The Consumer Financial Protection Bureau took a major swing at an emerging use for the reverse mortgage last week, releasing a study that showed the costs might outweigh the benefits achieved by using the proceeds to delay Social Security payments. But one prominent retirement researcher disputed those findings with a Tuesday article in Forbes.
The CFPB’s analysis was “incredibly flawed, misleading, and harmful,” according to Jamie Hopkins, an associate professor of taxation at the American College of Financial Services in Bryn Mawr, Pa.
In Hopkins’ view, the report fails to account for the advantages that borrowers can gain through Social Security deferrals if they live longer than expected: While the CFPB calculated the benefit increases based on average lifespan, Hopkins argues that the real goal of waiting is to hedge against a longer-than-expected retirement.
Hopkins also takes issue with the bureau’s analysis of Home Equity Conversion Mortgage costs, noting that most borrowers no longer have to pay servicing fees — the CFPB estimated a $35 per month charge — and that many receive credits from lenders and brokers to help mitigate closing costs, which did not play in to the bureau’s calculus.
Finally, Hopkins claims that due to the relatively small number of people who currently employ this particular reverse mortgage strategy, the Social Security delay method didn’t deserve such a strong, in-depth rebuttal from government regulators.
“If anything, the strategy is probably vastly underused, not over,” Hopkins wrote in his conclusion. “Instead of driving Americans away from a strategy that the CFPB showed was viable, they should be looking to provide guidance and insight into how Americans can effectively use home equity, Social Security, and reverse mortgages in positive way to improve retirement security.”
Read the full piece at Forbes.
Written by Alex Spanko