Upon returning to the reverse mortgage industry in 2016, the most common question posed was about the largest change I had observed since my time running Bank of America’s reverse platform six years earlier. Initially, my response focused on the significant regulatory changes and consumer safeguards introduced after the 2008 financial crisis. I also highlighted the wealth of academic and policy research demonstrating the benefits of incorporating home equity into retirement income strategies and the emergence of various senior services businesses.

While these developments are crucial and have enhanced the program’s safety, soundness, and awareness, I have come to realize that the most meaningful change is that the math of the “retirement crisis” is no longer theoretical. Individuals and families are living these realities daily.

As Sandra Block recently cited in Kiplinger, “More than half of 65-year-old Americans will need long-term care services of some kind…” ^[1]This statistic resonates profoundly when you find yourself on a plane seated next to an adult child who is one of the “40 million family caregivers, providing unpaid care, which AARP recently valued at an estimated $600 billion.”^[2] For these caregivers, the statistics are personal, accompanied by emotional and financial stresses that are all too real.

Retirement readiness is no longer an abstract concern. Important questions abound:

• How do I best provide inheritance while alive?
• How can I enhance my private pay options for in-home care and ease the burden on my family?
• How can I modify my home for better accessibility and safer aging in place?
• How can I buy my dream retirement home without a hefty mortgage payment?
• How can I avoid outliving my savings?
• How can I pay off my current mortgage or high-interest credit cards to improve cash flow?
• How can I access my home equity if I am on a fixed income and have been declined for a traditional mortgage cash out refinance or home equity line of credit (HELOC) due to Debt-to-Income issues?
• What are the most tax-efficient withdrawal strategies during retirement?

These are critical, life-changing questions that thousands—if not millions—are grappling with as you read this article. The work we do in the reverse mortgage space is vital in helping homeowners responsibly tap into home equity, allowing them to enjoy their retirement years with greater financial freedom and peace of mind.

Of all the challenging and fun work I have had the privilege of doing over my thirty-five years in financial services, helping homeowners leverage their accumulated housing wealth to increase choice and drive improved outcomes is deeply rewarding. Witnessing the growth of businesses that deliver emotional and financial value through specialized expertise—from in-home care to veterans’ benefits and social security counselors—is equally exciting.

”I have come to realize that the most meaningful change is that the math of the “retirement crisis” is no longer theoretical.”

The significance of this collective work cannot be overstated, but the complexity can be daunting, which often contributes to underutilization. For instance, Gregory Bean, Vice President of Business Development with Paradigm Senior Services, points out that out of approximately 4.4 million veterans with service-connected disabilities, only 156,000 are receiving home care benefits. Similarly, the full utilization of Long-Term Care Policies is alarmingly low. Most people enter retirement underinsured and unprepared for long-term care costs. And, according to Debbie Miller, Owner of Senior Helpers, even seniors who have policies need guidance. Out of around 8 million active policies, only 300,000 seniors have fully activated the in-home care portions.

Like reverse mortgage professionals and others dedicated to senior services business, Gregory and Debbie commit considerable time and energy to education and awareness. The potential for meaningful impact is immense. Sandra Block notes that “Baby boomers are expected to transfer more than $50 trillion in wealth during the next 20 years,” ^[3] with $13.2 trillion of that being housing wealth.^[4] Responsibly integrating home equity can unlock fresh solutions and enhance the quality of life for individuals and families. 

Since 1990, nearly 1.5 million homeowners have utilized reverse mortgages.^[5] Whether addressing one of the aforementioned questions or exploring ways to “help the next generation” as discussed in Sandra Block’s article, this is a pivotal time for reverse mortgage programs and, more importantly, for the families we serve.

Where do we begin?

First, we must understand that it goes beyond merely offering a product. Yes, in many ways it is simply another mortgage product, and borrowers, and referral partners stand to benefit even more as the industry catches up to the broader mortgage space in terms of talent, technology, and borrower experience.  Importantly, however, we must ensure that culture, people, and processes remain centered on the individual human experience. To quote the title of this article, “People are living the numbers.” Any loan officer or lender engaged in this space must relentlessly impute the emotional and financial value of their work.

Second, check your existing data. How many applicants aged sixty-two and older seeking to extract equity have been denied more traditional solutions, such as cash-out refinances or HELOCs? According to a report from the Urban Institute’s Housing Finance Policy Center, Home Equity Conversion Mortgages (HECMs) accounted for 6.7% of total home equity extraction transactions among borrowers aged sixty-five and older in 2020, compared to 36.6% for HELOCs and 56.7% for cash-out refinances. The data suggests that older applicants are denied cash-out refinances and HELOCs at higher rates than younger applicants. In 2020, about 86,000 applicants with Debt-to-Income ratios above 50% were denied a HELOC or cash-out refinance.^[6] Perhaps some of the unserved applicants or a portion of the 543,322 borrowers who used alternative solutions in 2020 would have been better served through a HECM?

Third, reach out to senior services businesses in your community, or even to friends or neighbors with aging parents, and ask how you can help.

As with all financial products, reverse mortgages may not be the best solution for everyone. It is essential, however, to raise awareness with GRIT, accuracy, and professionalism.