Reverse Mortgages = Subprime? Unfortunate Comparison says HUD Economist

What seems like an increasingly negative impression of the reverse mortgage business – among some consumers, media outlets and government representatives – has several practitioners wondering what can be done to counter these beliefs – and who might take the lead in such an effort. One reverse originator reportedly has asked an industry trade association to collect special fees from members to mount a counter-offensive, including but not limited to a significant marketing campaign.

It seems that subtly yet powerfully, there even has developed a growing notion that the reverse mortgage business is akin to (now-discredited) subprime lending, which is blasphemed for a wide-range of ills, not the least sparking a worldwide recession.

“It’s an unfortunate comparison,” asserts Ed Szymanoski, noted economist with HUD, in conversation with RMD. He points out that the FHA, principal guarantor for nearly all reverse mortgages today, “has lot of protections built in.”

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Jeff Foody agrees. He is corporate education liaison, EquiPoint Financial Network, and regards any equation of reverse mortgages to subprime as nothing more than “sensationalism. People fear what they don’t know,” he says. Foody figures reverse mortgages have been “obscure for some time, so it’s easy to make [false] comparisons.”

One secondary market trader adds that the two mortgage sectors are “not anything at all alike. Reverse is all government-based lending, no one can compete on LTVs, and the rates are floored,” he points out.

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at nmorse@morsecommunications.com

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  • “It’s an unfortunate comparison,” asserts Ed Szymanoski, noted economist with HUD,..”

    I don't agree, I think it is a deliberate comparison, and one meant to gain the political support of the majority of seniors and their kids; the ones NOT in the market for RMs. In other words these cynical (sorry, The Cynic) critics are using the poor seniors who could benefit from RMs to curry favor with the vast majority of better off senior/voters. You will find abusers in any field of financial transactions and if there were that many abusive RMs then there would be factual statistical data. I'm not sure, but most of the negative stories seem to be anecdotal; if not, let's see the figures and hear pro and con stories from real RM customers, not rigged up witnesses arm twisted into non-confrontational testimony by kangaroo-style subcommittees.
    Call me paranoid, but I can't think of another scenario that fits; it is an artful dodge.

  • Many of the negative aspects of the mortgage industry as a whole link back to the subprime market.

    The Reverse Mortgage Industry must continue to practice ethically, give education and monitor itself in order to prove and effectively show clients and crtics that there our industry does care and our product is a fair and equitable financial instrument.

  • Many of the negative aspects of the mortgage industry as a whole link back to the subprime market. rnrnThe Reverse Mortgage Industry must continue to practice ethically, give education and monitor itself in order to prove and effectively show clients and crtics that there our industry does care and our product is a fair and equitable financial instrument.

  • Mr. Morse,

    It would be best if all statements related to reverse mortgages being compared to subprime cease. While it is very true they are very misleading and flat out wrong, the status of the people making these statements give the statements undue credibility and unfortunately at least one (and perhaps even two) has more weight than anyone who has publicly defended HECMs against such charges to date.

    Mr. Dugan needs to be corrected privately and carefully behind the scenes and allowed to make his own correction. The statements of neither Mr. Szymanoski nor Mr. Foody have the same level of instant credibility that those of Mr. Dugan (or the Senator) engender. We can all get steam blown off by bringing up the unfairness again and again but it is self-defeating.

    Yes, as new attacks come, we need instant and immediate rebuttals but let's not keep dregging up old war stories again and again, letting more people know what others have falsely said about our product. Unfortunately from a general public point of view, the government positions of at least two such detractors bring more weight to bear on the subject than all of ours combined.

    Until we have a “white knight” we need to react in real time, not weeks or months later. I think Marty Bell's call for a truce last month is something we all need to heed.

  • Seniors who qualify for a FHA (HECM) Reverse Mortgage are people who have husband their resources and perhaps represent the largest equity position in America's homes.
    Marketing should be directed strongly to Seniors who need approximately 52% equity in their homes to qualify for the program.
    There seems to be a misconception that Reverse Mortgages are a factor
    in every senior homeowners life. Not so'
    It is clearly intended and used as a conduit to a peaceful mind and a tranquil heart . Ask the people who have them and then refer to HUD's own finding that the families of the Seniors who are using the program ,overwhelming favor and praise it.
    Bob LaFay, Reverse Mortgage Consultant

  • If Hal Riney or David Ogilvy were alive today they would donate their efforts to create a powerful ad campaign to re-position the category. Think “Beef, its whats for dinner” “Saturn” or many other wonderful in the public service campaigns such as The United Negro College Fund “a mind is a terrible thing to waste” that have radically altered how people perceived an entire industry.

    As a senior advertising and marketing exec, with three campaigns in Ad Age's Hall of Fame, I'd be happy to spearhead the effort.

    What says NRMLA to the idea?

  • Mr. Morse,rnrnIt would be best if all statements related to reverse mortgages being compared to subprime cease. While it is very true they are very misleading and flat out wrong, the status of the people making these statements give the statements undue credibility and unfortunately at least one (and perhaps even two) has more weight than anyone who has publicly defended HECMs against such charges to date.rnrnMr. Dugan needs to be corrected privately and carefully behind the scenes and allowed to make his own correction. The statements of neither Mr. Szymanoski nor Mr. Foody have the same level of instant credibility that those of Mr. Dugan (or the Senator) engender. We can all get steam blown off by bringing up the unfairness again and again but it is self-defeating.rnrnYes, as new attacks come, we need instant and immediate rebuttals but let’s not keep dregging up old war stories again and again, letting more people know what others have falsely said about our product. Unfortunately from a general public point of view, the government positions of at least two such detractors bring more weight to bear on the subject than all of ours combined.rnrnUntil we have a “white knight” we need to react in real time, not weeks or months later. I think Marty Bell’s call for a truce last month is something we all need to heed.

  • Seniors who qualify for a FHA (HECM) Reverse Mortgage are people who have husband their resources and perhaps represent the largest equity position in America’s homes. rnMarketing should be directed strongly to Seniors who need approximately 52% equity in their homes to qualify for the program.rnThere seems to be a misconception that Reverse Mortgages are a factor rnin every senior homeowners life. Not so’ rnIt is clearly intended and used as a conduit to a peaceful mind and a tranquil heart . Ask the people who have them and then refer to HUD’s own finding that the families of the Seniors who are using the program ,overwhelming favor and praise it. rnBob LaFay, Reverse Mortgage Consultant

  • If Hal Riney or David Ogilvy were alive today they would donate their efforts to create a powerful ad campaign to re-position the category. Think “Beef, its whats for dinner” “Saturn” or many other wonderful in the public service campaigns such as The United Negro College Fund “a mind is a terrible thing to waste” that have radically altered how people perceived an entire industry.rnrnAs a senior advertising and marketing exec, with three campaigns in Ad Age’s Hall of Fame, I’d be happy to spearhead the effort.rnrnWhat says NRMLA to the idea?

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