Sometimes you find pearls of wisdom when you least expect it ...
Yesterday's blog on ActiveRain by Dan Pena titled "Why do we need Reverse Mortgages?" was that kind of find.
My mind had barely digested Dan's powerful blog when ... what do I find in my mail? The latest ConsumerReports magazine (Sept. 2009) with a lengthy article concerning Dan's very topic ...
Reverse Mortgages.
The CR magazine article was of quite a different tone than Dan's blog. The sub-title read a little like something you'd find in The Enquirer. "The next financial fiasco?? It could be reverse mortgages." Very ominous.
Now, to their credit, ConsumerReports is providing a boat-load of information, facts, and figures within their article. But for every plus described, there are multiple negatives written. Sometimes very dramatically.
The words chosen to describe Reverse Mortgages are even scarey sounding. CR tosses around the terms and words "lending lures", "on the hook", "unfortunate situations", and "worrisome trend" throughout the pages. If they are trying to scare seniors from researching or considering these loan products, it probably worked!
The truth of the matter is, like any other lending product, Reverse Mortgages can be written by ethical, intelligent, and well-meaning individuals like Dan Pena, who is obviously a caring professional and trying to do right by his clients ... or they can be written by opportunistic snakes that take advantage of every situation they can. We've seen it before, as evidenced by our current housing and mortgage crisis and unfortunately, we will most likely see it again in the future. 
The snakes are smart and sneaky and always seem to be able to slither a little faster than our laws and regulations can be written.
In the meantime, our mothers, fathers, and grandparents need to be protected and educated regarding these mortgages. Educated PRO and CON.
WE need to be educated too as sons, daughters, grandchildren, caregivers, and friends. In two separate blogs, written in March of 2009 ("Reverse Mortgages - The Fact List") and ("Getting the Facts Out - Reverse Mortgages"), I provide some 
basic and preliminary information regarding this lending. I can provide more info and guidance too ... but these posts are a good place to start when loading up on Reverse Mortgage facts and options. Seminars, books, videos, and the internet are other opportunities for learning about this lending and Dan Pena is obviously a wonderful resource to be considered. Search one of these learning tools out.
The near future will see new changes enforced regarding these loans. There is no doubt about that. Stronger protections and more strict regulations will be demanded and implemented for seniors' benefit. That is all good, for when done properly and in the right situations, Reverse Mortgages can provide income and assistance that some seniors greatly need. Dan's blog showcased such a need in the clearest and purest of fashion.
Pearl of Wisdom for today?
Reverse Mortgages must be allowed to survive for just these instances.
Gene Mundt, Sr. Vice President
Personal NMLS #216987
The Federal Savings Bank
1823 Centre Point Circle, Naperville, IL 60563
Skype! 630-219-1316
Gene, toss the CR Magazine in the trash. If the article is slanted as an expose it is just a simple minded media hack's way of getting his trash published.
Reverse mortgages can be expense and are not for everyone. But... when they work they can work magic, they can be life changing life savers.
It is very important that all consumers be educated about loans they may consider. However the education should come from professionals such as Dan who know all the INs and OUTs
That's the problem with advertising, truth doesn't usually grab people's attention.
I passed that article up last night and now you have me wishing I hadn't. May have to go back to it. We just closed on a home where the owner was deceased. The kids had tried to sell by FSBO and when we got into the picture they only had about 45 days before foreclosure proceedings were to start. Might be good to educate the public, when there is a time frame and urgent need, don't try to sell it on your own.
Bill, Maria and An: Thanks for writing and injecting your input!
The CR article was a little out of the ordinary. I usually find their reporting and articles very fair and un-biased. For some reason, the Reverse Mortgage topic has always been treated a little differently .. at least in my opinion. While containing valid information and concerns ... this article seemed a little intimidating in tone and seemed to be trying to argue that ALL Reverse Mortgages are evil and the larger percentage of loan officers working with them were the same way. Obviously, not true.
An ... I agree. We should be educated on OUR behalf, because we all become seniors ... and to protect those seniors we love and represent through our efforts.
Again, thanks to each of you ...
Gene
A local Reverse Mtg guy in my area just eliminated the mortgage pmts for an 82 yr old local guy, who still owed money on the mortgage and was starting to struggle at that age.
I dont know all the details, but it saved a lot of hardship for that older gentleman by undertaking a reverse mtg.
For the right situation, they can truly be remarkable savior programs !
I can't understand why they charge so much in fees for reverse mortgages. It's one of the priceiest loans around. Up to 7% in costs I was told today by a met life guy!
Thanks for the interesting post today.
Patricia Aulson/portsmouth NH
Very interesting, I am always concerned that my mother will be "taken" by someone and do this without consulting with us.
There is a time and a place for Reverse mortgages and I know many people here in Florida that have them and like them and are happy with them, especially when they don't want their kids fighting over their equity after they die:) Katerina
Just as with anything - each situation is unique and as with everything and anything there are those out there that are going to take advantage and unfortunately those are what we hear about. I too saw the report in CR and it did have me questioning and thinking it all through. But just like with everything -what works for one may not work for another. I do hope that kids, family - do check up on elders though and make sure they are working with a reputable lender and understand all the facts as well just as they should with anything of such importance.
Thanks for th heads up....I have done a couple of reverse mortgages..it is like any mortgage product..if used right it can be a life changer..if its used for lenders just to make money it is no good...Thanks for your opinion..
Brian Ferrick
Sheldon: Glad to hear that this older gentleman found a Reverse Mortgage lender that could help .. and make life easier for him. At 82 you certainly don't need the stress of outgoing payments.
Russ: It seems terribly unfair .. almost cruel .. that the costs connected to these loans can be high. But maybe that is part of the plan. They believe by making it so, that all those but the most serious and needy will bypass taking part? Reverse strategy ?? on Reverse Mortgages?
Patricia: Thank you for writing ... and reading!
Christine: I share this fear, as well. In her fight to remain independent, I fear my mother may take actions unadvisable or of serious consequence. And .. I'm a mortgage originator and licensed financial planner! I understand their need to feel strong and independent, but ...
Nestor & Katerina: If they don't have it "right" in Florida with the vast senior population there ... where will they? Glad to hear that so many are being helped.
Valerie: Your sentiments were exactly what I was trying to convey. Their is good and bad in everything ...
We need as many innovative financial products as we can get. Reverse mortgages aren't expensive; they're cheap. Therin lies the problem; like sub-prime loans, the risk isn't priced into the reverse mortgage market.
The reverse mortgage market will be the sub-prime pop of 2030 because they are not priced expensively enough today
Brian: These programs are just another tool in our arsenal of (hopefully) helpful options for our customers. Glad that you found this beneficial option and tool to work with.
Thanks for writing ...
Gene
Gene,
Thanks for the post. Reverse mortgages can be risky. They certainly need to be fully explained, and there are quite a few differences among the products.
Brian
There are problems with reverse mortgages just as there are with regular mortgages--and it's not the fault of the product; it's the selling or promotion of the product to those who will be harmed. We currently have several million examples of homeowners who were sold mortgage products that were not right for them. I do share some of the magazine's concern that too many people are being lured into reverse mortgages by marketing campaigns that are not designed to educate but to sell.
Like many things, reverse mortgages have a purpose and when used properly by informed consumers, they are a benefit! Nice blog!
Jeani
Thanks for the excellent post! I think that during this era of high public scrutiny of financial instruments in the housing market, reverse mortgages will receive a great deal of attention. I suspect that the current housing crisis may extend to the reverse mortgage industry when older loans which did not anticipate declines in house values come to term. I would be very interested to know whether this sector of the mortgage industry has adjusted to the new realities? Any thoughts?
Hi Gene -- I don't know enough about reverse mortgages to comment, having read many pros and cons. I would love to see a statistical analysis that could compare the final outcome of seniors who did not have a ton of equity in their homes, but reserved it outside their home compared to ones who took out reverse mortgages and see where the final net amount ended up for each category.
I would be very interested to know whether this sector of the mortgage industry has adjusted to the new realities? Any thoughts?
It hasn't, Joyanne. That and increased life expectancies could crash this market. I just addressed this on my blog. There has NEVER been a better time to be a reverse mortgage borrower than right now; it's going to be a lot harder to get one of these loans next year.
I think it is the next lawsuit waiting to happen. I think if my folks did one for any reason I could hire a lawyer that could prove the lender took advantage of them. Not that I would agree but that is how easy it is to sue and E& Os will just pay to get on down the road.
There are definitely good and bad things about reverse mortgages, and those getting them need to be well educated on the good, the bad and the ugly.
There are definitely good and bad things about reverse mortgages, and those getting them need to be well educated on the good, the bad and the ugly.
Reverse mortgages can be a real blessing. The heirs won't get much . . .
Can this possibly be just a another way boomers can manage to live up to the old boomer bumper sticker:
I'm spending my children's inheritance!
?
Gene, you're back and your BAAAD..I mean that in the nicest way! Glad to see you're no longer blog-logged and giving us the good posts we have come to expect!
Joyanne:
Please keep in mind that these loans are typically capped at 60% to 70% LTV.
FHA ultimately insures that mortgage amount, so yes ... it is possible that
modifications to the existing standards could follow, pending the actual
performances from these loans...just as lenders have adapted in the
traditional mortgage markets.
I appreciate your interest and your point is well taken. Hopefully the
problems you mention can be avoided and seniors will not become victims of
these concerns. If you have further questions regarding these mortgages, do not
hesitate to contact me. I will do my best to assist or answer the questions
you have.
Thank you, Joyanne for writing.
Gene Mundt
Jeani: Thanks for writing .. and the compliment. It's greatly appreciated.
John:
Unfortunately you are correct, there were truths written in that article
within CR. I do think, however, the magazine seemed to dwell on the
negatives mentioned ... and may not have indicated clearly that there are
any positives to these loans. In certain situations, these loans do have an
important part to play and can offer seniors options they might not enjoy
otherwise. Those options need to be investigated in each and every
individual case. No broad denials or endorsements involved.
I feel that individuals, to protect their own interests, have a
responsibility to educate themselves regarding their finances and their loan
options/programs, no matter their age. With seniors considering a Reverse
Mortgage, that is also true. For those seniors that may need special counsel
or guidance ... families, friends, caregivers, and etc. need to step-up and
educate themselves as well on these senior's behalf and for the senior's
protection. We can only hope that anyone involved in a transaction of this
type does not take advantage of any senior's susceptabilities or frailties.
Thanks for your input, John.
Reverse mortgages have a purpose and can be beneficial in the right circumstances. However, people need to see the full picture and certainly are not best for everyone.
Charles:
I hope that your fears are not well-founded! You are definitely correct
when you say we are litigation crazy in the U.S.
I can only hope that common sense enters into this somewhere ...
Thanks for writing.
Brian:
Exactly right .. the differences and finer points MUST be explained. A
lender should not proceed if the customer states they do not understand ..or
if they are uneasy about anything concerning their loan. With seniors, it
is exactly why I always try to impress upon them that they should bring
someone they trust with them to any of our appointments together. I suggest
this strongly for their ease of mind and to allay any fears they may have.
Two or more pairs of ears is always preferred in these situations.
They help to pick-up the differences you mention ..
Thanks for the response.
Brian:
Valid concern ... that may prove to be all too true.
I am hoping that the changes that are obviously coming address many of the
concerns and issues talked about here on AR within the responses I received.
Time will tell.
Thanks for your valuable input ...
Chris: I'm not sure if those stats exist. Will keep my eye out for that information. Thanks for writing!
Christine: Like the phrase you used! Good, Bad, and Ugly sure describes much of what we deal with everyday, doesn't it?? And you're right ... education is so very important!
Carla: I just keep hoping that the thought of not being able to leave an inheritance to a heir DOES NOT keep a senior from seeking the financial options they need desparately. We all want to do well by our kids and most of us dream of being able to help them out upon our passing ... but sometimes it just is not possible. I've heard horror stories about seniors bypassing (or heirs not even allowing) a Reverse Mortgage option being used for this reason. It's just not right.
Jim: I kid my boys about that all the time!! I don't think they see me as being very funny ... only slightly amusing. Dad!
SarahGray: Have to admit it ... you have me chuckling this morning. Yes, my proverbial back-up has exploded! As always, it's great to hear from you. I swear, when my wife and I get out to North Carolina on vacation we're going to finally get a chance to meet you. We're hoping it's soon ... and the dinner's on me!
Bring it on big guy! I'd love to meet the two of you! We have exceptional restaurants in Chapel Hill so you won't get off easy! ;-P
Dang, I'm so sorry to hear about that article. So I guess the seniors can just go on eating dog food instead of using some of the equity in their home. Congrats, CR!
Too many sharks are doing ifomercials on this. Frank Zappa was right about whayt he censored from his kids about TV promotion. Don't trust anybody using an 800 number.
Joetta: I applaud CR on writing the article and promoting the issue ... and I respect their right to have their opinion. I respectfully agree to disagree .. at least somewhat.
Joe! Love the Frank Zappa reference! We are providing a little hint about our ages with the reference ... and my understanding it ... aren't we? I get your drift ...
Gene
It's the media's job to sell newspapers and magazines, and frequently the stories are one sided, no matter what journalists claim.
I subscribed to MONEY magazine for many years, until they had a large cover article all about how realtors rip off consumers and how to sell your house on your own. It was pages of horror stories, on how homeowner after homeowner was ripped off by sleazy agents. I cancelled my subscription then.
Gene, great thoughts in this area of Reverse Mortgages. People have to be aware of the pros and cons of a situation and review that and not only look at it blindly one way.
Gene...
I don't know squat about this topic but I did want to pop in and offer you my support :)
TLW...ROAR!
Gene - That is the great thing about the Rain ! We can find many examples of valuable info every there ! And learn a ton and be ahead of the curve just by being an active blogger !
Erica: Totally understand your position on this. Have seen the same type of thing and reacted in basically the very same manner. It's the only re-course we have.
Gary: Exactly what I try to promote. If seniors and their families have all the information they can intelligently make their own best decision. It's my job to provide that information and guidance.
I'm roaring back ... and thanks for stopping by!
Christopher & Stephanie: I have mentioned this benefit myself! It's like going to school each day! Thanks for pointing it out again ...
Gene
Gene, I agree. Too many people do not take the time to perform the due diligence needed when making huge financial decisions.
Damon:
I am sometimes amazed at the "ill-preparedness" of my customers hoping to obtain a mortgage. Given the size of the financial responsibility they are facing, you would think they would wish to educate and prepare themselves before proceeding. I try to impress upon them that they need to listen and make the effort ...
Thanks for writing, Damon .. and best of luck selling in the remainder of '09!
Gene - I have had Reverse Mortgages on my mind, too, but had not seen the article you reference, so thanks for the information relayed. I've always seen Reverse Mortgages as a "need based" loan vs. a "wants based" loan. Most of the inquiries I received several years ago were from "wants based" homeowners, who I could not see receiving any value from this loan product. Lately, though, I see a lot more "needbased" situations - elderly folks who barely scrape by getting food on the table and heating/cooling their home, but can't repair their leaky roof or fault plumbing. With "safety net" services drying up, I believe the reverse mortgage will become even more critical for those folks who have worked so hard to payoff/pay down their mortgages. We have great HUD approved housing counselors here who really look out for the RM homeowners.
Karen: Unfortunately, it is true. It seems as though we are hearing of these hardship cases more often... given the economy. The Reverse Mortgage is going to see vast changes soon, I think ... some of which are necessary to put further safeguards into place ... others that will be just plain silly and done as a knee-jerk reaction to over-zealous media reports. Typical. I am sure we will all be interested to see how this shakes-out. I'm just hoping they don't do away with the lending in its entirety.
Thanks for writing, Karen. It was good to hear from you again ...
Gene
Reverse mortgages have a place as long as the decision is an informed one. As you point out, it is up to us to get the knowledge before we find ourselves in the situation.
Gary: You are absolutely right .. we will all find ourselves at the age where we are facing concerns of this nature (hopefully). Education is the key to the whole process as far as I'm concerned ..., the positives and the negatives. It would be totally wrong to move forward in the process with any senior before they are educated about the lending they are entering into and its costs ... or before they were comfortable with the situation. Please feel free to contact me if you ever have any questions regarding these loans. Thanks for commenting, Gary.
Gene