2017—PS Financial Services, a leading Miami-based Company specialized in Reverse Mortgages Loans, recently had Owner and Principal, Phil Stevenson, a Certified Reverse Mortgage Professional (CRMP), participate as a guest panelist at a webinar held as part of the National Reverse Mortgage Lenders Association’s Reverse Mortgage Education Week. The webinar was also created in partnership with Next Avenue, a PBS news service that covers baby-boomer issues.
The goal of the panel was to inform how these types of loans work and to try to eradicate common misconceptions related to the industry. Stevenson and his fellow industry professional panelists answered a variety of questions collected by Next Avenue, disclosing the challenges that specialists face when attempting to pitch the products to consumers.
“Whenever a borrower or a client asks me if they can outlive a reverse mortgage and be forced to move, I tell them, ‘yes… when you turn 150 years old,’” Stevenson said, humorously, before adding, “reverse mortgage does have a date on the legal document and you need a date when this mortgage will end, and it’s the youngest borrowers 150 th birthday. We know no one is going to reach 150, at least not at this point in history, maybe in the future. So, you can live there for the rest of your life as long as you comply with the rules.”
During his portion of the panel discussion, Stevenson focused on explaining why it’s important to comply with Home Equity Conversion Mortgages (HECM) rules and provided specific examples of cases managed by PS Financial Services and how they have counseled several couples with their reverse mortgage. He also explained that, after August 2014, some rules changed for the non-borrowing spouse, ultimately providing them more protection.
Stevenson is one of only approximately 150 CRMPs nationwide and currently sits on the Ethics Committee of the NRMLA. He was also on the expert panel in 2016 assigned to rewrite the National Mortgage Licensing Test, which every person in the United States who wants to become a Licensed Mortgage Loan Originator must pass.
Reverse Mortgages have a less than stellar reputation; in fact, many Americans, retired or not, continue to see the reverse mortgage as a “loan of last resort” or a loan to take out when there are no other options left. In fact, many Americans think taking out a reverse mortgage either means you are poor or uneducated because there is no way a financially savvy senior would even take out a reverse mortgage.
The truth about reverse mortgage, however, is something else entirely. The first hurdle is making sure a borrower understands the reverse mortgage and, most importantly, realize that the reverse mortgage is a way to use the untapped equity in the home they’ve paid for throughout their working years.
A recent article, published by CNBC, highlights how and why the reverse mortgage became a loan of last resort:
“The criticism of reverse mortgages is less with the product itself than with the way that people use them. ‘Free money’ has a tendency to encourage bad behavior — one reason the Federal Housing Administration requires borrowers to undergo a counseling session before entering a reverse mortgage contract. In other words, don’t use a lump sum payment from one of these to buy the Mercedes-Benz you’ve always wanted.”
A reverse mortgage should be a long-term retirement planning tool, and not just for cash strapped seniors, but for affluent seniors who have planned and saved for retirement. As with any financial product though, a borrower should know and understand their financial obligations, which include paying any and all maintenance on the property as well as keeping up with their property taxes and homeowner’s insurance payments.
Most importantly, a reverse mortgage is a flexible alternative to more traditional forms of retirement planning such as social security or 401ks or stocks and, with more Americans living a lot longer than ever before, flexibility is key.
For example, if the stock market has taken a downturn, it may be time to pull funds from the reverse mortgage line of credit in order to sustain retirement expenses while the market stabilizes. Another example may be to set up monthly reverse mortgage payments to help supplement social security payments and cover retirement expenses.
These are just two of the ways reverse mortgages can adapt to a retiree’s situation, not just at 62, but also at 72 or 82. For example, a potential retiree may be saving at 62 for retirement but may need more cash flow at 72 as they adjust to their new needs and wants. At 82, fixed expenses may be set and monthly payments may be more attractive than they were at 72.
Point is, things change, and so do retirement needs and a reverse mortgage is a way to, not only sustain retirement but also ensure that it is secure and worthwhile.
Give us a call at (888) 845-6630 to speak to one of our brokers or email us at info@PSReverseMortgage.com. A reverse mortgage calculator is great to get started but it’s the personal touch that matters.
The reverse mortgage was a created to help retirees stay in their home without the need to keep up with monthly mortgage payments at a time when cash flow might not be optimal. In addition, borrowers who also owned their homes free and clear could tap into the home equity they accumulated throughout their working years and leverage it during retirement.
Something happened along the way that increasingly painted reverse mortgages in a negative light and, suddenly, a financial product that was created to help seniors became the “most misunderstood mortgage” there is. Even more confounding is the fact that many financial experts and academics find “no rational reason” why many older homeowners remain hesitant to tap into their home equity.
A recent article in Reverse Mortgage Daily interviewed Steven Sass, a research economist at Boston College’s Center for Retirement Research, about the familiar behavioral roadblocks many retirees have about the reverse mortgage and the financial industry in general.
At the top of the list is a fear of getting into debt late in life and the satisfaction that comes with owning a home free and clear. These are two things that are not inherently bad but can cause problems for future retirees.
For example, the article mentions the fact that Social Security may be non-existent in the future and newer generations are saving less and less so where do future seniors obtain cash flow for their retirement needs: the equity in their home. Equity is a funny thing, many people don’t think about it until they need it but it’s an important source of cash flow. More importantly, it’s an option to supplement income and diversify assets in an ever-changing environment.
In a perfect world, a homeowner takes out a reverse mortgage line of credit at 62 and lets it grow, untouched, as a “rainy day” fund for the future but, like equity, many homeowners don’t think about the reverse mortgage until it is necessary and, by then, it may be too late.
“If you have a sufficient income to cover your expenses, is there any great need to go out and secure this line of credit or get the money?” Sass asked rhetorically. “So I think people might need some impetus to use a reverse mortgage.”