Modeling Reverse Mortgage Outcomes Key to Financial Planner Acceptance

Despite some regulatory hurdles, financial planners have long been identified as a key source of future reverse mortgage growth, particularly as the industry attempts to position the products as one potential part of an overall retirement plan.

And when working with financial planners and clients, sometimes showing the cold, hard data can be the most convincing.

A webinar held earlier this month by Reverse Mortgage Funding showed how modeling software can more accurately help financial planners determine whether a reverse mortgage should fit into a client’s retirement plan in order to increase their probability of success. The session encouraged participants to view reverse mortgages, as well as the software, as valuable wealth management tools for clients most likely to benefit: homeowners aged 62 or older with at-risk retirement plans and no long-term care insurance who are still making mortgage payments.


“Reverse mortgages are something planners are becoming more and more interested in,” Timothy Jackson, the head of financial planner education and support for RMF, said. He hosted the August 16 webinar using eMoney, a popular financial planning software program.

The presentation provided common methods advisors are using to demonstrate the financial impact reverse mortgage funds have on a client’s retirement income plan. During the webinar, Jackson modeled common uses of reverse mortgages among advisors —a credit line to eliminate an existing mortgage balance being the most prevalent. The advisors learned how, under the right circumstances, reverse mortgage proceeds can increase both cash flows and in some cases legacy values.

In one scenario, a couple was considering refinancing their current $208,000 mortgage into a reverse mortgage to eliminate principal and interest payments. Jackson modeled the difference between either continuing to make payments or refinancing into a HECM and allowing the reverse mortgage debt to accumulate, highlighting the impact of each on the client’s plan.

Navigating the intersection between financial advice and reverse mortgage originations has always been particularly tricky, with restrictions against cross-selling other financial products — such as annuities or insurance — prompting many advisory firms to issue blanket bans on discussing HECMs with potential clients.

Earlier this year, for instance, an advisor shared his story of receiving a fine after recommending a reverse mortgage to a client. But the financial-planning connection, when handled correctly and without pressure to purchase certain investment products, can be a main referral source for HECM originators.

The webinar addressed the kinds of conversations planners should be having: “We’ve learned that that messaging alone can completely change the conversation,” he told the group. Rather than call a couple and tell them they need a reverse mortgage, he suggested, “Ask if they’d like to learn the facts about the … government-insured reverse mortgage.”

During a brief Q&A that followed, a participant asked if Jackson would recommend a HECM to his own family. He responded that some of his relatives already have one but added, “Just because you qualify doesn’t mean it’s a good idea.”

“If we can demonstrate that a client is at risk of not meeting their goals, it makes a very compelling story for the advisor to provide to their client,” he says.

Written by Clare Curley

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  • Assumptions are at the heart of any reliable projection. Be too conservative or not conservative enough and you drive the projections in two different directions. (Some claim that the projections on the profit/loss situation for HECMs in the MMIF are far too conservative. Is that right? Time [which the industry may not have] will tell.)

    I have seen projections prepared using 8.43% returns with no investment fee charges when, in fact, looking at actual historical results, the financial adviser has never been able to provide a net investment return greater than 4.5% after investment fees. So while the projections showed investments growing faster than the balance due on the reverse mortgage, exactly the opposite was true. The latter situation is referred to as negative arbitrage.

  • I have a problem with any claim of that anyone is getting more interested in HECMs when the implication is that endorsements will follow. Just look at the following: “’Reverse mortgages are something planners are becoming more and more interested in….’”

    That would be great to rely on but planners are sources of loans which means one adviser can be instrumental in the origination of a number of reverse mortgages over a period of years. The optimism does not address the loss of some planners due to the 10/2 changes.

    I wish these promoters would bring stats to prove their point but making great anecdotal claims requires no stat evidence.

      • EricSD,

        We hear the same kind of thing about H4P. Right? Just look at how H4P endorsements are doing after a decade of using builders and Realtors as referral sources.

        In a world of less than 3,000 endorsements for two months in a row and this month and the next two not looking much better, if better at all, this is little more than pie in the sky until at least the next decade.

        The article is not about what ORIGINATORS can do to get more loans but rather how advisers can help us make their clients realize the value of our products. This reliance on the pro bono efforts of others helps explain why we are at this level of endorsement production.

        Those who claimed that relying on the financial community to get more sales would mean less endorsements. Unfortunately at the. time, I was not among them. But go on to read what B C wrote in his comment yesterday.

  • George,
    That is not the point. Of all the words written about in the article about helping planners to model RM’s and how to talk to them and giving an example, you choose to look at the negative. Just because in the article Jackson states more planners are becoming interested in them, doesn’t say or mean that we should rely on them to feed us clients, where did you get that? This article was about a tactic that can be used when talking with planners. why do you have to bring in low endorsements and 10/2, that has nothing to do with what was written. I also work with FP’s and can tell you yes, they don’t get paid recommending RM’s used properly they can help the client in not drawing down assets under management which they do make money on.
    How long does it take for a good idea to be embraced? A year, 5 years, 10? Does that mean you should stop trying? Just because it always has been the case, absolutely does not mean it always will be the case.

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