McCaskill Remains Vigilant on Reverse Mortgages

A reverse mortgage is simply a Home Equity Loan for senior homeowners [with some very special benefits].

Since less than 2% of eligible homeowners have ever participated in the program, it is so easy for false information to be passed along as truths. Noise is not truth just because it is heard loudest in a small group. But, consider this…urban legends abound on almost every subject and most all are simply inaccurate.

Let’s consider these points:

(a) Big fees not true. The fees are always less than what it would cost to sell the home. Where are the headlines that scream about the fees that the Realtor charges to take a sales order? Even experienced Realtors will agree that the actual cost to sell a home reaches somewhere above 10% total costs. Add up the seller concessions at settlement, the real estate commission, the costs of moving which include the labor, the truck, the new utility deposits, and more. To sell a $400,000 home will cost around $40,000 in fees. A Reverse mortgage on the same house will cost less than $20,000. Think of it this way…a reverse mortgage is a way for a homeowner to, in a sense, sell the home to themselves. They get some of their profit in hand, ie., equity, and they get to keep the home, too. Let’s stop yelling nonsense and start thinking a bit.

(b) All Loan Officers are not scum. Stop it already! Sure, there are criminals out there and they should rot in jail. But, there are plenty of decent, honest, compassionate, experienced, and caring people who love what they do and enjoy a quality of life that comes from the joy of helping elder clients consider positive ways to work out their financial issues and solutions under the guidance of professional assistance.

(c) The “news” is partial. Let’s be reasonable here. Do you believe everything you read? Do you believe that every journalist actually researches all the points of their written article? If you look at most negative stories in the press, they are almost always the same story - “Miss Jones gets Reverse Mortgage, Loses Everything”. Turns out that the criminal got her to get the loan so that he/she could invest her funds in the excellent opportunity for frog-leg futures. And, true, everything was lost. But, that was a criminal act…no different from painting driveways black. Be realistic, here. That was not the fault of the reverse mortgage. That was a criminal act and is no more the fault of the reverse mortgage financial product than you would place the blame for someone losing their savings in Las Vegas after taking out a regular loan from, say, Bank of America. It is not the fault of the source of funds but, rather, the fault of a criminal act combined, perhaps, with faulty reasoning.

(d) Ask the good people who have actually benefited from the power of a reverse mortgage. Please, talk to the ones who actually know the facts. Call a lender. Ask to speak to a client.

(e) Researchers estimate that nearly 78% of all older adult households do not have sufficient resources to sustain them through their retirement years. This fact and other truths can be found in the detailed research document just released by MetLife and the National Council on Aging. You can read it at http://seniorlifestylemortgage.com/pdf/tappingequity.pdf

My view is that it is time to put the reverse mortgage bashing to rest and to accept the reality that this federally insured lending program has incredible benefits. A Reverse Mortgage is a valid, well-designed financial tool that solves problems in a safe and secure manner. You, too, may seek its benefits at the appropriate time.

And, besides, the product has an incorrect name. No one actually “reverses” anymore. That’s what the borrowers did when they wanted to convert equity into a monthly proceeds stream. Now, almost everyone prefers the funds to remain in an always accessible credit line. That is why I prefer to call it a Senior Lifestyle Equity Loan.

~wrh