Forward on Reverse: Marketing Reverse Mortgages 101: It's All About EducationAtare E. Agbamu, CRMSreverse mortgage, retirement finance, heloc, hecm
Money, the ubiquitous personal finance monthly, devoted
its entire June 2003 issue to retirement finance. Among the
retirement experts quoted in the cover story was a well-regarded
financial planner in New York. In the story, he authoritatively
posed this question, "If I have a ton of money in my house, but am
going to stay there until I die, do I really have an investable
asset?" Our highly knowledgeable financial advisor answered,
rhetorically, "I don't think so."
A May 24 article in National Underwriter, titled "What
Boomers Should Know About Reverse Mortgages for Mom and Dad,"
contained some presumably informed advice from financial planners
to baby boomers about reverse mortgages. In the concluding
paragraph of the article, a certified financial planner, who
described her philosophy as "Thou shalt not have debt when you
retire," offered the following well-meaning but potentially costly
counsel to boomers on medical expenses and reverse mortgages:
"And, even if money is needed for medical expenses for one
spouse & (offers a note of caution). The surviving spouse is
often the wife, and if there is a reverse mortgage, there is the
danger she will not have a place to live, as well as the potential
for loss of Social Security and pension benefits. So, if a reverse
mortgage is being considered, these factors should be weighed, she
In my July 2004 column, "Harvesting Cash for the Golden Years:
To HECM or to HELOC?," I related a personal experience. Peter
Forward, a pseudonym for a seasoned Twin Cities mortgage broker,
put his own mother into a traditional home equity line of credit
(HELOC) because of the "high cost" of a comparatively superior
There is a common thread in these three examples of advice from
otherwise informed financial professionals: a lack of basic reverse
With an elementary grasp of reverse mortgages, our
Money magazine-quoted expert could have known that reverse
mortgages have, forever, transformed accumulated home equity into
an "investable asset" for retirees. Also, he could have figured out
that reverse mortgages have made home equity a more reliable source
of retirement cash flow for all homeowners than stock-market-linked
401(k)s and mutual funds.
With a rudimentary understanding of these unique home equity loans,
our National Underwriter-quoted guru could have understood
that a "surviving spouse" can never be forced from her home or lose
her "Social Security and pension benefits" in a reverse mortgage
And with a fifth grade knowledge of reverse mortgages, our veteran
mortgage broker, Peter Forward, could have concluded that, given
his mother's long-term (more than five years) need for cash, the
government-insured reverse mortgage program's entry cost, high as
it may seem at first glance, was actually a small price to pay for
a 99.9 percent foreclosure-proof home equity loan without monthly
repayments. Instead, he saddled his mother, already strapped for
cash, with a home loan that would burden her with monthly mortgage
payments, cost her more in the long term (in contrast to the
federal government reverse mortgage), and expose her to the hazards
of default and foreclosure in the winter of her life.
There are several lessons here, but I will stress just two of
them. One: Get your reverse mortgage counsel from specialists who
focus on reverse mortgages. The National Reverse Mortgage Lenders
Association (NRMLA) has a list of referable reverse mortgage
specialists across the nation. You can reach NRMLA at (202)
939-1760 or visit their Web site at www.reversemortgage.org.
Reverse mortgages are fairly complex. It takes much concentrated
study and practice (originating, processing, underwriting or
servicing) to understand them. Besides, they are always evolving.
Features are being removed or added to make them more senior
friendly. A while back, Fannie Mae removed the equity-share feature
in its reverse mortgage program, the HomeKeeper, because the market
did not like it. Today, no reverse mortgage program has this
Recently, the U.S. Department of Housing and Urban Development
added a rate lock feature (expected rate only; expected rate is
used to decide how much equity to convert into cash) to its
FHA-insured program. Again, get your reverse mortgage advice from
credible, focused experts.
And finally, lesson number two: there are three keys to
marketing reverse mortgages: education, education, education. It's
all about education!
Let's think forward on reverse!!
The next two articles in the Marketing Reverse Mortgages 101
Series: It's All About Educating Seniors and their Advisors and
It's All About Understanding Mature Prospects.
Atare E. Agbamu, CRMS is a reverse mortgage consultant with
Credo Mortgage in Twin Cities, Minn. Atare is widely regarded as an
emerging authority on reverse mortgages, and is frequently
consulted by financial professionals and families across America.
His reverse mortgage interviews have been webcast on MortgageMag
Live! Atare serves on the board of Little Brothers-Friends of the
Elderly in the Twin Cities and on the national board. In addition,
he is a trustee of The Little Brothers Foundation, serving on its
investment committee. He can be reached at (651) 389-1105 or e-mail