Monthly Archives: March 2017

Financial advisors increasingly recommend Home Equity Conversion

March 5th, 2017  | by Alex Spanko  | Reverse Mortgage

As financial planners and scholars increasingly advise certain borrowers to take out Home Equity Conversion Mortgages as early as possible as part of their retirement plans, some loan originators are noticing increased interest for the products from younger borrowers. At the same time, many in the industry are working to adapt their strategies to target individual age subsets of the consumer marketplace for home equity conversion marketplace, each with their own set of concerns.

Laurie MacNaughton, a reverse mortgage specialist at Southern Trust Mortgage in northern Virginia, says an age gap has become more and more apparent in her business as financial advisors increasingly recommend HECM loans for younger borrowers as a retirement-planning option, while elder law attorneys continue to refer clients in their 80s who may applying to meet immediate financial needs.

But for those who didn’t explore HECMs as an option in their early 60s, there may not be a sense of urgency, MacNaughton said — especially as people in their 70s remain active longer and may not think they’ll run into financial issues in the future.

“In the ‘60s, [people in their] 60s were the old people, but now they’re still working and running marathons — it’s kind of an Indian summer,” MacNaughton said, noting that in her home region of the Washington, D.C. suburbs, many who work in government and politics remain on the job as consultants or contractors into their mid-70s. She terms consumers in their 70s the “silent generation” for HECM borrowers — not to be confused with actual Silent Generation, a term for people who were born between 1925 and 1945.

National data from the Department of Housing and Urban Development doesn’t quite back up MacNaughton’s anecdotal observation around the nation’s capital: Borrowers aged 70 to 79 accounted for 39.3% of all HECM loans in fiscal 2016, up from 37.1% in fiscal 2015.

But the age gap in MacNaughton’s practice made sense to Mike Gruley, who highlighted the different approaches he generally uses when reaching out to baby-boom borrowers and older potential clients. Gruley, an executive vice president of reverse mortgage lending at 1st Nations Reverse Mortgage in Ann Arbor, Mich., says people in their 80s tend to be far more suspicious of credit in general, having been raised in a generation where mortgages and other loans were seen as burdens that needed to be retired as quickly as possible.

“We don’t hear about many baby boomers having mortgage-burning parties,” Gruley says, noting that people in their 60s have fewer qualms about using home equity to both cover necessary expenses and pay for indulgences such as vacations and second homes.

As a result, Gruley doesn’t usually take the home-equity approach when working with older borrowers, instead focusing on the practical benefits of securing additional funds to help pay bills and other necessities.

“We don’t need a second house,” he said, summarizing their attitudes. “This one just got paid for.”

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Older Americans Have Home Equity, mortgage payments, no pensions and WORRY about retirement. Why?

March 26th, 2017

A pair of recent surveys reveal the facts that many in the reverse mortgage industry know all too well: Seniors worry about how they’ll pay for retirement, don’t have pensions, and are sitting on significant quantities of home equity (some of which can be turned into cash contributions to living expenses in just a few weeks with a HECM mortgage).

Perhaps the most interesting revelation in the Employee Benefit Research Institute’s annual Retirement Confidence Survey, however, is the disparity between those who are approaching retirement and Americans who have already exited the working world. According to the institute’s data, about 60% of active workers in the United States feel confident that they can fund a comfortable retirement, while nearly 25% are “not too confident” and 16% are “not at all confident.”

That’s a significant contrast from the optimism among the already-retired set, 79% of whom feel very or somewhat confident that they’ve properly planned for a financially comfortable retirement; a full third reported feeling “very confident,” while only 8% said they weren’t confident at all.

This gulf pervades the group’s findings, with consistently higher sentiment about a variety of retirement planning topics — including the ability to pay for basic needs, medical expenses, and long-term care — among retirees than active workers, though even retired Americans had a great deal of concern about the latter metric: Almost half reported being “not too or not at all” confident about covering nursing home or home health care expenses in retirement, compared to 57% of those still in the workforce.

Meanwhile, a separate report issued by the Department of Health and Human Services’ Administration on Aging — “A Profile of Older Americans: 2016” — illustrates the vast amount of home equity in the hands of adults over the age of 75. According to the HHS report, which reflects data through the end of 2015, a full 76% of Americans in that age group own their homes, but median income among that cohort was only $31,000 per year. Of the age-75-and-up folks who owned their homes in 2015, 78% of them had no mortgage and owned their homes free and clear.

Americans in that age group tended to own older homes — with a median construction year of 1969, as compared to the overall median of 1978 — but interestingly, only 3.5% of those homeowners reported “moderate to severe” problems with regular upkeep, such as plumbing and heating systems. Those homes had a median value of $150,000, as compared to a median original purchase price of $53,000; for the overall population, those numbers were $180,000 and $127,000, respectively.

Among all Americans older than 65, including both homeowners and renters, the median income in 2015 was $31,372 for men and $18,250 for women, with only 21% of those reporting incomes of more than $50,000 — and 15% with incomes of $9,999 or less.

These stats plainly illustrate that home equity remains a vital potential source of retirement funding for older Americans. The lingering question for those in the reverse mortgage industry, though, remains how to convince a larger percentage of them that tapping into it can often be a prudent retirement option.

Quick hits

Both reports are worth checking out in full, but if you don’t have time to wade through the impressive amounts of data, here’s a bite-size encapsulation of some of the more interesting facts from each.

34% The increase in the 60+ population in the United States between 2005 and 2015, from 49.8 million to 66.8 million

69% Americans with a retirement plan who feel very to somewhat financially secure

32% Those without a plan who feel the same way

98 million The projected amount of Americans aged 65 and older in the year 2060

8.8% Percentage of older American below the poverty line in 2015

19.4% Proportion of people 65 and up in Florida, the highest in the country; nationally, that number is 14.9%. Only six other states had a percentage of 65+ residents greater than 17.0%: Maine, Vermont, Pennsylvania, Delaware, West Virginia, and Montana.

47% Percentage of workers who report less than $25,000 in retirement funds, including savings and investments

24% Workers who have less than $1,000 of any kind of retirement savings

Those interested in pursuing a FREE HECM ANALYSIS can proceed to the navigation bar “CONTACTS” and ask for one. The “ride” is free of cost and obligation, but the results will give/offer your own personal review of the facts. (Gofinancial.net — Warren Strycker).

But Wait, Doesn’t the Bank Own the House? “Well, that’s false” — known as fake news

March 12th, 2017

If you read the trade press, you might be led to believe that the Home Equity Conversion Mortgage industry is experiencing a kind of public-relations renaissance, as popular media outlets begin to present a more balanced picture of reverse mortgages and their potential benefits for Americans aged 62 and older.

It’s certainly true to an extent — as RMD reported last week, the vast majority of HECM mentions in the media over the past year have been either positive or neutral, according to PR tracking data obtained by the National Reverse Mortgage Lenders Association, and originators across the country have seen a shift in the tide of public perception. But of course, as even HECM boosters and several passionate RMD commenters have pointed out, everything isn’t sunshine and rainbows on the ground, and reverse mortgage professionals around the country continue to face the same nagging set of misconceptions.

Steven Sless, branch manager at Home Point Financial Corporation in Owings Mills, Md., recently related a story to RMD about sitting down with a Certified Financial Planner to purchase a life insurance policy. After opening with some small talk about their lives and finding out that Sless was in the reverse mortgage industry, the planner still had the same questions he fields from average consumers.

“There’s not a lot of knowledge, and not a lot of want, to really dive deep and understand the product and how it works,” Sless says.

That knowledge gap lies at the heart of the problem. Loren Riddick, branch manager at the Loren Riddick Team of Peoples Home Equity, Inc. in Alcoa, Tenn., says he didn’t trust reverse mortgages up until very recently, despite not knowing all that much about them.

“About six years ago, I thought it was the biggest crock of bull I’d ever heard of,” Riddick told RMD. But after taking the time to learn about the product and see how it could help certain borrowers, Riddick became a believer, and he says he’s closed more than 100 HECMs — and he’s now been around the industry long enough to have heard all of the misconceptions himself from the other side of the table.

But Wait, Doesn’t the Bank Own the House?

If your typical reverse-mortgage originator had a crisp $10 bill for every time he or she heard this question from potential borrowers, inquisitive fellow party guests, or skeptical journalists, he or she probably wouldn’t have to be working in the first place.

Riddick says this problem stems from an understandable confusion on the part of the borrower about why a bank would ever offer such an arrangement. A typical consumer understands how a bank makes money off of a forward mortgage, Riddick notes, charging interest over time on a loan used to pay for a house. But when it comes to a reverse mortgage, receiving money from a bank with seemingly nothing in return is often too much to process, and consumers thus naturally assume the bank has to take ownership of the home.

“Folks just can’t get their arms around: How does the bank make money?” Riddick says.

To combat this, Riddick generally tries to marry the concepts of forward and reverse mortgages in his clients’ minds, first asking them where they sent their forward regular mortgage payments, then inquiring as to whether or not that bank owns their home. More often than not, he says, they believe that the forward-mortgage lender also retains ownership until the loan is fully paid off.

“Well, that’s false,” Riddick says, slipping into the pitch he gives inquisitive clients. “Because if the bank owns the property, then the bank would have to sign the purchase contract. The bank would have to give you permission to build a deck, or paint a room.”

Aren’t Reverse Mortgages Expensive?

Sless called out the “stigma” of reverse mortgages as high-cost loans as the top misconception he faces on a daily basis, despite declines in the mortgage insurance premium and closing fees that aren’t all that different from those required for a forward loan, and note .

His solution: Be as clear as possible about all fees upfront, and emphasize that it’s a one-time expense. “We have to communicate effectively the benefits to the borrower — even if they’re at a 2.5% MIP due to their equity position, you’re still going to be able to recoup your costs relatively quickly,” Sless says.

Isn’t a Reverse Mortgage Only for the Desperate?

Larry Waters, a senior reverse mortgage consultant at Resolute Bank in Hayden, Idaho, says he can’t still shake the perception of HECM loans as a product of last resort — a misunderstanding that, unlike the other ones discussed in this article, may actually result in willing applicants being turned away. Waters notes he frequently receives interest from potential borrowers that have run out of savings, but who eventually cannot receive a reverse mortgage due to the Financial Assessment and other reforms that have made it significantly harder for underqualified applicants to close.

“With these last-resort cases today, it may not work,” Waters said in an e-mail to RMD. “If they have a large existing mortgage balance, combined with bad credit results, they may now be required to have a LESA [life expectancy set-aside], and then they may not have enough equity to qualify for the loan.”

Waters says the industry should focus on promoting the loans as a supplementary product for the financially healthy.

“The new message today is that people need to be more proactive and be in good financial shape to obtain this loan,” Waters says.

For more information about this website, call 928 345-1200 and ask for Warren Strycker. veteran mortgage professional for Patriot Lending USA. Email: wstrycker@patriotlendingusa.com.

 

 

The case for Gofinancial in the HECM discussion — ‘digital component’

While TV campaigns may spark a consumer’s initial interest, the digital component is important because nowadays, consumers often go online to learn more. This is where a lender’s Internet presence counts.

Tom Evans, VP of marketing at Finance of America Reverse, says digital marketing is a great way to connect with consumers who want to research the loan independently.

“The Internet is a great mechanism for educating the consumer. If I think I know what a reverse mortgage is and I’m not interested in being on a phone call with someone pressuring me to buy something, the Internet is my playground,” he says. “I can find everything I need without talking to someone.”

Evans says one bonus about a digital campaign is that it can allow you to collect a consumer’s contact information so that you can stay in touch with them throughout the process.

“It allows you to nurture them in a variety of different ways over time. You can use social media to reach out to people you’ve already made contact with, you can use email drip, you can even use phone calls from non-sales-based personnel to say, ‘Hey, I want to make sure you got all the information you requested,’” he says.

“All of our advertising strategies are about making a lasting connection with a consumer. They are all good in doing that, but the digital strategy does give you a little more flexibility to guide them through the process.”

Still, Evans says FAR continues to utilize traditional marketing strategies in addition to its digital campaign. Online marketing, he says, has become just one more way to reach consumers, who are increasingly selective about how they want to get their information.

“Some folks absolutely do not want to talk to anyone, they just want to learn as much as they can before they make any decisions. On the flip side of that are people who don’t even want to talk to someone on the phone, they want to have that face- to-face engagement; they want to talk to someone they feel they can build trust with,” Evans says. “It’s so amazing how varied the rainbow of purchasers is, there are so many ways people look for information and for products, and as a marketer you have to figure out how to taste the rainbow—to steal a good marketing slogan.”

Written by Jessica Guerin

Those wishing to take your HECM discussion up a notch, review the nearly hundred articles on the HECM mortgage on this page, and then see contact information in the navigation bar. Visitors here sometimes take hours of time sorting out the facts. (Gofinancial by Warren Strycker).