|By RON LIEBER|
Executives from reverse mortgage companies know plenty about consumers’ feelings around inheritance. After all, they’re in the business of encouraging older Americans to drain equity now from homes they may pass on to their heirs in the future.
But dare to quote one of these people as a source in this publication, as I did last week, and this is the kind of vigorous reaction that comes from readers:
“I can’t even imagine a scenario where a reverse mortgage should be considered anything but radioactive,” said one comment.
And: “They’re nothing but a scam that nobody with any common sense should fall for,” according to another.
“These vehicles are the province of the most unscrupulous of lenders and would be outlawed in a more civilized society,” said a third.
These are easy things to say when you have enough savings or pension and
It’s been fascinating to watch the reverse mortgage industry grow up — or try to — in recent years. On one hand, it’s always been filled with no-name companies using second-tier celebrities to try to sell seniors on the product. Unethical salespeople engaged in all manner of bad behavior, persuaded customers to pull equity from their homes and invest it in inappropriate financial products or to leave spouses off the property’s deed in a way that caused them to lose the homes later. Name-brand companies like
But this summer,
Many of the people entering or examining the reverse mortgage business now describe their interest in it as a sort of conversion. Even half a decade ago,
That’s changing now, and BNY Mellon’s news release about its intentions was replete with happy talk about buying only loans that lenders had underwritten in a “socially responsible” manner.
“We have this idea as human beings that we live at the end of history and all facts are known,” he said. “But my sense here is that we’re still figuring out how your home is supposed to fit with the rest of your assets.”
Over the years, you’ve probably seen
But recently, the 72-year-old
Her conviction brings her no particular joy. “When I look forward, I don’t see how people are going to have enough, I really don’t,” she said. People spend their adult lives paying off their mortgages, and those with pensions were often able to avoid using that home equity in retirement. “Our assessment going forward is that it’s a luxury we’re not going to be able to afford,” she added. “They are going to need money, and this is the place where the money is.”
As a reverse mortgage counselor for an affordable-housing nonprofit in
Roughly a decade later, she’s now an associate professor at the
At Harold Evensky’s financial planning firm, he and his partners have the types of clients that tend not to default on any of their debt. But they do worry a lot about people having to sell their investments when the markets have fallen, because that locks in losses.
But as costs fell and some of the loan rules changed, two of Mr. Evensky’s colleagues at Texas Tech, where he teaches, decided to run the numbers. What the three realized and eventually published in
Lenders have asked the well-respected
Still, over the next five or 10 years, more people are probably going to need these loans whether we like it or not. It could happen if they’re completely out of money, in which case they may use so much of their equity for living expenses that there may not be much left if they later need to sell the house and move to a nursing home. Others may want to upgrade their standard of living in their golden years (and worry little about leaving an inheritance, which is certainly their right). Or they may simply want some Evensky-style portfolio insurance.
Call the loans and the lenders and the executives who run them all the names you want. But the tool they sell is one whose time is coming, and people who refuse even to consider a reverse mortgage in the coming years may do themselves a disservice.
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|Source:||New York Times Digital|