Reverse Mortgage Education, We Have A Long Way To go

Over the weekend I was reading some of the comments on RMD and many of them were geared towards the Wall Street Journal describing a reverse mortgage as a product which sold your home to a bank.  Each of us has put lots of work into teaching people that a bank doesn’t own your home when you get a reverse mortgage, but it’s clear that more education needs to be done. 

Last week the Los Angeles Times wrote that More homeowners turning to reverse mortgages and in its letters to the editor, a woman wrote in and said that Reverse mortgages should have fixed interest rates:

I’m glad to see that the government has considered reverse mortgages in the stimulus package. But still not enough has been done.


This has been one of the biggest rip-offs in the banking business — and directed at seniors, which is inexcusable.

The biggest problem with the reverse mortgage is not the exceedingly high origination costs, the maintenance costs or the low ceiling on loans, but the fact that there is no fixed interest rate. The approximate rate you quote in your article is 4%, but who knows what the interest rate will be in five or 10 years.

With rates at a historic low, this is an unseemly burden to seniors and their heirs.

When I read her comment it made me realize that our industry has needs to do a better job marketing to the public about what type of reverse mortgages are available.  BNY Mortgage released a fixed rate HECM in March of 2007 and shortly following that other lenders did as well.  As of last week, some lenders are offering a fixed rate HECM at 5.63%, why don’t more people realize that?

In terms of marketing, the industry has been built on two famous faces, Robert Wagner and James Garner.  They’ve been the main drivers of public awareness for the product and they’ve done a great job, but it’s obvious more needs to be done. 

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  • we have to learn our seelves what we say as we are supposed to be leaders. Last week Reverse mortgage news published somene blog that FHA is allowing gift for reverse mortgages. even printed mortgage letter saying so. I caled Financial freedom who said no gift funds, Okay if RMs reported they know better. I called another rep. who told me what I wanted to hear gift funds were alowed and he would send me the link. Which he did, great letter reads “source of cash:No gift funds” i sent this back to the rep with the link attach and his e-mail back to me No Gift funds.
    This is from the reps and the experence reverse mortgage people. I meet a broker who has done hundreds acoording to him and his add says “no payments ever. I guess when i sell it there will be no payments due!or when family wants the home thier is no payment. where diign up! Time for a specail licenses for Reverse mortgege people!

  • It seems, with all of our country’s expertise in marketing, we can create effective marketing campaigns for any product or service but we cannot create a campaign that overturns the negative image of reverse mortgages that exist in this country today.

    I just spoke to a 75-year old man yesterday whose Son-in-Law, a banker, heard he was looking into a reverse mortgage. His Son-in-Law’s words were “Stay Away from Reverse Mortgages!” The man did not know why – but simply closed himself from hearing anything further. This happens often.

    If the government truly wants to promote the use of reverse mortgages for funding seniors’long-term care, the upfront FHA insurance costs need to be lowered and spread out over the life of the loan and incentives offered to those seniors taking them. A national campaign could be created marketing the idea of the ‘new and improved reverse mortgage’ creating the idea(similar to campaigns to promote literacy, anti-littering, anti-smoking)that’it’s the right thing to do’ to dip into your home equity to take care of yourself in your senior years.

    I read the RMD everyday and read all the negative press – and then when a favorable article is printed – we all jump on it as if we’re finally vindicated by seeing something positive written about reverse mortgages. This must change or market penetration will remain at 1% or less.

    The most sophisticated marketing campaigns have failed to overturn the negative image of reverse mortgages. With the state of the economy today – it might be a perfect time for a government endorsement of reverse mortgages to ‘help’ reduce costs for long-term care and to promote greater independence for seniors.

  • While the percentage of seniors who have heard of a reverse mortgage has increased steadily, unfortunately it has not been accompanied by a similar increase in familiarity. Education is still the big problem without question. Three years ago Bart Johnson of the FHA mentioned that they were eager to launch a nationwide public awareness campaign ala, seat belts etc. Obviously it hasn’t happened.

    I am encouraged by the response by some of the media. Despite the errors contained in the WSJ piece recently, after writing the author an email taking her to task, I received a phone call from Ellen Schultz apologizing for missing the erros her article contained. She said it was her fault for not catching it and that she would be doing future stories on reverses to help correct some misconceptions of what she believes is a terrific product.

  • Here is the problem as I see it: We are preoccupied with marketing instead of educating. And much of what passes for marketing in our industry is 20th century hucksterism. The channels we use for our “marketing” lack credibility with the consumers.

    The one-way communication through free CDs, expensive TV or cable commercials, and famous spokespersons is helpful but insufficient because the obvious commercial intent causes seniors to discount the information.

    Solution: We must engage seniors and their circles of influence — children, advisors(professional and non-professional)– in meaningful face-to-face educational sessions in the communities we serve and answer their questions honestly and competently, one audience at a time.

    For a complex financial tool with a host of conceptual and historical baggage, It is the most fruitful approach.

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