March 30th, 2017
Citing the growing cabal of pro-reverse mortgage academics and the story of one Mississippi homeowner, CBS News’ MoneyWatch called Home Equity Conversion Mortgages “a smart way for seniors to tap home equity” in an article published yesterday.
MoneyWatch writer Kathy Kristof tells the story of Richard Blackmon, a 70-year-old Magnolia State retiree who initially thought that a reverse mortgagee was a scam after seeing an advertisement for the product. But faced with growing debts and unwilling to leave the “three-acre compound” where he lives, he learned more about the program and took the leap.
“Honestly, about this time last year, I was contemplating having to file for bankruptcy,” Blackmon told CBS. “I can’t rave enough about this program.”
Kristof’s piece nods to the HECM’s shadier past, but emphasizes that the reverse mortgage’s bad reputation stemmed from “some unscrupulous advisors” acting before the Great Recession. She also cites some familiar academic faces in the HECM world, Wade Pfau and Steven Sass, as well as American Advisors Group executive vice president of retail sales Paul Fiore, who told CBS about his father’s experience with a reverse mortgage loan.
Like many other popular sources, Kristof explains the growing use of reverse mortgages as pillars of a larger retirement plan, a fail-safe in case other investments experience a downturn at an inopportune time. But unlike mainstream news outlets, she frames reverse mortgages as a low-cost option in certain circumstances.
“The fees depend on your home’s value and the amount of equity you need to tap,” she writes. “However, they can be as little as 0.5 percent of the home’s value. Thus a reverse loan on a $250,000 home might cost $1,250.”
She touts the growing home equity line of credit option, terming it a “smart” option and encouraging readers with considerable amounts of home equity to take out the loans as early as possible to access the no cost (the LOC actually grows and does not require payments as most LOCs do)home equity loan rates.
“So those who use the loans as a line of credit, borrowing sparingly — or not at all — in the early years pay virtually nothing,” Kristof writes. “Meanwhile, the amount available to borrow rises each year according to a formula. So the longer you have a reverse mortgage outstanding and unused, the more equity you’ll be able to tap.”
Naturally, Kristof counsels that the loans are not for everyone, specifically calling out borrowers under 62 — who, of course, can’t take out a government-backed HECM loan — as well as “rich” people who have no need to tap into home equity and people who intend to leave their homes within the coming few years.
Still, Kristof’s piece provides a simple, straightforward explanation of the HECM and its potential benefits from a trusted news source, along with a human success story to put a face on its positive uses.
“This was a win-win situation for me,” Blackmon told CBS. “I only wish I’d known about these loans sooner.”
Gofinancial gives you the opportunity to learn about the HECMs now. And, there’s a chat line to ask questions. See “HOME” in navigation bar to investigate.