Aging in Place with a Reverse Mortgage: Challenges and Opportunities

As a generation of aging Americans collectively decides that they’d rather stay at home than move into senior housing, reverse mortgage originators and lenders could have a new potential marketing angle. But as with many other retirement-planning ptiches, the words could fall on deaf ears.

On a recent National Reverse Mortgage Lenders Association webinar about aging in place with a reverse mortgage, Louis Tenenbaum — founder of HomesRenewed, an advocacy group dedicated to making America’s homes accessible to the elderly — said he’s been preaching the need for aging-related home improvements for decades without seeing significant shifts in behaviors.

“People hear the message, but they don’t want to hear about it,” Tenenbaum said, despite persistent surveys that show the vast majority of Americans want to remain in their homes even as their physical abilities decline.

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“People want to maintain that autonomy,” Tenenbaum said.

He cited data from Clarity Insights, a marketing research firm, showing that seniors overwhelmingly feared things like a loss of independence (26% of respondents), ending up in a nursing home (13%), and the loss of access to family and friends (11%) more than death itself, with just 3% of people citing the end of the line as their top concern.

Tenenbaum was joined on the call, part of NRMLA’s Reverse Mortgage Education Week, by Todd Brickhouse, president of the Brickhouse Design Group home renovation firm in Massapequa Park, N.Y., and Craig Barnes, Reverse Mortgage Funding’s corporate education leader. Brickhouse dedicated his portion of the proceedings to the range of accessible renovations that homeowners can consider, from ramps to in-home elevators to standing bathtubs, while Barnes provided the audience with a basic breakdown of the Home Equity Conversion Mortgage program.

Barnes also told the story of a client who said she wanted to be taken out of her house horizontally and not vertically, reflecting the prevailing attitudes of many aging citizens.

“And that really is very much the borrower who is a great fit for reverse mortgages,” Barnes said.

That’s because the kinds of upgrades that allow seniors to stay at home don’t come cheap. Brickhouse and Tenenbaum both laughed when asked to give a ballpark cost for a typical couple in an average-sized home, saying that it’s impossible to give a blanket estimate. But Brickhouse said retrofitting just a bathroom could cost anywhere from $17,000 to $25,000 in his home area of metropolitan New York, with residents in smaller communities outside of cities looking at a bill that’s about $5,000 less.

The high price tag could be a reason why more Americans don’t consider it as an option. According to new data from the National Association of Home Builders’ remodeling arm, only 17% of remodelers reported that “most” of their customers were aware of aging-in-place improvements, a slight increase from 11 percent back in 2013. The NAHB also reported declines in the proportions of remodelers who have conducted certain higher-price-tag jobs, such as the addition of a first-floor bedroom, the installation of ramps, and lowering door thresholds.

The problem, according to Tenenbaum, is that most American homes were designed at a time when people didn’t think about living into their 80s and 90s, let alone staying at one property for that length of time. But he noted that millions of Americans live in houses that were built to meet the needs of bygone generations, including homes constructed before electrification, gas-powered furnaces, or high-speed internet. Renovating homes to adapt to the needs of a greying nation, therefore, should be seen as the logical next step in the evolution of the American home.

“It’s not about aging and frailty,” Tenenbaum said. “It’s about a continuing pattern of ingenuity.”

Written by Alex Spanko

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  • Alex wrote a great article,

    These are all excellent points and all of us need to put them on our menu of items to discuss with our senior clients and at any educational workshops we give in our communities.

    True, many seniors would like to stay in their present home but down sizing and purchasing another home to meet those needs for “Aging in place” can be done with our H4P program. This program we have to offer can satisfy all those needs, especially if our client has a good deal of equity in their present home!

    I feel if we can couple all the points Alex brings up in his article and look more at utilizing the H4P program, these two areas will help us all tremendously.

    Expanding our business network to the “Aging in place” opportunities we have can be endless! All we need to do is allow are minds to take us in the right direction!!

    John A. Smaldone
    http://www.hanover-financial.com

    • Yet, John, what is new about this idea when marketing HECMs? You yourself have reinforced this concept over and over again in your comments over the last decade.

      Yes, seniors need to know that HECMs may be just the tool they need to reach this goal but isn’t this once again appealing to our traditional marketing base with “old news?”

      Yes, we need to be reminded about this and yes there are still a significant number of seniors who could benefit from HECMs in their striving to age in place but let us not return to take this up as our sole mantra.

      While the H4P product can allow a senior to stay in one place from purchase forward, it does not allow them to live in their current residence as the place they age in. H4P is hardly flying off the shelves of lenders. It is still the most overrated product ever offered by our industry. Savers did much better in their short tenure in our industry than H4P has done so far and Savers came after H4P and have not been around for about 3 and one-half years.

      But let us come back to aging in place. One key reason our industry is shrinking is due in great part to its over emphasis on marketing with an Aging in Place theme.

      Those who are reaching out to the financial advising community are overall still novices. There is little sophistication in our presentations and there is a growing controversy over how much of the available line of credit can actually be drawn out per the Security Instrument and HECM regs. Forget about the fact no one can predict what the available line of credit will be in 20 years since the index factor of the growth rate is a variable. (There are three factors in the growth rate, the index rate which changes monthly or annually and the ongoing MIP rate and the margin both of which remain constant throughout the life of a HECM ARM). There is now this so called third limitation on the line of credit that has many of us talking to ourselves.

      Lower principal limit factors, the first year limitation on disbursements, and financial assessment has greatly discouraged a large number of those in our traditional marketing base from seeking a HECM as a means of aging in place. Again what is this new angle Alex declares but then fails to describe when providing information to seniors on aging in place at presentations you believe we should be doing?

      • The_Cynic,

        I will say this about you, your position and comeback says it straight out, this is what I respect about you and always have!

        Yes, I do keep on reinforcing this because it is important. As far as the H4P, it does serve a major purpose for those who truly can’t remain in their present home or because of conditions beyond ones control, for many reasons.

        I do agree with you 100% when you came back on Alex and said, “Lower principal limit factors, the first year limitation on disbursements, and financial assessment has greatly discouraged a large number of those in our traditional marketing base from seeking a HECM as a means of aging in place”! Right on for that one.

        As far as the financial planner/advisor or the professional industry as a whole, you will not get any argument from me on that. In fact, I have been talking about that myself for a long, long time now! This area I did not touch on, that will be for another day.

        In closing, you did good with your comeback, very good, even though I think you got a bit off track. My compliments to you my friend, you make it a good evening for your self!

        John

  • Alex unlike John, I see nothing new in your article.

    “…reverse mortgage originators and lenders could have a new potential marketing angle.” Advertising HECMs as a tool to age in place by using proceeds to modernize and make the home more senior friendly is “NEW?”

    Someone needs to sit down and have a talk with Alex. For over a dozen years I have been hearing without confirmation or verification that President Ronald Reagan told us HECMs were designed so that seniors could age in place. That kind of marketing was going on for over a decade before I even heard of it.

    Millions of dollars have been spent on marketing the theme that HECMs were created so that seniors could age in place. So where is the “new potential marketing angle?”

  • All good points for Americans who hope to stay in their homes if their health changes. Another option for aging in place is that a reverse mortgage could be used to pay for in-home care.

    George Lambert
    Author, A Boomer’s Guide to Long-term Care

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