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Changes to Reverse Mortgage Program Has Positive Effect

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Changes to the Reverse Mortgage Program Has Positive Effect

Amid the news that the positive press for the reverse mortgage program have surged in the past months and FINRA's declaration that the reverse mortgage is no longer a loan of last resort, individual financial planners are beginning to see the benefit of the reverse mortgage as a long term retirement planning tool as well as an alternative way of paying off one's mortgage and using those funds for other uses.

In the past, misuse of reverse mortgages lead to borrower defaults when they were unable to pay their property taxes and insurance. In addition, because most borrowers received their funds in a lump sum, there were instances where little was left over for unexpected expenses.  

In an effort to make the program safer for borrowers, changes were made to the program to make it a more advantageous, long-term retirement planning tool and NOT a loan of last resort.

Since the changes, part of the uphill struggle have been educating new and past consumers on the benefits of the program as a way to strengthen their retirement portfolio. In addition, educating financial planners became more important as well as they were another vehicle through which consumers could be educated. 

Presently, financial planners have begun to embrace the reverse mortgage program after the changes, choosing to provide their clients with different ways it should be used (and ways it shouldn't) to make sure the consumer knows about the program and why or why not it works for their specific situation.

According to an article in Reverse Mortgage Daily, reverse mortgages are beginning to shed their previous reputation.

David John, an associate professor of finance at the University of Wisconsin-Superior stated in the original Bankrate article:

"Reverse mortgages [...] can be a useful financial tool to senioes when used appropriately. [...] financial planners didn't view the reverse mortgage as a planning tool. It was viewed as a last resort and they assumed that the only people that do reverse mortgages are people that are desperate."

In truth, it was a vicious circle, reverse mortgages were only suggested when borrowers were in dire financial states so that only borrowers who had monetary need would even look into a reverse mortgage. 

Hopefully, as more positive press and positive reverse mortgage stories make their way through the industry, more consumers, financial planners, etc. will, at least, make the effort to learn more about the program before pushing it aside as a "last resort."

Most importantly, it's a program to consider for the future as well and is most beneficial when taken early and used to plan future retirement needs, expected or unexpected.

Beth Paterson, executive vice president of Reverse Mortgages SIDAC said:

"Maybe they don't need the money right now, but down the line they might have a medical emergency, so it's good for them to have the option."

Interested in a reverse mortgage or simply want more information? Give PS Financial Services a call at (888) 845-6630 or via email at info@reversemortgage.comWe don't pressure those who inquire. We are simply here to help.

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Information and content in this blog is original to Phil Stevenson

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Phil Stevenson

PS Financial Services

Owner and Principal Mortgage Originator

Certified Reverse Mortgage Professional (CRMP)

LO #365768

NMLS #968090

Cell: 888.845.6630

Miami Mortgages & Florida Mortgages

Copyright © 2013 by Phil Stevenson & PS Financial Services, LLC

Winston Heverly
Coldwell Banker Access Realty - South Macon, GA

Phil, a nice read today, sharing an insight that all of us can appriciate.

Aug 12, 2014 12:29 PM
John Pusa
Glendale, CA

Phil - Thanks for the great information about the positive effects on changes to reverse mortgage programs.

Aug 12, 2014 01:27 PM
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Phil, I'm still on the fence about HECM loans. If the ONLY thing keeping someone from being able to retire is their mortgage payment then I would be whole-heartedly behind it.

But the truth is most people need a whole lot more money to retire than just the amount of their mortgage.

Bill Roberts

Aug 13, 2014 12:25 AM
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Winston, thank you! 

John, thanks for your input.

Bill, the benefit of the reverse mortgage is paying off a mortgage and (many times) store the rest of the proceeds in a line of credit that is growing yearly for the borrower, tax-free. If they do not have to pay off a mortgage, can those funds can go directly into the line of credit, which as like a reserve account, that can be tap into if and when it's needed.

No one knows how much they will receive, how worthwhile it will be, if they do not look into it first. Through education borrowersand financial planners can look into the reverse mortgage as another method of retirement planning instead of simply dismissing it from the get go.

Aug 13, 2014 02:11 AM
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Phil, Thank you.

I see the reverse mortgage as a source of funds that can be invested (at a higher rate of return) to achieve retirement goals.

Bill Roberts

Aug 14, 2014 02:11 AM