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A Response to a misleading headline in the Modesto Bee about reverse mortgages...

By
Mortgage and Lending with Reverse Mortgage Consultant

I just read an article in the Modesto Bee titled "Reverse mortgages a new threat to seniors"

By TONY PUGH
McCLATCHY NEWSPAPERS - last updated: December 22, 2007 http://www.modbee.com/business/story/160490.html

The headline is a bit misleading.  The author is basically talking about how unscrupulous loan originators are advising their borrowers to use the proceeds from a reverse mortgage to buy a deferred annuity. I agree with the author that that is a deplorable practice which, in most cases, does not benefit the senior.  However, a cursory reading of the headline may scare some seniors away from reverse mortgages.  Perhaps the headline should have read: "Using a Reverse Mortgage to purchase an annuity is a threat to seniors".

Anyway, here is my response to the article in the Modesto Bee:

Although I agree with a lot of the content of this article, I feel that the subject line is misleading. Reverse mortgages in and of themselves are neither good nor bad. The better question to ask is: Is this an appropriate financial tool for MY situation? In many cases, it is. A borrower needs to understand that the reverse mortgage will consume equity. Is that important? It depends. If the borrower has a mortgage and is using every dime to make their house payment, the reverse mortgage will pay that off and provide them financial relief. That is a good use for a reverse mortgage. Or, consider the borrower whose spouse has died and his/her income has been reduced. Why not tap into the equity of the home to make life easier and to have some financial peace of mind? For the borrower who is planning to stay in their home, realizes they won't be leaving all the equity to the kids, and has a real financial need, the reverse mortgage can be a Godsend.

As for lumping the sale of a reverse mortgage with an annuity...I totally agree that RARELY will that benefit the borrower and is a practice that needs to be highly scrutinized and regulated. I originate reverse mortgages and I warn my clients to stay away from annuities. They are a bad deal. If the borrower needs a monthly income stream, the reverse mortgage can provide that in many cases and no annuity is needed. I deplore the practice of getting a senior into a reverse mortgage, then turning around and selling them an annuity. Shame on those greedy salespeople!

So, buyer beware. Look for reverse mortgage professionals who have been in the business for at least two years and who do NOT try to sell you an annuity or get their insurance buddies to contact you. Look for a professional who will sit and talk to you about the suitability of the reverse mortgage for YOUR situation. They should ask you questions like: How long do you plan to stay in your home? How do you feel about not leaving equity to your heirs? What is your monthly income and why do you need this money? Can you find it elsewhere? A good professional consultant will not put you into a reverse mortgage if it is not right for you. I know -- I am such a consultant!

Comments (6)

Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re
My parents were in a reduced income situation and the reverse mortgage has been very helpful.
Dec 24, 2007 04:11 AM
Sylvia Williams
Reverse Mortgage Consultant - Elk Grove, CA
Ed.D
Terry - Thanks for your comment.  I find that in the majority of cases, a reverse mortgage is beneficial.  For those that need them, they are wonderful.  Thanks!  Sylvia
Dec 24, 2007 04:33 AM
Corey Matelli
Reverse Mortgage Company - San Jose, CA

Well done, Sylvia.  Last week I responded to a news reporter in on the NBC affiliate in Denver, CO who posted a news story and article headlined, "Reverse mortgage threatens family home".  The headline was sensationalized in order to draw fear (thus, attention), but the story in no way brought any facts which told the whole story.  There was no input from anyone in the reverse mortgage industry.

The reporter did change the headline in response to my letter, which was some consolation.  But if you read the story, there are still many holes.

You can read the original story, with the revised headline, here.  

You can read my blog comments about this article and the media's tendency to resort to fear in lieu of facts here

Thanks for taking up the good fight!

Merry Christmas!

~Corey Matelli 

Dec 24, 2007 06:31 AM
Sylvia Williams
Reverse Mortgage Consultant - Elk Grove, CA
Ed.D
Corey -- I saw that article last week, too, but didn't get around to responding.  Good for you!  When I read the article, I thought to myself "there is no way she could have been foreclosed on with a reverse mortgage".  I read your excellent comments in your Blog about the article. What kind of agenda is going on with these writers???  Anyway, you get a gold star for getting the headline changed.  And as reverse mortgage professionls, we have to remain vigilant to make sure that the media is reporting the facts.  Thanks, Corey!  And Merry Christmas! .......Sylvia
Dec 24, 2007 07:52 AM
Corey Matelli
Reverse Mortgage Company - San Jose, CA

Hi Sylvia.

Thanks for the kind words.  Have yourself a Merry Christmas.  By the way, I'm in Elk Grove celebrating Christmas with my parents.  :o)

~Corey

Dec 24, 2007 09:28 AM
Sylvia Williams
Reverse Mortgage Consultant - Elk Grove, CA
Ed.D
Corey - Wow!  What are the odds that you would be in my home town for Christmas?  :)
Dec 24, 2007 10:44 AM