As financing options diminish, seniors today are turning more to reverse mortgages to provide needed cash flow. During 2008, according to an AARP survey, 36 percent of middle-aged and older Americans stopped putting money into their retirement accounts and 17 percent prematurely withdrew funds from such accounts.
“In the past, seniors might take out a second mortgage or draw against a home equity line, but with tougher income and credit requirements, this is no longer an option,” says Jack Belles, president and co-founder of Reverse Mortgage of New England, based in Plainville, Mass. Belles, who receives referrals from eldercare attorneys and financial planners, started Reverse Mortgage of New England in 1992.
Developing business was a slow process at first, he says, because there were no wholesalers around for partnering. Eventually, Belles joined forces with Financial Freedom (in 2002) and, he says, “The rest is history.” Today, 95 percent of Belles’ business is FHA-insured reverse mortgages – the remainder is purchase and refinance mortgages. The company closes approximately 25 reverse mortgages per month.
But the reverse mortgage business is not for everyone, cautions Belles. “It is often not a fast process. An initial meeting can last close to two hours and you truly have to put their interests first, even if that means having conversations for three years before closing a deal!” He calls it, “tell don’t sell,” adding: “you can’t cram it down someone’s throat.”