MReport September 2021

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14 | M R EP O RT FEATURE A s a reverse mortgage specialist, I'm constantly reading about the products I sell and what people say about them. The other day I was reading an article in a trade publication about how reverse mortgages are a good option for people who "need a source of income" and who are "strug- gling to stay ahead of their bills." I had to shake my head. "Not again," I thought. There was plenty wrong with the article, but the biggest issue I had with the piece was that reverse mortgages were again being portrayed as a "loan of last resort." An even bigger problem is that many people in our industry, as well as many financial planners and Realtors1, still think of reverse mortgages this way. The truth is that most home- owners would be wise to get a reverse mortgage the minute they turn 62 years old and use it to supplement their retirement income. In fact, widespread use of reverse mortgages can also help prevent what is shaping up to be a retirement disaster of epic proportions in this country. People are living longer, and many won't have enough money saved to retire in their 60s. According to an October 2020 report from the Center for Retirement Research at Boston College, the median balance of retirement accounts for house- holds aged 55-64 years old was $144,000, which would generate only $570 in monthly income. According to a 2019 retirement survey by GOBankingRates, 64% of Americans will retire with less than $10,000 in savings. Reverse mortgages could go a long way to help people live more comfortably when they retire, and, in fact, could change the way retirement is approached in this county. They can also give loan officers an opportunity to help homeowners in ways that enable them to enjoy a better quality of life in their retirement years. However, these opportunities will be missed unless lenders find a way to change the conversation about reverse mortgages. Myths Die Hard M ost Americans, and indeed most mortgage profession- als, have it branded in their minds that the goal of homeownership is to pay off your home. This is a deeply held cultural belief that dates to the Great Depression and mortgage-note-burning parties that tell us the goal in life is to be free and clear of all debt. Many Americans also think of reverse mortgages as something to avoid at all costs. We've all heard the horror stories about reverse mortgages, and how countless widows were kicked out of their homes. To be sure, the reverse mortgage industry has, in the past, done a lot to earn this bad rap. For a long time, I believed these things too. I spent the bulk of my early career in the mortgage in- dustry advising my clients to stay far away from reverse mortgages. However, in the early 2000s, I went to a reverse mortgage seminar in Miami—basically just to get away from the Wisconsin winter—and it changed my life. I saw that reverse mortgages could play an important role in a bor- rower's financial retirement plan. A reverse mortgage is a feder- ally insured loan that enables homeowners 62 and older to access a portion of their home equity in either cash, monthly payments, or as a line of credit. There are several types of reverse mortgages, but by far the most popular is the FHA-insured Home Equity Conversation Mortgage (HECM), which allows borrowers to access between 30% and 75% of their home's value de- pending on current interest rates and the borrower's age. Borrowers can use reverse mortgages to pay for medical expenses, for travel, or to diversity their financial portfo- lio by investing home equity into other assets. The HECM is not a loan of last resort, nor is it a welfare program. There are credit require- Reversing the Conversation About Reverse Mortgages Use of reverse mortgages could help prevent what is shaping up to be a retirement disaster of epic proportions. By Harlan Accola

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