Everyone has a reason for doing something—a motivation that drives them to a higher purpose in life. While some may plot the the next phases of their lives in an organized storyline, others find their true callings as a byproduct of life’s unexpected circumstances.
At least that’s how it all turned out for John Kennedy, a Seattle-based Home Equity Conversion Mortgage (HECM) advisor for top-20 reverse mortgage lender The Federal Savings Bank. At 90 years old, Kennedy has been actively focused in the reverse mortgage industry for the past two decades—almost as long as the HECM program has been in existence.
Conventional wisdom would indicate that most 90 year olds would have retired long before their ninth decade, but Kennedy isn’t like most 90 year olds. Rather, he’s chosen to remain active in the reverse mortgage industry for the better part of 20 years.
A World War II veteram, public speaker and author of articles focused on financial planning, Kennedy prefers to limit his clientele to his peers, many of whom are predominantly seniors. Apart from his work with The Federal Savings Bank, Kennedy is also a founder of the Aging in Place Council of Washington, charter member of the Alliance for Retired Americans, as well as a member of both the Puget Sound Alliance for Retirement Americans and National Council of Senior Citizens.
Kennedy recently caught up with Reverse Mortgage Daily to talk about what drew him into the reverse mortgage industry and why he continues to remain focused on HECMs to this very day.
RMD: How long have you been focused on reverse mortgages?
JK: I first began investigating HECMs in 1995. I don’t know when I wrote my first application, but it was somewhere between 1995 and 1999.
I’ve been involved with reverse mortgages for about 20 years.
RMD: What initially attracted to you begin working with reverse mortgages in the first place?
JK: I’m a financial planner by trade. I was originally licensed in securities back in 1960. At that time, I was a mutual funds salesman for Putnam Mutual Funds, and I was dualy licensed in securities and life insurance. I then got involved with Financial Freedom Senior Funding Corporation in its early days during the 1990s, which was just a natural maturation from what I had done before.
Somewhere around 1999-2000, HUD made regulations that would not allow a person to be involved with reverse mortgages who was also licensed in life insurance. They felt it was a conflict of interest, so I had to choose between being licensed in life insurance or licensed in securities.
Why choose reverse mortgages? [At the time] practically no one was involved in reverse mortgages; I was one of the first people in the State of Washington to get involved with them.
It used to be that I was getting a lot of customers just from making a solicitation either by mail or some kind of advertising, or by giving seminars at the local library. I would get customers because people had their home and read about being able to borrow and not pay it back.
[In deciding between securities and reverse mortgages] it was just a matter of which is the better product? I knew a lot of financial planners, so I could refer securities business to them.
RMD: Why have you continued to focus on reverse mortgages for so long?
JK: Of course, it was so I could make some income and I was pretty good at it. I have an in-depth background and understanding of reverse mortgages amongst the top people in the industry. It’s something I know.
I get a self satisfaction out of helping people do something they don’t know how to do. At 90 years old, you don’t really get retired. I feel I’m much more productive in helping people solve their financial problems.
So [continuing to focus on reverse mortgages] is partly a matter of self satisfaction and partly a matter of necessity.
RMD: How long have you been with The Federal Savings Bank?
JK: I’ve been with The Federal Savings Bank for over a year now, so it hasn’t been too long. They are a good organization, federally chartered so I can do business in all 50 states rather than just one.
And the company has some powerful people to work with, including [Senior Vice President, HECM Division] Rob Balmer, [Executive Vice President] Mike Crossett, and [Senior Vice President, HECM National Division] Maggie O’Connell, who I’ve known since the 1990s when we were both with Seattle Mortgage Company.
RMD: Reverse mortgages have undergone some serious program changes since the late 1980s, when HUD rolled out the Home Equity Conversion Mortgage program. How have you kept up to speed on all of the new rules since then?
JK: Mostly by the internet. There is an awful lot of information on the internet. That, and of course my employer, The Federal Savings Bank, keeps me up to date and informed. They are a solid organization and have some very capable people. Of course, the company was created by veterans—mostly West Point graduates—which is pretty impressive.
RMD: I understand you are a veteran as well.
JK: I’m a veteran of World War II. I was born in 1925 and the war [for the U.S.] started in 1941. When I graduated high school in 1943, I went directly into the U.S. Navy. All of the able-bodied men went into the service, while the female population went to work in the factories, shipyards and so forth. We had an all-out effort.
I spend about 30 months in the Navy during WWII, and after I got out in 1946, I qualified for the G.I. Bill of Rights and went to college.
RMD: Did you find any similarities between serving in the military and working in the reverse mortgage industry?
JK: Not necessarily. I didn’t know about investments at that time. When I was in high school and then went to the Navy, my major interest was sports—I was a jock.
I didn’t know what Pearl Harbor was, but I soon learned on December 7, 1941. It was a Sunday and I was walking home from church, and somebody came out and said the Japanese bombed Pearl Harbor.
So I went into the Navy and when I got out I qualified for the G.I. Bill of Rights and went to school. Instead of using [the grant] for vocational school, I used it to study philosophy and graduated from Seattle University. I then went to Loyola University in Chicago to study psychology.
That gave me a lot of insight into many, many things and has been a basic background of my life since then. With my degree in philosophy and psychology, I learned than I can learn any subject matter just by going to the university and getting all the books they had on a particular subject on their curriculum.
RMD: So how did you make the transition from philosophy and psychology to the finance world?
JK: At the time, I was married. I had a wife and a child, and that kind of changed the program. I had to figure out what to do to make a better living than what they pay an amateur psychologist. At the time, society was different—there wasn’t a great demand for psychologists, except for teaching, but it wasn’t a practical vocation back then. So I changed direction at that time to industrial sales back home in Seattle. It was a matter of adjusting to circumstances.
After a period of years, I was working with Crucible steel company, but it wasn’t a very fulfilling job. That’s when I became interested in finance and got recruited as a mutual funds salesman for Putnam. It was just a matter of finding a vocation, which was a bit more satisfying than selling steel.
RMD: In your experiences, what was the most impactful change that has happened since you’ve been doing reverse mortgages?
JK: Of course, the 2008 financial problems were quite impactful. That scared people out of doing almost anything.
Prior to the crash of 2008, people were starting to increase their use of reverse mortgages. Because of the housing market bubble, they could take advantage of housing values that were rising too fast.
When we had the crash, people not only got scared, but the values of their homes went down and some of them got underwater [on mortgages]. The whole economic system got blown up. It was a national catastrophe. That was serious for everybody.
RMD: In your opinion, what are some of the biggest misunderstandings of reverse mortgages that you’ve encountered with people?
JK: There has been a lot of misinformation and there has been a lot of negative publicity, and so a lot of people are having negative attitudes toward reverse mortgages and don’t really want to investigate them because of that.
The fact is that most people don’t have a background in finance or economics, so it’s difficult for them to have a feeling of confidence in their judgement in regards to a financial product like reverse mortgages. That is partly the problem, but mostly it has been misinformation.
The publicity and public relations, in my opinion, are the most powerful things for reverse mortgage.
For more information about this website, call 928 345-1200 and ask for Warren Strycker. Email: firstname.lastname@example.org, This is a HECM informational website and does represent a lender and loan officer in providing solutions for retirement products or services. 928 345-1200. See Home page “Information” tab for contact information.
Home equity is often considered one of the biggest assets retirees have, but many people are not taking advantage of this critical source of wealth hiding in plain sight under their roofs. For some retirees, a reverse mortgage may be worth considering in retirement, according to a recent TIME Magazine article.
The topic of reverse mortgages and their use in retirement planning recently found its way into the latest issue of TIME dated February 15, 2016. The article, written by Dan Kadlec, discusses how reverse mortgages, which were once scorned for high costs and risky full-draw loans, are now getting another look from financial planners.
“Experts now argue that this type of loan can be safe and even wise—as well as a key source of income that homeowners short on savings and planning to stay put should set up the minute they become eligible at age 62,” Kadlec writes.
For many retirees who own their homes mortgage-free, reverse mortgages could be a viable solution to helping them fund their longevity.
About 36% of owner-occupied homes are mortgage-free, and for homeowners age 65 and older, this share jumps to 65%, according to U.S. Census Bureau data referenced by Kadlec, who also notes that even amid a so-called “retirement-income crisis,” $12 trillion in home equity is lying on the table, to be used for either peace of mind or to preserve a legacy.
“This is the asset hiding under your nose,” said Shelley Giordano, chair of the Funding Longevity Task Force, a group of financial advisors who have been focused on leveraging housing wealth in retirement, in the TIME article.
While reforms in recent years such as the elimination of full-draw lump sum loans, Financial Assessment and non-borrowing spouse protections have made reverse mortgages stronger products, TIME notes that the biggest breakthrough has been financial planning research that shows the benefits of loan utilization early in retirement.
That is one reason Kyle Winkfield, a financial planner in Washington, D.C., recommends homeowners who have a potential savings shortfall obtain a reverse mortgage line of credit earlier rather than later.
“It’s better to have this and not need it than to one day need it and not have it available,” Winkfield told TIME.
By setting up a reverse mortgage line of credit, and not using it until other savings are depleted can produce stronger results nor homeowners than those who wait until other retirement funds are dry, the article suggests.
“Tapping the equity line only when stocks are down, giving your portfolio a chance to recover, has similar benefits,” Kadlec writes. “The next time a silver-haired star urges you consider a reverse mortgage, it may be a sound suggestion.”
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Public perception has been described as a social phenomenon defined by the difference between fact and popular opinion. It is the reputation of a product or person— a judgment fueled by emotion, rumors and cultural prejudices and given a voice by the mainstream media.
Reverse mortgages (HECMs) have long suffered from a negative public perception. The problem is the result of several factors, including common misconceptions about a somewhat complicated financial product that have been hard to dispel. Most Americans simply don’t understand the ins and outs of the product, with many holding on to the false belief that the bank owns a borrower’s home. Even some financial professionals are uninformed about the details of the loan.
Of course, it would be remiss to deny that the product has had its issues in the past. The woes of non-borrowing spouses entering into foreclosure have inspired many attention-grabbing headlines, and the long-ago misdeeds of some bad apples who pushed borrowers to purchase other financial products with their proceeds didn’t help matters. Then there were unfit borrowers who were running through their money, leaving nothing left for taxes, insurance or living expenses. The fact is that the product is designed for senior citizens, and society is rightfully protective and emotional when it comes to their well-being. Stories about seniors failing to thrive with these loans gave rise to a negative sentiment about the product and its usefulness.
But after years of productive dialogue between the industry and lawmakers, the reverse mortgage program has adopted new rules to safeguard it from the blunders of the past. It’s a unique and complicated product, and it took time for officials to understand the guidelines needed to maximize its effectiveness. With new protections in place for non-borrowing spouses, expanded rules to police industry participants, and a financial assessment to ensure the loan’s suitability for a borrower’s circumstance, reverse mortgages are a better, stronger and safer product than ever before.
The truth is there is no other product out there that allows older Americans to access their home equity, and statistics indicate that many will need to utilize this valuable asset to support their retirement.
Recently, research and commentary from noted academics and financial professionals have outlined the benefits of strategically using one’s home equity through a reverse mortgage, insisting that one’s housing wealth should become an important factor in retirement planning. The media appears to be catching on, citing the latest research and noting that recent program revisions have provided extra safeguards for consumers. With all of this momentum gathering in 2015, some are noticing a change in the tide. The public conversation about reverse mortgages is trending toward positive, and many are predicting that public opinion will follow suit.
Pushing the Needle
In 2015, a handful of academics and financial professionals published research and publicly commented on the use of reverse mortgages in retirement planning.
Joe Tomlinson, an actuary and financial planner, researches and writes about investment options and retirement planning. In April of last year, Tomlinson published a paper on Advisor Perspectives, a website that specializes in “actionable advice for financial advisors.” Titled “New Research: Reverse Mortgages, SPIAs and Retirement Income,” the paper examines how Single Premium Immediate Annuities and monthly tenure payments or line of credit withdrawals from a reverse mortgage could be utilized along with investment portfolio withdrawals to stabilize one’s retirement income.
“Retirees need longevity protection and additional funds. Annuities and reverse mortgages can meet those needs,” Tomlinson writes. “While annuities have been researched extensively, reverse mortgages haven’t received as much attention. We need research on how to fit these two products together in overall retirement plans.” Tomlinson concludes that financial planning software that can analyze the coordinated use of annuities and reverse mortgage proceeds needs to be developed to assist middle-income seniors whose savings cannot provide sufficient retirement income.
In October, Nobel Prize-winning economist and MIT finance professor Robert Merton drew the finance world’s attention to reverse mortgages. Speaking at a wealth management conference before members of more than 140 wealth advisory firms, Merton said he believes that reverse mortgages will become an essential component of retirement savings. The house is the largest and sometimes only major asset for many in the working middle class, he said, and reverse mortgages are well suited to tap that wealth. “Americans have wrongly steered clear of reverse mortgages,” Merton said. “This is going to become one of the key means of funding retirement in the future.”
Jamie Hopkins, an associate professor of taxation at The American College and associate director of the school’s New York Life Center for Retirement Income, has also become a vocal proponent of reverse mortgages. Hopkins said he began researching the HECM’s role in retirement planning after reading research by Barry Sacks, John Salter and others in the Journal of Financial Planning. Their work inspired him to explore strategic uses for home equity in retirement planning, and the frequent Forbes contributor often writes about his belief in the value of the product. “Using a reverse mortgage is no longer just for the cash poor and house rich,” Hopkins wrote in an article last May. “Instead, reverse mortgages can be used strategically as one part of a retirement income plan designed to build a buffer against sequence of returns risk early in retirement, help defer Social Security benefits or reduce cash outflow from traditional mortgage payments.”
In November, The Journal of Retirement published an article examining various ways in which a reverse mortgage can be strategically used in retirement income planning. Written by Tom Davison, partner at the financial planning firm Summit Financial Strategies, and Keith Turner, a reverse mortgage advisor with Retirement Funding Solutions, the paper explores how different strategies can suit different types of borrowers. “Today, there is an evolving understanding of reverse mortgages as a valuable financial planning tool,” Davison and Turner write. “Reverse mortgages are now seen as well suited for retirees—not only homeowners who are underfunded and turn to a reverse mortgage as a last resort, but also those who enter retirement well-funded.”
Finally, a paper published in November by Wade Pfau, a professor of retirement income at The American College of Financial Services, outlines six different strategies for using reverse mortgages. Titled “Incorporating Home Equity into a Retirement Income Strategy,” Pfau’s paper illustrates that taking out a reverse mortgage as a last resort produced the least successful outcome, while taking a reverse mortgage line of credit at the beginning of retirement, and allowing the credit line to grow before tapping it, proved to be the most successful strategy.
“Strategic use of a reverse mortgage can improve retirement outcomes,” Pfau writes. “There is great value for clients to open a reverse mortgage line of credit at the earliest possible age.”
Picking Up on the Trend
Perhaps spurred by the uptick in positive commentary from the finance world, the mainstream media seems to have changed its tune about the value of HECMs. According to NRMLA, 93 percent of news articles about reverse mortgages in 2015 were neutral or positive.
Big-time newspapers like The Wall Street Journal, USA Today and The Boston Globe published articles last year explaining how a reverse mortgage can be used in conjunction with other strategies to enhance a retirement portfolio. Web coverage was equally positive with sites like forbes.com, marketwatch.com and time.com detailing why home equity should be an important part of the overall retirement picture.
“A lot of the positive and neutral news coverage we saw in 2015 came from articles about retirement planning that included general information about how reverse mortgage loans work and the features, benefits and responsibilities to consider before applying,” says Jenny Werwa, NRMLA’s director of public relations. “What I like about these mentions is that they put reverse mortgages in the context of other financial tools and strategies that are already familiar to consumers, so that tells us that we are getting more mainstream, which is very positive.”
Mike Kent, president of Liberty Home Equity Solutions, says he thinks recent product changes have helped elevate the conversation about HECMs. “I believe the changes made to the product over the last year, such as maximum draw limitations and credit-based underwriting, and the changes made regarding non-borrowing spouses, have made the product much safer and more appealing to the general public,” Kent says, adding that new research has helped tip the scales. “These papers have been very supportive and have really helped to change the opinion of many in the retirement planning field regarding the value of a reverse mortgage in overall retirement planning.”
Sherry Apanay, chief sales officer at Finance of America Reverse, credits NRMLA’s collaboration with industry lenders for the recent surge of positive press. “I believe it’s apparent that NRMLA’s P.R. campaign has had a huge positive impact. The campaign is funded by a group of large and small lenders that are committed to the success of the reverse mortgage industry, and even more importantly, are committed to ensuring that accurate information about reverse mortgages is available so consumers can make informed decisions.”
Apanay says positive press coverage is a major element to the market’s growth. “One word: credibility,” she says. “When a trusted publication provides balanced reporting and a positive perspective on reverse mortgages, it helps.”
Teague McGrath, chief marketing officer at AAG, also stresses the value of positive coverage in the mainstream media. “These outlets are powerful when you consider their strength in the areas of potential reach and perceived credibility. Forbes has something like 45 million unique online visitors and WSJ about 20 million. The WSJ has the highest-paid subscriber base in their print news. And when you consider these are one-stop news stores for your business, financial, lifestyle/arts, technology, health and auto news, positive coverage in these outlets translates to greater exposure and increased consumer awareness.”
Sustaining the Momentum
It remains to be seen what 2016 will bring for the industry, but many are hopeful that the year will see a period of much-needed stability after so much change. Armed with a stronger product, many reverse professionals are eager to see this positive momentum continue full steam ahead.
“Public perception is definitely improving,” says Kent. “As we see the positive changes in opinion in articles written about the reverse mortgage product, public opinion follows. We are seeing a corresponding excitement about the product in the general borrowing public.”
While the latest coverage is promising, some industry veterans believe there is a lot of work that still needs to be done to turn things around.
“I believe the positive articles have made an impact, but unfortunately the negative stuff seems to stick around longer and permeate ‘belief systems,’ whether or not they are based on fact,” says Apanay. “I think we still have some work to do.”
McGrath agrees. “We need consistent, amplified positive coverage to create a significant upward shift in reverse mortgage loan volumes.”
To help advance the cause, reverse professionals can continue to spread with word among professional partners and their local media. Combatting inaccurate coverage online is another great way to advance the message. NRMLA’s Blog Squad seeks to do just that, enlisting members of the industry to comment online and correct misinformed reporting.
“It’s important to correct inaccuracies and misconceptions about reverse mortgages that appear in publications,” Werwa says. “We encourage all professionals in the industry to use the comment section in online articles to post positive messages and facts about the product, the industry and our borrowers.”
McGrath also says the industry needs to be vocal when it comes to the press. “When we see a controversial, contentious and all-round negative article, we need to respond and correct it as an industry. Likewise, we should promote articles that depict reverse mortgage loans accurately and positively as a viable financial planning tool for retirement. Borrower stories and articles promoting expert opinions can combat the negative, outdated articles and new groundbreaking studies need to be funded. The bottom line is we just need more of us in the industry to make this our mission, with consistently greater frequency.”
Apanay says reverse professionals can help propel the product forward by acting with integrity and furthering their product education. “A larger number of originators need to be more interested in serving the seniors’ need than making a sale. Don’t misunderstand me, we’re all here to make a living, but there’s a right way and a wrong way. Serving seniors is how this industry was built and with numerous changes over the past several years, I think we’ve lost some level of integrity and expertise. A commitment to education from every loan originator is key! If you don’t fully understand the math, you have no business taking a loan application. If every company, every loan originator, raises the bar on education, we can improve the product’s reputation. It’s a great product, but may not be the solution for everyone, and it’s our job to help consumers figure that out.”
Kent echoes this idea. “Educate, educate and educate. The goals of every organization should be to educate and inform the consumer about the reverse mortgage product. If we do a good job educating and informing, borrowers will be able to make the decision about whether the product is right for them.
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Coming from a long history of the publishing industry beginning in my own weekly newspaper, my sense is that it may be harder to get a truth message out now than ever before. On the other side, it is probably the same rocky experience for those searching for it. This message is still true. If you want to know the truth — the stuff that makes you free — then you have to be patient with the facts and be willing to rid yourself of the fake news that clouds the issues you wish to know about. Fake news usually comes from those profiting on someone else’s failure. Jamie takes you through the steps to truth about the Reverse Mortgage. I have one at home so my own experience is more than a spin of somebody’s opinion. My work on this Gofinancial webpage comes from a desire to get the truth out. I have determined that as long as I can, I will serve the readers in putting forth the truth as I see it. Let patience have its perfect work as you consider what is posted here. (Warren Strycker).
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This loan is for larger loans with balances up to $6M; Non-QM, self-employed, ITIN and previous credit event borrowers are accepted;
Terrific solution for borrower with a previous bankruptcy, foreclosure or short sale. No seasoning is required on the credit event; Gift funds are accepted;
Perfect for clients that have assets they own but do not necessarily want to use them to purchase a home. No income needed to qualify for this program; We will validate that the borrowers have enough assets to cover their debts through a 3rd party. LTV up to 85%.
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