April, 2012 | Reverse Loan Consultant

April 2012

April 20, 2012 Reverse Mortgages No Comments

Financial Planning & Reverse Mortgages

Here is part 2 of an article that was published in Reverse Mortgage Daily, discussing how more Financial Advisors are beginning to look at the Reverse loan as an additional method of managing their client’s investments from being drawn down.
“Statements from those like Evensky, who are highly regarded in the financial planning community, have the potential to reach an largely untapped market. And some lenders may already be seeing an immediate benefit.

“We have already begun to market to the younger demographic, and this article has strengthened our message,” says Mike Gruly of 1st Financial Reverse Mortgages. ”The fact that the message comes from a respected member of the financial planning industry instead of the lending industry itself attracts more serious listeners, and is creating more serious dialogue.”

The dialogue is something originators have long worked toward, but have seen little success with as recently as late 2011.

Numerous financial planners told RMD in September [3] that they either didn’t know enough about reverse mortgages to recommend them to their clients, or that outdated information about reverse mortgages was drawing them against the loans as a retirement tool.

Today, however, the conversation has a different tune as originators have research with data to back up the idea of marketing to younger borrowers who have greater savings and higher home equity.

“This offers different possiblities but for a different customer, and a customer who might be amendable to a financial planner,” financial columnist Scott Burns told RMD after writing about the Sacks and Sacks research.

The Saver is a win-win for retirees, Evensky told Financial Advisor magazine.

“When markets regain their strength, the mortgage can be paid back,” Evensky told Financial Advisor magazine. “Our studies indicate this will significantly increase the survivability of the portfolio in retirement.”

Written by Elizabeth Ecker [4]

April 19, 2012 Reverse Mortgages No Comments

Financial Advisors and Reverse Loans

The obligation of a Financial advisor to their client, is to to guide them in their investments to develop a healthy portfolio of funds and also protect those funds from running out, by managing the account and providing guidance to the clients on an ongoing basis.

For many years, Advisors have felt that a Reverse loan defeats the purpose of protecting their clients’ assests and due to lack of knowledge about the FHA loan program and how they function, the Advisor would not consider them as an option to protect their client’s principle from being drawn down.

But recently an article was published in Financial Advisor magazine to the industry, about how they can utilize a Reverse mortgage to extend the life of their clients investments without any tax consequences. It is simply a matter of the Advisor being more open to learning about this unique federal loan program for seniors and what it could mean for their business in the coming years because the future of financial planning will be rapidly changing as the Boomers begin to consider retirement and new methods and options for financial planning will need to adapt to the changes as they appear.

I will be posting some comments in two parts from Reverse Mortgage Daily with the first one here:

Reverse Mortgages on the Verge of Financial Planning Breakthrough?
Posted By Elizabeth Ecker On April 18, 2012 @ 6:36 pm In News,Retirement,Reverse Mortgage | No Comments

An article [1] published Wednesday in Financial Advisor magazine demonstrates the way in which a reverse mortgage can preserve the portfolios of retirees who have investments. On the heels of another recent article written for financial planners on the same topic, it is beginning to sound like a sea change for the reverse mortgage industry and its work with financial planners.

Featuring an interview with nationally-recognized retirement expert Harold Evensky, the Financial Advisor article [1] details the Saver option for use by baby boomers who are planning for retirement.

“I’m reasonably positive [the Saver] will become an important part of our planning in the future,” Evensky told the publication.

Evensky and colleagues at Texas Tech have worked on a yearlong study on the use of reverse mortgages in retirement planning that is expected to be published soon. In speaking with groups of financial professionals about the research, Salter told RMD [2] he has received positive feedback from the planning community. In the meantime, Evensky says the studies indicate that use of the reverse mortgage Saver product will significantly increase the survivability of a retiree’s portfolio in retirement.

Part 2 to follow on 4/20/12

April 12, 2012 Reverse Mortgages No Comments

When Should You Retire?

Retiring at one time, was something most people planned on doing if they had been contributing to a retirement plan. And especially if they had been fortunate enough to work for one employer for many years that provided a retirement program to their employees.

However in the last several years, that possibility has changed because of the economic crash we recently experienced and because many people have lost their jobs, retirement may have to be delayed.

I found the following article to be interesting and you may too.

Reverse Mortgages Delay Retirement Shortfall, New Study Shows
Posted By Elizabeth Ecker On April 10, 2012 @ 5:20 pm In News,Retirement,Reverse Mortgage | No Comments
“Financial advisors will be of greater help to their clients if they focus on a broad array of tools, including taking out a reverse mortgage, a Boston College study[1] released in April finds.
The study, conducted by the Center for Retirement Research at Boston College, analyzed the point at which a person of retirement age falls short of his or her retirement “target” when several different tools are used: delaying retirement, taking out a reverse mortgage and controlling spending.
The study assumes reverse mortgage retirement income is used either by a homeowner without a mortgage who takes the maximum loan amount and receives lifetime payments over the course of the loan or by a homeowner who has a mortgage, in which case the loan is used to pay off the existing mortgage or is received as a lump sum.
Under a base case scenario, 74% of households fall short of their retirement target at age 62. The study finds that with a reverse mortgage, that age increases to 67. When compared with other potential solutions however, including controlling spending and investing 100% in “riskless equities,” the reverse mortgage delays that age more than the other mechanisms for each age group.”

April 5, 2012 Reverse Mortgages No Comments

Investment Advisor Magazine and Reverse Loans

I am posting a article that discusses how more financial Advisors are reconsidering the use of a Reverse mortgage for their clients. Typically, the stumbling block has been the “reputation” that the FHA loan product has had to endure, as being a terrible option for additional funds as we age.

Investment Advisor magazine: Reconsidering Reverse Mortgages

Posted By Elizabeth Ecker On April 3, 2012 @ 10:33 am In News,Reverse Mortgage | 1 Comment

Trading their reputation as a loan of last resort, reverse mortgages are gaining popularity among borrowers and investment advisors, according to an April 2012 article [1] in Investment Advisor magazine. As the need for retirement income grows and product options have changed, advisors may be starting to take another look at reverse mortgages as a retirement tool. Investment Advisor writes:

…the product is often seen as an overpriced retirement income vehicle of last resort for distressed seniors. In fact, advisors typically avoid recommending them to their clients, and following Wells Fargo’s and Bank of America’s exit from the reverse mortgage market in 2011 due to worries about rising defaults, the product has come under an even greater cloud of suspicion.

…yet as the U.S. population ages in pricey properties they don’t want to give up, the market for reverse mortgages is growing. In particular, HECMs have gained popularity because the federal government backs the program. As baby boomers age and home prices remain stagnant, seniors are likely to rely on them even more—and ask their financial advisors about reverse mortgages.

Here’s the surprise for advisors who decide to give reverse mortgages a closer look: Under the right circumstances, there are times when the product may actually benefit a client.

…If anything threatens them now, it’s not a lack of demand. It’s the risk that the FHA will go broke and require a tax bailout for the first time in its 77-year history

“I’m hearing about a lot of changes going on in that marketplace that I think will make reverse mortgages dramatically more relevant for advisors,” says [Michael Kitces, publisher of “The Kitces Report” and director of research for Pinnacle Advisory Group in Columbia, Md.]. “I don’t think advisors ever were really using them in the first place, but with some of the changes coming forward now, we may start seeing reverse mortgages used for the first time with some increased regularity by advisors.”

“I don’t care how bad the market gets, this loan is virtually never going to be underwater,” Kitces said. “It’s a way to take a loan out against your house and not have cash-flow constraints in paying it back.”

Written by Elizabeth Ecker [2]