You get just one chance to build or destroy your credibility with potential borrowers and financial professionals. Here are some of the most common inaccuracies told by some reverse mortgage originators today…
*There is no transcript for today’s episode*
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Editor in Chief: HECMWorld.com
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.
Readers wishing to submit stories or interview requests can reach our team at: info@hecmworld.com.
2 Comments
Shannon,
what you just got through saying is oh so true! We as industry professionals have a fiduciary responsibility to our seniors to explain in details all the pros and cons.
I hear stories from seniors only to often on how their loan representative did not explain this or that about my reverse mortgage. What is so sad to hear is when they find out about things like the growth of their line of credit is not adding to the increase of value to their him but only adding to the amount they can borrower,
There are so many other examples I can bring up but you presentation brought the message home loud and clear!
We must not be sales people when we are in front of our prospective senior borrowers, we have to be knowledgeable advisors. We need to guide them into the component parts of our product that will do them the most good. If our product serves them no benefit, we need to tell them that, do them the service and do what is right!
That is my take on your message my friend.
John A. Smaldone
http://www.hanover-financial.com
Of the various financial schedules required for a HECM, perhaps the least comprehensive is the amortization schedule particularly where the Standby HECM is being planned. It is here where knowing how the math behind the schedule is the most valuable and most needed.
For example, we hear the comparisons of the $21,000 upfront costs for a $600,000 with today’s HECM and only $12,000 for a HECM that qualifies for the upfront of 0.5% of six months ago. But unless that amount is being paid off at closing, it means little compared to how much those upfront costs will cost at termination.
For example, assume that an adjustable rate HECM will have an average effective interest note rate of 5.8%. Assume there are no draws from the line of credit over the life of the HECM and no pay downs as well. Assume the first HECM has a case number assignment (CNA) dated 9/1/2017 and the other one dated 10/27/2017 and both homes cost $600,000.
So what will the pay off amount be at termination be at closing at the end of 10 years? On the HECM with a 9/1/2017 CNA, the pay off amount will be $24,236 but on the one with a CNA dated 10/27/2017, $39,365.
After 20 years the balance due on the HECM with a 9/1/2017 CNA will be $48,949 and the one with the 10/27/2017 CNA, $73,790.
Finally after 30 years, the balance due on the HECM with a 9/1/2017 CNA will be $98,861 and the HECM a 10/27/2017 CNA, $138,321.
When looking at the simplest of the HECM strategies, the Standby HECM used as a pure cash reserve rather than a portfolio offset to the risk of the sequence of returns. When the line of credit is not tapped, HECMs with CNAs dated before 10/2/2017 may in fact have been cheaper than today’s HECM used for that purpose at not only the time the HECM is originated but also at loan termination. This conclusion goes against some of the positions begin promoted today.