Is the issue of heirs opposing their parents taking a reverse mortgage rooted in truth or is it a myth perpetuated by a misinformed media? Last week we sat with Michael Banner, National Education Director for Security One Lending and founder of the American CE Institute who shares his real life experiences with children heirs and senior professionals across the country.
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As a prominent commentator and Editor in Chief at HECMWorld.com, Shannon Hicks has played a pivotal role in reshaping the conversation around reverse mortgages. His unique perspectives and deep understanding of the industry have not only educated countless readers but has also contributed to introducing practical strategies utilizing housing wealth with a reverse mortgage.
Shannon’s journey into the world of reverse mortgages began in 2002 as an originator and his prior work in the financial services industry. Shannon has been covering reverse mortgage news stories since 2008 when he launched the podcast HECMWorld Weekly. Later, in 2010 he began producing the weekly video series The Industry Leader Update and Friday’s Food for Thought.
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10 Comments
I by and large disagree. I would say that 75% of the people I speak to who do not do a reverse mortgage are influenced by their children’s disapproval. Yes, their “children” for that is who they are. The most common refrain is ” my children do not want me to do it”. (the other common reason is that the parents want to leave the house or the proceeds of a sale to their children.) Yes, the comeback from me is “whose lives are they anyway, are your lives to be lived at the highest possible level or not?” It has bought me a few loans but mostly a waste of time once the “children” say no.
I tend to disagree w/ this video, as I have spoken to numerous parents who say its “up to the kids” or “the kids dont want us to do this”.
In the video Mike states that in his presentations he asks people to raise their hands, and then asks them to stand (in front of a room full of people)if they don’t want to put their parents needs first… common sense says that people wouldn’t be honest and show there greed in front of others.
I have seniors that just won’t budge because of the “kids” feelings about the Reverse. If Mike hasn’t seen this, I think he is very lucky to be getting just all referrals. I do marketing all over and again, some of these kids are just greedy. absolutely disagree w/ this video
I also don’t think it’s a myth, for me as an originator, it’s a definite reality. My last borrower was talked out of doing a reverse mortgage by her two daughters, even though she was barely able to pay her monthly mortgage. After 4 months, she did a reverse mortgage and told me that she won’t tell here children because they would be so upset.
I can honestly say I lost one loan due to greedy children. They actually came to my office in a threatening manner wanting to know “where do you get off taking our inheritence?” This on the day the loan was to fund. I had closed the loan with J B Nutter. With the document brought in by the kids (in their forties) and a call to my client, we cancelled the loan.
I was assured everything had been handled properly, it was a good loan, I was not at fault. I continue to ask clients to bring everyone to our meetings, give the kids my number, I want everything clear upfront for a smooth transaction.
So it can happen but educating everyone you can will hopefully reduce, if not eliminate such situations.
First, let me say when a client themselves states they want to leave the home to their children free of any mortgages I totally respect that decision.
But I do maintain when a client states “it’s up to the kids” or “the kids do not want me to do it” or “the seniors won’t budge because of the kids feelings about reverse mortgages” then in most cases the kids have no idea of the financial situation their parents are actually living in at this point of time in their lives.
And again, this is no disrespect to those “children.” Many seniors are very hesitant to admit to their children they are not in the best of financial positions. These people have huge pride…
That being said: Children are not against reverse mortgages! In the great majority of these situations those children don’t have the full picture. If your clients allow you to meet with the children you will see how quickly they change their mind..
Please know, I totally respect both of your opinions, and I’m sure this happens from time to time, but I will not be convinced there are that many selfish heirs out there that truly do place their inheritance in front of their parent’s quality of life.
At least I hope this world hasn’t sunken that low yet! LOL
I do not remember reading more negative reactions to a Reverse Focus/HECM World/Reverse Fortune video. No doubt Mike Banner was speaking from his perception and views on the subject. Sometimes our experience is limited and like most perceptions, facts most likely paint a very different picture.
Two weeks ago, my wife obtained an application from a senior whom my wife had been working with for a year. His daughters fought him about getting a HECM despite meeting with my wife. Their position is that they do not want a lender or FHA becoming fellow heirs through charging upfront costs and accrued MIP and interest.
The father finally realized that his cash flow situation would soon ruin him financially even though his life expectancy is not as long as other males his age.
The senior told my wife that he realized that his future with a HECM would not entirely strip away the inheritance he had created for his daughters and hearing a financial planner on TV proclaiming that many seniors could be hurting themselves by not getting a HECM decided to ignore his daughter’s opinions, follow the advice of a friend and the financial planner, and get the HECM.
I find Mike’s view on this subject to be naive and not representative of the industry as a whole.
Thank you to Michael Banner for his interview and to all for your comments. We encourage the frank open discussion of ideas here on HECMWorld especially those some may disagree with or those that may challenge long-held beliefs and experiences in the field.
I have over 10 years originating HECM and other proprietary reverse mortgages and have encountered only a handful of earnest objections by heirs over the inheritance, resulting in the potential borrowers failing to proceed to application or withdrawal before funding. Though the question has been presented by a minority of potential borrowers, very few have not followed through with application and funding.
When this objection has become a factor to consider, I’ve employed one of several methods to mine deeper into the objection, most often finding the objection was in fact a means the borrowers used to develop a better understanding of the HECM, their benefit and the resulting depletion of home equity that may be benefited to the heirs.
If the borrowers state their intent to leave the home as a debt free legacy, I respect that completely and will only pursue further discussion if I perceive some discontinuity in their perception and financial strategies.
Overall, I’ve found that greed is not a factor to concern myself with. Understanding of the HECM on the part of the borrowers and their family and heirs is the foundation for good relationships and a must for sound lending practices. That said, learn what your potential borrower’s financial position and strategies are, present the HECM as a tool to meet those and should misunderstanding remain, approach the facts from another tact.
With the idea seemingly a ‘reality’ in the minds of originators, the problem appears more to me a matter of developing a thorough fact-finding and relationship building plan to foster a trust with borrowers ‘and’ their heirs.
In 13 years, it has been rare that the adult children of potential clients tell me or the potential client tells me that the RM won’t be done because the adult children don’t want to lose their inheritance.
It has been less rare that the potential client tells me their children don’t think the RM is a good choice. Who knows what their motivation is.
I have had many potential clients tell me they want to protect the equity for their children.
But I also remind myself there may be some self-selection here. For potential clients that know their adult children would have a fit if they were to do a RM and risk their inheritance, they just plain don’t call us.
Our anecdotal evidence is somewhat like a telephone survey in the early 20th century. It got a response that was totally contrary to what actually happened. This was because mostly rich households had telephones at that time. So, typical households were not represented in the survey.
Are heirs a dominant reason why HECM applications do not close? Absolutely, not!! But it is a reason, if not a significant one; however, it is not so significant as to rise to the level of attention that the New York Times recently placed on it.
Right now only about 60% of all HECM applications successfully close once a case number has been assigned per HUD statistics. In all likelihood, less than one out of every two completed applications (including those which never receive a case number) close. The reasons are myriad. However, such stats do not look at the reasons that seniors who reach out to originators or attend seminars, etc., do not complete or even start the application process.
As a CPA specializing in tax issues, the needs of heirs should be a consideration but not the litmus test for not getting a HECM. Heirs are but one factor among many. Prospects should have a list of pros and cons and on a weighted basis should use that list to help them reach a relevant conclusion about getting a HECM.
We must also keep in mind that attitudes about the importance of the needs of heirs vary substantially by region of the country and the economic status of the HECM prospect versus those of heirs. As one father told me: “My two sons are doctors and have already made multiple times the money I did in my entire career.” Or as another father stated: “My son cannot walk and I must carefully consider how I spend my money now so that he has enough to live happily.” These are two very different situations and neither involved “greedy” heirs but in both cases, a proper weighting was given to the needs of heirs.
Tom is right on point when he describes how there is insufficient objective evidence to conclude how wide a problem heirs might be in trying to close HECMs. Tom is also right to be concerned about the quality of the information we have on this subject generally since it is only anecdotal and not verified. While such a response is not as satisfying as declaring it is really not much of a problem at all, we need to address the issue with grace and professionalism and stop using terms such as “greedy heirs” to describe concerns expressed about the needs of heirs even though at times that is precisely the case.
As an aside, it is humorous to read claims that education conquers all especially when couched in terms of a salesperson describing how he allegedly overcomes all objections related to heirs. Unfortunately such hubris is not rare in our industry despite truly awful conversion rates and shrinking 1) application numbers as well as 2) overall industry revenues. It seems humility, respect for the consideration of prospects, and realistic self-assessments about personal production are not considered virtues by some in our industry.
(The opinions expressed in this comment are not necessarily those of RMS or its affiliates.)