financial crisis

Reverse Loans Improve Lives

I mentioned in my last post that quite often I am asked why people apply for a reverse loan and what are the most common reasons.

In my previous post I spoke about a client who had been using her credit cards to pay for her “cost of living” expenses, because her Social Security income was too low to get her through each month.

However, the downside to using credit cards, is eventually you use all of the credit available on them, but still have an ongoing payment that now cannot be met.

You can read about Sylvia and how we managed to eliminate that debt and give her additional money each month from a reverse mortgage in the previous post.

My next example is Bonnie and Jim   ( No last name for privacy reasons) who had had a major medical disaster destroy their lives.  Medical emergencies are probably the number one reason for causing personal financial collapse as no one is prepared for the medical expenses that come with aging.

He had a great career in the movie studios as a transportation driver and life was quite good for them until he developed diabetes.

Unfortunately like so many men, Jim ignored it and continued to eat and drink whatever he wanted and did not take care of his health.   Needless to say he became very ill and almost died resulting in the loss of both of his legs and kidneys to the disease.

He was no longer able to work and they quickly ran out of their savings to pay medical bills and their regular ongoing monthly expenses and used up all of the funds that were available on their credit cards leaving them in a terrible, crushing financial situation.

They owed the IRS money, all the credit cards and ended up doing a Chapter 13 Bankruptcy but somehow managed to continue to make their mortgage payments and ultimately repaid the money they owed to the IRS

I was referred to them by a CPA and in spite of the ugliness of their credit and the bankruptcy, I managed to get them approved for their reverse loan, relieving them of the burden of mortgage payments, plus additional funds that they were able to receive at the close of Escrow.

Making their life just a little bit better.

Jim and Bonnie are doing very well as of this writing and even though their credit had been ruined, I was still able to get them approved for their reverse loan and help them move forward and into better circumstances.

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Reverse Loans for Retirement

Well, this is the direction the FHA loan is going as America is staring at a huge domestic crisis, as to how to take care of the aging Baby Boomers.

Most don’t have enough money to retire and live on for the rest of their lives and with the recent positive changes in the FHA HECM Reverse mortgage, it will provide them an additional option to preserve the funds that they do have in any portfolio.

This is the most regulated loan in the Lending industry.   Safe, affordable and a realistic option to fund one’s longevity.

Here is the remainder of the article.

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

“Such reluctance can be largely attributed to a lack of education on how to strategically leverage home equity in a retirement income plan, coupled with a lack of understanding for the new consumer protections that have been enacted in recent years.

Of a total of 1,003 people between ages 55-75, roughly 70% failed a retirement income literacy quiz on reverse mortgages administered by The American College earlier this year. While more than half of these retirees and pre-retirees (56%) said they haven’t considered home equity use in retirement, far less (14%) admitted they have considered the idea of using a reverse mortgage to support their retirement.

Despite these attitudes, as longevity is expected to increase, more seniors may find themselves with insufficient savings to sustain their financial needs in retirement. This presents a plausible scenario that could lead to increased demand for reverse mortgages in the future, but it all starts with education.”

If you would like an honest and detailed presentation of the facts about Reverse loans, please contact me.

I will meet with anyone living in the Southern California region.

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Are You Ready to Retire?

Various studies of Americans saving habits for retirement have been under review for quite some time and the consensus is that most Americans are underfunded in their retirement plans and most people are very concerned about outliving their savings.

Moving forward in the coming years, more seniors will seriously consider using a Reverse loan to stop the bleeding from their savings and leverage what they do happen to have, to last longer than the typical projection that a Financial Advisor may provide to their clients.

A study that was completed this year  looked in depth at what Americans are doing do save for the future, found that most are unprepared to retire and other dire concerns the will effect their ability to live comfortably.

Here is the first part of an article discussing this very serious, domestic situation that will have huge impacts on our seniors in the future.

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

“As increasing longevity continues to stretch personal savings thin, a recent study suggests Americans will need to look beyond traditional funding sources if they want their retirement to last for the long haul.

Americans are living longer than ever before, yet many are still not taking the necessary steps to financially plan for their future, according to the 2016 Northwestern Mutual Planning & Progress Study. Out of more than 2,000 people aged 18 or older, only 21% say they have increased their savings in efforts to prepare for retirement, whereas 44% report having taken no steps at all.

The 2016 study, which Harris Poll conducted on behalf of Northwestern Mutual, explores the state of financial planning in the U.S. today, providing insights into the money behaviors and priorities of American adults.”

Due to the length of this article I will follow up with additional posts, sharing it in it’s entirety.

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Under Funded Seniors

Every day 10,000 people are turning age 62 and many of them are underfunded for retirement.   As the “Silver Tsunami” of Boomers begin to retire or attempt to retire, they may not have the funds for their later years and this is a serious national concern, about to take care of this aging population in the next ten years.

Financial Advisers after may years of resistance to the idea of using a Reverse loan as part of retirement planning, are beginning to see the wisdom in utilizing this option to extend the longevity of a retirement portfolio.

The Journal of Retirement recently published an article about how using funds from a Reverse loan is an excellent strategy manage and extend retirement funds and provided three examples of individuals and how a Reverse mortgage could give them a retirement advantage.

My previous two posts cover the first sections of the article and this post will provide the remainder of it.

“The Under Funded Client”

“Lastly, there are under-funded clients—those who may need cash flow immediately and may obtain a reverse mortgage as a last resort only after exhausting all of their other resources. This group’s Monte Carlo success rates are low, perhaps 60% or less.

“These clients may have the greatest need for a reverse mortgage,” the authors write. “However, it can be demonstrated, using Monte Carlo simulation, that under-funded retirees with home equity that is equal to, or greater than, their relatively low level of invested assets can gain a tremendous boost from the use of an RMLOC [reverse mortgage line of credit]. The challenge may be to maintain a strong financial discipline and to use the reverse mortgage judiciously to their greatest long-term advantage.”

An important conclusion of the article is that reverse mortgages can help with a retiree’s three basic concerns: enhancing sustainable spending, serving as an emergency fund, and even boosting estate sizes, according to Davison and Turner.

“Overall, the major positive surprise is the value reverse mortgages can add to the lives of retirees, both those who already look forward to a satisfying retirement and those who are not as well prepared financially but will make it through,” Davison and Turner write. “This bodes well for a country with a rapidly expanding and aging retiree population.”’

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Strategies to Extend Retirement Savings

I shared part of an article in the previous post that discusses a recent paper that was prepared and published about how using money from a Reverse mortgage is a strategy that more Financial Advisers are considering for their older clients.

And of course, each situation is different depending on the age and assets of seniors and their personal concerns.   Most often they are worried about running out of money and not being able to remain in their homes and have the funds to pay for any services they may need in the future.

The article provides three different scenarios for consideration and how a Reverse mortgage might be used in each situation.

New Paper Spells Out Reverse Mortgage Strategies for Financial Planners

“Because reverse mortgages do not offer a one-size-fits-all solution, the authors note that it is useful to think of these products as being used differently by three homeowner profiles: individuals whose retirement plans are well-funding, those whose plans are constrained and others who are under-funded.

Those fitting into the “well-funded” description, the authors note, may use a reverse mortgage line of credit as a standby or emergency fund; their Monte Carlo success rate is high (over 85%), indicating they may rarely face a spending shortfall during retirement.

Meanwhile, constrained clients are those who typically have Social Security or a pension and a “medium-sized” investment portfolio. This group, according to the authors, has a Monte Carlo success rate ranging from 65% – 85%, indicating higher chances they will need to cut future spending due to underperforming financial markets.

“Their plan may have no cushion to absorb unplanned-for events such as higher medical costs or greater longevity,” write Davison and Turner. “Constrained clients may especially benefit from using a reverse mortgage in concert with their investment portfolio or other assets.”’


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