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Irrational Statements Show Ignorance of Reverse Mortgages

January 25, 2010

Makes Irrational Reverse Mortgage StatementsHave you made or heard these statements?  “Stay away from reverse mortgages!”  “I wouldn’t recommend a reverse mortgage.”  “It’s the worst thing you could do.”  “Reverse mortgages are a scam.”  “Don’t do it!  Too many things can go wrong.”  “Reverse mortgages only benefit the banks.”  “The bank owns the home.”  “You can outlive the mortgage.”  These statements get my ire up because it shows people making these statements don’t know what they are talking about when it comes to reverse mortgages.

Let me give you the facts:  A reverse mortgage is a mortgage just like any loan against the home but it has special terms for seniors 62 and older.

  • There are no income or credit score requirements to qualify.
  • No monthly payments required.
  • There is no limitation on how the funds can be used.
  • Funds can be received in monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these.
  • Social Security and Medicare are not affected because it is a loan.
  • Medicaid can still be received with the reverse mortgage.
  • Borrowers can stay in the home as long as it is their primary residence or in the case of a couple as long as one borrower is still in the home as their primary residence.
  • The loan is non-recourse which means there is no personal liability to the borrower or their heirs if they are not retaining ownership.  So they don’t have to come up with the difference if the loan balance is higher than what the home is be sold for as long as they are not retaining ownership.
  • At the time of sale if the home is sold for more than the loan balance, the borrower(s) or their heirs receive the difference.

Just like any mortgage, borrowers still have the title and are responsible for property taxes and insurance, association dues (if applicable), maintaining the property and abiding by the terms of the loan.

FHA offers and insures the majority of reverse mortgages known as the Home Equity Conversion Mortgage, or HECM, making it the most highly regulated mortgage available.  Lenders are regulated by RESPA (Real Estate Settlement Procedures Act) and HUD (Housing and Urban Development).  Funds are guaranteed by HUD.   Application and Closing documents include many disclosures, in fact at the time of Application it is required that sample closing documents be provided to the borrowers.  Additionally, all borrowers are required to go through third-party counseling by HUD approved counselors.

Fees are regulated and only HUD allowed fees are permitted with no mark-ups.  Even though many times they are considered expensive or high the compare to conventional loans, in fact the difference comes down to FHA Mortgage Insurance Premium.  You can see a comparison of the costs in my article, “Reverse Mortgage Costs – High or Mythical?

In the last few years HUD and RESPA have implemented more regulations and protections.  And recently HUD has been charging those who have not followed these regulations and even pulled their licensing.

Happy MN Reverse Mortgage Borrower

Happy MN Reverse Mortgage Borrower

The reverse mortgage has been a life saver for many.  According to an AARP report 93% of the borrowers are satisfied.  Based on a survey of our borrowers our company has 100% satisfaction.  I just talked with one borrower last week who told me the reverse mortgage has made a huge positive difference in her and the one her sister had made a big difference in her life also.  (Her sister has now passed away.)  One day we received a call from a man who said, “I want a reverse mortgage because since Jim got his, he’s a new man.”  Some of my other Blog posts share other stories on how the reverse mortgage has made a difference in the lives of seniors: “Finance Retirement With A Reverse Mortgage,” “Know A Senior Who Wants Security, Independence, Dignity, and Control?  A Reverse Mortgage May Be The Answer!” “Reverse Mortgages Finance Home Care,” and  “Reverse Mortgages Answers Prayers.”

I’ve posted some Blog articles addressing the media’s attacks on reverse mortgages, “The Media Needs The Reverse Mortgage Facts,” “But Wait, There’s More… Reverse Mortgage Facts The Media Needs To Know,” and “It Is NOT Reverse Mortgage Fraud When…”  It’s obvious the public needs these facts too when they make the statements that are in the opening paragraph.

When people make such irrational statements they don’t know what they are talking about.  The reverse mortgage is not right for everyone but everyone has the right to get the details and facts so their decision can be based on the truth, not on opinion.  As asked in my Blog, “When You Don’t Know What You Don’t Know About Reverse Mortgages,” would you go to a plumber for health problems?  And to expand on that, would you go to a general practitioner if you have heart problems?  No, you would go to the specialist.  So before making or believing such irrational statements, contact a specialist and get the facts.  Our website, www.RMSIDAC.com is full of information and facts and if you are in Minnesota we’d love to provide the facts for you via phone or in person.

© 2010 Beth Paterson https://bethsreversemortgageblog.wordpress.com 651-762-9648

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14 Comments leave one →
  1. January 26, 2010 11:08 am

    Great article and, as a financial advisor, I could not agree more. Because here is the biggest flaw in many people’s arguments:

    This biggest problem I see in our industries, as a whole (NOT just in Reverse Mortgages), is that you have certain “professionals” out there who boldly make one-sided statements out there, such as:

    “A Reverse Mortgage is a Bad Decision”
    “Never Buy Whole Life Insurance”
    “Annuities are Not Good For Them…But Not You”
    “Never Do a Will…Everyone Needs a Trust”

    I totally agree with you that these types of statements are “ignorant”, and let me explain why.

    The reality is that sometimes these statement are accurate, and sometimes they are FAR from the truth. If you really think about how many different people there are in the world today, I think it is 100% accurate to say that in order to see if these products or strategies fit, you must first:

    1. Review and analyze your “big picture” financial situation
    2. Determine your future goals/needs/dreams
    3. Review ALL your options and see which ones fit best

    I can provide you with personal examples where Reverse Mortgages, Annuities, Whole Life Insurance, and using a Will vs. a Trust were not only good decisions at that time, but proved to get better and better as time passes.

    So here is the bottom line with regards to Reverse Mortgages:

    – Should EVERYONE age 62 and over use a Reverse Mortgage? Absolutely not!
    – Should NOBODY so much as consider a Reverse Mortgage? Absolutely not!
    – Does it make sense for someone ages 62 or over to sit down with a experienced Reverse Mortgage professional like Beth and review your options, analyze the pros and cons, and see if it truly makes sense given your personal circumstances? YOU BET! You know why? Because if it a Reverse Mortgage is not a good fit for you, then good people and seasoned experts like her will be the first to tell you…”it’s simply not for you”!!

    As they say, “Never say Never”!! 🙂

    Christopher P. Hill, Founder
    http://www.funeral-resources.com/funeral-resources (Our Blog)

  2. September 13, 2010 9:24 pm

    Hi Beth…

    You are doing a great job in marketing yourself!

    I completed the SRES training last year and have been working with Seniors and their adult children for several months. Through our division, Senior Concierge Services, we provide services in selling and relocating and/or in home services to enable our clients to age in place safely and comfortably in their existing home.

    When is a reverse mortgage not a good vehicle to generate cash for elder care support? What is the profile of the ideal customer? Can you service clients in the Chicago metro area?

    How lucky are we to be able to make a difference? I feel your passion for what you do and am sure you have many grateful clients.

    Look forward to hearing from you….Susan

    Susan Wyle Schreiber, SRES, CNHS
    WyleSchreiber Team
    Baird & Warner and Senior Concierge Services

    847/858.1631

    • September 19, 2010 6:32 pm

      Hi Susan,

      Thanks for the compliments! Congrats on your SRES completion! It is so rewarding to work with and help to make a difference in senior’s lives.

      The biggest reason when a reverse mortgage is not appropriate for a senior is if they are not planning to stay in their home for a longer period of time.

      Profile of an ideal client is someone 62 and older who owns their home and wants to stay there and they could benefit from some additional money.

      Currently we are not licensed in Illinois.

Trackbacks

  1. The Misconceptions of Reverse Mortgages Abound… What Do You Know? « Beth's Reverse Mortgage Blog
  2. Beware Of Reverse Mortgage Misstatements – The Fact Is Reverse Mortgage Lenders Do NOT Own The Home! « Beth's Reverse Mortgage Blog
  3. Why are you so afraid of reverse mortgages? « Beth's Reverse Mortgage Blog
  4. Do You Know The Best Kept Reverse Mortgage Secret in Minnesota? « Beth's Reverse Mortgage Blog
  5. Seventeen Facts About Reverse Mortgages You May Not Know. « Beth's Reverse Mortgage Blog
  6. Why Are People So Resistant to Reverse Mortgages? « Beth's Reverse Mortgage Blog
  7. Senior Loses Home After Listening to “Reverse Mortgages Are Bad” Advice « Beth's Reverse Mortgage Blog
  8. Do You Go To A Plumber For Health Issues? Then Why Would You Receive Advice on Reverse Mortgages From A Politician? « Beth's Reverse Mortgage Blog
  9. Are Reverse Mortgage Property Tax Defaults Really Due To The Reverse Mortgage? …They Are Not The Only Reason Seniors Lose Their Home « Beth's Reverse Mortgage Blog
  10. Have Senior Homeowners With Reverse Mortgages And Tax Defaults Really Gone Into Foreclosure and Lost Their Homes? You Are In For A Surprise! « Beth's Reverse Mortgage Blog
  11. Why Are People So Resistant to Reverse Mortgages? | Minnesota Reverse Mortgages SIDAC

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