NBC News Breaks Down Reverse Mortgages

Joining the ranks of other notable publications like The Wall Street Journal and Reuters, NBC News is the latest mainstream media outlet to chime in on reverse mortgages and what borrowers can expect from these types of loans.

An article from NBC News breaks down the basics of a reverse mortgage, covering areas including how these loans work and the costs associated with them.

NBC News also stresses that while reverse mortgages can help solve a “host of problems” for retirees who are house-rich but cash-poor, they also come with some “pretty significant risks.”

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“Reverse mortgages are a useful tool for some people,” said Lori Trawinski, senior strategic policy adviser with the AARP Public Policy Institute, in the article. “They can enable retirees to age in place, but we always emphasize that these are loans, and as such, borrowers have obligations.”

The article then goes into detail on the requirement that borrowers stay current on their property taxes, homeowners’ insurance and any other homeowner’s association dues and assessments, as failure to comply with these mandates could send the loan into default and the home into foreclosure. 

Since upfront origination and costs associated with reverse mortgages can make them expensive loans for some borrowers, NBC News urges its readers that reverse mortgages might not be the best solution for every borrower.

Cash-strapped homeowners who are using a reverse mortgage as a last-ditch effort to hang onto their home should also think twice, said Sean Keating, a certified financial planner, principal and founder at Patriot Financial Advisors, in the article.

“When an older couple cannot afford to live in the home anymore, getting a reverse mortgage will only delay the loss of the home and will leave them with no assets,” Keating added.

Read more at NBC News.

Written by Jason Oliva

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  • The interviewees show their misunderstanding of the purpose of the HECM program. To them as well as with most of those with a more social and less financial educational background, aging in place is the obvious reason why the HECM program was created. But in
    fact staying in a home for a number of years is the expectation for any mortgage borrower (including HECM borrowers) except in bridge mortgage financing.

    Aging in Place is a prudent choice most seniors make but many still need help as to cash flow; providing a cash resource is exactly what the purpose of the HECM program is. To declare that Aging in Place is the purpose of the HECM program is ridiculous and inane.

    When one has the view that HECMs were created so that seniors can age in place, that person has little realization that the legal and HUD stated purpose of the HECM program is to allow seniors to have access to cash through using their home as collateral for a non-recourse mortgage. Not only is the purpose clearly stated
    in the law [12 USC 1715z-20(a)] but HUD concluded the same thing in its HECM Handbook (Handbook 4235.1, Section 1-2).

    So where do these people get this misunderstanding about HECMs? It is grounded in their minimal financial education and lack of understanding about debt and its variations such as mortgages.

    These interviewees are lost in the loan of last resort concept even though they would never admit it.

    • Great commentary—as usual.You correctly pointed out that “HUD stated purpose of the HECM program is to allow seniors to have
      access to cash through using their home as collateral for a non-recourse
      mortgage”.
      I however, would like to again have steps taken to exempt seniors from paying school taxes. This would allow seniors to spend their money wisely for healthcare costs and prescription drugs as realized by a monthly tenure payment. Any comment or rebuttal?

  • KatyDog,

    As an industry we have no official position on this issue. Individually we do.

    Why should seniors be exempted? Many are taking advantage of courses offered by state supported universities, colleges, and community colleges.

    Most of those over 62 had the education costs of their children, grandchildren, and other relatives supported by those 62 and older. Now it is their turn to carry this water, people like you are irrationally crying foul.

    None of my children attended a state supported grade school. My grandchildren are attending state supported schools in another state. Yet I am on Medicare but not shirking this responsibility. Why do you support shirking it?

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