There have been many changes to the reverse mortgage program in the past few years, forcing financial planners who were once skeptical to now realize how these products can benefit their clients and, in certain cases, their own businesses.
There has been an overwhelming amount of positivity toward reverse mortgages, due in part to a combination of the recent improvements made to the program and from the media becoming more educated and painting reverse mortgages in a better light.
“We’ve seen a lot of streamlining and clarity from the reverse mortgage program,” says David Holland, certified financial planner and CEO of Holland Financial in Ormond Beach, Fla. “I wasn’t particularly keen on them at first and I used to always tell clients to be careful and only to use them [reverse mortgages] as a last resort.”
Holland has since changed his tune. There is a fairly large market for reverse mortgages in Florida, he explains, which is why earlier this year he launched Holland Mortgage Services, a licensed mortgage broker specializing exclusively in reverse mortgages. The new business line is setup as an independent broker, allowing Holland to work with any reverse mortgage lender that operates a wholesale channel.
“Since the launch in February, we have already closed four loans and have two more currently pending,” says Holland, who notes he is currently partnered with two reverse mortgage lenders.
With a more neutral outlook from before the changes were enacted, James Kinney, owner and certified financial planner at Financial Pathways in Bridgewater, N.J., explains that he was not completely against reverse mortgages before the new regulations were put into place, but thought the program needed to be regulated.
“I was somewhat favorably disposed before, if it was for the right person,” says Kinney. “But the changes have helped make reverse mortgages more sustainable and suitable for the people who are taking them out.”
Using a reverse mortgage as a safety net is how Kinney sees it. “My father uses one, my mother-in-law uses one and they have benefited greatly from them,” he says. “You just need to know exactly what you’re getting into.”
Slowly, but surely, reverse mortgages will become even more mainstream as the population ages and a growing share of older Americans find themselves looking for new ways to fund their longevity.
“We’re already beginning to see somewhat of a more balanced commentary from major news outlets,” Holland says.
About 93% of reverse mortgage media coverage was either positive or neutral in the second half of last year, according to data from the PR NewsWire monitoring service and the National Reverse Mortgage Lenders Association. Of the more than 5,000 news stories about reverse mortgages in the past year, only 4.2% conveyed a negative sentiment.
The protections will just keep improving upon themselves, Kinney shares. “The changes are very useful and have helped keep people from getting in over their heads,” he explains.
The one area that needs more of a focus is educating financial planners.
“If more finance professionals can learn the benefits of this product and how to use it correctly, we will see an increase in financial planners adding reverse mortgage origination to what they do,” Holland says.
Both Kinney and Holland can agree that with more education in the financial services industry, the more the reputation of reverse mortgages will start to change.
“The changes are not radical at all” explains Holland. “They’re just trying to answer as many concerns as possible to ensure everyone’s clear on what a reverse mortgage can and cannot do for them.”
Written by Alana Stramowski