Changes to the Reverse Mortgage Program Has Positive Effect

Changes to the Reverse Mortgage Loan Has Positive Effect

Amid the news that the positive press for the reverse mortgage loans have surged in the past months and FINRA’s declaration that the reverse mortgage is no longer a loan of last resort, individual financial planners are beginning to see the advantage of the reverse mortgage loan as a long term retirement planning tool as well as an alternative way of paying off one’s mortgage and using those funds for other uses.

In the past, misuse of reverse mortgages lead to borrower defaults when they were unable to pay their property taxes and insurance. In addition, because most borrowers received their funds in a lump sum, there were instances where little was left over for unexpected expenses.

In an effort to make the program safer for borrowers, changes were made to the program to make it a more advantageous, long-term retirement planning tool and NOT a loan of last resort.

Since the changes, part of the uphill struggle have been educating new and past consumers on the advantages of the program as a way to strengthen their retirement portfolio. In addition, educating financial planners became more important as well as they were another vehicle through which consumers could be educated. 

Presently, financial planners have begun to embrace the reverse mortgage product after the changes, choosing to provide their clients with different ways it should be used (and ways it shouldn’t) to make sure the consumer knows about the program and why or why not it works for their specific situation.

According to an article in Reverse Mortgage Daily, reverse mortgages are beginning to shed their previous reputation.

David John, an associate professor of finance at the University of Wisconsin-Superior stated in the original Bankrate article:

“Reverse mortgages […] can be a useful financial tool to senioes when used appropriately. […] financial planners didn’t view the reverse mortgage as a planning tool. It was viewed as a last resort and they assumed that the only people that do reverse mortgages are people that are desperate.”

In truth, it was a vicious circle, reverse mortgage loans were only suggested when borrowers were in dire financial states so that only borrowers who had monetary need would even look into a reverse mortgage.

Hopefully, as more positive press and positive reverse mortgage loan stories make their way through the industry, more consumers, financial planners, etc. will, at least, make the effort to learn more about the program before pushing it aside as a “last resort.”

Most importantly, it’s a program to consider for the future as well and is most beneficial when taken early and used to plan future retirement needs, expected or unexpected.

Beth Paterson, executive vice president of Reverse Mortgages SIDAC said:

“Maybe they don’t need the money right now, but down the line they might have a medical emergency, so it’s good for them to have the option.”

Be aware that while you cannot lose your home under normal circumstances, foreclosure may occur if you do not pay your taxes and insurance and otherwise comply with the loan terms.

Interested in a reverse mortgage loan or simply want more information? Give PS Financial Services a call at (888) 845-6630 or via email at info@reversemortgage.com. We don’t pressure those who inquire. We are simply here to help.