Monthly Archives: June 2019

Senior Housing Wealth Hits New High of $7.14 Trillion; Fuel HECM?

By Chris Clow | June 24, 2019 REVERSE MORTGAGE DAILY

Homeowners age 62 and older saw their collective housing wealth increase in Q1 2019 by 2.7 percent compared to the previous quarter. This constitutes an increase of approximately $104 billion to a record of $7.14 trillion, according to data provided by the National Reverse Mortgage Lenders Association (NRMLA) in conjunction with data analytics firm RiskSpan. The increase was reported Monday in the quarterly release of the NRMLA/RiskSpan Reverse Mortgage Market Index (RMMI).

The RMMI rose in Q1 2019 to 257.12, which marks another consecutive all-time high since the index’s original publication in 2000. That increase was described as being primarily drivenby an estimated 2.4 percent (or $110 billion) increase in the values of homes owned by seniors, which also includes an estimated increase of 0.8 percent in the population of senior homeowners.

This was offset, however, by a 1.1 percent (or $6.5 billion) increase of senior-held mortgage debt.

“Reverse mortgages have become an essential component for addressing a huge problem for many Americans—funding retirement,” said NRMLA President and CEO Peter Bell in a press release announcing the data. “More than 1.12 million families have used a reverse mortgage alongside side their 401Ks, IRAs, savings, investments, Social Security, Medicare and Medicaid to cover life’s daily expenses, so they could live more financially secure lives.”

Bell also echoed the sentiment he shared about reverse mortgage products in a recent USA Today op-ed, which responded to an investigative story concerning the safety and effects of taking out a reverse mortgage loan.

“As with all major financial decisions, a reverse mortgage should be part of an overall strategic plan, with input from knowledgeable professionals, and family members who may be impacted,” Bell advised.

Senior housing wealth topped $7 trillion for the first time ever according to the previous RMMI data release in March 2019. The RMMI also previously recorded a year-over-year increase of 6.5 percent in 2018, lower than the 8.4 percent increase recorded in 2017 and the 8.2 percent increase in 2016.

Busting Three Half-Truths About Reverse Mortgages — Hopkins

Generation of Americans Entering Old Age “Least Prepared in Decades”; Gallup numbers “spin”

American Seniors Prefer to “Age in Place”—But What’s the Right Place?

Karan Kaul

As more Americans near retirement age, they’re grappling with where they should live as they grow older. Should they stay in their existing homes? Sell and buy a smaller home? Become renters?

Although there is no single right answer, a recent, private convening of experts on aging and retirement hosted by the Urban Institute highlighted the need to think about both aging in the right place and how to pay for it.

Aging in place may prove costly or difficult

Survey after survey has shown that older Americans overwhelmingly prefer to age in place. But aging in place may require some trade-offs. Staying in a home must be financially sustainable, but it should also maximize physical, social, and emotional well-being. Financial considerations include maintenance and repair costs and the cost of necessary safety retrofits (grab bars, lifts, ramps, etc.), as well as the general cost of living in that area.

The size of the home, which drives many of these costs, must also be optimized. According to the 2017 American Community Survey, over 40 percent of seniors age 55 to 75 years, and 38 percent of seniors age 75 and older live in 3-bedroom houses, suggesting a potential mismatch between the size/maintenance requirements for the home and the needs of the inhabitants. But this doesn’t necessarily imply downsizing, as smaller, newer homes in sought-after areas could be more expensive. Rather it implies finding a place that balances multiple objectives:

availability of the right place at an affordable price point, plus repair and maintenance costs

access to medical facilities such as primary care doctors, in-home care, and nursing homes

social programs that facilitate interaction

local transportation options

proximity to family and friends

Households will value each of these factors differently, but the eventual decision will have an enormous impact on the financial, social, emotional, and health outcomes of seniors. Aging in the wrong place for many years can lead to poor financial outcomes relative to moving out earlier in retirement. This highlights the need to educate seniors on the financial consequences of aging in the wrong place.

Ultimately, the question of whether seniors are aging in place may not be as important as asking whether they are aging in the right place.

How can we help seniors age in the right place?

Regardless of whether they choose to stay or move, most older Americans don’t have enough savings to pay for their living expenses in retirement. And more seniors are relying on mortgages: 41 percent of senior homeowners ages 65 and older have a mortgage today, compared with just 21 percent in 1989. Mortgage balances are also higher, increasing on average from $17,000 to $72,000 over the same period for the same age group.

And with people living longer, retirement savings must last longer. Participants at the convening discussed a few options to mitigate retirement costs.

In-home modifications

Researchers Michael Eriksen and Gary Engelhardt found that 3 million Americans ages 65 and older are treated for falls annually, requiring 800,000 hospitalizations and resulting in 300,000 hip fractures. The hospitalization cost is about $33,000 per stay, and the aggregate annual cost is about $55 billion, a large portion of which is undoubtedly incurred by Medicare.

As the nation’s population of seniors increases, and given the mismatch between homes and needs of inhabitants, these expenses will likely grow.

The researchers suggest a relatively inexpensive fix: in-home modifications that reduce the incidence of falls by 50 percentage points for those ages 75 and older. Every $1 invested in modifications returns $1.50 in reduced medical spending for people ages 75 and older, according to Eriksen and Engelhardt.

Of course, falls are only one small component of the overall cost of retirement. The bigger question is how to pay for overall retirement expenses, given limited savings.

Home equity products

Convening participants discussed the potential for monetizing home equity to improve retirement finances, but the lack of efficient mechanisms is a major barrier. Home equity is the major source of wealth for most elderly homeowners, including many whose available liquid assets could not cover an unexpected major expense.

Home equity loans and lines of credit are currently only available to people with the strongest credit profiles. Cash-out refinances require income to support the mortgage debt, and this vehicle is interest rate dependent; they are very costly if rates have risen substantially since the original mortgage was taken out.

Thus, homeowners with limited incomes and savings have only one option for equity extraction: the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) program, which has fallen short of its potential.

Seniors point to high costs, product complexity, fear of losing their homes, or getting scammed as reasons they don’t participate in the HECM program. In response to massive losses on HECM loans during the housing bubble, the US Department of Housing and Urban Development made several changes to HECM requirements to reduce risk. But these changes have shrunk the pool of potential borrowers and cut HECM lending volumes. Changes to program requirements have also introduced uncertainty for lenders.

Convening participants agreed about the urgency of stabilizing and improving HECM by doing the following:

lowering costs associated with servicing HECM loans and introducing a lower loan-to-value ratio

offering a lower-cost product for households that want to borrow a limited amount (for instance, to pay for home safety retrofits)

encouraging the return of the private reverse mortgages, a product several lenders have recently relaunched

But are these fixes enough? Some in favor of HECM’s current model prefer targeted changes to address issues like postassignment servicing. But others favor a fundamental reform of the program to make sure it is servicing those who need it most.

Many seniors continue to age in unsuitable or expensive homes, requiring proactive intervention from both homeowners and government. The public and private sectors can take steps to educate seniors on the benefits of aging in the right place and make changes that help more seniors do just that.

Addressing these issues will allow seniors to thrive in their chosen homes. Failure to act will only make the situation worse as more Americans reach old age.

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Am I “demented” now? — 7 ways to keep your memory sharp at any age

Editor’s Note: If you notice you are tipping glasses full of water over without realizing i — and it isn’t lack of peripheral eyesight, or wondering why you can’t pee when you are sitting on the toilet, it could be that your brain isn’t functioning as usual (or at all). It’s difficult to acknowledge that your hands and other bodily functions don’t work without your brain, and other stuff you don’t want to admit, isn’t working, because…

Yes, it’s depressing, but that is what results from knowing this stuff is happening as  you age and not really dealing with it (because you didn’t think you could do anything about it)… and you don’t have mountains to climb, and you wonder if you are demented now! All that, and more. 

(Yes, it’s probably OK to be a little frustrated. That’s called retirement even when you don’t. But when things aren’t functioning because you don’t use them for long enough, then life issues are at stake whether you  like it or not.

Now, there’s this…

Surprising ways to retain sharp memory using brain games that strengthen mental functioning.

I asked my 95 year old father to go with me to a seminar I was holding and he said “no”. It made me pause, so I asked him: “Why not, dad?” and he said “I don’t want to”.

Hmmmmm. What happens when we don’t want to? Nothing. Nothing happens and then we tip glasses over and wonder why we can’t pee when command requires brain function.

 

 

As we grow older, we all start to notice some changes in our ability to remember things. Mostly, though, it’s about we don’t try much.

Maybe you’ve gone into the kitchen and can’t remember why, or can’t recall a familiar name during a conversation. You may even miss an appointment because it slipped your mind. Memory lapses can occur at any age, but we tend to get more upset by them as we get older because we fear they’re a sign of dementia, or loss of intellectual function. The fact is, significant memory loss in older people isn’t a normal part of aging—but is due to organic disorders, brain injury, or neurological illness, with Alzheimer’s being among the most feared.

Most of the fleeting memory problems that we experience with age reflect normal changes in the structure and function of the brain. These changes can slow certain cognitive processes, making it a bit harder to learn new things quickly or screen out distractions that can interfere with memory and learning. Granted, these changes can be frustrating and may seem far from benign when we need to learn new skills or juggle myriad responsibilities. Thanks to decades of research, there are various strategies we can use to protect and sharpen our minds. Here are seven you might try.

  1. Keep learning

A higher level of education is associated with better mental functioning in old age. Experts think that advanced education may help keep memory strong by getting a person into the habit of being mentally active. Challenging your brain with mental exercise is believed to activate processes that help maintain individual brain cells and stimulate communication among them. Many people have jobs that keep them mentally active, but pursuing a hobby or learning a new skill can function the same way. Read; join a book group; play chess or bridge; write your life story; do crossword or jigsaw puzzles; take a class; pursue music or art; design a new garden layout. At work, propose or volunteer for a project that involves a skill you don’t usually use. Building and preserving brain connections is an ongoing process, so make lifelong learning a priority.

  1. Use all your senses

The more senses you use in learning something, the more of your brain will be involved in retaining the memory. In one study, adults were shown a series of emotionally neutral images, each presented along with a smell. They were not asked to remember what they saw. Later, they were shown a set of images, this time without odors, and asked to indicate which they’d seen before. They had excellent recall for all odor-paired pictures, and especially for those associated with pleasant smells. Brain imaging indicated that the piriform cortex, the main odor-processing region of the brain, became active when people saw objects originally paired with odors, even though the smells were no longer present and the subjects hadn’t tried to remember them. So challenge all your senses as you venture into the unfamiliar. For example, try to guess the ingredients as you smell and taste a new restaurant dish. Give sculpting or ceramics a try, noticing the feel and smell of the materials you’re using.

  1. Believe in yourself

Myths about aging can contribute to a failing memory. Middle-aged and older learners do worse on memory tasks when they’re exposed to negative stereotypes about aging and memory, and better when the messages are positive about memory preservation into old age. People who believe that they are not in control of their memory function are less likely to work at maintaining or improving their memory skills and therefore are more likely to experience cognitive decline. If you believe you can improve and you translate that belief into practice, you have a better chance of keeping your mind sharp.

  1. Economize your brain use

If you don’t need to use mental energy remembering where you laid your keys or the time of your granddaughter’s birthday party, you’ll be better able to concentrate on learning and remembering new and important things. Take advantage of calendars and planners, maps, shopping lists, file folders, and address books to keep routine information accessible. Designate a place at home for your glasses, purse, keys, and other items you use often. Remove clutter from your office or home to minimize distractions, so you can focus on new information that you want to remember.

  1. Repeat what you want to know

When you want to remember something you’ve just heard, read, or thought about, repeat it out loud or write it down. That way, you reinforce the memory or connection. For example, if you’ve just been told someone’s name, use it when you speak with him or her: “So, John, where did you meet Camille?” If you place one of your belongings somewhere other than its usual spot, tell yourself out loud what you’ve done. And don’t hesitate to ask for information to be repeated.

  1. Space it out

Repetition is most potent as a learning tool when it’s properly timed. It’s best not to repeat something many times in a short period, as if you were cramming for an exam. Instead, re-study the essentials after increasingly longer periods of time — once an hour, then every few hours, then every day. Spacing out periods of study is particularly valuable when you are trying to master complicated information, such as the details of a new work assignment. Research shows that spaced rehearsal improves recall not only in healthy people but also in those with certain physically based cognitive problems, such as those associated with multiple sclerosis.

  1. Make a mnemonic

This is a creative way to remember lists. Mnemonic devices can take the form of acronyms (such as RICE to remember first-aid advice for injured limbs: Rest, Ice, Compression, and Elevation) or sentences (such as the classic “Every good boy does fine” to remember the musical notes E, G, B, D, and F on the lines of the treble clef).

 

Additional editor’s note: And, if you are a computer guy/gal, you already know about passwords. Don’t try to memorize them. They will change and then you’re stuck. Have one place where you keep them (not on the computer) and keep them there forever as you change them to comply with Microsoft that now you have to change them. (If you are hooked up to Microsoft and on the internet, you know they come into your computer at night and change stuff. Yes, they do, don’t they? Gotta have a way to remember or you won’t survive.

 

I

How to find a trustworthy reverse-mortgage lender? Start here.

By Wade Pfau: Professor at The American College and Principal at McLean Asset Management. His website:  www.RetirementResearcher.com

A common question I receive regards how to find a trustworthy reverse-mortgage lender. This is not necessarily easy for those beginning the process with little more to rely on than an Internet search engine. A starting point may be with personal referrals from your financial advisor, or from friends or family who have felt satisfied with their lenders. I am also willing to help readers find the names of local lenders from reputable companies if you write to me providing your city and state. I am not compensated by reverse-mortgage lenders for giving such referrals.

For more information, download our Reverse Mortgage 101 Cheatsheet.

It is important to speak with a few different lenders and to get a sense of the range of possibilities with regard to reverse-mortgage options in terms of up-front costs, the lender’s margin, and ongoing costs, and whether the lender can serve as a resource to address any servicing issues after the loan is initiated. Costs will vary and can depend on how the loan is used: those wishing to set up a line of credit as a later resource may have to pay a higher up-front cost than those who plan to spend more quickly from the HECM. It is important to consider more than just who offers the lowest up-front costs, because having a personal connection to the lender can be important for any subsequent servicing issues or questions, and because the interaction of up-front costs and the lender’s margin can be complicated and hard to assess.

Here are some issues to consider when speaking with a lender:

Is the lender patient about meeting with you in person or speaking by phone to answer your questions?

Is the lender clear about the different terms and costs available for reverse mortgages? Does it explain the costs clearly and not try to hide them by emphasizing only the possibility of no “out-of-pocket” costs?

Has the lender been clear about your responsibilities regarding property taxes, maintaining homeowner’s insurance, and keeping the property maintained?

Has the lender suggested that you seek additional guidance for tax advice or for advice about receiving assistance from government-welfare programs, if relevant?

Does the lender demonstrate interest or knowledge about retirement-income planning so that you have a better sense about the right options and strategies for your situation? Is the lender conversant about the topics and issues raised in this book?

As well, there are some red flags to consider that may suggest that a lender is not the right choice for you:

The lender pressures you to make a decision about applying for a reverse mortgage before you feel comfortable or ready.

The lender encourages you to take a larger proceed from the line of credit when the loan begins than you otherwise feel comfortable with or feel is necessary for your situation.

The lender encourages you to use the reverse-mortgage proceeds to buy a new investment or insurance product, especially if it seems as though the lender could receive some sort of compensation if you do.

The lender provides you with a list of HUD-approved independent counselors, as it should, but tries to direct you to a specific counselor.

This is an excerpt from Wade Pfau’s book, Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement (The Retirement Researcher’s Guide Series), available now on Amazon.

Wade Pfau: Professor at The American College and Principal at McLean Asset Management. His website:  www.RetirementResearcher.com

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