Among the Urhobos of Nigeria’s turbulent Niger Delta, “How are you?” is often followed by a peculiar question-cum-greeting: “Is it well at home?” The home, in Urhobo understanding, is the center of the family and the person. Harmony at home is well-being, disharmony is the reverse. If you care about a person, the thinking goes, you inquire about the state of their home.
In assessing whether a senior can stay at home long enough to reap the benefits of a reverse mortgage, “Is it well at home?” is a good question for originators to keep in mind. Marital transitions—widowhood or widower-hood, divorce, separation—are pregnant with risks for seniors and lenders. Let’s go back to Lake Matata, Minn. and to Paul Pumata.*
Pumata, 76-years-old, lost his wife of 54 years six months ago. Ever warm, always kind and gracious, Sandy Pumata was Paul’s center, the rock of their home for 54 years.
Two months after Sandy Pumata’s death, their financial advisor, Peter Puta, delivered another blow: Monthly income from his bond portfolio will have to be cut by 50 percent to preserve capital. Puta suggested looking into a reverse mortgage for cash to cover the shortfall until the portfolio rebounds.
Meanwhile, Pumata’s only daughter in Tempe, Ariz., Jennifer Zama, has been asking her dad to relocate to the warmer climate of Tempe so that she could look after him now that her mom was gone. The relocation idea was persuasive because Pumata is very fond of his three grandchildren. His immediate need though is cash, and a reverse mortgage was the best option, but he was uncertain about his residency in Lake Matata, Minn.
During counseling, the counselor spotted his residential uncertainty, they discussed it briefly, and the Financial Interview Tool (FIT) summary reflected it as “yellow flag” number three. How should Pumata’s loan officer bring up the issue for discussion at the loan interview? Here is a suggestion:
“Mr. Pumata, at FreeFloat Bank, we pride ourselves on helping our reverse mortgage customers think through their decisions. We know reverse mortgages are cheaper the longer you stay in your home. To guide my product recommendation for you, may we discuss how long you plan on staying in your home?”**
This question could help Pumata and his loan officer, Randy Zeros, discuss his residency and its implications for the loan. It could help Zeros recommend the new HECM Saver, a perfect product for seniors in transitions, uncertain of their residency. But without the FIT signal and the discussion, Zeros and Pumata could have decided on HECM Standard, a decision that Pumata could come to regret, a decision that may even bring the thought of litigation to Pumata and his daughter when they learn later that there was a cheaper reverse mortgage for short-term use.
Other marital transitional situations involve divorce and separation. Besides living-aloneness, the absence of a spouse or partner through divorce or separation could bring isolation and trigger depression in some seniors. Without support for daily living activities, isolation and depression could impair their health, calling into question their ability to benefit from the loan over time.
As you go about putting seniors into the right reverse mortgage, keep the Urhobo greeting/question in mind: “Is it well at home?”
*Names of people and places are fictional.
**Please give me your feedback (e-mail me at [email protected]
) on the strengths and weaknesses of this question, as well as your suggestions for improvement.
Atare E. Agbamu is author of Think Reverse! and more than 140 articles on reverse mortgages. Since 2002, he writes the nationally-distributed column, “Forward on Reverse.” A former director of reverse mortgages at Minneapolis-based AdvisorNet Mortgage LLC, Agbamu has years of hands-on experience marketing and originating reverse mortgages. Through his advisory, ThinkReverse LLC, Agbamu advises financial professionals, institutions and regulators across the country. In a 2007 national report on reverse mortgages, AARP cited Agbamu’s work. He can be reached by phone at (612) 203-9434 and e-mail at [email protected]