RMD Review: Updated Reverse Mortgage Book Breaks Down New Landscape

A new book on reverse mortgages seeks to explain the products in an even more concise fashion to average potential borrowers — while also explaining the new reverse mortgage math.

Author Dan Hultquist released “Understanding Reverse — 2018” at the start of the new year, providing an update of his regular series of educational books on Home Equity Conversion Mortgages.

This time around, the book includes updated information about principal limit factors in the post-October 2 world, with an increased emphasis on brevity and layman’s-terms explanations. The book’s 43 chapters are each just two pages long, presented in a question-and answer format: For instance, “What Are the Advantages of Making Payments?” provides several answers in short sections, such as potential tax benefits and increases in line-of-credit access for adjustable-rate loans

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The book represents a more direct approach by design: Despite the fact that most buyers come from the industry, Hultquist said copies frequently end up in the hands of people who might be considering taking out a HECM loan.

“The books will circulate. They tend to move,” Hultquist, director of learning and development at the San Diego-based software firm ReverseVision, told RMD. 

For instance, he’s heard stories of financial planners who give copies to potential applicants, who in turn leave the books at local churches or senior centers.

“Now you’ve got these books floating around, and if they don’t know who gave it — or ultimately where it came from — they call me,” Hultquist said.

As a result, lenders and brokers have increasingly put stickers with their contact information inside bulk-ordered copies of the book, Hultquist said, ensuring that curious readers can eventually make contact with an active originator of HECMs.

Even though this new edition, currently available on Amazon and through Hultquist’s website, contains updated information about principal limit factors and mortgage insurance premiums, it’s actually shorter than previous versions. The goal, Hultquist said, is to provide a succinct question-and-anaswer format for end users — so instead of including references to regulatory language straight from the Code of Federal Regulations directly in the text, Hultquist moved that information to separate footnotes.

“The end user doesn’t care. They just want to know — is it a regulation? Can you document it somewhere?” he said.

Written by Alex Spanko

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  • I used to provide a copy of Reverse Mortgages for Dummies to every Prospect I gave a presentation to. i ordered them by the gross from Amazon. The book confirmed everything I said during the presentation, enabling me to take more applications. That lasted a few years, until the mortgage crash. There’s no way a book like that could exist today … there are just too many changes, too fast – it’d need to be revised a few times a year. I’m surprised anybody would release a book out how Reverse Mortgages work anymore.

    • In principal, I agree. It is difficult to anticipate changes (e.g. 2018 tax law) and write content in a way that would likely remain true. Jessica Guerin did a great job editing this 2018 edition in an attempt to accomplish that goal, and make it easier to read.
      The timing of the release is also important, as major regulatory changes tend to occur toward the end of the fiscal year. At the beginning of the year, it is much safer to release any type of reverse-related marketing material.
      Fortunately, most of the concepts don’t require changes from year to year (non-recourse feature, borrower responsibilities, etc.). In addition, the decision window for most book recipients is rather short – older homeowners generally make a confident decision one way or the other.
      Because I share your concern, I’m going to send you a copy in the mail and I’d love to get your feedback on how this edition was strategically written.

      • Dan,

        You may have opened up a Pandora Box. I would love to get a copy of the book and I will also give you my honest feedback on how this edition was strategically written!

        I have a lot of respect for you sir and would appreciate tremendously receiving a copy from you.

        My address is:

        John A. Smaldone
        1165 Summerfield Drive
        Maryville, TN 37801
        865-980-3583

        I look forward to hearing from you Dan and receiving that Book, I am sure it is great!

        John

      • Tom,

        The new FHA MCA is NOT any one number. For traditionals and refis, it is the lower of 1) appraised value of the home or 2) the HECM lending limit. For H4Ps, it is the lowest of 1) the HECM adjusted purchase price, 2) the HECM lending limit, or 3) the appraised value of the home.

        It seems you are confusing the HECM maximum claim amount with the HECM lending limit.

      • Hi, Tom. Fortunately, the examples that referenced the HECM lending limit were removed. However, because the book went to print before the increase was announced, the initial print versions reference the lending limit at the time of publication, but the Kindle Version shows the current value of $679,150. Amazon will have an updated print version in early February that will address this, and one other small change.

      • Dan,

        Thank you very much my friend, I got it in the mail, so far it is great!

        Thanks again,

        John

      • Thank you for sharing your book with me, Dan. It’s one of the few books I’ve read from cover to cover – every single word … Legal Disclaimer, Copyright, etc. I’m impressed, and will be purchasing your updated editions as they’re released.

    • While there are a lot of changes with reverse mortgages, Dan does a great job on keeping up with the changes in his book through revisions. I have found that the basics are the same all the way back to when I started in the industry in 1999 so while some numbers have changed, the core of the program remains the same. We should all appreciate that Dan has written and does keep his book up to date. It’s a great plus for the industry.

      • Ms. Paterson,

        While the basics of the product may have changed little over time, the same cannot be said about our knowledge of the workings of HECMs or their growing strategic uses. Even the uses of its most basic features have changed with time (such as fixed rates towards the end of the last decade).

        As to authors, Mr. Hultquist certainly has been the most diligent to keep both the industry and the public informed about and current on HECMs. As time marches on, no doubt, we will see the diligence of authors like Dr. Pfau and Ms. Giordano demonstrated in new and updated books on HECMs. Yet is demand sufficient to provide much room for more books to be profitably published unless we see a dramatic increase in originations?

        The industry has lost insight and skill due to retirements and deaths without having such insight and skill documented through the writings of those individuals who are no longer in the industry. It is good to see at least Dan is endeavoring to change that lack even for the sake in some measure of future generations of originators.

        It is good to see you once again participating in RMD comments.

  • The Social Security Administration uses a question and answer format in their books for general information, and they write to an “8th grade” level of reading comprehension.

    The point is that Social Security has been at this a long, long time and on a massive level of communication requirement. So, it has worked for them, and obviously should work for Reverse Mortgages.

    Further, Social Security deals with changes in the same way as Reverse Mortgages, and changes haven’t been of any significant problem with regard to their informational, reading material.

    After all, people generally don’t take written material, aimed at a general-readership of any sort as cut-in-stone, and just act upon it per se, standalone: they’ll look into it on-line, and make “800” phone calls, etc.

    Before the internet, for example, who would read a travel guidebook and think nothing stated in that guidebook could have possibly changed, then, book a vacation without first checking it out? Virtually, no one.

    I’d have to disagree with the critical post, above. It seems that there is zero downside to publishing Reverse Mortgage information as described in the original post; regardless of possible changes. It’s all for the good, especially if the book generates further interest.

    • Ed,

      It is your last point I agree with the most. Without more interest in reverse mortgages, will they slowly become irrelevant? The last 8 years have not been among the industry’s best as to closings.

      Besides the line of credit which feature do you prize the most in your HECM? Are you paying it down or does that aspect appeal to you, especially when you can borrow back whatever you pay in?

      • Yes, the ability to pay back into the loan and generate a $1 for $1 increase in the Line-Of Credit is a feature only second to The-Line-Of-Credit itself.

        Personally, I only draw from the “growth” of the Line Of Credit, and even haven’t done much of that at all.

        With the opportunity, I’d definitely deposit-back into the HECM, rather than anywhere else for “ROI.”

        The only way that could change is if the “Fed,” with a red-hot, growth economy, raised interest rates to the point where the “money markets” returned to an attractive place to park cash (see: 1980s).

      • Ed,

        As to your investment decisions, those are yours and yours alone.

        As to a cash flow or other type of financial strategy, taking the growth out of the line of credit makes little sense unless you need that exact amount of cash for some purpose each time you take it.

        The growth in the line of credit is nothing more than an offer to obtain additional loan proceeds. At termination all of that growth you take out of the line of credit is subject to repayment with interest and ongoing MIP. Has anyone represented that to you differently such as the growth belongs to you and does not have to repaid?

        What ROI are you talking about? The only ROI is from reduced interest and ongoing MIP, not from the growth in the line of credit.

      • Also, you don’t understand the reverse mortgage program.

        1) It has to be “paid back,” but not by me, alive.

        2) If I get 5%+ growth on money paid into the loan, that return of cash flow is dramatically higher than the less than 1% generated from a bank deposit.

        3) You don’t seem to understand cash flow.

      • Ed,

        Interesting that you know that you will die before voluntarily or involuntarily leaving your current home. Other than your current frame of mind, how is it that you know this is true?

        As to your second point, you do not get growth on “your money.” That growth is on the amount that the lender will lend you which is determined from your available line of credit. The growth is simply a contingent asset that you can obtain by borrowing more. The interest a bank account pays to you is yours and if you take it out of the account, you do not owe anything to the bank; that increase in cash is your cash from the moment you earn it.

        But is cash flow everything? While it certainly king in retirement, cash that creates more debt is nothing to treat the same as cash that comes from dividends, bonds, savings accounts, etc. Yet in this context paying down a HECM does not mean just a higher available line of credit but it also means less debt which is exposed to accruing interest and MIP.

        As to cash flow, there is a huge difference between its inflow sources. An amount received from increasing a debt is much different than an amount obtained through earning it in a savings account. The cash earned from a savings account does not have to be repaid while one obtained through debt does.

        Your insight explains a lot of the less rational statements your responses are peppered with. While we do not view cash differently, we certainly do view what is a preferred source of cash flow over what is not.

      • It’s not clear which is worse, your naivete or presumptuous rambling, but it always seems to come across as non-productive and insulting somehow.

        In any case, it’s not worth further response.

      • Ed,

        You have a view. It just does not happen to agree with mine and in many cases the experience of most originators.

        We listen to your opinion. Perhaps if you originated you might see another side to your numerous rebukes and attacks. I am pretty sure that lenders will not be incurring huge marketing costs in hammering some math applications so as to appeal to the 15% of the population that might appreciate the math (but less than 1% would appreciate the hammering).

        I am just glad to learn writing that someone is “naivete” and presumptuously rambles is both productive and lacks insult. These will really help people gain insight into the workings of HECMs.

        Why not be positive and more of a realist?

      • Mr. McSherry,

        Your logic escapes me. First you inform us that you are taking out the growth in the line of credit but that you get 5%+ growth when paying down the loan. So what is your logic in taking it out?

        I see you invoke cash flow but do not state how you are using that cash inflow. It is that reasoning that is important in solving seniors in a similar financial situation. Is it that you have no heirs or that you are not concerned about the legacy you leave them, or how do heirs work into your estate planning? By your prior statements, you did not realize what the growth in the HECM line of credit until after you received your first HECM monthly statement which implies that your cash inflow strategy of taking the growth monthly was planned after that you received that first statement.

        You do not seem shy about providing aspects of how you take proceeds. Presenting general reasons for getting the HECM and other considerations since obtaining it would be helpful to originators.

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