So there we are, the Reverse Mortgage Specialist, listening to their issues and now it is our turn to tell them about a FHA-Insured reverse mortgage that is just for seniors (62+), and was passed into law in 1987 by the Reagan Administration as a way to help them tap a portion of the homes equity without having to take on any additional monthly mortgage payments, sell the home, or give up title. We tell them how the program works and then inform them that they will have to go to a HUD Approved Counseling Agency to receive a counseling certificate if they decide to move forward with an application. We leave the appointment feeling good that we have educated them about how the FHA-Insured reverse mortgage works. We know that this is a product that helps people and could ease their minds during this very difficult financial time.
Then we arrive in the office and turn on our computers see where Carmen Wong Ulrich, the personal finance “expert” on the Today Show is telling a national audience to stay away from reverse mortgages because they could cost you 20% of the equity in your home. What? Where does she get those numbers? We only see the costs being 2% origination on the first $200,000 and 1% thereafter with a cap of $6,000, another 2% FHA Mortgage Insurance Premium which protects both the homeowner and the lender from any shortfalls, and of course the normal loan fees for attorney, appraisal, title insurance, flood and credit reports; totaling approximately 5-6% depending on the home value. That is a far cry from 20%!
Then there is Senator Claire McCaskill of Missouri speaking in the Senate chamber and on CSpan telling the world the reverse mortgage is “very dangerous.” Driving to work every day is dangerous – not reverse mortgages. The confusion with the legislators is that the danger isn’t the reverse mortgage itself, but rather what happens or what the senior chooses to do with the monies received from the reverse mortgage.
It seems that almost daily we get slammed, bashed, accused, and painted with the same brush as sub-prime. Yet those of us in the industry know we are helping seniors improve their quality of life and allowing them to age in place successfully. We are the ones that are told by the very people this product serves that it’s a Godsend. We are the ones that receive a hung at the closing, special thank you notes, and even Christmas cards. Not bad for a scam artist.
Reverse mortgages are simply tapping an asset. The landscape of retirement is changing and more will have to consider this asset when looking at the overall financial picture. It is a safe and reliable source for income when done properly and can help pay for retirement living and long term care.