Financial Planning: Reverse Mortgages Making a Comeback

While financial advisers and clients may still be skeptical, reverse mortgages are making a comeback with certain regulators, banks and others who see viable use for these loan products in retirement planning, according to a recent article from Financial Planning.

“Increasingly though, some advisers and some financial advisory firms are starting to view reverse mortgages as an important part of the retirement planning process, particularly since a set of reforms were imposed by the Federal Housing Administration and the Department of Housing and Urban Development in 2013,” the article states.

But while the industry’s largest banks like MetLife (NYSE: MET) and WellsFargo (NYSE: WFC) have since exited the reverse mortgage market, smaller regional banks, smaller regional banks such as Dollar Bank in Pittsburgh and Fulton Bank in Lancaster, Pa., have entered the space in the years following, according to Financial Planning.

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On the regulatory front, the article pointed to an update from the Financial Industry Regulatory Authority (FINRA), which in recent years changed its description of reverse mortgages, no longer describing them as “loans of last resort.”

“This past year, though recognizing reforms in the products, such as mandating an independent financial consultation and running a financial assets check on borrowers—requirements that now better protect borrowers from being ousted from their homes—FINRA changed its recommendation,” the article states.

Read more at Financial Planning.

Written by Jason Oliva

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  • Here is an interesting statement “This past year, though recognizing reforms in the products, such as mandating an independent financial consultation and running a financial assets check on borrowers—requirements that now better protect borrowers from being ousted from their homes—FINRA changed its recommendation,’ the article states.”

    So one of the reforms this last year was an independent financial consultation. The only thing independent in the HECM originating process is counseling. So what was so new last year when it came to counseling? Can anyone help on this point?

    • Hi Cynic,

      Nothing major changed, other than HUD training us on the LESA. Oh, and the inevitable discussion of whether we should call it a “Lesa” or “Lisa” or my preferred, “life expectancy set aside.” (I try to avoid acronyms.)

      Frank J. Kautz, II
      Staff Attorney

      Community Service Network, Inc.
      52 Broadway
      Stoneham, MA 02180
      (781) 438-1977
      (781) 438-6037 fax
      FrankKautz@csninc.org

      • Frank,

        Thank you for confirming what changed and what did not. (BTW, I’m a Lesa kind of guy.)

        You are absolutely right there was a change in what counseling presents but there was no requirement recently added “mandating an independent financial consultation.”

        Although there is much to commend the Financial Planning Journal, it is unconfirmed claims like those above which keep the Journal less than reliable.

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