NY Times: Why Are Reverse Mortgage Borrowers Getting Younger?

A reverse mortgage taken too early could be a mistake, a New York Times article published this week points out. Gathering input from consumer advocates, the Times addresses what it finds a potential downside to people taking reverse mortgages at a younger age—a phenomenon recently outlined in a MetLife Mature Market Institute/National Council on Aging study.

Featuring input from two reverse mortgage professionals, Mario Martirano of Residential Home Funding Corporation and Kelly Sabino of US Mortgage, the article also points to the reasons people are taking reverse mortgages at a younger age, namely to pay off debts or avoid foreclosure.

Even though the minimum age for taking out a reverse mortgage has been set at 62, many industry experts feel it is too young.

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“It’s a bad idea,” said Judith Grimaldi, a lawyer in Brooklyn who specializes in representing the elderly. “You have too much life ahead to encumber your most important asset.”

Ms. Grimaldi recalled a New Jersey couple who took out a reverse mortgage in their 60s. Now in their 70s, they have no equity left in their home, which means they cannot afford to move out and buy another. Under HECM-insured reverse mortgages, borrowers must keep current with property taxes and insurance.

…Homeowners who wait until at least age 72 to take out a reverse mortgage will get considerably more, Mr. Martirano said, though he noted that some borrowers cannot wait. They may use a reverse mortgage to dig themselves out of a financial hole, or even to help prevent foreclosure, so long as they have enough equity in the property. “We do a lot of them for foreclosures,” he said.

Read the original article.

Written by Elizabeth Ecker

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  • The MLMMI/NCOA March 2012 study seems like it is going to conclude that HECMs should be used as more than a loan of last resort until it adds:  “At the same time, the growing trend toward borrowing at earlier ages also raises concerns.”  If that is not fodder to those who believe HECMs should only be used as loans of last resort by younger borrowers, what is?

    The MLMMI/NCOA study lacked any in depth analysis.  The authors  totally ignore the findings of Mr. Evensky, CFP, Dr. Salter, CFP and Drs. Sacks regarding the use of HECMs in financial planning for younger seniors.  The latter authors (Evensky et al) make their case through very convincing research that acquiring a HECM in the earlier years of retirement could be much more beneficial for many retirees than waiting until age 72 even if all that a Saver is used for is cash flow reserve. Yet the authors of the MLMMI/NCOA study present no research to conclude all but the opposite.  

    Our detractors should find far more comfort in what the MLMMI/NCOA March 2012 study presents than those who believe in HECMs as financial planning products.  As presented in comments to prior articles, the MLMMI/NCOA study distorts the trend toward younger borrowers and younger counselees.  As the average age of the general population who are 62 and older has become younger, is it any surprise that the average age of the youngest HECM borrower and counselees would not also go down, especially since the results of the latest MLMMI survey indicate that a higher percentage seniors own a home today than in 2008?  For survey results on home ownership of seniors see http://rmdaily.wpengine.com/2012/04/09/metlife-retiring-boomers-arent-moving-12-would-consider-a-reverse-mortgage/   

    The reactions expressed by NYT interviewees are not surprising in the least.  No doubt the authors of the March 2012 MLMMI/NCOA find much to agree with in quotations of the NYT interviewees above.

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