Monthly Archives: February 2017

WSJ: Reverse Morgage Credit Lines Appealing to Younger Borrowers

February 13th, 2017  | by Alex Spanko Published in HECM, News, Reverse Mortgage

Reverse mortgage credit lines are becoming more and more attractive to younger HECM borrowers amid the specter of rising interest rates, a Wall Street Journal article published today claims.

The story features quotes from multiple financial advisors and retirement experts extolling the virtues of taking out a home equity conversion mortgage line of credit as early as possible to hedge against future fluctuations in the stock market, home prices, and interest rates.

The WSJ cites research from brothers Barry H. and Stephen R. Sacks — a tax attorney and a retired economics professor, respectively — which recommends that borrowers use their lines of credit to weather down stock markets, allowing time for their investments to grow and preventing significant interruptions in lifestyle. This strategy improved the borrower’s chances of retaining wealth into old age, the Journal reported.

The Journal notes multiple potential downsides to the HECM line of credit, advising readers that the origination fees — giving an example of $9,000 on a credit line of approximately $200,000 — make it a less desirable short-term option. The paper also provides the often-mentioned caution about the potential lack of inheritance for the borrower’s heirs.

But overall, the Journal strikes a positive tone about the use of HECM credit lines, ending with this quote from Jamie Hopkins, an associate professor of taxation at the American College of Financial Services: “If home equity is incorporated more strategically in the future, we will see vast improvements in the financial security of retirees.”

 

What is Financial Exploitation?

Financial exploitation occurs when a person misuses or takes the assets of a vulnerable adult for his/her own personal benefit. This frequently occurs without the explicit knowledge or consent of a senior or disabled adult, depriving him/her of vital financial resources for his/her personal needs.

Assets are commonly taken via forms of deception, false pretenses, coercion, harassment, duress and threats. There is more detailed information about financial exploitation here.

These are commonly reported forms of financial exploitation* reported to Adult Protective Services agencies:

Theft: involves assets taken without knowledge, consent or authorization; may include taking of cash, valuables, medications other personal property.

Fraud: involves acts of dishonestly by persons entrusted to manage assets but appropriate assets for unintended uses; may include falsification of records, forgeries, unauthorized check-writing, and Ponzi-type financial schemes.

Real Estate: involves unauthorized sales, transfers or changes to property title(s); may include unauthorized or invalid changes to estate documents.

Contractor: includes building contractors or handymen who receive payment(s) for building repairs, but fail to initiate or complete project; may include invalid liens by contractors.

Lottery scams: involves payments (or transfer of funds) to collect unclaimed property or “prizes” from lotteries or sweepstakes.

Electronic: includes “phishing” e-mail messages to trick persons into unwittingly surrendering bank passwords; may include faxes, wire transfers, telephonic communications.

Mortgage: includes financial products which are unaffordable or out-of-compliance with regulatory requirements; may include loans issued against property by unauthorized parties.

Investment: includes investments made without knowledge or consent; may include high-fee funds (front or back-loaded) or excessive trading activity to generate commissions for financial advisors.

Insurance: involves sales of inappropriate products, such as a thirty-year annuity for a very elderly person; may include unauthorized trading of life insurance policies.

This piece is posted to explain what sometimes happens as seniors age and run out of money. The dangers of exploitation is sometimes the premise for abuse. We watch for those wishing to take over the elder household building a financial wall against intruders. “Let’s talk about it”, said Warren Strycker. A HECM loan leaves room for relatives but establishes continuing independence as elders can stay in their homes with the financial support they need. Call — let’s talk about it nationwide”,  928 345-1200.

HECM MORTGAGES are regulated by the U.S. Government where counseling is mandated for complete understanding in which family can listen in to protect and support their parents in retirement. Counselors are trained to watch for manipulation of family members in these important discussions.