How Educating Financial Advisors About Reverse Mortgages Expands the Business

Across the country, many reverse mortgage professionals believe that the ultimate path toward expanding the scope of the business runs through financial advisors, charged with presenting options and solutions to clients looking to improve their financial standing. While recent years have been filled with both forward momentum and occasional setbacks in reaching this goal, the work on forging these greater bonds continues.

One organization that is dedicated to the idea of expanding the scope of home equity lending in this way is the Academy for Home Equity in Financial Planning at the University of Illinois, Urbana-Champaign (UIUC). The Academy has expanded its ranks to encompass a broader academic perspective in an effort to help solidify its mission of expanding the scope of home equity and reverse mortgages to a broader base of financial professionals, which will help to open more lines of business.

Originally a co-founder of the Academy along with Torrey Larsen, Shelley Giordano has been an advocate for the greater incorporation of reverse mortgages into the broader retirement conversation through her work in both establishing and maintaining the Academy. She shares perspectives on this mission and how it is progressing in the newest episode of The RMD Podcast, available now.

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Discovering a compelling message

Having been recruited into a reverse mortgage company on something of a whim, Giordano’s first reverse mortgage customer had a major impact on her perspective concerning the ability that the product concept has to provide a more stable retirement for those who use it. Then in the mid-2000s at a National Reverse Mortgage Lenders Association (NRMLA) event in San Francisco, Giordano came upon some literature authored by Dr. Barry Sacks which left an indelible impression on her.

Shelley Giordano

“The topic [of the literature] was so compelling,” she says. “It was really just a simple approach: if you can avoid selling out of your retirement portfolio when it’s down in value, that’s just hugely protective of the portfolio which you’re trying to rely on over many years of retirement. [Sacks] had made the leap there that you needed a different asset, which we now call a ‘buffer asset,’ an ‘alternative asset’ or an ‘uncoordinated asset.’”

That can be the housing asset in the form of a reverse mortgage, she explains of the literature. She found the ideas expressed by Sacks particularly engaging because it was both eye-opening and efficient in getting across the ways in which a reverse mortgage can provide a practical solution to retirement funding.

“This concept of looking for a solution, or a way to avoid or mitigate having to sell your invested funds when they were down in value, and what that actually did over time, was just a huge eye-opener for me,” she says. “From the very beginning, I was always looking for a reason that stood by itself to have a reverse mortgage.”

The fact that Sacks’ ideas were not dependent on a borrower being needs-based was a really compelling component of what he had to say, not because reverse mortgages shouldn’t be available to help needs-based borrowers but because framing the product as an effective financial strategy seemed to be a more attractive argument.

“I was looking for a reason that it was smart to take out a reverse mortgage or at least know about a reverse mortgage,” she says. “Or, to know of a way that you could use a reverse mortgage that made sense in and of itself and was not a ‘rescue.’”

Genesis of the Academy

The message of Dr. Sacks as absorbed by Giordano would prove to be the foundational basis of the future Academy’s work, and proved to be the basis of her own teaching of reverse mortgage loan officers. When Torrey Larsen approached Giordano about getting a group together to further develop some of these ideas, Giordano assembled the larger group who realized that their resources could be pooled together in order to craft more effective messaging.

“I was able to track everybody down to call me back. And so our initial group — Dr. Sacks, John Salter, Rita Chang, and Dr. Sandra Timmerman, as well as one of the professors from the Boston College Retirement Resource Center — came together and we just had a conversation,” she says. “Everybody agreed that we needed to pool our efforts, and see what we could do about changing the media treatment, as well as outreach to financial advisors to start thinking about the house as part of retirement planning.”

The association with Salter led directly to the involvement of Dr. Wade Pfau in the organization, and Dr. Pfau led the group to Jamie Hopkins, who also ultimately became involved. Hopkins would also eventually lead to the inclusion of Dr. Craig Lemoine at UIUC, and the eventual formation of the current organization under that institution’s auspices.

Move to UIUC, accomplishments

After being housed at the American College as the Funding Longevity Task Force, the organization rebranded as the Academy for Home Equity in Financial Planning and moved under the purview of UIUC in mid-2019. Dr. Lemoine became the organization’s executive director, and the move to the institution has been a difference-maker in fulfilling the organization’s mission, Giordano says.

“It just adds greater credence to what we and our members are saying to be under the aegis of a university,” she says. “It’s the Academy for Home Equity in Financial Planning at the University of Illinois. That in and of itself, I think is probably the greatest change that we’ve had. And we’re also delighted to be able to share support of the Academy with our sister companies Longbridge [Financial] and Finance of America Reverse (FAR).”

The Academy has also helped to innovate practices that are now observed across the reverse mortgage industry, along with the creation of authoritative messaging from notable financial thought leaders, Giordano says.

“Without a doubt, the number one accomplishment is that we have megaphones in the embodiment of people like Wade Pfau, Jamie Hopkins, Barry Sacks and Craig Lemoine,” she says. “These are experts in the academic world of retirement income. They have done the research to really describe how the housing asset can improve retirement income security, [and how to] protect that portfolio because of [modern retirement’s] reliance on savings.”

Having those kinds of authorities involved allows for more sophisticated and nuanced conversations with clients, as well as with referral partners and financial advisors and helps serve to expand the reverse mortgage business as a result.

Lemoine and Giordano will both be presenting the results of an expansive study concerning financial planners and reverse mortgages at RMD’s upcoming HEQ event this September. If you haven’t already, register to see the presentation, and listen to episode 15 of The RMD Podcast for the full conversation with Shelley Giordano.

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  • Like Shelley, I took one of those “white papers” at the 2006 NRMLA National Convention in the San Francisco Embarcadero Hyatt. Unlike Shelley, I had known of the author for almost 3 decades. He is a well known and respected tax attorney with a specialization in multiemployer employee benefit plans. He was a frequent speaker at the International Foundation of Employee Benefit Plans.

    At the time of the “white paper,” the strategy was in its infancy., so I choose not to go into the “white paper..” The 2012 article is another story. I have never questioned its math, just its inadequate and less than full assumption disclosures. When I sent inquiries to the author, the only response I have gotten is that the math is right. What that has to do with assumption disclosures is uncertain? Assumptions are normally the weakest part of any projection. If you want to read reasonably full and adequate assumptions, read the Actuarial Review of the FHA Mutual Mortgage Insurance Fund for the fiscal year ended September 30, 2019. Just because the assumption disclosures in the Actuarial Review are reasonably full and adequate, that does not mean that the assumptions are suitable or more likely to occur than other assumptions. Yet without being reasonably full and adequate disclosures, it is hard, if not impossible, to determine if the results should be relied upon.

    When selling their ideas, even financial academicians are susceptible to the lure of expedient exaggeration (a phrase taken from North by Northwest as a pleasant way to calling something false and misleading), reverse mortgages are debt and not any kind of asset. To help realize the difference, compare a HECM line of credit to a bank savings account. If you take $5,000 out of a savings account of $110,000 — $105,000 will be shown as being left in the account. With a HECM line of credit, if you take $5,000 out of the line of credit of $110,000, the line of credit drops to $105,000 as well but one other thing is triggered and that is if the borrower owed $258,000 the moment before the $5,000 was taken from the HECM line of credit, then after the $5,000 payout, the unpaid principal balance is $263,000 or $5,000 more. So when you take $5,000 out of a savings account, one negative things happen but when you take out $5,000 out of the HECM line of credit two negative things happen. Reverse mortgages are not assets of any kind when it comes to borrowers..

    I do agree that a reverse mortgage can be used as a “buffer” to avoid the realization of a market loss. A HECM line of credit can also be an “alternative” to selling assets. Also use of a HECM line of credit can be “coordinated” to the market conditions so that the realization of market valuation losses can be minimized. What I reject is using the word asset to describe any kind of debt.

    Some say that computing home equity where a reverse mortgage is involved makes the reverse mortgage part of the asset. That is nonsense. In accounting there is a term for that and that is a contra account. Accumulated depreciation is a contra account to fixed assets as accumulated amortization is a contra account to amortization and the allowance for bad debts is a contra asset to accounts receivable. So reverse mortgages are nothing more than debt that can be used to express home equity and it is also a contra account (or offset) to the value of the home to arrive at home equity.

    This is not the first time that a group of very smart people fell to the lure of “expedient exaggeration.” The finance people at Enron were brilliant verging on genius. They worked with their consultants, Andersen Consulting,, to find a way to turn liabilities into assets. We all know the financial chaos that developed from that mislabeling.

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