Monthly Archives: June 2017

USA Today: Reverse Mortgages Could Hold Key to Secure Retirement

June 1st, 2017

Joining the chorus of popular media outlets that have covered home equity’s role in retirement, USA Today ran a lengthy piece this week about ways homeowners can tap into their wealth — including with a Home Equity Conversion Mortgage.

Quoting experts such as reverse mortgage researcher Wade Pfau and wealth advisor Randy Bruns, the national newspaper provided an uncritical forum for a high-level discussion of the HECM program and its potential benefits for seniors.

“Reverse mortgages have become a critical component of retirement planning,” Bruns told the paper. “A reverse mortgage line of credit can greatly reduce sequence of return risk by providing timely access to cash so you won’t have to sell investments until after markets have recovered,” he continued, explaining an increasingly popular pitch for the HECM: Use your home equity in down markets so you don’t have to deplete your nest egg just to cover basic living expenses.

“The hope is that a reverse mortgage line of credit can act as a standby source of liquidity in the kinds of instances that would otherwise lead to financial ruin for your portfolio,” Bruns told USA Today.

The paper built its story around a recent brief from the Employee Benefit Research Institute — which RMD covered last month — showing that the vast majority of the average American’s retirement war chest lies in home equity.

EBRI senior researcher Craig Copeland looked at households’ retirement investments relative to their overall wealth, including home equity, and determined that built-up home value accounted for pretty much all of what the average American will have to fund his or her retirement.

“Consequently, when measuring families’ financial asset holdings at retirement, it is overwhelmingly the case that just [retirement account] assets plus home equity represent almost all of what families have for retirement outside of Social Security and defined benefit pension plans,” Copeland wrote in his brief for EBRI.

In addition to reverse mortgages, USA Today’s piece suggests that  workers start funneling money into an employer-sponsored 401(k) or a private IRA as soon as possible, and also consider purchasing a home if possible — with the goal of paying down the mortgage quickly to build equity rapidly.

“It might seem obvious, even simplistic,” USA Today writer Robert Powell notes. “But having home equity and retirement accounts are key to most families’ financial assets and — by extension — retirement security.”

Read Powell’s full piece at USA Today.

Finding a HECM Use for Every Income Bracket

June 19th, 2017

While reverse mortgages have long been seen as a product of last resort, professionals in the industry know that opinion is changing — and now a new blog post shows the different ways that people can use Home Equity Conversion Mortgages no matter their financial situation.

Over at Tools for Retirement Planning, personal finance blogger Tom Davison maps out Home Equity Conversion Mortgage strategies for three types of potential borrowers: “well funded,” “constrained,” and “underfunded.”

For instance, a “well funded” borrower may have planned well for retirement, but could use a reverse mortgage to buy a new home — either larger or smaller than the current property — or remodel his or her existing home to age in place safely and comfortably. On the other end of the spectrum, an “underfunded” retiree could take out a HECM and pay down high-cost debt, cover the cost of necessary medications, or even just keep the heat on in the winter.

In the middle, “constrained” borrowers could potentially use reverse mortgage proceeds to defer Social Security payments, supplement required minimum distributions from retirement accounts, or just to have a little extra cash to spend on small luxuries like visiting grandchildren, Davison writes.

Davison based these categories on a recent report from the Center for Retirement Research at Boston College, in which economist Steven Sass found that consumers will increasingly need to tap into home equity in retirement, but remain reluctant due to “strong behavioral and informational barriers.”

In his March 2017 brief, Sass split households aged 65 to 69 into five groups based on equity and financial wealth, and found that traditional savings only exceeded home equity for the richest fifth of the U.S. population — while home equity accounted for the overwhelming majority of retirement wealth for the second and third quintile of older Americans.

“The value reverse mortgages could bring to the aging U.S. population starts with the breadth of users and uses,” Davison writes. “The value and breadth also challenge homeowners, financial professionals, and the reverse mortgage industry to find good matches between an individual homeowner’s situation and their highest and best use of a reverse mortgage.”

Read Davison’s full piece here.

 

Selleck Asks: ‘Why Not’ Use Home Equity?

June 20th, 2017  | by Alex Spanko  | American Advisors Group, HECM, News, Reverse Mortgage

American Advisors Group this week debuted its latest television commercial starring actor Tom Selleck, who this time asks older Americans why they aren’t using the equity built up in their homes.

Set in the same finely appointed loft apartment as a previous Selleck-centric spot, the new ad finds the “Blue Bloods” star telling seniors that they’re sitting on more than $6 trillion in total home equity, citing a statistic from the National Reverse Mortgage Lenders Association’s Reverse Mortgage Market Index.

As in a previous commercial for the Orange, Calif.-based AAG, Selleck directly addresses potential borrower concerns head-on in the two-minute advertisement, titled “Why Not Use It?”

“I think reverse mortgage loans are misunderstood sometimes. Maybe some retirees just don’t trust them,” Selleck says.

“They can sound too good to be true. But the fact is, in some ways, a reverse mortgage loan is not that different than a traditional mortgage,” he continues, calling the equity that the homeowners have already paid into their properties “kind of a savings plan.”

The new ad — along with a shorter 60-second version — began running Monday on the big four broadcast networks as well as a variety of cable channels, according to a release from AAG. It marks the third time that the 72-year-old Selleck, also famous for his starring role as TV’s “Magnum, P.I.” from 1980 to 1988, has appeared in a spot for the reverse mortgage lending giant; in previous ads, Selleck has likened retirement planning to a “three-legged stool” and told viewers that, like them, he once thought a reverse mortgage was too good to be true.

“The new campaign direction focuses on the fact that many older American homeowners are struggling to fund their retirement despite the enormous amount of home equity that’s available to them,” AAG chief creative officer Teague McGrath said in the release. “Tom Selleck has a deep appreciation of this problem and understands how reverse mortgages could be a critical component in many seniors’ retirement funding.”

Selleck himself agreed.

“Reverse mortgages have been undervalued and underutilized for too long in this country,” the actor said in the release. “Senior homeowners should have a way to use their hard-earned home equity to help fund their retirement.”

“I’m one of those seniors now,” said Warren Strycker, longtime loan originator now with Patriot Trust Lending, “and I’ve had a reverse mortgage for a long time now with no regrets”.

“Come, let us reason together,” Strycker added. “Why not Patriot Lending” he adds. (See “information” tab on the navigation bar for contact information.)