people in his industry.  One financial planner felt that issuing warning runs the risk of doing as much harm as good.  While the piece might be a few months after the FINRA announcement, it’s interesting to get other financial planners reactions to the alert. 

Regulatory authority issues reverse mortgage warning

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  • pray tell me how Met life was allowed to become a reverse mortgage lender? They promised not to mix reverse mortgages with investments and insurance people. But their agents are calling on met life insurance agents telling them about reverse mortgage and to wait 90 days before investing seniors money from a reverse mortge. tell me how they are not skirting there prokmoises. This was told to me by a met life agent.

  • Interesting… I know prior to purchasing First Horizon, MetLife generated most of their retail origination business through referrals from their insurance people. I guess you can only expect it to happen with reverse mortgages too.

    Thanks for the comment.

  • In the May 2008 issue of the Kiplinger Retirement Report, Kathryn A. Walson wrote the following quotation:

    “A reverse mortgage shouldn’t be seen as a cost-free way to enhance your lifestyle in retirement,” says John Gannon, senior vice-president at FINRA. “It’s an expensive option, and people need to realize they’re reducing the value of their home.”

    Per the FINRA website Mr. Gannon is Senior Vice President, Office of Investor Education. That’s right – Investor Education.

    The article was primarily about the Boach and Munoz cases. The problem in both cases was the inappropriate sales of insurance products — life insurance (Boach) and annuities (Munoz) — using reverse mortgage proceeds. Either Ms. Walson failed to inform Mr. Gannon that the topic of the article was these two cases or Mr. Gannon decided to deflect the investment advisor issue and inappropriately attack reverse mortgages.

    What is unbelievable is that a senior officer in the FINRA Office of Investor Education stated that home values drop as a result of reverse mortgages. Is this man really that ignorant? I doubt it.

    Yes, home equity drops due to reverse mortgage upfront loan costs. Perhaps immediatley following funding because of proceeds taken at funding , the balance due on a reverse mortgage is greater than the total of the liens it replaces and the loan costs incurred but how is home value affected? I doubt that the “investment educators” at FINRA need more financial, real estate, mortgage, and investment education to understand these basic financial concepts.

    I agree with Mr. Benelli, that it seems there is definitely some unstated reason for FINRA deflecting the heat away from inappropriate investment advice to reverse mortgages. Does it take that much imagination to guess why?

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