Effectiveness. It’s a crucial skill in the ever changing landscape of our industry and the increased time and energy required to succeed as an originator.
Continue readingHECM: A Mortgage or Social Program?
Is the federally-insured reverse mortgage a social program or a mortgage loan? The question should be addressed as it goes to the heart of recent program changes, restrictions and requirements. While few argue the HECM program is a social program many often lament that the loan no longer serves the needy, cash-poor or typical borrowers or the past due to principal limit reductions and further loan restrictions.
Continue readingYou only get one chance
Once chance. That’s all you get when it comes to making first impressions with your potential borrowers, outside professionals and others. Having spent numerous years in the field sitting at hundreds of kitchen tables as an originator and financial professional here are a few things I’ve learned or failed at in the past.
Continue readingNavigating Rapid HECM Changes
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The pace of change to the Home Equity Conversion Mortgage (HECM or reverse mortgage) program has rapidly accelerated in recent years. First we had several principal limit factor reductions, the introduction and subsequent removal of the HECM Saver program, the elimination of the Standard HECM products, two-tiered FHA insurance premiums and first year distribution limts. Recently HUD enacted a new policy for Non Borrowing Spouses (NBS) with new PLF tables which goes into effect this August 4th which should be shortly followed by a finalized Financial Assessment measuring a borrower’s financial capacity. How does one keep pace?
First FHA can and will make policy changes quickly as they see fit via mortgagee letter due to their new authority in the Reverse Mortgage Stabilization Act of 2013. The lengthly rule-making process no longer applies allowing for swift and sudden program modifications. Such rapid tweaks to the program can be beneficial in addressing issues as they arise but also create frustration and confusion for both lenders and the consumer alike. One could say the only constant for the HECM program is change itself.
Policy changes may present unique opportunities. For instance, while imperfect, the Non-Borrowing Spouse policy may allow for many to revisit previous loan prospects who walked away due to their concern of the younger spouse being able to remain in the home after the older borrower passes away. It also will garner positive press amongst consumer advocacy groups and financial professionals. Similarily the Financial Assessment while increasing origination efforts and underwriting will be received similarly. Perhaps our industry tagline should read “this is not your grandparent’s reverse mortgage”.
Not suprisingly many of these changes have not been openly embraced by many reverse mortgage professionals. Collectively we want strong consumer protections but not at the expense of further narrowing our potential market with borrowers having to pass through the filter of numerous regulations and underwriting standards. Unfortunately further restrictions seem to arrive during a down market where we can ill afford further reductions in volume. What remains is how we will both prepare and respond in the coming months as these new policies take effect.
How do you anticipate preparing or even leveraging your business in light of these recent changes? What advantages and disadvantages do you anticipate? Please share your ideas in the comment section below.
Non-Borrowing Spouse Policy: A Wrench in the Gears?
What may have gone unnoticed by some may in fact turn out to be one of the most momentous policy decisions in the history of the HECM program: the non-borrowing spouse provision.
Continue readingShifting Your Mental Gears
We can find ourselves stuck in a gear mentally. It could be fear, doubt, unbelief, negativity or anger. So just how can we shift gears mentally to stop feeling bad? Here are a few things I’ve learned in recent years…
Continue readingA Year for Change (Part 2): Growing In Gratitude
What if gratitude became the focus of your life for a year? This world-bridging wisdom can serve as both template and platform from which to approach your HECM service — and your life.
Continue readingHaven’t We Learned?
The Wall Street Journal recently reported that more homeowners are once again tapping into their home equity. As home values recover and interest rates remain artificially low many are beginning to take out HELOCs or Home Equity Lines of Credit to fund home renovations, pay off higher interest rate debts or cover other expenses.
Continue readingComplacency: The Art of Self-Sabotage
Like a fog rolling in silently complacency can quietly invade our life. Before we know it we can find ourselves hindred by a false sense of contentment and satisfaction.
Continue readingGiving LTC Some TLC: Planning for Long-term Care
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Do your reverse mortgage prospects and clients have a plan for the unexpected?
According to a recent survey of 449 financial advisors, even prudent seniors overlook a critical component of retirement planning. When the experts were asked, “What’s the biggest threat to the financial security of retirees?” the number one answer was “healthcare expenses.”
Yet these advisors were not focused on medical expenses, but on the cost of non-medical long-term care. It’s vital that seniors prepare for such contingencies.
Why do 75-80 percent of Americans lack a plan for long-term care (LTC)? In a recent Life Planning Network webinar, Allen Hamm, author of Long-Term Care Planning, said there are two main reasons:
- Lack of awareness: Half the population does not understand the risks of living into old age, and the need for assistance that will likely arise;
- Lack of trust: long-term care insurance is expensive, and having the insurance industry lead the conversation is a backwards approach.
Older adults also don’t believe (or don’t want to believe) they’ll need help. Not too long ago, people retired and died within ten years. Now we’re living a “whole new generation in retirement,” says Hamm.
While many people believe Medicare will cover LTC, it’s false comfort: Medicare only reimburses for hospitalization up to 100 days, which is considered short-term care.
Long-term care, by contrast, usually involves activities of daily living (ADL) and can continue indefinitely. Hamm cites the five most common situations in which a senior might need LTC:
- Alzheimer’s and memory care
- Parkinson’s Disease
- Strokes, which can leave people in need of assistance with ADL
- Heart and circulatory conditions, especially if combined with diabetes (which can create memory issues)
- Frailty due to longevity
LTC takes its greatest toll on women, who have traditionally been the family caregivers. Explains Hamm, “Because women outlive men by an average of seven years, and men tend to marry women a few years younger, men intuitively know their spouses will take care of them. But who will take care of their wives?
“When the husband dies and the wife needs assistance, she usually ends up moving to assisted living or into a nursing home.”
There are four basic ways to pay for LTC:
- Family support: a spouse, child or other relative may choose to quit their job or reduce their hours in order to care for the parent/relative
- Medicaid (MediCal in California)
- Personal assets
- LTC insurance
Reverse mortgage (a component of personal assets) can be a viable way of meeting LTC needs, as long as it is thought through carefully, Hamm says. For instance, if the senior is going to remain in their home, what home modifications might be necessary to “age-proof” the house and make it viable for both senior and eventual caregiver?
Another option is an LTC rider on a regular insurance policy. This form of “hybrid insurance” enables the policyholder to draw on the rider if they need it later in life; if they pass away early, the rider pays the beneficiaries.
Though there is no “perfect age” at which to sign up for LTC insurance, a good time to opt in is between 50 and 60, says Hamm, since this is a time of life when:
- We can prioritize our level of risk
- Health is normally still good enough to qualify for coverage
- The premium is usually still affordable (i.e., LTC makes sense as an economic value)
- Someone’s risk tolerance is typically more conservative than when they were younger.
As with all later life decisions, the best course of action is for young seniors, or those not yet seniors, to familiarize themselves with all the options available. While life is more fun lived on the bright side, planning for the unexpected is smart. It’s easier to relax and enjoy retirement when you know that whatever happens in the remaining ten, 20, 30 or more years of life, you’re covered.
