Friday Round-Up: HUD Secretary Praises Reverse Mortgages

It’s been an eventful week in the reverse mortgage industry, so in case you missed it, here are the top headlines from Reverse Mortgage Daily from the last seven days.

HUD Secretary Carson Praises Reverse Mortgage Program in Speech — In a rare move, a sitting Department of Housing and Urban Development secretary lavished praise on the Home Equity Conversion Mortgage program in a public speech. Ben Carson trumpeted government-backed reverse mortgages as a key solution for seniors’ retirement planning problems in a keynote address to the members of LeadingAge Florida, a group that represents non-profit care providers.

AAG Finds Success with Selleck’s ‘Softer’ Approach — American Advisors Group explained the continued appeal of Tom Selleck as a reverse mortgage pitchman, citing internal research that found the actor elicits a significantly better response from consumers than a generic, spokesman-free ad — all while contrasting Selleck’s approach from that of his predecessor, the late Fred Thompson.

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Postal Service Uses Reverse Mortgage ‘Scam’ for Good — In this interesting twist on an old scheme, the United States Postal Service used a phony reverse mortgage scam to arrest a man who had bilked hundreds of thousands of dollars from an elderly Texas widow.

Walter Shares Fall Below $1, NYSE Puts Company on Notice — Walter Investment Management Corporation (NYSE: WAC) received a compliance warning from the New York Stock Exchange after its average stock price dipped below $1 for 30 consecutive trading days. The company — which services reverse mortgages that had been originated through Reverse Mortgage Solutions and Security One — could face a delisting from the exchange if its stock price doesn’t improve.

Bankrate Explores ‘Best and Worst’ Uses for Reverse Mortgages — In this slideshow, mortgage website Bankrate explores the good and bad reasons for using a reverse mortgage — with some advice that’s open for interpretation and debate.

Reverse mortgages in the news

Our international look at reverse mortgages continues, this time with yet another piece from Australia and a detailed exploration of the reverse mortgages available in India.

Business Today, a publication that covers business news in India, walked potential borrowers through that country’s reverse mortgage options in a guest piece. Written in somewhat colorful English, the story explains that banks generally allow borrowers to take out 40% to 50% of the home’s value, and as in the United States, the loan only comes due when the borrower dies or leaves the property. In addition, there’s no prepayment penalty, the piece states.

“Consider the benefits and drawbacks simultaneously, and if the former outweighs the latter, then surely a decision of getting the reverse mortgage loan will not ever make you repent,” the story concludes.

Meanwhile, back in Australia, the Sydney Morning Herald advised borrowers to “do the sums” before taking out a reverse mortgage loan. That publication noted that in Australia, borrowers can only take out 20% of a home’s value in their 60s, a number that only rises to 30% for those aged 70 and up. The piece also includes a satisfied reverse mortgage borrower who paid off his debts and has more cash for monthly expenses.

“Now this is an opportunity to do whatever we want — travel, renovate something in the house, renovate the kitchen, buy a new car, go overseas, whatever,” Peter Morris — which, oddly, the paper notes is a pseudonym — told the Herald. 

Also curiously, the paper claimed that reverse mortgages are “popular overseas” but remained a “niche product” in Australia.

Written by Alex Spanko

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  • “The piece also includes a satisfied reverse mortgage borrower who paid off his debts and has more cash for monthly expenses.” Maybe in another country, the payoff of other debt with reverse mortgage proceeds does not create new debt but in the US it most certainly does.

    The quotation is but one of many myths created by our own industry. Paying off other debts with reverse mortgage proceeds, leaves one debt owning AT LEAST the total of the debt that was paid off. For example, if the HECM was originated solely for the purpose of paying off debt and all upfront costs, if any, were financed then the total HECM balance due would be equal to the debts paid off plus the upfront costs of the HECM.

    We have to learn how to help seniors understand without making such false and misleading statements as intentionally stated in the quotation.

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