Financial Advisors and Using a Reverse Mortgage

This post contains the remaining part of an article I shared in the previous post, regarding how Financial advisors are gradually seeing the benefits of using a Reverse loan to extend their clients retirement funds.

There have been many changes in the HUD program recently, making them even more attractive as a solution to fund longevity.   The costs have been reduced and there are more options to chose from than in the past and of course, they are insured by the federal government.

Here is the remaining portion of the article:

Investment News:  Reverse Mortgages Recast for Financial Planners

By Alyssa Gerace on February 19, 2014

Giordano is chairman of the reverse mortgage industry’s Funding Longevity Task Force, which includes members like John Salter, a tax attorney specializing in pension matters; Harold Evensky, president of Evensky & Katz Wealth Management; and Shaun Pfeiffer, a professor of personal finance at Edinboro University.

The three have done extensive research [2] on how the government-insured Home Equity Conversion Mortgage (HECM) product can be used as a retirement planning tool [3].

“Our study considers using a HECM Saver reverse mortgage as a risk management tool in conjunction with a two-bucket investment strategy, coined the standby reverse-mortgage strategy, in order to increase the probability a client will be able to meet predetermined retirement goals,” they wrote in a 2012 article published in the Journal of Financial Planning.

Since then, HUD has issued new rules for HECMs that limit homeowners from borrowing more than 60% of the maximum reverse mortgage loan amount when it closes for a one-year period, Investment News writes. The program changes are meant to ensure loans will cover borrowers’ ongoing expenses, in addition to other common uses such as improving cash-flow.

“A HECM is just another way we can help clients address their retirement income needs,” task force member Marguerita Cheng, a financial planner and chief executive of Blue Ocean Global Wealth, told Investment News

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