Why does the Reverse Mortgage Program NEED to Exist?
It's a pretty bold statement but I stand behind it. Aside from the negative media, the recently implemented changes and the success stories of the reverse mortgages, there is the question: why does the reverse mortgage exist?
I don't think it's a question of 'does' but a question of 'need.' There is a socio-economic need for the reverse mortgage, and even if the program changes, it can never be destroyed, just altered. Just like energy, there will always been 'the need' for the reverse mortgage. According to an article by the Mortgage Professor, "Should Government Support HECMs?," here's why:
- There is no other program like the reverse mortgage. Well duh but it's true. The only other program that resembled the reverse mortgage is the reverse mortgage. The problem is, how many reverse mortgage programs, besides the FHA-insured, are left after the recession? Zero. Private reverse mortgages depend on a private secondary market that collapsed as soon as the recession hit, yet the government-backed reverse mortgages still exist...
- Reverse mortgages provide positive externalities. The value of reverse mortgages are not enjoyed by private entities or companies, they are enjoyed by the general public. By provide a service that converts illiquid housing wealth into a spendable income, reverse mortgage take some of the pressure off of public services geared toward retirees, many of which are retiring without adequate plans despite the fact they are living longer.
- Reverse mortgages protect retirees against the risk of outliving their financial assets. While the common misconception is that reverse mortgages are just for the financially desperate, the line of credit option, offers retirees, who plan ahead for retirement, the freedom to draw their funds, if and when they need it, regardless of the amount. It protects their more easily depletable assets and minimizes risk of outliving your current income.
- Reverse mortgage programs are a model for private programs. Most private programs that came about before the recession included various safeguards against greedy, unethical lenders, many of which were modeled after the reverse mortgage. In fact, one of the most important contributions of the program is the requirement that all borrowers be counseled by a third party, completely unaffiliated with the lender.
- Reverse mortgage programs are self-funding. Through the mortgage insurance premiums, paid for by borrowers, the program can be self-sustaining in terms of funds while still providing consumer protection if the borrower's home ever goes upside down. The elimination of the Standard Fixed-Rate HECM this past April has gone a long way in preventing future losses to the program.
So I ask again, why does the reverse mortgage NEED to exist...because there is nothing else like it. There have been imitations but none that could withstand the test of time. The endurance of the program, as well as its adaptability and influence, have made it, not only a valuable program, but one without that comparison.
Interested in a reverse mortgage program or want more information? Give PS Financial Services a call at (888) 845-6630 or email us at info@PSReverseMortgage.com. We do not pressure those who inquire. We are simply here to help.