Reverse Mortgage Changes Suited for Financial Planner Partnerships

Recent and upcoming changes to the federal reverse mortgage program could lead toward increased collaboration between lenders, financial planners, and their clients, says a Financial Advisor article

The new rules may not have much of an impact on those planning ahead, however. The Home Equity Conversion Mortgage (HECM) overhaul shifts the product to a proactive planning tool rather than a loan of last resort, Michael Kitces, director of research for the Maryland-based Pinnacle Advisory Group, told Financial Advisor. 

“Given that financial planners tend to work with somewhat more affluent clients anyway, and engage in a proactive planning process that addresses the client’s ability to fund their retirement goals, it is likely that the new financial assessment rules will have little impact on reverse mortgage eligibility for most financial planning clients,” Kitces says in the article.

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HECM changes include consolidating the Standard and Saver programs into one loan product and limiting the amount of money a borrower can access in the first year of the loan, along with a higher mortgage insurance premium depending on how much of the loan principal borrowers take upon closing.

Higher fees are expected to make the loan a less likely option for borrowers seeking it as a last resort, but that’s not what the program was originally intended for anyway, according to Kitces.

“The higher cost may lead some reverse mortgage lenders to focus even more on working with financial planners whose clients can qualify and use the reverse mortgage strategies more proactively,” he says in the article.

Read more at Financial Advisor

Written by Alyssa Gerace 

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  • In the article there is not one mention of the lowering of the principal limits to 85% of the Standard principal limits. That is THE biggest issue with the new HECM which the author blatantly ignores. This is among the worst analysis of the effects of the Mortgagee Letter 2013-27 on the HECM program.

    Then there were other problems such as rather than the initial MIP being based on the MCA, stating it is based on the “assessed” value of the home. In real estate jargon that means what the property tax assessor appraises the home at for property tax purposes. What kind of nonsense is that?

    Rather than a well reasoned and sound analysis of how the changes in HECMs will impact the value of the HECM to various financial categories of seniors, the article looks like something written by a less than ethical promoter of HECMs who wants to evade the important changes.

    • Cynic,
      Do you go to clients and mention the lowing of the principal limits? Do you go to your clients with a well reasoned and sound analysis of how the changes in HECM’s impacted their situation? I think not. There is absolutely no reason to discuss and analyze what once was and what is now. Cynic it’s time to get over the changes, accept them, move forward, or find another line of work.

      • Bob,

        I have never written anywhere or spoken to anyone about “the lowing of principal limits.” I know that the term “the cattle are lowing” is found in a Christmas carol but I have no idea how “lowing” applies to principal limits. Is that a new technical term from HUD? If so, please define.

        Perhaps if you considered and thought about the recent LOWERING of principal limits, we might have something to discuss.

        Have you considered that the author of an article on recent changes to HECMs might have a different responsibility to her/his readers than originators to their customers when originators present what HECMs are and how they might affect the prospect? When writing an article about the recent changes to HECMs why leave out one of the most crucial changes? Are you justifying such blatantly irresponsible writing? It seems you are.

        As a senior and someone believes that the new HECM products are less responsive to the neediest of senior homeowners, I hope to see HUD look into increasing the principal limits as the MMI Fund improves over time. It seems you are satisfied with the new changes and believe that no one should seek something better. It seems you do not respect the freedoms of others.

        Let us just say I refuse to bury my head in the sand. Whether you like it or not, endorsements will most likely be down this fiscal year directly as a result of the changes and lender revenues will suffer badly even if endorsements exceed 61,000 this fiscal year (which seems highly unlikely).

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