Kiplinger: Reverse Mortgage ‘Makeover’ Enhances Appeal for Retirees, Planners

In recent years, reverse mortgages underwent a much-needed makeover to enhance the Home Equity Conversion Mortgage (HECM) program and improve borrower protections. As an added bonus, these critical updates have also increased the appeal for reverse mortgages, which have gained some new supporters in the retirement planning world since then.

“Over their 29-year history, reverse mortgages have earned a bad rep, thanks to smarmy TV ads and fears that borrowers could easily lose their home to the bank,” writes Pat Merts Esswein for Kiplinger’s Personal Finance, April 2016. “And many financial advisers have given reverse mortgages the cold shoulder, knocking them as high-priced, risky loans of last resort.”

Now, as a result of recent rule changes, particularly the Financial Assessment, more planners have begun to pay greater attention to reverse mortgages and the role they can play in retirement income planning.


Kiplinger references several of the most recent change to the HECM program, including the Financial Assessment, 60% upfront draw limitations and updates to the non-borrowing spouse policy.

The article also discusses the strategic use of the reverse mortgage line of credit, drawing insight from Wade Pfau, director of retirement research at McLean Asset Management in McLean, Va.

Reverse mortgages offer flexibility to help make other retirement resources last, Kiplinger credits Pfau as saying.

“One of the biggest risks in retirement is that a market downturn could force you to sell investments at a loss to maintain income,” Kiplinger writes. “With an HECM line of credit, you could make withdrawals when the market is down and, when your portfolio has regained value, sell investments to replenish the line.”

Read more at Kiplinger.

Written by Jason Oliva

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  • The sad news is the modifications have yet to be embraced by the senior community who are the most important group to creating endorsements.

    The financial community has yet to address debt proceeds for what they are, cash flow, not income.

  • The_Cynic is no doubt technically right! Yes it is debt and yes it is cash flow.

    However, and I have said this before, if you are a senior struggling and need more income to live, pay bills and improve the quality of retirement, guess what?

    When that mortgage payment disappears, the credit card payment disappears, the car loan is paid off and their is money left over to enjoy the quality of a better life, as far as the senior is concerned, physiologically, they now have income they did not have before.

    If the senior looked at it as just debt and cash flow, they would most likely NOT take out the HECM in the first place. It comes down to what I said before, it is in the eyes of the beholder!

    One last thing, thank God our seniors do look at it as income and not a burdened debt, if they did not view it in this way, the reverse mortgage would not have or will not have a future, nor would we have happy seniors at the end of the day:)

    John A. Smaldone

    • John,

      Your comment is exactly why so many of our critics say our approach is translucent double talk and dribble. Knowingly calling debt proceeds income is why some Enron executives have gone to jail.

      Yes, seniors are repulsed by debt. Who isn’t? Yet we are not selling income, we are selling cash flow that creates debt. Integrity and fiduciary responsibility are fundamental to trust. Yet your response says as to reverse mortgages, relative integrity and relative fiduciary responsibility are our goal. How far do we push that? Do we have seniors sign apps and loan docs with no explanations about anything that refers to debt?

      Debt proceeds are not income and a reverse mortgage is a negatively amortizing nonrecourse mortgage.

      Your arguments are exactly why so few believe our originators are professional and at least one politician has accused perceived dirty tricks from the other political party as nothing more than the same tactics of bogus reverse mortgage peddlers preying on seniors.

      Knowingly calling debt proceeds lacks integrity. You claim it is the only way to sell HECMs. I know a large number of HECM originators who do not call debt proceeds income. What is the matter with calling them what they are, cash inflow? It must be repaid somehow even if it is nothing more than turning over title to the collateral to the note holder.

      I do appreciate your honesty about what your use of the word income even though it lacks integrity when used in a sales presentation to a senior.

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