The Reverse Mortgage Blog - by Dennis Haber Esq.

THE REAL COST OF A REVESRE MORTGAGE

A reverse mortgage is a product that solves many of the problems facing our seniors. It is not perfect. It is not a panacea. It is not for everyone.

A good number of people suggest that it is just too darn expensive. While I would love to see the total costs come down, I do not see that happening in the near future. While, the origination fee will come down, someone has to convince FHA/HUD to lower the mortgage insurance premium on these loans as well.

Having said this, I think that the real cost of obtaining the reverse mortgage is what one has to give up in order to get it. Economists like to talk about “real costs”.  How expensive is too expensive? If the closing costs are $18,000, or $15,000 or $9000 or $5000. Where should the line be drawn? (this also depends upon value and how much a senior can withdraw.

I think the focus has to be on other available options. Too many professionals say to their senior clients, “Do not get a reverse mortgage because it is too expensive.” When a client tells me this, I ask, “Well what other options did this person come up with”? Typically the answer is “none”.
I then go through the options with the client. Selling/moving in with family/assisted living/downsizing/REX or Equity Choice/maybe the professional who told you not to do it will pay your expenses. Perhaps it takes this advisor 2 hours to watch 60 minutes. Maybe there is an epidemic I do not know about. (The same applies to many members of Congress).

Another way to look at this is as follows: If you were gravely ill and there was one doctor that could cure you would you go to that Doctor? If that doctor was expensive would you still go to that Doctor? I would think that the answer would still be yes in both instances.

Well, reverse mortgages make sense for many people. It is the cure for the financial ills that many are facing. I encourage everyone to stop looking at one negative aspect of the program, like costs, and conclude the program is no good.Likewise, there are some that look at one of the positive features and say, “this is for me”. This is also a mistake. The only way to evaluate the program is to look at all the positives along with all the negatives and then make a determination.

Otherwise, if you led your life the way you decide whether to obtain a reverse mortgage, you would look only one way when crossing the street or you would run your business by looking at revenues without considering expenses. You must always consider both sides of the equation.

Congress: Seniors just don't matter

The FHA Modernization bill is languishing in both houses of Congress. This is a piece of legislation that could achieve so much for our seniors across the country. If this is true, why does such an important piece of legislation gather dust, like a forgotten object, that is found by serendipity, only after much time has passed?

It seems that these “great men” who walk the halls of Congress, giving great speeches, while feigning concern when the eye of the camera is aimed at them, really do not care. The average senior citizen has no one knocking on the doors of their representatives in those great halls. A senior can’t hire a well paid lobbyist who parade around Congress, in their five thousand dollar suit, to argue his/her case. So “important legislation” sits, collecting dust, like any piece of trumpery would. That is important legislation that could help seniors.

Perhaps as election time rolls around, someone will find this dusty piece of legislation. Maybe, just maybe a white haired senator will proclaim, “I am the champion of senior issues”. Yes you are, only when it is time for election votes to be counted. Sometimes, it is hard not to think that these “great” elected officials need 2 hours to watch Sixty Minutes. I am sorry. I have strayed. I got my jab in.

Why is the FHA Mod bill important? It does a number of things. For one it puts more money in the pockets of seniors. For another, it lowers one of the closing costs- the origination fee. It also opens up reverse mortgages (FHA) to those million of seniors that live in co-op apartment units. OK, you say, this stuff is nice. But there are more important things that congress needs to attend to. I say, with an emphatic, “No”. We forget just who we are talking about. We are talking about a generation that has done so much for this country. We forget that these heroes are struggling as decrepitude gets the upper hand as the aging process continues unrelentingly. Our seniors need help, not next year, not next month, not tomorrow. They need it TODAY.

Imagine that you have a parent, an uncle, an aunt, or a friend that has to make difficult choices. Say choosing between paying the utility bill and buying food at the grocery store.

Perhaps congress thinks it’s OK for seniors not to have heat in the winter or air conditioning in the summer. Perhaps Congress thinks it is Ok for seniors to eat pet food instead of food that everyone else eats. Perhaps Congress thinks it is OK for seniors to choose between which medications to take-each one just as vital to health. Perhaps Congress thinks it is OK for seniors to lose their home because they cannot pay their property taxes. Perhaps Congress thinks it is OK to make it harder for seniors to declare bankruptcy when a major illness disrupts their lives and they do not have the money to pay for the gap insurance. Well I for one do not. It is about time that the clarion call goes out that our senior citizens are an endangered species. We do more to protect animals than we do to protect humans.