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Recent HECM Changes Opening Minds
Are reverse mortgages a useful retirement tool or a bad move for today’s retiree? That is the question addressed in CNBC’s recent article in age-based investing.
It should come as no surprise but anytime you turn conventional wisdom on its head you will get resistance from most. The Home Equity Conversion Mortgage turns the conventional American wisdom of paying one’s home off before retirement and keeping the home encumbered upside down. However in today’s world of retirees being ‘upside down’ in retirement preparedness more financial professionals and media pundits are beginning to question conventional wisdom when it comes to home equity.
The column begins by citing recent improvements in consumer protections increasing the comfort of financial advisors recommending the loan. Ironic considering that many of the HECM’s recent changes met strong resistance yet they may be the very factor that finally expands the program’s marketshare which has hovered at a mere 2% of eligible households for years.
Rita Cheng, a certified financial planner and CEO of Blue Ocean Global Wealth said…
Download a transcript of this episode here.
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1 Comment
Although we are marketers and salespeople, we need to be accountable and at least somewhat realistic. If the rate of case number assignments continue at the same pace as June, July, and August (the three latest months for which HUD has released case number assignment information), our endorsement count for this fiscal year could go below 48,000.
So while we keep telling ourselves that the HECM is now a better product for financial planning purposes and with financial assessment, a safer product for consumers, our case number assignment numbers seem slow to reflect it and may result in making this fiscal year the worst for endorsements since fiscal 2005.
Today we have better catch phrases such as reversing conventional wisdom and the standby reverse mortgage strategy but few originators seem to understand the product; their math many times proves it. We may be doing well at presenting at conventions of the financial advising community, but many times that is more due to the thirst for newer topics with enthusiastic speakers than acceptance of what we present. Eventually it should make a difference in our numbers but how much of a difference and when?
The product is dynamic and has a plethora of uses but we seem to limit its use far too much in our presentations. HECMs are a product which can be turned into a true retirement cash flow tool when used in a prudent manner by the borrower. A HECM is not a retirement planning tool but rather a retirement cash flow tool. It is not in the planning phase when a HECM becomes a tool but rather in the execution of that plan.
As the adage goes: “The proof of the pudding is in the eating.” If we cannot see what it is we are purporting reflected in our case number assignments and endorsements, then we need to reexamine our claims. We are not there yet but nine months goes quickly and there are no signs of an immediate turn around.