Reverse Mortgages and Annuities

An annuity should never be purchased using money from a reverse loan, but in the past there were times when a reverse loan borrower would unwisely do just that and sometimes these vulnerable seniors were (for lack of a less sensitive term) “robbed”.

But what has happened since then to protect seniors from this kind of scam?

In 1987 Congress passed the FHA Insurance and Uniform Lending practices and the FHA insurance bill that would insure Reverse mortgages.

The first reverse mortgage to be insured by FHA was in 1989 and they continue to oversee this program very closely as an added protection to seniors and since that time additional oversight has come from Housing & Economic Recovery Act, HUD, Ginnie Mae, the National Reverse Lenders Association and the Consumer Financial Protection Bureau.

Prior to this time, reverse loans were created and offered by other entities  such as insurance companies in exchange for a portion of the equity of the borrower’s home when they passed away and at very high interest rates.

And quite often an annuity was tied to this transaction by obligating the borrower to use the funds from the reverse loan to purchase  this insurance product.

Is this an acceptable suggestion for a senior to utilize in their “later” years?


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Will I Outlive My Retirement Money?

Well, many Americans are very concerned about this probability because they simply don’t have a retirement plan or never bothered to set one up for themselves and now they are facing a scary future where they may not have enough money to sustain their lives.

The 2016 study that was done by the Harris Pole for Northwestern Mutual took a very serious look at the pending domestic crisis America is facing and not surprisingly, those who are approaching retirement   ( If they can retire) and those that have already retired, are worried about running out of money.

In a previous post, I shared the first part of an article that discusses this study and due to it’s length I will share part of it in this post, with the rest of it to follow.

New Study Underscores Retirees’ Need for Non-Traditional Funding Sources
Posted By Jason Oliva On June 7, 2016 @ 5:32 pm In News,Retirement,Reverse Mortgage

“Life expediencies continue to climb and that’s a good thing, however, Americans are increasingly less confident that their savings will last through retirement. Roughly two-thirds of survey respondents believe there is a chance they will outlive their savings, with 34% of this bunch saying the likelihood of this happening is 51% or better.

“The prospect of an extended retirement in an environment of diminishing safety nets makes it even more essential that your financial plan is flexible enough to stretch as long as needed,” said Rebekah Barsch, vice president of planning for Northwester Mutual, in a written statement.

The 2016 study results not only highlight the vast unpreparedness of American adults, but also underscores the need to look beyond traditional funding streams like Social Security to bolster retirement savings.”

Of course, as a Reverse Loan Consultant I know how valuable the FHA loan program is for preserving wealth and providing emotional security, but that is another topic.

People need to simply become educated about their benefits and why they should consider using them as part of a retirement plan.

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Can a Baby Boomer Afford to Retire? and in a recent survey the completed with American citizens on the average seems to be relatively upbeat.

Until they ask Boomers how they feel about their future and if they are comfortable enough to retire later on in their lives?   And they found out that a very high percentage of them are quite concerned about their future.

Here is the second half of the article previously posted on this site.

Baby Boomers’ Retirement Situation is ‘Troubling’
Posted By Jason Oliva On September 28, 2015 @ 5:22 pm In News,Retirement,Reverse Mortgage

“This is a “troubling” development for those over age 50, as these years are the home stretch in preparing for retirement, says Chief Financial Analyst Greg McBride.

“Using retirement savings to cover an emergency is a permanent setback to retirement planning, with the possibility of taxable distributions, early withdrawal penalties, loss of tax efficiency, and the inability to replace withdrawn funds in future years,” McBride said in a written statement.

People with higher incomes were less likely to dip into their nest egg, with more than 90% of people earning $75,000 or more saying they haven’t touched their retirement savings.

Another key highlight of the survey revealed that people living in the South were more than twice as likely than people in the West to have used their retirement savings for an emergency.

The survey was conducted by Princeton Survey Research Associates International, which obtained phone interviews with 1,004 adults living in the continental U.S. between September 3-6.”

Written by Jason Oliva

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HuffPost and Affluent Reverse Mortgage Homeowners

As I mentioned in the previous post, financial advisors are suggesting to their wealthier clients to consider using funds from a Reverse mortgage in lieu of drawing down on their investments.  The number one concern of just about everyone, is running out of money and one way to slow that possibility down, is to use a Stand By Reverse loan.

Here is the remainder of the article:

HuffPost:  Why Reverse Mortgages Make Sense for Affluent Boomers

Posted by Emily Study On July 8, 2015

“This is not just for the destitute, which is what the perception was for quite a long time,” Fiore told The HuffPost. “That’s when you will start to see the volume increase because people will look at it as a legitimate tool for retirement.”

A shift in reputation has also led to reverse mortgages becoming a bigger part of the financial planning conversation, with advisors embracing the product as a way to hedge against future costs and plan ahead.

“The financial planning community has really adopted the product in a positive way,” Fiore said.

In closing I would like to mention a study from last year called “The 6% Rule VS the 4% Rule in that various scenarios were created, showing how using a Reverse loan could extend the longevity of  retirement funds by many years.

The study was written by Gerald Wagner, Ph.D and in the study he found that ” the 4% rule works well with portfolios that are at least 50% invested in equities and then shows how the use of a reverse mortgage can be used to ‘easily create new rules, such as the 6% rule for a 30 year horizon'”.

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CNN Article About Reverse Loans

I am sharing a brief summary of an article that was recently published by CNN about why more financial advisors are reconsidering the FHA loan as an option to extend retirement funds.

Overall, the article is good but it does make a mistake in regards to Closing Costs that I discussed in a previous post.

The Origination fee CAN be  as much as $6,000 but depending upon which loan program is used and the interest rate associated with it, the fee drops and in some cases the borrower can receive a credit towards the fee.  Reducing the Closing Costs overall.

CNN Money: Reverse Mortgages Poised to Be Mainstream Strategy

Posted By Jason Oliva On May 20, 2014 @ 4:25 pm In News,Retirement,Reverse Mortgage |

“Reverse mortgages, what were once considered options of last resort, are now poised to become a mainstream financial strategy for older adults looking to shore up their retirements, reports CNN Money in a recent article [1].

Now that reverse mortgages have undergone a variety of program changes, financial services companies are aiming to make these loans more appealing to consumers, with some advisors even touting them as standby credit.


‘“Home equity is key to Americans’ retirement security, so it’s crucial to responsibly offer reverse mortgages,” said Christopher Mayer, a Columbia Business School professor and CEO of Longbridge Financial, in the article.

The article also encourages readers to weigh the costs of reverse mortgages, among other considerations, to determine if these loans are a good fit for one’s own financial situation. ”



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