I just finished reading an article about a network news program that did a negative report on reverse mortgages citing an incident in Los Angeles of a senior borrower who was talked into buying annuities that did not mature until the year 2033 without a substantial penalty.
http://video.msn.com/video.aspx/?mkt=en-us&vid=48aa14ef-9e00-4f14-91da-82c6149aa078
I saw the actual Nightly News piece with Tom Costello. I was very concerned with the piece because I saw that they interviewed a woman identified as Robin Talbert with the AARP. I have to believe that only part of Ms. Talbert’s comments were represented in the piece on the program as her comments stated “We’re all living longer and you don’t want to outlive that equity in your home” to which the piece cut away immediately to Mr. Costello who added “Because the bank could then take the home”. Ms. Talbert is absolutely correct, and the AARP champions all things for seniors, but they are extremely aware of how reverse mortgages operate and Mr. Costello’s remarks are done in a way to mischaracterize reverse mortgages.
This is the type of misinformation and misreporting that we have been running into for several years now. While I do not know all of the borrower’s circumstances in this particular situation and I always get extremely angry when I hear of any mortgage professionals who do not keep the borrower’s best interests at heart, it is not the Reverse Mortgage that is the “rip off” here, it was the end use of the funds. The notion that the bank will take the borrower’s home when her equity is gone is just plain wrong and bad reporting. The whole idea behind the reverse mortgage and one of the reasons the borrowers pay mortgage insurance is that no matter what happens to the equity, the borrower will never make another house payment and the borrower or the borrower’s heirs will never owe more than the property is worth, regardless of what the equity position does. The loan is set up so that you own your property, not the bank. If the Nightly News or Mr. Costello had researched reverse mortgages more thoroughly, they would have learned that if the borrower had chosen what is known as the “tenure option” or payments for life, she would have received those payments for the rest of her life so long as she continued to occupy the property and the bank would never “then take the home” when the senior outlived the equity as the report leads the listener to believe.
I think it is very important for seniors to not only go through the required counseling, but also to enlist the assistance of their loved ones or trusted financial advisors whenever available. In this piece, the borrower said she didn’t really even need the money, she was doing just fine without it. Her daughter was with her during the television interview and maybe if she had been with her during the reverse mortgage process, she could have helped her to keep from getting the loan in the beginning. Another piece of advice, don’t ever go into the process with someone who is only looking to sell you another product or service. If you don’t need a reverse mortgage and someone is trying to sell you one so that you can buy something else, or you do need one for living expenses and then someone tries to tell you that you should put the money into something else instead, find a reverse mortgage specialist who is only looking to help you fulfill your reverse mortgage needs. Many people have used reverse mortgages as retirement tools but make sure that your use of your funds is from your careful plan and decisions, not from someone else’s salesmanship.
Reverse Mortgages can be a very viable retirement tool and I’ve seen them help many senior borrowers. Like almost anything, they can be abused but if you take the time to research the products and the people with whom you are working, the reverse mortgage can be the difference to many seniors of staying in their homes or having to leave; between barely surviving and aging in grace and dignity. I would hate to see a senior borrower avoid this viable option that may be badly needed due to bad or partial reporting.
Michael Branson
All Reverse Mortgage Company
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