It was just one line in an otherwise upbeat article about American Advisors Group and its latest advertising campaign, but it was enough to rile reverse mortgage professionals tired of hearing a common misconception about the Home Equity Conversion Mortgage.
New York Times writer Joanne Kaufman used the latest Tom Selleck AAG spot to explore the ways that different companies use older, trusted actors to pitch their products or services to the American public. Kaufman was setting up an observation about how advertising agencies tend to employ women when pitching pharmaceuticals, citing Blythe Danner and Sally Field as examples, while the men have been reserved for financial products. And that’s where the trouble starts.
“They are commonly matched with lenders that sell reverse mortgages, a type of home equity loan (one in which the bank gives you money and takes your house when you die),” Kaufman writes.
The response was swift. We here at RMD received multiple emails about the piece, including from Steve Sayetta at Advisors Mortgage Group, who called the line “fake news,” and from Shelley Giordano of the Funding Longevity Task Force, who wrote on LinkedIn that “the New York Times gets it wrong on what happens at loan’s end.”
Now Jamie Hopkins, a professor at the American College of Financial Services in Bryn Mawr, Pa., has joined the fray with a piece in Forbes setting the record straight on the non-recourse feature of HECMs.
“Just like any mortgage, the program requires that the borrower own the home and maintain title up until death or sale. At no time does the bank ‘own the home,’” Hopkins writes. “Additionally, the bank does not automatically take the home upon death.”
Of course, the families of HECM borrowers who pass away have several options, including purchasing the home, selling it and collecting any proceeds after the mortgage debt is satisfied, or allowing the servicer to take over.
“Not only is the New York Times’ statement wrong, it also perpetuates a harmful and damaging misconception about reverse mortgages,” Hopkins writes.
Hopkins goes on to praise the paper’s generally favorable picture of the products, and notes that the tide has slowly turned in favor of HECMs in the minds of academics, lawmakers, and retirement planners. But he also quotes Tom Davison, another proponent of reverse mortgages, to illustrate the challenges that HECM professionals still face.
“Ironically, the New York Times author also includes a quote about older adults: ‘They’ve been through so much, so they do more due diligence than the younger generation,’” Davison told Hopkins. “Hopefully reading the New York Times is not key to their due diligence.”
Written by Alex Spanko