MetLife Releases Reverse Mortgage Guide for Consumers

image MetLife Mature Market Institute (MMI) announced the release of The Essentials: Reverse Mortgages to help consumers make informed decisions regarding the use of home equity to help fund one’s retirement.

“Reverse mortgages can allow older individuals to receive funds while they continue to live in and own their homes,” said Sandra Timmermann, Ed.D, director of the MetLife Mature Market Institute. “Our guide is a general introduction to reverse mortgages. It explains important terminology, presents basic issues, and answers frequently asked questions.”

The Essentials: Reverse Mortgages provides the following information for those considering a reverse mortgage as an option:

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  • 95% of reverse mortgages are Home Equity Conversion Mortgages (HECM). They are insured by the Federal Housing Administration (FHA).
  • The amount one can borrow depends on age, type of reverse mortgage, current interest rates, location of the home, value of the home, and FHA lending limits in that area. For HECM loans, there is currently a $625,500 borrowing cap for most areas.
  • The costs associated with a reverse mortgage typically include an origination fee, other closing costs, and for HECM loans, both an upfront mortgage insurance premium and an ongoing premium. These costs can be included in the loan and paid (with interest) when the reverse mortgage becomes due. A monthly service fee may also apply.
  • With a reverse mortgage there are no monthly mortgage payments. However, as long as borrowers still live in and own their home, they continue to pay their property taxes, homeowner’s insurance, and any home maintenance. The loan, including accrued interest and any service fees, becomes due when the borrower (or last borrower for a couple) dies, sells the house, moves permanently to a new residence, or fails to live in the home for twelve consecutive months.
  • Borrowers may choose to receive funds as a lump sum payment, where the cash will be available immediately, in equal monthly payments for a fixed number of months (or for as long as one borrower lives in the home), as a line of credit to draw funds as needed, or any combination of these options.
  • Interest rates for most reverse mortgages are tied to a financial index and vary according to market conditions. Some financial institutions offer both fixed- and variable-rate reverse mortgages.

The Essentials: Reverse Mortgages

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  • I applaud MetLife for putting the booklet together.

    There are a few problems with its contents. That is the way it always is with first editions. I have in fact started contacting MetLife with suggested changes.

    However, the idea of having such marketing publications is a great idea and should be encouraged.

  • I trust, Mr. Veale, one of your suggestions was: “If the home value is less than the Debt, depending upon the Heir's tax situation, the Heirs may be
    subject to a bill from the IRS for that portion of the debt covered by the FHA Insurance which the IRS considers INCOME to the Borrower.”

    • Mr. Nelson,

      I am surprised you posted. I thought you would tied up with your son. Please send him our thanks and greetings.

      No reader should feel they cannot make suggestions. After all we all have a stake in this industry.

      Enjoy the time with your son.

  • Met Life is an insurance company, a big one, and it sells deferred annuities and long-term care insurance to seniors. What’s it doing touting reverse mortgages? Is Met Life’s brochure, THE ESSENTIALS: REVERSE MORTGAGES a “public service” or a “marketing ploy” that may wrongfully be used to lead a senior into using home equity to purchase one of their products?

    In AARP’s report, Reverse Mortgages: Niche Product or Mainstream Solution, AARP make a strong recommendation that, if adopted, would outlaw the sale of certain insurance products to reverse mortgage borrowers:
    “Recommendation 16: State governments and the Insurance Marketplace Standards Association should amend their suitability standards and cost disclosures for long-term care insurance sales to cover situations in which consumers are considering using reverse mortgage proceeds to purchase it. Sales practices that attempt to convince consumers to use home equity to pay for such insurance should he defined as violations of suitability standards..”

    I hope Met Life is not giving this new reverse mortgage brochure to the insurance agents who are selling annuities and long-term care to their clients. That would be an unsuitable sales practice.

  • Yes, Mr Veale, my Son is home along with the other almost 100 members of his US Army Reserve Company. The DC-10 Flight arrived home about 1:30 A.M. Tuesday; after an hour delay for weapons turn-in, many Family members met their Soldiers at the Ft. Lewis hangar. The flight flew direct
    from a US Marine Base in Iraq to McCord Air Force Base in Tacoma with two Fuel stops in Ireland and Indianapolis. (And we Citizens complain about a long nine or ten hour day sometimes!) Tuesday night at six the Company was honored by Ft. Lewis in the Base Theater for their hard work during the previous year; it was a tearful and heartfelt reunion and honorarium. Now
    to my Blog: I hadn't meant to spend any time on RMD but after reading the section in the MetLife guide (which I, too, feel is a useful tool) about FHA
    Insurance, I saw it failed to mention the POSSIBILITY of a future IRS bill for heirs, which you so carefully articulated in a past RMD. I can't tell you how many RM folks I have shared that fact with since your writing: Most have said I was just in error. One fact for sure, I will never again state to a potential FHA HECM client that the FHA Insurance guarantees the client will never leave a debt for their Children. If that POSSIBILITY causes me to lose business, so be it: Seniors need to be told the whole truth. I still believe something should be done to eliminate even the POSSIBILITY; we Seniors don't mind using some of our home equity to help financially in the last years of our life, but we damn sure don't wish to leave a debt of any kind for our Children, if we can't help it.

    • As mentioned previously there are ways to avoid paying the tax but the family should seek the help of a tax attorney who is an estate planner and familiar with trusts. The tax issue will not arise, however, IF the value of the home is greater than the balance due upon termination of the reverse mortgage.

  • I have often wondered why there is such an uproar and some feel it should be banned, against using a portion of reverse mortgage proceeds to fund LTCi or an ILIT. These, if I'm not mistaken, can be valuable tools to assist in protecting ones estate and legacy.Yes there are “bad guys” in every industry and we will never be able to legislate them away, but the majority of industry people do work in the best interest of their clients. I was always under the impression that the goal of a reverse mortgage is to assist seniors who want to age in place and assist them to do so safely (modifications….repairs…etc) and to assist them to protect themselves, their estate, and their legacy.

    James and James I would appreciate your feedback on this.

  • Mr. Greene: I have never said FHA HECM proceeds should never be used to purchase LTCI. It's the sale of annuities with high sales charges and withdrawal fees that I feel is a Senior rip-off. I believe it really is a matter of
    whether the Senior can qualify and afford to purchase LTCI at one's older age. I've heard about policies where premiums are refunded if the policyholder does not make a claim; some have said this is not cost-effective. I surely do not know; others with LTCI experience know far more. I do worry, as a Senior, if I will be part of the 30% (higher as one ages, I understand) who unfortunately will for health reasons be forced to spend my last days in a nursing home.

  • Jamesanelson: It was not my intent to infer that you made these statements, rather one always reads in various articles that the sale of any insurance product along with a reverse should be banned. I agree with you that the sale of annuities,with high charges, high withdrawal fees, and a long term maturity are a Senior rip-off and those people and companies that follow that practice should be dealt with appropriatly.(jail would be my opinion) I was really looking for your's and James Veales insite and views on using a portion of reverse mortgages to assist in funding LTCi and ILIT.

  • As long as the Senior has enough money (or Relatives who will step up to the financial plate should the Senior run out of FHA HECM Funds and unable to refinance to secure more), I believe the Senior should use the proceeds for any reason to assist keeping the Senior in his/her home: For many of us, any step we can take to either stay out of a nursing home with in-home care or assist us in paying for care there is a positive one. It would seem to me, to reduce the acquisition cost, the marriage of an FHA HECM and LTCI might make sense. Should a Senior purchase separately? Depends upon how much money one has and at what cost at an older age, even if one qualifies healthwise, in my opinion.

  • My how civilized we have become. When I first started posting on this fine forum, I was practically cursed out when I disclosed I was an insurance man. Must be the climate change effect.

    • dduck12,

      Forgive me; I have had too much caffeine today.

      Most studies on LTCi seem like little more than propaganda financed by insurers. Choosing LTCi is chosing ten penny nails. It differs substantially by benefits, cost structure, and even stability of the insurers.

      Please do not misunderstand, many seniors who do not have LTCi should have it; however, most of those who are looking for it are ill prepared to compare policies and insurers. Rather than providing the information needed to evaluate them, studies usually only reinforce the idea that “everyone needs it.”

      I do not care who the advocate is, Dr. Stucki, Stephen Moses, or some other authority on the subject, the acquisition of LTCi and the origination of a reverse mortgage should be two entirely different and separate transactions entered into at entirely different and separate times. This is not to say seniors should not be free to use their proceeds to acquire LTCi; they should.

      For most older seniors, a reverse mortgage is difficult enough to fully comprehend, adding a product that has even more variations to contend with is hardly appropriate. Here cross selling is not the real problem it is placing too much pressure on the senior to make too many decisions of a substantial financial nature all at one time. This is one reason why I fully credit HUD with making the right decision when they stood up to the Clinton Administration and Congress and refused to implement the enacted provision that allowed lower MIP if HECM proceeds were used to acquire LTCi. The G. W. Bush Administration and Congress did exactly the right thing when it eradicated that provision out of the U.S. Code in HERA.

      Too few seniors have properly evaluated the real value of LTCi. At the same time, acquiring LTCi can be wasted money for those who cannot obtain enough of it or do not properly match their most probable risks against available benefits. Benefits should also be compared to those provided through other avenues such as government and nonprofit programs for seniors. Then there is the issue of evaluating insurers.

      All middle aged and older adults should evaluate LTCi but not everyone who evaluates it should get it. For many seniors, LTCi could be far more beneficial than life insurance. Even some LTCi policies provide limited life insurance features.

  • My how civilized we have become. When I first started posting on this fine forum, I was practically cursed out when I disclosed I was an insurance man. Must be the climate change effect.

  • dduck12,rnrnForgive me; I have had too much caffeine today.rnrnMost studies on LTCi seem like little more than propaganda financed by insurers. Choosing LTCi is NOT like chosing ten penny nails. LTCi differs substantially by benefits, cost structure, and even stability of the insurers.rnrnPlease do not misunderstand, many seniors who do not have LTCi should have it; however, most of those who are looking for it are ill prepared to compare policies and insurers. Rather than providing the information needed to evaluate them, studies usually only reinforce the idea that u201ceveryone needs it.u201d rnrnI do not care who the advocate is, Dr. Stucki, Stephen Moses, or some other leading authority on the subject, the acquisition of LTCi and the origination of a reverse mortgage should be two entirely different and separate transactions entered into at entirely different and separate times. This is not to say seniors should not be free to use their proceeds to acquire LTCi; they should.rnrnFor most older seniors, a reverse mortgage is difficult enough to fully comprehend; adding a product that has even more variations to contend with is hardly appropriate. Here cross selling is not the real problem it is placing too much pressure on the senior to make too many decisions of a substantial financial nature all at one time. This is one reason why I fully credit HUD with making the right decision when they stood up to the Clinton Administration and Congress and refused to implement the enacted provision that allowed lower MIP if HECM proceeds were used to acquire LTCi. The G. W. Bush Administration and Congress did exactly the right thing when it eradicated that provision out of the U.S. Code in HERA.rnrnToo few seniors have properly evaluated the real value of LTCi. At the same time, acquiring LTCi can be wasted money for those who cannot obtain enough of it or do not properly match their most probable risks against available benefits. LTCi benefits should also be compared to those provided through other avenues such as government and nonprofit programs for seniors. Then there is the issue of evaluating insurers.rnrnAll middle aged and older adults should evaluate LTCi but not everyone who evaluates it should get it. For many seniors, LTCi could be far more beneficial than life insurance. Even some LTCi policies provide limited life insurance features.rn

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