Originators and other players in the reverse mortgage space say that challenges remain when convincing financial planners and other retirement experts that reverse mortgages are a good idea for some borrowers, but a solid education can be the best cure for skepticism — and positive thinking about the products is gaining traction.
Shelley Giordano, chair of the Funding Longevity Task Force, says that she’s seen a steady improvement in understanding among financial advisors since the task force formed in 2012 Giordano specifically points to the gradual release of academic papers from researchers such as Wade Pfau, Gerald Wagner, and Barry and Stephen Sacks as key weapons against the perception of reverse mortgages as a loan of last resort.
“For the very first time, we [have] real data that stands up to this perception of what a reverse mortgage is,” Giordano says. Still, she noted that a lack of knowledge about HECM products continues to be pervasive.
“Unfortunately, financial advisors generally are not trained on housing wealth,” she says.
Ed O’Connor, a reverse mortgage specialist for First Bank Mortgage in West Babylon, N.Y., says he’s also noticed an increase in the prevalence of positive news articles about reverse mortgages, but that he’s still gotten the best reception from advisors who have actively put in the work to understand HECM loans.
“If they’ve taken the time to learn about the product, it either fits for a client or it doesn’t,” O’Connor says. “They’re not changing their thought process just because the rest of the world is.”
O’Connor also speculated that some financial advisors are beginning to see a subtle advantage to recommending HECM loans to customers that otherwise would need to take money out of their 401(k) accounts; if the client chooses a HECM, the advisor avoids taking a hit to the amount of assets under his or her control.
For financial advisor Jack Dvir of Financial Pointe in Newbury Park, Calif., the change in perception about reverse mortgages came only after close consultation with a trusted advisor. A former certified public accountant and a financial planner for the past 16 years, Dvir initially saw HECM loans as a final option for homeowners who had simply run out of money.
But after getting to know a reverse mortgage consultant who provided unbiased opinions based on clients’ actual financial situations — including, he says, advising against reverse mortgages for multiple customers — he began to trust the product and see HECMs as a potential option to cover long-term care expenses and other costs that spring up during retirement.
He likened the use of reverse mortgages to elevator safety: “You don’t want an elevator with just one cable. You want multiple cables in case one snaps. I’ve come to look at reverse mortgages to provide that extra cable.”
Dvir said he’s discussed reverse mortgages with about half of his clients — some of whom still react negatively based on news reports they’ve seen about foreclosures or predatory lending tactics. When faced with a skeptical client, Dvir employs the same strategy that convinced him: He shows the customer the hard numbers, running various scenarios to show how a HECM might or might not help them. And he’s won some converts in the process.
“It’s hard to argue with the numbers,” he says.
Written by Alex SpankoPrint Article