The author writes: “A reverse mortgage is a type of loan taken against equity in a home…. It requires no monthly payments, with interest charges instead added to the loan balance and paid only after the homeowner sells or dies.”

A reverse mortgage is not taken against the equity in the home. All loans against the home must be paid off with the closing of the reverse mortgage. So as to priority a reverse mortgage is a first lien, not a second or higher number such lien.

Yet the author writes: “But over many years, the credit line … grows each year by the current interest rate on the loan plus 1.25 percentage points, which is the loan’s annual mortgage-insurance charge.” So when it comes to the line of credit, both interest and the ongoing MIP increase the line of credit but as stated in the first quotation, only interest increases the balance due. Yet it is clear the line of credit they are addressing is a HECM LOC but not the balance due?

Ya gotta hand it to these guys, they are really clever, no MIP on the balance due but there is MIP in the growth rate. Can someone tell me where to get this particular type of reverse mortgage?

Then we come to the tenure payout at age 82. Without telling us the expected interest rate, they conclude that the tenure payout at 82 will be “nearly $5,000” per month if the available line of credit is allowed to grow without any draws but that is only true if the expected interest rate was at least 5.54%. (The author computes the available line of credit to be “more than $600,000” when the borrower is 82 but it is more like $625,750.) Unfortunately at 5.54% the principal limit factor could only be 0.459% which on a MCA of $400,000 would be a principal limit of just $183,600 which is lower than the net principal limit used in the example of $200,668.

The article as a whole lacks substance and needs correction with better disclosure. The industry needs better writers if our statements about the HECM Line of Credit are to hold up and have sufficient credibility.