Monthly Archives: March 2016

80% of seniors could benefit from HECM

March 17th, 2016  | by Jason Olive Published in HECM, News, Retirement, Reverse Mortgage

Not only do seniors’ ages and net worth determine their eligibility for a reverse mortgage, but these factors also play a significant role in the likeliness of older households obtaining Home Equity Conversion Mortgages, a recent study suggests.

Past studies on reverse mortgage utilization have indicated that as much as 80% of seniors could benefit from getting a HECM.

Furthermore, while previous research has found that households with low incomes and modest wealth were most likely to benefit from reverse mortgages, the opposite may actually be true, according to research from the University of Georgia’s Department of Financial Planning, Housing and Consumer Economics, published in the International Journal of Financial Studies this month.

To determine the factors influencing elderly households’ participation in the reverse mortgage market, lead researcher Swarn Chatterjee used the 2012 Health and Retirement Study (HRS) for this empirical analysis, as well as to provide a nationally representative dataset of households age 50 and older.

The HRS dataset, which is maintained by the University of Michigan and is funded by the Social Security Administration and the National Institute of Aging, contains information on the respondents’ participation in the reverse mortgage market, as well as their household assets, and their demographic and socio-economic characteristics.

The HRS study included 10,625 respondents, however for the purposes of the University of Georgia’s reverse mortgage analysis, Chatterjee used homeowners age 62 and older. Age played a significant factor in the probability of having a reverse mortgage, with older adults more likely to have a HECM than their younger peers.

Seniors ages 74-79 had the highest likelihood of having a reverse mortgage (42%), followed by those ages 68-73 (36%) and 80-104 year-olds (13%). Meanwhile, the youngest cohort between ages 62-67 were least likely to have a reverse mortgage (9%).

“It is possible that at a later stage in their retirement many households understand the potential inadequacy in their retirement savings and thus explore options, including reverse mortgages, to supplement their income later in retirement,” Chatterjee writes.

While previous studies have suggested that reverse mortgages could be useful financial products for people with modest savings, poor health and unmarried people, the University of Georgia study finds that households with higher net worth, higher education levels and higher income were more likely to obtain reverse mortgages.

“The results of this study indicate that households with a greater stock of human capital—higher net worth, better educational attainment, and higher income—were more likely to have reverse mortgages,” Chatterjee writes.

As the Baby Boomer generation continues to age and enter retirement, reverse mortgages have the potential to benefit this large cohort of the American population. And as numerous retirement studies repeatedly underscored the financial unpreparedness of this group, the need for additional solutions and resources is now greater than ever.

A lack of awareness, however, continues to hamper reverse mortgage utilization among potential qualified seniors who would benefit from getting a HECM. The study’s authors conclude that further research is also needed to examine reverse mortgage awareness and demand for the HECM product.

“This provides an opportunity for financial planners, non-profits, the government, and advocacy groups for retirees to educate elderly households about the potential benefits and pitfalls of using reverse mortgages as a retirement tool,” Chatterjee writes.

Written by Jason Oliva

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About “Sequence of Returns Risk” in the HECM discussion

March 6th, 2016  | by Jason Oliva Published i HECM, News, Retirement, Reverse Mortgage

Just like any relationship, whether emotional or professional, communication is integral to developing a meaningful connection that allows each of the parties involved to effectively understand the needs and wants of their partners.

While the importance of meaningful communication may sound like a cover story worthy for the front pages of glam-mags like Cosmo and Vogue, this concept is critical for reverse mortgage professionals in their ongoing efforts to forge relationships with financial advisers as well as other retirement professionals.

The financial services industry is complex and within the retirement planning microcosm, it can seem as though advisers speak a different language. For reverse mortgage lenders, that can seem to only widen the divide between them and planners.

The truth of the matter is that reverse mortgage lenders and financial planners meet with a similar clientele. Typically, these clients are older adults who, in most cases, have built a substantial amount of home equity during their lifetimes and they’re entering retirement with the same goal: not outliving their money.

U.S. seniors had about $5.76 trillion in aggregate home equity last year and that number continues to rise each quarter, according to the most recent readings from the National Reverse Mortgage Lenders Association/RiskSpan Reverse Mortgage Index for the third quarter of 2015.

However, among Americans ages 55 and older—those nearest to retirement who should already have built significant savings—29% report having no savings or pension, according to a survey conducted last year by the Government Accountability Office. GAO’s research also consistently showed that people ages 55-64 are less confident about their retirement, with many planning to work longer to afford it.

The enormous stockpile of housing wealth among this older demographic, coupled with their unpreparedness and lacking confidence, offers an opportunity for reverse mortgage professionals to engage financial planners in a meaningful dialogue about how a Home Equity Conversion Mortgage (HECM) can best serve their clients’ needs.

But reverse pros need to be able to talk-the-talk, and that requires knowing the proper financial planning lingo to show that a reverse mortgage, when used strategically, could be the solution to any number of retirement road bumps.

“Reverse mortgage loan originators need to have a fundamental understanding of what financial advisers are trying to accomplish with their clients, which is basically to have their money last as long as they will be alive—but also taking into consideration that there will be market volatility,” said reverse mortgage industry veteran Shelley Giordano, who chairs the Funding Longevity Task Force, a group of financial planners and professionals focused on the strategic use of housing wealth in retirement.

Market volatility presents a real opportunity for the use of reverse mortgages in retirement planning, especially when considering the downward pressure faced by the Dow Jones and S&P 500 indices since the beginning of this year.

For many retirees who have a sizeable portion of their savings invested in stocks and other market instruments, having a resource that isn’t directly impacted by the ups and downs of the market could provide some extra protection for their retirement. Given the recent market volatility, reverse mortgage professionals must convey this message as they approach financial advisers.

Sequence of returns risk

Depending on a retiree’s allocation of market-related investments, dips in the financial markets could have an adverse effect on a person’s ability to retire comfortably.

As financial planning research has demonstrated—and widely publicized in the mainstream media lately—the strategic use of home equity can greatly increase the spending horizon of a person’s portfolio to last them for a 30-year retirement, particularly when using the line of credit option.

In this case, the reverse mortgage is used largely as a reserve, where a borrower draws from the loan only when his portfolio experiences a lower return. As retirees make withdrawals from their investments, negative returns that stack up early on during this period when a person is accessing their funds subjects them to what is known as sequence of returns risk.

For retirees who are living on the income they earn from retirement investments, this sequence risk is a primary concern which can cause some people to begin selling off assets for much lower than their worth.

“Understanding sequence of returns risk is important because if you have to sell-off too many assets in retirement because they are undervalued, and if there’s an extended period where there is a bad sequence of returns, that can be very dangerous,” Giordano said.

It is important for originators to have at least a basic understanding of sequence of returns risk so they can mention it in their conversations with financial advisors.

“Reverse mortgage experts need to know about Sequence of Returns Risk because this is one of the best ways a reverse mortgage can be incorporated into an overall financial or retirement income plan,” said Jamie Hopkins, professor of taxation at The American College in Bryn Mawr, Pa. “It [reverse mortgage] is one of the few assets someone might have where they can really get income that’s not correlated to the market.”

Hopkins, who is a frequent commentator on reverse mortgages for Forbes, has presented at several reverse mortgage industry conferences to discuss how reverse pros and financial planners can learn to speak the same language when it comes to serving their borrowers and clientele.

According to Hopkins, sequence of returns risk is going to be an even bigger concern as less people in the future retire with traditional pensions.

“All of a sudden, you’re going to have more people worried about sequence risk,” he said. “High net worth clients are equally concerned about this risk—it’s not a risk that only applies to a small subset of retirees.”

For reverse mortgage originators, the point is to at least have a basic understanding of sequence of returns risk, even if that means just being able to mention this concept to a financial advisor.

“If an originator can mention sequence risk and say reverse mortgages can stand in for having to make withdrawals early in retirement when the portfolio is undervalued, then they have a basis to start learning what researchers like Dr. Barry Sacks, Wade Pfau, Tom Davison and John Salter are writing about,” Giordano said.

Using a reverse mortgage to buffer against market swings and sequence risk falls within the greater context of portfolio sustainability, which is another important financial planning talking point originators should bear in mind.

Portfolio survival

Many financial advisers base their plans on the idea of portfolio survival. This is the essence of retirement planning. As advisers run Monte Carlo simulations to determine the likelihood that their clients’ assets will be able to survive a certain number of years, and under what circumstances and scenarios this will be possible, two major objectives are minimizing sequence of returns risk and improving cash flow.

A reverse mortgage helps accomplish both of these goals by reducing what advisers call the “withdrawal rate” from the portfolio. For example, if a retiree finds himself subject to sequence risk and he needs to sell 7-8% of his portfolio’s assets every year, under this strategy the portfolio might not survive a lengthy retirement.

“If we get too high of a withdrawal rate, we know that can actually deplete your portfolio fairly quickly,” Hopkins said. “A lot of financial advisers are looking for ways to lower that withdrawal rate, especially early in retirement so it increases the survivability or success of the portfolio.”

For further strategic discussion about how the HECM works to use home equity wisely in retirement mode, contact Warren Strycker who represents The Federal Savings Bank nationally, 928 345-1200.

It can be your “fish in the water” security when you turn 62.

 

Common Reverse Mortgage Myths Debunked During HECM Counseling

March 29th, 2016

From an educational standpoint, Home Equity Conversion Mortgage (HECM) counselors are the first line of defense in the ongoing struggle to dispel the most common reverse mortgage myths and misconceptions.

Mandatory HECM counseling provides seniors with the necessary exposure to make an informed decision about getting a reverse mortgage. Like originators, the job of a HECM counselor is also rooted in education as they help prospective borrowers more clearly understand the inner workings of reverse mortgages.

Despite this dual effort on the educational front, and the wide variety of positive press from the mainstream media lately, several reverse mortgage illusions have yet to evaporate into the ether.

Borrowers, in fact, still own their homes

One of the most common misconceptions of reverse mortgages is that borrowers automatically relinquish ownership of their homes once they obtain a HECM.

Perhaps the result of negative media representation in the past, the lingering effect of this myth has obscured the truth about reverse mortgages among the general public. The reality is often a pleasant revelation for seniors once they undergo HECM counseling.

“Seniors are under this misconception that they don’t own the home anymore—the lender does,” said Sherry Tetreault, a Tenn.-based certified credit counselor with ClearPoint Credit Counseling.

Although many prospective borrowers already have some knowledge of reverse mortgages, having done their own research prior to the counseling session, Tetreault, who has been a credit counselor for 16 years and a HECM counselor for seven years, admits that the misunderstanding about the transfer of homeownership continues to be one of the most frequently asked questions during the counseling process.

“They are always surprised to learn they still, in fact, own the home even with a reverse mortgage,” she said.

No payments necessary?

The internet provides a wealth of knowledge on just about anything. With a few keystrokes and clicks, even unsavvy web browsers can find the most basic information on reverse mortgages to aid them in their quest for knowledge.

Unfortunately, not everything published on the internet is vetted for accuracy. So it’s not beyond reason to be naturally suspicious of financial products that offer extra cash flow without requiring a monthly payment in return.

“Most of the time, when seniors are coming for counseling, they are skeptical about why they are able to get this [reverse mortgage] loan and not have to make payments,” Tetreault said.

Tetreault’s job then is to clarify that the funds obtained from a reverse mortgage must be repaid at a later date, and that just because borrowers aren’t required to make monthly payments toward the loan balance, they are still required to maintain their property taxes and homeowner’s insurance.

Clarifying what makes the reverse mortgage become due and payable creates some surprise among prospective borrowers, Tetreault said, but it also opens the door to other questions that seniors might not have thought about previously, such as what happens if they do not pay property taxes and insurance payments on time.

“We talk about what their responsibilities are as reverse mortgage borrowers to make sure they do not put themselves at risk of foreclosure,” she said.

The million-dollar question

HECM counseling is a necessary stepping stone in the older homeowner’s journey to get a reverse mortgage. This decision is typically prompted by a significant need, whether that is the result of an unexpected personal issue or even the intrigue of using home equity to supplement retirement wealth.

In many cases, the million-dollar question is: how much money can I get from a reverse mortgage?

One of the things ClearPoint does off-the-bat is ask counselees how they plan to use the money they receive from a reverse mortgage; whether that means using these funds for daily or future expenses, paying off debt, etc.

In understanding what the loan proceeds will be used for, Tetreault said counselors can help prospective borrowers determine if a reverse mortgage is really the right product for them, or if there are other alternatives that might fit best with their financial plans.

At the end of the day, the decision to get a reverse mortgage hinges upon education and the awareness of what other resources are available to seniors that can help them accomplish their personal needs.

“Education empowers consumers,” Tetreault said. “Whether seniors take that information and decide to get the reverse mortgage or not, at least they are educated and have an understanding of all the choices and options available to them.”

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Advisors Get Crash Course on Reverse Mortgage Financial Planning Strategies

March 21st, 2016  | by Jason Oliva Published in HECMNewsRetirementReverse Mortgage

There is a widespread movement in the reverse mortgage industry to educate professionals such as Realtors and home care workers about how Home Equity Conversion Mortgages can possibly better serve their clients. But most of all, the push for greater reverse mortgage education has largely focused on the financial planning community.

Thanks to recent HECM program changes in the last few years, sensationalist stories that besmirched reverse mortgages in the past have largely given way to media coverage highlighting the much-needed makeover of the HECM product from a loan of last resort to a retirement income planning tool seriously worth considering.

“Reverse mortgages have this negative image in the U.S. for some reasons that were never really fair to begin with,” said Wade Pfau, professor of retirement income at The American College, during a recent webinar hosted by the Financial Experts Network, a Pittsburgh-based company that focuses on educating financial advisors on reverse mortgages.

Many of these legacy issues with the HECM program do not relate to clients today who plan on using a reverse mortgage as part of a coordinated retirement income planning strategy, Pfau noted.

“These issues related to the idea that people were desperate; they did not have sustainable financial plans in place, and basically, a reverse mortgage would have let them kick the can down the road a little further,” he said.

The webinar was held primarily as an educational session to teach advisers how they can fit home equity into a client’s retirement income strategy. During the session, advisers learned an overview of how reverse mortgages work, including their eligibility requirements, various spending options and the different possible uses for HECMs.

About half of the webinar focused on portfolio coordination for retirement spending, with an emphasis on using home equity as a standby reverse mortgage line of credit to create retirement income efficiencies by managing sequence of returns risk—a concept which has been the focal point of research from Pfau, as well as other researchers such as Barry Sacks, Harold Evensky and John Salter, who also participated on the webinar.

Of the more than 200 webinar sign-ups, most of which were financial advisers, approximately 57% tuned into the session—an attendance rate that reflects a higher than average participation rate, according to Tom Dickson, founder of the Financial Experts Network.

Advisers’ interest in the reverse mortgage subject matter became even more apparent during the webinar’s question and answer portion, with much of the questions focused on learning more about what happens when the HECM becomes due; how a reverse mortgage can assist with tax bracket management; as well as the best way to overcome client objections.

“It’s how you present it [a reverse mortgage],” said John Salter, associate professor of financial planning at Texas Tech University. “You do get some pushback, but you have to explain all of the benefits [of using home equity], especially with the winner being set up a reverse mortgage right now and not use it.”

An easy way for advisers to start the conversation about reverse mortgages with their clients, Salter added, is to let them know that research points to early access—especially for the line of credit option—as the best way to use home equity as part of a retirement income plan.

When it comes to recommending a reverse mortgage for clients, it turns out that most advisers have already done so, according to the results from an attendee survey distributed after the webinar provided to RMD.

Answering the question, “Have you ever recommended a reverse mortgage?” 42.8% of advisers responded “yes, for clients that can use income,” while 8.7% responded “yes, for clients that had a conventional mortgage.”

On the flip side, 30.7% of attendees said they have not recommended reverse mortgage because their clients “never needed it,” while 17.5% said “no, because I thought they were too expensive.”

Written by Jason Oliva

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New Research Shows Financial Planning Value of Tenure HECMs

March 3rd, 2016  | by Jason Oliva Published in HECM, News, Retirement, Reverse Mortgage

Reverse mortgages have been the subject of much financial planning research over the past few years, the emphasis of which has focused on how these products add to the value of a retirement income plan. While planners have largely focused their research on the line of credit option, few have explored the effectiveness of the reverse mortgage tenure option in the context of financial planning.

Reverse mortgages provide a means to generate more retirement income than can be obtained from retirement savings alone—and the tenure option does so in a direct way, says a recent report published in the Journal of Personal Finance.

The report, “Reverse Mortgages, Annuities, and Investments: Sorting Out the Options to Generate Sustainable Retirement Income,” was written by Joseph Tomlinson, FSA, CFP, managing director of Tomlinson Financial Planning in Greenville, Maine; alongside Shaun Pfeiffer, Ph.D., CFP, associate professor of finance and personal financial planning at the Edinboro University of Pennsylvania; and John Salter, Ph.D., CFP, AIFA, associate professor of personal financial planning at Texas Tech University and a partner and wealth manager at Evensky & Katz Wealth Management in Coral Gables, Fla. ad Lubbock, Texas.

The study examines how using either reverse mortgage option (line of credit or tenure) can generate improvements in sustainable retirement income, particularly when combined with single-premium immediate annuities (SPIAs).

Although the popular financial approach to generating retirement income has been to rely on systematic withdrawals from investments, such as stocks and bonds, the researchers suggest planners have two additional options worth considering: reverse mortgages and annuities.

“Such options may be particularly useful for clients whose finances are constrained and they need to either generate more retirement income or make the income more secure,” write Tomlinson, Pfeiffer and Salter.

An issue for planners, they suggest, is how to choose among these two options and how to combine these alternatives in a way that best meets client needs.

Ideal candidates for annuities, particularly SPIAs, are those who need more security so that their retirement income will last for life, and can tolerate the illiquidity that a SPIA entails, according to the study. Whereas for reverse mortgages, ideal candidates are those who need additional retirement income, plan to stay in their home for life, have adequate long-term care insurance and do not plan on leaving a bequest.

“With the reverse mortgage options, purchasing a SPIA improves the security of retirement income, but does not increase the income,” the study states. “Combining SPIAs with reverse mortgages provides a way to gain additional retirement income security, but without much impact on the overall level of retirement income.”

Researchers ingrain their analysis around a scenario involving a husband and wife as borrowers, a couple which they believe presents a more typical situation for financial planners. Specifically, researchers assume the couple lives in a $400,000 home and that the husband is 65 and the wife is 63.

Based on August 2015 interest rates, for this couple the initial principal limit they would receive from a Home Equity Conversion Mortgage (HECM) would be $212,000, according to researchers’ calculations based on the reverse mortgage calculator provided by the National Reverse Mortgage Lenders Association.

Under this scenario, a borrowing couple utilizing the reverse mortgage tenure option would be able to obtain $1,130.36 per month. Assuming setup fees were financed ($212,000 – $10,826), the available amount for borrowing would be $201,174.

By comparison, researchers note that a SPIA purchased with $201,174 would pay $955.21 per month, based on market rates as of August 2015 for SPIAs sold directly.

“The SPIA advantage is that payments continue until both members of the couple are dead, whereas tenure payments only continue until the home is vacated,” the study states. “For couples who can put plans in place to utilize home care if needed and keep their home as long as possible, the tenure option can be expected to provide payments for a duration similar to a SPIA.”

The term tenure payment calculation is based on an interest rate that is the sum of the annual Mortgage Insurance Premium of 1.25% and the HECM Expected Rate, which is the sum of the 10-year LIBOR swap rate—about 2.3% in August 2015—and a Lender’s Margin, which may vary by lender, but was set at 2.5% in the NRMLA calculator as of the date of the research’s publication. The researchers’ example of the 65-year-old husband and 63-year-old wife assumes a 4.8% HECM Expected Rate.

“The tenure payment calculation uses a higher expected duration than the SPIA, which would lower the payout rate, but a higher interest rate, which would raise the payout, and the interest rate more than offsets the duration,” the study states. “So based on current pricing, tenure payments ($1,130.36) will exceed SPIA payments ($955.21) when the SPIA purchase amount is set equal to the HECM Net Principal Limit.”

Researchers then move onto how the reverse mortgage options and SPIAs, either separately or together, can be integrated with systematic withdrawals to improve retirement outcomes.

Per the already established scenario featuring the 65- and 63-year-old husband and wife, researchers also assume this couple—who have a $400,000 home with no mortgage—also has $1 million in tax deferred savings.

Additionally, their Social Security income is $30,000, which will increase each year for inflation, and is assumed to reduce to $200,000 in real dollars when either member of the couple dies. It is also assumed that this couple has their savings allocated 60/40 in stocks/bonds and rebalanced to this allocation annually.

Compared to relying only on systematic withdrawals from investment accounts, the use of either reverse mortgage option (LOC or tenure) was found to greatly increase consumption—$70,881 median consumption for the line of credit, compared to $74,735 for tenure payments and $64,287 for systematic withdrawals.

Because of the assumption that withdrawals are taken from savings before tapping the line of credit, the line of credit option depletes savings but leaves some home value. Tenure, on the other hand, depletes home value more and leaves remaining savings.

“Overall, the tenure option does somewhat better than the LOC in terms of both consumption and bequest measures,” researchers state. “This reflects tenure not depleting savings and thereby leaving more money invested in stocks, the potentially highest return asset.”

Because the tenure option pays out a higher rate than the SPIA, the study indicates it is necessary to allocate $238,061 for SPIA purchase, compared to the $201,174 borrowing limit used to generate tenure payments.

The SPIA option leaves median consumption about the same, but does reduce consumption risk, according to researchers who note that under the SPIA home value is preserved for late-in-life needs or a bequest.

“If the goal is to maximize consumption without a bequest concern, the reverse mortgage options win out over the SPIA,” the study states. “If bequests are important, the decision requires evaluating tradeoffs between consumption and bequest.”

The research from Tomlinson, Pfeiffer and Salter is the first to seriously consider how the reverse mortgage tenure payment option compares with the use of a SPIA.

Besides the need for more research on this topic, the researchers conclude that there will also be a need for planning software capable of handling combined analysis of reverse mortgages, annuities, and systematic withdrawals on a customized basis for financial planning clients.

View the report in the Journal of Personal Finance.

Both HECMs and SPIAs are available at Gofinancial.net. Consider them with Licensed-Appointed-Insured, Warren Strycker, 928 234-1200, Can-anything-good-come-out-of-Yuma-Arizona? (Yes).

HECM Borrowers Report High Satisfaction Levels, demonstrate choices

Editorial note:  This information demonstrates entrance to or out of the HECM (Reverse Mortgage) process is designed to allow access and egress without harm. Counseling is provided upfront to screen out those not interested. The application is not a legal document and doesn’t require anyone to finish. Even at the close, borrowers are allowed out of the contract they signed without cost after a three day rescission period. There is no reason to believe the HECM is a trap of any kind out of which you cannot “reverse” yourself and some do so without harm. (Gofinancial.net).

March 13th, 2016

STUDY:

Reverse (HECM) mortgages can serve a variety of needs for the borrowers who use them. While some motivations to obtain these loans are more obvious than others, borrowers report high satisfaction overall when it comes to using a reverse mortgage to foster independence and improve well-being, according to the results of a recent survey.

A wide majority (83%) of seniors who received Home Equity Conversion Mortgage (HECM) counseling and decided to follow through with a reverse mortgage said they were “satisfied” or “very satisfied” with their decision, according to a survey conducted by researchers from Ohio State University, and funded by the MacArthur Foundation and the Department of Housing and Urban Development (HUD).

The survey,” Aging in Place: Analyzing the Use of Reverse Mortgages to Preserve Independent Living,” combined HUD loan data; administrative data from households who received HECM counseling, as well as survey data collected on these households three to nine years after receiving counseling for a reverse mortgage.

Researchers’ goal was to gain a better understanding of reverse mortgages and their impact on borrowers’ financial security, well-being and independence in old age.

To explore these relationships, Ohio State researchers Stephanie Moulton, Donald Haurin, Cazilia Loibl and J. Michael Collins analyzed seniors who received HECM counseling from ClearPoint Credit Counseling Solutions between 2006-2011. This population included seniors who obtained a reverse mortgage and retained it; those who took a reverse mortgage and then later terminated it; and those who decided not to take a reverse mortgage after receiving counseling.

In total, 1,761 people participated in the survey. Of this population, 68% obtained and retained their reverse mortgage; 6% obtained a reverse mortgage and then later terminated the loan; and nearly one-quarter of respondents decided against getting a reverse mortgage altogether after completing HECM counseling.

The average age of survey participants was 70 years old at the time they received counseling. Approximately one-third of them were women living in single-person households, and 17% had a four-year college degree.

While a majority of respondents expressed satisfaction with their reverse mortgages, even those who eventually terminated their HECMs (78%) also felt “satisfied” or “very satisfied.” Meanwhile, among those who decided against getting a reverse mortgage, 60% reported satisfaction with their decision to not follow through with a HECM.

When researchers asked survey participants the extent to which they agreed with the statement, “Having a reverse mortgage improved the quality of my life,” 76% of active borrowers and 65% of terminated borrowers agreed with the statement.

On average, the annual income of participants was about $31,000, or $2,600 per month. Besides home equity, the median amount of assets among this group was only $2,000. Just under half of respondents (45%) reported no assets at the time of HECM counseling other than their home, effectively making the reverse mortgage their only source of wealth.

Supplementing income (42%) and paying off other mortgage debt (39%) were the top intended uses for seniors who obtained a HECM. Other plans included using a reverse mortgage to pay for home improvements (24%), provide financial help for family members (19%), to delay using other sources of retirement wealth (16%) and to pay for ongoing health expenses (14%).

Although there has been a lot of discussion about using a reverse mortgage line of credit to lock-in home equity as an insurance against declining home values, only 10% of survey respondents reported using a HECM in this regard. Just 6% said they planned to use a reverse mortgage for big purchases such as a new property, a car or vacation.

Aside from gauging borrower satisfaction, a critical part of the research aims to study the impact of reverse mortgages on long-term financial stability and well-being. This, according to researchers, will require longer-term tracking of borrowers to estimate the outcomes of households who obtained reverse mortgages compared to those who did not.

One indicator of household well-being is the condition of living environment. Based on the survey results, many (85%) active reverse mortgage borrowers report the condition of their home is “good” or “very good.” Similarly, 81% of terminated loan borrowers and 76% of non-borrowers rated their living conditions at the same levels.

Although all groups of HECM borrowers report high satisfaction with their home conditions, the data indicates that active HECM borrowers have higher levels of satisfaction than their survey peers. While this could be due to a direct effect of the reverse mortgage, researchers suggest it could also be that homeowners who opt into a reverse mortgage have homes that are in good condition prior to getting a loan. This suggests further detailed analysis is needed.

In order to gauge the impact of HECMs on factors of well-being, researchers say they need to establish a comparison group of otherwise similar seniors who did not originate a HECM. Two future studies from the Ohio State University researchers plan to address this area of study.

First, researchers note they will be comparing the long-term credit outcomes for seniors who originated HECMs to similar seniors who extracted equity through another channel, such as a HELOC, cash-out refinancing or second liens. Second, researchers plan to compare its survey respondents to a nationally representative sample of seniors, in efforts to compare HECM borrowers to non-borrowers in the areas of finances, health, housing and  recission general well-being.

These analyses, which are currently in process, are slated for completion by August 2016.

For those seeking a reliable path to obtain information about how to obtain to these products anywhere in the United States, Contact Warren Strycker, 928 345-1200 or email wstrycker@thefederalsavingsbank.com or wstrycker@Gofinancial.net.