Points to Renewed Reverse Mortgage Potential

During a time when financial planners have taken a renewed interest in reverse mortgages for their clients, a recent article suggests Realtors may also see a possible resurgence in reverse mortgage interest ahead.

“For those close to retirement, a lack of savings may mean monthly expenses go unpaid. As a result, retirees may be considering a reverse mortgage to bring in much-needed cash,” writes real estate and finance reporter Tiffani Sherman in the article “As Markets Wobble, Will We See a Wave of Reverse Mortgages?”

National Reverse Mortgage Lenders Association President Steve Irwin provided commentary for the article, noting the recent hit to retirement accounts and how home equity can help buffer the shock for some households. While the most recent Department of Housing and Urban Development data reflects a decline in loan volume during April, the article points to NRMLA data indicating counseling sessions increased during March, the timeframe when the COVID-19 pandemic prompted stay-at-home orders from governments across the nation.


The article further details reverse mortgage basics and background, but does not detail the Home Equity Conversion Mortgage for Purchase program, on which industry members have historically worked to connect with the Realtor audience.

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  • This is an interesting quotation from an industry leader: “’It’s a needs-based transaction. They need to augment their financial stability…. They need to augment whatever retirement funding they have in place, or they need to relieve themselves of the burden of monthly principal and interest payments of a regular mortgage. I think that we will see more and more the use of the reverse mortgage as part of a more comprehensive financial plan in retirement.’”

    While the paragraph is technically correct and well spoken, it seems the word “need” is glaringly overused. Is a reverse mortgage always need based? I know of many seniors who do NOT need to augment their financial stability or retirement funding but prefer to obtain a potential source of cash just in case. Harold Evensky argued about the positive potential use of reverse mortgages, not the need for them. Few affluent people want to focus on their need of a reverse mortgage.

    Bringing up the need to be relieved of the “burden” to make mortgage payments, falls into the trap of the key argument that reverse mortgages are loans of last resort. Some seniors do not need to get rid of their forward mortgage but do not want to lose cash flow to interest (or even principal) nor do they like dings to their credit report for being late with a payment or two. The need issue particularly on this point does not inspire planners to focus on the cash flow potential of this aspect of a reverse mortgage.

    There are several other problems with the article generally but two stand out.

    The first is a statement by the author of the article, Tiffani: “Since the first reverse mortgage in 1990, over a million have been issued and currently about 550,000 are outstanding, according to the NRMLA.” If she would have switched reverse mortgage with HECM, the quotation would be substantially correct. Yet this a problem that rages in our industry. While a HECM is a reverse mortgage, a reverse mortgage is not necessarily a HECM.

    The last standout is not a commission but rather a striking omission. Where in the article is H4P or any proprietary reverse mortgage currently being offered in the industry that offers the right to purchase the collateral with the mortgage proceeds? Now that is not a great problem if the post was in the flagship magazine of CFPs, “Financial Planning,” but it is in May 2020 in the flagship magazine of Realtors, “” No one in our industry is at fault for the omission BUT with all of the marketing time and effort put into reaching out to Realtors, it shows how little impact our industry has had with Realtors when it comes to H4P or other purchase reverse mortgages. This omission shows up as a waste of marketing outreach dollars and time.

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