I was quite pleased to read Vivian Marino’s well crafted reverse mortgage piece in the real estate section of the New York Times today (3/15/09). I congratulate reporting that squarely recognizes that a reverse mortgage is meeting the needs of our seniors. At a time of such financial uncertainty, the HECM program is ensuring that older Americans have a viable financial future.
Ms. Marino acknowledges, with her opening sentence, that getting credit today is not easy. In her last paragraph on the first page, she also acknowledges that it has become more difficult to sell a home. This does not mean that options are not discussed. It does mean that economic realities need to be dealt with.
After explaining the pros and cons of the loan, and pointing out that the program does have one major deficiency, (it is expensive) the article maintains a hopeful tone. I found the quote from the NJ attorney particularly interesting. The bromide that it should be a loan of last resort, has little merit when it is juxtaposed with the articles’ opening sentence and last paragraph as noted above. I believe that this kind of thinking emanates from a fear that a reverse mortgage is the wrong thing to do. And this fear exists because many advisors have not sought to sufficiently educate themselves about this program.
Kudos for Ms. Marino for shying away from the typical article of the past that views the reverse mortgage as one dimensional; it is expensive therefore it is no good. Likewise, I do not believe that any financial professional would say that a particular program is perfect. Each one has its merits in the right circumstances. The reverse mortgage is no different.
Likewise, it is time for the industry to unabashedly declaim that the expense of the program, is not in and of itself, a reason not to move forward. If it were, then one should never purchase or lease a car; or buy furniture; or eat at a restaurant; or purchase long term care insurance; or have homecare ; or travel. After all, each of these is “expensive”.
Many seniors are thunderstruck by the déjà vu quality of the economic downturn. Never would or could they surmise that in their life time the “D” word would be uttered as part of the news of the day.
Our beloved elders have become the “invisible man”, as the pundits conveniently omit advice for this helpless and innocent class. Many are prisoners in their home, yet they did nothing wrong.
It is also time to recognize that this country owes so much to our elders. They must have access to viable options. Therefore the reverse mortgage program must be viewed with an objective pair of eyes. Articles that shine the light of fairness on the program will enable a fruitful dialogue between the industry, senior advisors, and the seniors to flourish. Real informed decision making will always flow with objective reporting.
Dennis,
If we evaluate HECM cost based on Reg Z Truth in Lending TALC estimates, we can also toss the phrase "It is expensive." Prior to recent Fannie increases, TALC disclosures frequently estimated the true cost of a HECM to be below the prime rate, based on current rates, in as little as five years.
Posted by: John Krajsa | May 25, 2009 at 08:52 PM