CNBC: Financial Planners Not Sold on Reverse Mortgages

Reverse mortgages are not suited for everybody, and the same goes for financial advisors, according to a recent CNBC article that attempts to rationalize the pros and cons of these often misunderstood loan products.

Whether it’s due to costs, arguably restrictive program changes or even celebrity TV endorsements, CNBC claims reverse mortgages have become the “ugly stepchildren of the home-lending industry.”

“Most financial advisors see the products as a last resort for cash-strapped seniors—and a bad one at that,” writes CNBC. “They are expensive, restrictive and usually don’t provide enough income to help borrowers meet their financial needs for very long.”

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CNBC constructs its argument based on the viewpoints of just two financial advisors, neither of whom are entirely sold on the efficacy of reverse mortgages in retirement planning.

“The concept is sound—people have equity in their homes and can generate income from it, but the products in the marketplace still leave a lot to be desired,” said Ric Edelman, CEO of Edelman Financial, in the article.

Read the CNBC article.

Written by Jason Oliva

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  • Typical of those who have no idea about the difference between a dollar borrowed and a dollar earned, a large segment of financial advisors look at the proceeds from reverse mortgages and call them income. No doubt these same type of advisors also recommended purchasing Enron at its peak when Enron was reporting debt proceeds as income through its subsidiaries.

    Reverse mortgages are nonrecourse mortgages for those generally over 62 with special features to help manage cash flow throughout retirement. They can be utilized by the house rich and cash poor as a loan of last resort but that is hardly their best and highest use. It seems these financial advisors have little knowledge of the difference.

    Many warned us that depending on financial advisors for growth would do little more than marginally increase endorsements. It is rare for financial advisors to recommend debt other than the imprudent and risky use of margin accounts in the past. They rarely understand managing debt prudently through the use of low risk techniques and the financial advisors selected by CNBC show are no different.

    (The opinions expressed are not necessarily those of RMS or its affiliates.)

  • Those that exclaim negativity with the reverse mortgage are uninformed. Any one speaking about the mortgage should speak first with a specialist to know the correct information.

  • I have to agree on what my friend Jim Veale has said. However, when it comes to especially CNBC, they never had anyone on staff that ever really understood the reverse mortgage.

    With all the new changes that have gone into effect over the past year or more they understand even less about what a reverse mortgage is all about.

    As far as financial planers go, they are not an easy sell but once they grasp and embrace the program for what it really is, they are aboard!

    Financial Planners must be approached differently and we in the industry must have patients in dealing with them. Another important factor when dealing with financial planners is knowing your product well, be educated or they will chew you up!

    John A. Smaldone

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