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National Mortgage Professional
Aug 23, 2005

Forward on reverse--Marketing reverse mortgages 101: It's all about educationAtare E. Agbamu, CRMSreverse mortgages, retirement financing, consumer education 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 says. 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 reverse mortgage. There is a common thread in these three examples of advice from otherwise informed financial professionals: a lack of basic reverse mortgage knowledge. 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 transaction. 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 feature. Recently, the U.S. Department of Housing and Urban Development has 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 atare@credomortgage.com.
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