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Why Are People So Resistant to Reverse Mortgages?

February 17, 2012

Resource Networking MeetingI was at a resource provider network meeting the other morning when a Minnesota County government agency talked about their financial and foreclosure counseling services.  When I mentioned they should keep in mind that a reverse mortgage should be considered for homeowners over 62 the response was resistance.  Here’s how the conversation went.

Me: “Keep in mind that a reverse mortgage may be an option for your clients who are homeowners 62 and over.”

Agency: “Our clients don’t qualify for a reverse mortgage.”

Me: “Why do you say that?  Are they homeowners 62 and over?”

Agency with hesitancy: “Some, but not many.”

Me: “Well for those 62 and over a reverse mortgage may help them.”

Agency, again with hesitancy: “They are in foreclosure.”

Me: “But a reverse mortgage may help save their home from foreclosure.”

Agency, defensively: “But one spouse may not be 62.”

Me: “The requirement is that both borrowers be 62 so the younger one would need to be removed from the title, and while that is risky and not normally recommended, if it’s a matter of losing their home or being able to stay in their home, the reverse mortgage may be an option.  It’s at least worth considering.*”

*I suggest they talk with an attorney so they are aware of the risks of removing a younger person from the title.

Agency: “But there may not be enough funds to pay off their mortgage.”

Me: “We can work with the banks to negotiate them taking the reverse mortgage proceeds as a payoff.  It’s been done where the banks accept the reverse mortgage as a payoff.  It can be a challenge but it is at least worth a discussion and a try.  We have done some amazing things.

“All I’m saying is that instead of saying there aren’t options, we can’t help, the reverse mortgage should at least considered as an option and explored for those over 62.”

This conversation raises the question, why are people resistant to reverse mortgages when it can make such a difference in the lives of seniors?

Are they so hung up that it’s not their agency solving the problem they don’t think anyone can?  Or is it they don’t want someone else to help?  Are they afraid that someone else can help and they can’t?  Is it because their funding depends on them solving the problem and it’s more beneficial to them to not help and not provide all options?  Is it because they are a non-profit government agency and we are a private for-profit company?  Is it they don’t think I should get paid for my services (after all as a government non-profit agency and as paid staff they are making a salary with sick days and vacation days while I’m commissioned, no paid sick or vacation days.)?  Or is it they just don’t understand reverse mortgages?

I don’t understand why they or others wouldn’t want to offer an option that may benefit the seniors even if it’s not their program that solves the problem.  Even if it helps just one person/couple, isn’t it worth it?

A reverse mortgage is a mortgage that has special terms for those 62 and older to use their equity while they still own and live in the home.  Income and credit aren’t considered to qualify for an interest rate and monthly payments are not required during the term of the loan.  The loan is due when the home is no longer the primary residence of the borrower(s).

The most common reverse mortgage, and only one available in Minnesota, is the HUD Home Equity Conversion Mortgage or HECM which is insured by FHA.  The borrowers pay a FHA Mortgage Insurance Premium (MIP).

When the loan is being paid off, the borrower or the estate keep any difference between the loan balance and the sale price.  As a non-recourse loan, if the loan balance is higher than the sale price on the home, the lender is repaid the fair market value and the borrower doesn’t have to pay the difference – the FHA MIP covers the difference. The loan documents spell out there is no personal liability to the borrower or their estate, unlike conventional mortgages that can get funds from the estate to cover the loan balance.

One of the other meeting attendees commented to me after the meeting, “It appears they don’t really care to be helping people.”  That’s a sad impression to give when you are an agency paid to help the community.

I believe we all need to work together and offer options to help, whether non-profit, government or private for-profit.  If the reverse mortgage is considered and explored but is not the right option, I want to be able to know about other options and people who may help so I can do referrals to someone who might be able to assist them.  This is why I attend provider network meetings to learn about resources and options.

I wish others wouldn’t be so resistant to reverse mortgages when they can make such a difference for seniors.

© 2012 Beth Paterson http://bethsreve’rsemortgageblog.wordpress.com

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/pxPEm-xc

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10 Comments leave one →
  1. February 18, 2012 11:05 am

    I agree, Beth. I, too, wish that others would have an open mind about reverse mortgages. Your post helps shine some light on the subject. In the end…. most of us are working hard to serve the same client. We should all educate ourselves on all options available and discuss fully without bias or ignorance. Reverse mortgages should never be dismissed as an option simply because one is unimformed/misinformed or suspicious. Every professional working with seniors needs to locate a reverse mortgage loan officer who will become a trusted resource and provide an honest evaluation without any attempt at “selling” the senior client.

  2. February 18, 2012 2:04 pm

    It is amazing on how most of us assume we know all the answers, when it is so easy to just ask a professional to make sure you are on the right path! Keep up the good work Beth. People do need education in this area.

    Lori

  3. February 22, 2012 6:39 am

    99% of our work as Reverse Mortgage Consultants needs to be re-educating the professionals in areas of influence in our local communities. I hope the NRMLA PR campaign that I have heard about actually has some effect. Keep up the good work trying to get the truth out to the marketplace.

    • February 24, 2012 2:42 pm

      Thanks, Gregory! Yes, the majority of our work is educating the professionals as well as the public. Based on may comments posted in other arenas, we have a long way to go with our educational efforts!

  4. February 23, 2012 5:02 pm

    Excuse me. I found a tweet link to this page and I’ve read it with some interest in that I am over 62 and that I am a Realtor in Florida, (also known as God’s waiting room for Boomers). Let me first suggest that you read and learn the information provided by the Boston University Retirement Index here: http://crr.bc.edu/special_projects/national_retirement_risk_index.html

    It identifies the issue with hard numbers so that when you are in workshops you can point to the real issue for my generation–without RM there will not be the money we need to live like we are use to living.

    • February 24, 2012 2:37 pm

      Hi Michael,
      Thanks for your comment and sharing the link. The reverse mortgage is an important tool to help financing living and is likely to be very important in the future.

      As a realtor keep in mind the reverse mortgage can be used to purchase a home.

      “God’s waiting room for Boomers” made me laugh.

  5. March 2, 2012 2:27 pm

    As an attorney, I agree that a reverse mortgage is one more tool for helping seniors. I haven’t used it yet, but when I recommend investigating their use, seniors seem very skeptical. One client recently said, “Everyone knows reverse mortgages are just a con.”

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