Los Angeles, California Reverse Mortgage Loan Officer takes exception to CNN's unhelpful Help Desk segment
Just before I went on vacation, I watched a segment from CNN's Help Desk. They had a certified financial advisor offering his opinion on Reverse Mortgages. Rarely do I bother responding to inaccurate information but this time I decided to speak out against self proclaimed experts who engage in tub thumping. I'm publishing it here because I really don't expect CNN will ever correct their facts. I believe it's important that the public at large have the facts, not opinions. I hope the information below clarifies some of the misinformation their financial advisor put on the air.
At a time when so many seniors are struggling to survive in this difficult economy, I found CNN's Help Desk financial advisor's commentary singularly unhelpful and misleading. He immediately lost credibility when he arbitrarily quoted a cost of $20,000 in fees on a $100,000 benefit from a Reverse Mortgage. Currently, total closing fees on a home worth $200,000 would amount to a little over $7,000 according to one of the top lenders. If that still seems too expensive to him he should know there's a Home Equity Conversion Mortgage Saver program. You may receive a little less of a benefit at a greatly reduced cost. Does CNN believe presenting fiction as fact will be helpful to any of their viewers, much less the seniors who may desperately need to find funds on which to live. The financial advisor seemed like a nice enough guy so my guess is that it was just too tempting to pass up a national spotlight. Like so many others who would rather babble than give up the opportunity to hold a national audience captive, the financial advisor told us his opinion rather than the facts. He'll be able to add having been a CNN consultant to his list of credits, which is in turn, likely to serve as an endorsement to further his career. Most of us in the reverse mortgage industry who caught the segment are hoping that was the time when the rest of the world flipped over to another network or simply and promptly forgot what he was saying. The segment was useless as an answer to the question the viewer in Ohio asked, "What are the pros and cons of a Reverse Mortgage?"
As the cost to benefit ratio goes, consider that many seniors have been in their home for 30-40 years and therefore may have paid much less to purchase their home than the benefit they might receive by reversing the mortgage. In my opinion, the longer you've owned your home the more benefit you may realize from doing a Reverse Mortgage, even in today's depressed housing market.
The financial advisor went on to imply that in taking a reverse mortgage a borrower might "sell" the home for $120,000 which is completely false. The home remains in the borrower's name until all borrowers on title have permanently vacated the home. Does the debt accumulate interest? Yes, of course. It's a loan, not a social program. It can be repaid at any time, before or after the last borrower has vacated the home. If the value is less than the debt there is no recourse to the borrower or the borrower's heirs. What other type of loan allows you to borrow against the property, live there as long as you may, without having to make monthly repayments to the bank? If the borrower's aim is to age in place, this could be a great option.
The financial advisor also indicates that the borrower might disinherit their children by taking a Reverse Mortgage. Did he seriously mean to indicate that a senior should suffer the lack of prescription drugs,in-home care, heat, electricity, food or other necessary items in order to endow an heir? Does he assume that the potential heir would be happy to have their benefactor parent suffer so for the sake of their inheritance? He seems even to have disallowed the possibility that an estate may also include such items as jewelry, life insurance policies, stocks or family heirlooms which may constitute quite a valuable estate to pass on. There's also the possibility that the senior will not use up all of their Reverse Mortgage benefit, nor that if the funds are left in a Line of Credit they will earn interest.
I'm shocked that a person who earns his living giving financial advice has somehow missed the very basic advantages that using the tax free benefit from a Reverse Mortgage could provide. At the very least, it could increase cash flow for a senior who needs money on which to live. In the case of a wealthier borrower, it could be used to lower their tax rate and preserve and prolong their qualified funds. It may help position a senior to be a better candidate for Medicaid, Medicare or SSI or to allow them to purchase long term health care enabling them to age in place--the primary purpose for the development of these products. That is still not to say that these products are for everyone.
For someone who deals in financial advice that Help Desk financial advisor's view seemed somewhat myopic to me. It would be a terrible mistake to overlook what these products are able to do for a great many seniors simply because Mr. Flynn doesn't understand what they do. Finally, his advice to "be careful" completely ignores there is an independent credit counseling requirement to fulfill before an application is filed.
I don't know how much more careful the industry can be. An FHA approved third party credit counselor must certify that the borrower understands what he or she is doing, must go over what other options may be available to them, and review the risks and benefits that are specific to each borrower. This counseling also serves to filter out a senior who may lack the capacity to make such a decision on their own behalf.
No other loan product has such requirements and safeguards built in to the program. Due diligence is built right into the process of getting a Home Equity Conversion Mortgage. But if that isn't enough to satisfy Mr. Flynn's fear of things he does not understand, perhaps he'll feel better knowing that even then the borrower may still exercise their 3 day right of recision once the loan has closed.
It was astounding to hear a financial advisor say so many wrong things in such a short period of time.
How disappointing that CNN would choose to validate it."
If you or someone you know is over 62 and owns their own home and would like information on the Home Equity Conversion Mortgage, the Home Equity Conversion Mortgage Saver or the Home Equity Conversion Mortgage for Purchase programs, please call me or give them my contact information below. I'm always interested in providing people with the most current facts without any pressure for their full understanding of these useful programs.
Colette A Gray
Senior Loan Officer & Reverse Mortgage Specialist
HomeSafe Reverse Mortgages & Retirement Solutions
(310) 405-1703
(310) 405-1703
cgray@ColetteAGray.com
www.ColetteAGray.com
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