Are the HECM reverse mortgages living up to their reputation?

The short answer is that the HECM/government insured reverse mortgage is in fact doing its job. Senior borrowers who have obtained them overwhelmingly love what it has done for them. Money issues have literally been taken off the table. It allows seniors to enjoy the next chapters of their lives. When the reverse mortgage proceeds are used wisely and judiciously, the mental strain and melancholy that a lack of money brings is forever erased.

The longer answer is a bit more complicated. Now the answer morphs into shades of gray.  Using a football analogy, I would say that this program is irretrievably stuck in the “red  zone”. The reverse mortgage play book will not permit a touchdown or a field goal. Reverse mortgages can have successes and move up and down the field almost at will. Yet the program is incapable of putting points on the board.
Those individuals that focus upon the yardage gained will suggest that the reverse mortgage industry in general, and the HECM program specifically are huge successes. I firmly believe that the industry and the program should be and certainly could be much more “successful”. Here is some of what needs to happen:

1. Better Education initiatives. It is quite amazing that a program that has been around close to 20 years is still plague by the same misconceptions. Something is wrong with this fact. If NRMLA wants to continue to be the voice of the industry, they have to do more. A lot more.They must institute a free education policy toward the industry and they must take on educating the public.

2. Advisors who did not properly counsel their senior clients about reverse mortgages are, in my opinion committing malpractice. The lawsuits will happen. It is just a matter of time. I have often said that a reverse mortgage is not a one dimensional program. Like any program there are plusses and minuses, positives and negatives, advantages and disadvantages. Each must be reviewed. To merely say that it costs too much is not enough. Hundreds of thousands of seniors are behind in their mortgages or facing foreclosure. They obtained a conventional mortgage that they could never pay back. Often, they were encouraged by their advisors. Had these same advisors sat down and considered a reverse mortgage with their clients, the clients would not be facing dire circumstances today.
Question: Could you (Mr./Mrs. Advisor) look these clients in the face today and say that a reverse mortgage still costs too much? (Cost is not an an arbitrary number. It must be viewed in relation to an overall goal).

3. When our elders are not quite certain where they can go to get a reverse mortgage(who they can trust is the real issue) and do not quite have a handle on how it works (different originators provide contradictory answers) they become paralyzed and do nothing. Even if doing nothing is not in their best interest. Better people need to come into this industry. Another way to say it is those that see our elders as prey, better leave our industry. Voluntarily or involuntarily.

4. While raising the limits on the HECM program was a positive, it was not enough. Sadly some wholesale lenders convinced themselves that an even higher limit s would negatively impact upon their proprietary programs . (That currently does not exist).   Amazing. I believe that Congressman Barney Frank wanted higher limits as well.

5. Letting all sorts of miscreants into this industry has and will continue to give  same a perpetual black eye. This must stop.

6. All wholesalers need to establish concrete, clear policies beforehand and not after the fact. (For example, the recent refinancing issues). To many of us, "our word is our bond".

7. If the industry is not careful, there will be a terrible clash between firm delivery dates (when initiated) to FNMA and other investors with the  perceived “slowing down “ of  seniors obtaining counseling. These concepts must be reconciled.

8. Has anyone thought that perhaps seniors have too many choices? (For example-margins) Experiments have been done that showed that when people have too many choices, they are unable to make a decision.

9. I believe that a “Czar” should be appointed to oversee the “member” (originator) part  and education part of the industry. It shouldn’t matter whether one is a member of NRMLA or not. Yet there needs to be one enforceable standard when it comes to ethics. NRMLA is to be congratulated for its promulgation of an ethics standard.

10. Our elders are a national treasure. They must be viewed as a “protected class”.

I know that many in this great industry want the industry to do more. In these horrific economic times, this industry should be booming. It is not. In these though economic times our elders should be asking a lot more questions about the program. They are not. In these tough economic times a reverse mortgage could be the one thing that solves many of the financial ills facing our seniors. Yet they do not have confidence in the program (misconceptions) or in the companies that specialize in the program (lack of trust).

The industry can start to put points up on the board if it seriously looks at and corrects some of these issues that have heretofore prevented it from scoring. The window of opportunity is upon us. The industry must act now. Throw out the old play book. Now let's march downfield and score.

Comments

[Reverse Mortgages]

Thanks for sharing information, this is really helpful for Seniors.

Regards,

Rose.

[John]

Dennis,

Great insight, I agree with most of your comments, especially the NRMLA related issues.

If NRMLA can play more of an active role in promoting education by effectively marketing itself and the association I think it will help boost membership.

The reverse mortgage certification can help with this by reaching out to people who aren't necessarily members which will expand its reach to the individual loan originators.