Forbes: Younger Reverse Mortgage Borrowing Is a Misstep

On the heels of some positive mainstream reverse mortgage media coverage this week, a Forbes article following the release of a MetLife Mature Market Institute study says that the survey finding “spells trouble.”

The trend of younger borrowers taking reverse mortgages—now at roughly one in five borrowers between the ages of 62 and 64—may be putting those borrowers at risk, the article states.

“If they don’t have other retirement assets and they’re spending down the equity in their house, these ‘young’ reverse mortgage borrowers are putting themselves at great risk down the line,” Forbes writes.


The report subtly sounds an alarm to all prospective borrowers: “To the extent that they decide to tap home equity today, this resource will not be available to meet future needs. The decision that these aging homeowners make will therefore have long-term consequences for their retirement security.” And a more direct warning targeted toward big spenders who are saddled with debt: “These homeowners might be better served if they resolved their financial problems now, rather than deferring them through a reverse mortgage loan with interest to the future.”

View the original Forbes article.

Written by Elizabeth Ecker

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  • As to how Ms. Ebeling views the MLMMI and NCOA, I agree with her assessment.  It fully puts a HECM as a loan of last resort.  How else can it be interpreted?  That is the long held view of most counseling execs and senior advocates.

    Much more responsibly than the MLMMI and NCOA report, Ms. Ebeling does discuss the Sacks and Sacks article.  Savers were never created for the cash desperate senior.  It is a great product for the more affluent senior.  But its use is generally misunderstood even by our own industry.  Some are still sneering about its introduction mostly because they do not understand its use.

    It is telling that less than one month before the release of Savers, the new HUD protocol was released with no mention of Savers.  Even more telling is the fact that neither the protocol nor FIT have been changed since the introduction of Savers about 18 months ago to incorporate Savers into counseling.  Is it any wonder that NCOA would take the position it does in the March 2012 report?

    As is obvious Savers are not Standards and do not have the same risks nor should they necessarily be used for the same purposes.

    •  Jim is right in his analysis, particularly of the Saver program.  One of the best uses I have seen of the Saver program is to pay off an existing mortgage for a “young” senior.  The income freed up from not having to pay the existing mortgage and, if the remainder is kept in a credit line, the ability to have an emergency cash reserve, can be invaluable.

      I had clients recently who were 66 and the spouse was 63.  They had an outstanding mortgage of $78k dollars on a house worth nearly $500k.  She never worked and he had a health crises which now prevents him from working.  They had refinanced the house about 2 years ago, so their rate was only around 4 1/2%, but even that was tough to meet on social security.  They took a Saver program HECM from MetLife.  MetLife’s representative cut the majority of the fees, so that they got the loan for something over $3k dollars.  Their children all had their own houses, so they did not feel the need to worry about leaving anything behind for the kids, so the Saver program relieved them of their six hundred dollar a month mortgage payment (of course, they still have to pay the insurance and taxes, but they were already paying those separately).

      This HECM Saver will make a major difference in their lives and lifestyle.  It gives them a fairly large cash reserve that will increase over time, and, most importantly, takes the pressure off of the clients and gives them room to breath.

      I have also seen the HECM Saver used by clients who plan on moving in less than five years.  The costs are not as high as a Standard, which gives them flexibility and time.  The Saver is not the poor cousin of the Standard, but its own product with its own unique usages.  I wish more companies would “sell” it properly.

      I will also echo Jim’s comments about HECM’s as a last resort.  They should be considered among all of the options available, and given due weight.  What most consumer representatives tend to think is that the value of the home should remain in the senior’s family, what I tend to believe is that the senior should be looking out for themselves first and foremost.  If they want to help out and/or benefit their heirs, that is their right, but if they want to use their money and assets for their own benefit, it is their right as well.  Ultimately, it is their money to do what they want with, not ours on which to impose our values.

      Frank J. Kautz, II
      Staff Attorney

      Community Service Network, Inc.
      52 Broadway
      Stoneham, MA 02180
      (781) 438-1977
      (781) 438-6037 fax –work –private

      • Frank,

        Your cases are excellent.

        Four years ago I had a prospect in Laguna Beach, CA with a condo worth in excess of $600,000 overlooking the Pacific Ocean.  She wanted $5,000 to fix up the interior of the condo and $30,000 for a new car.  She loved the line of credit idea but would not do it because of the upfront costs of $17,000.  Who could blame her?

        Instead this woman had to beg her two adult children to give her the money so she cut it back to $9,000 with payments on the car.  She was 80 years old.  What a shame.

  • dduck12,

    Ms. Ebeling is giving her assessment of the March 2012 MLMMI and NCOA report.  She is right.

    The position in the report is the long overworked opinions of senior advocates.  Neither MetLife nor MetLife Bank take this position.  But see more in my comment below.

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