Posted tagged ‘mortgage planning’

Home Equity: A Strategy for Improving Cash Flow

June 10, 2009

j0403058After spending a lot of time talking with many financial advisors over the years, one of the key barriers that prevent them from looking into a reverse mortgage for their clients was the idea that they didn’t believe using home equity was a viable solution for financial planning, or more specifically improving cash flow. Specifically, the organization that moniters compliance for financial advisors (Financial Industry Regulation Authority) has kept a close watch on the industry and how they use home equity. It is my understanding that they are particularly interested in preventing the use of home equity funds for investments, which makes sense. With poor investment strategy, this could be a nightmare for all parties involved.

However, it is becoming more and more of an option today for many advisors to seriously consider the power of reverse mortgages as a method to provide the cash flow in longevity planning. Retirement is changing today. Many (including myself) are looking at the very real picture of “retirement” and realizing that we may need to reconsider how this time of life will really look. In all reality, the working years may be prolonged as the need for cash flow increases in light of the recent market deterioration.

Financial Planning magazine, in their May 2009 issue, has an article titled From Irrational Exuberance to Unreasonable FEAR. In the article, which is really a roundtable discussion among several financial advisors, they discuss how retirement is changing and how creative measures, including reverse mortgages, are certainly a viable option to consider when looking for cash flow during the retirement years.

It is my belief that reverse mortgages are at the cusp of entering into more of a mainstream product. Much different than the current “last resort” product.


Reverse Mortgage Industry – Current Implications

May 14, 2009

j0440988The reverse mortgage industry continues to grow nationwide. The numbers Year to Date have increased both in applications and in total endorsements (closings). But this is just a small picture of the overall industry. Over the past two years we have seen an industry get hit hard by a drop in home values, economic uncertanties, and interest rate adjustments. In addition, there has been a huge increase in the number of people who are originating reverse mortgages. Though this is good news from the standpoint that this product has become more of a standard product within the financial industry, it has impacted the total number of loans that any one individual can do. So we have a small increase in the total number of endorsements, coupled by more people doing them. This leaves many unable to close enough loans to make any kind of a marginal living. Many originators are finding business very difficult as competition has impacted the overall market.

This scenario is not surprising to me. Four years ago when I started in the industry it was an inevitable consequence to the financial condition of many of our seniors. I predicted the fact that banks and credit unions, as well as mortgage brokers would find this tool as one they need to add to their product mix. It was my attempt to make an impact in the industry at that time to position myself to be the local expert. And I have done just that!

What I did not see coming was the huge reduction in home values. At that time values were going, let me just say “bazerko” (sorry, probably not a word). Values are often much lower than the homeowners realize. Recently I had a home appraised that the homeowner was expecting $600-$700k in value. It is a phenomenal home! It was appraised at $485k. Now this is somewhat of an anomoly because of the lack of similar comparisons available, but more times than not, values are underestimated because there was a lack of understanding. The conversation of value is a critical one to have with the homeowners. Managing expectations provides open communication, and in the end, good relationships with clients (whether or not they were able to do the loan).

The other thing that was not expected was the increase in interest rate margins that we have seen with Fannie Mae. Fannie Mae, who purchases 90% of all reverse mortgages, has moved into a live pricing environment where the interest rates could fluctuate during the processing of the loan. For some, this reduces the expected benefit or all out takes them out of their ability to attain a reverse mortgage. Though I have been able to work around most of these situations to this point, it remains an unsettling reality in today’s market.

Check Out My Website

April 28, 2009

f0796_gullifordg1For years I have wanted to develop my own website that provides information about who I am and answers many of the questions that people have about reverse mortgages. I am proud to say that it has finally happened and much thanks goes to Rachel in marketing at Genworth Financial Home Equity Access. It is finally completed and looks great! Check it out at here!

Delaying the Reverse Mortgage Decision

April 9, 2009

j0382674I have recently had several conversations with the seniors about waiting for the right time. In all financial decisions, timing is very important. I have posted other blogs about this very issue. However, we are at a time in the industry, as well as the economy, that waiting may be the wrong decision. Let me explain.

The reverse mortgage industry is in a unique situation. Interest rates, though in the past have not played as critical of a role as they are today. For many years, the only RM product used was a 1.50% margin. It very rarely changed, and when it did, it was an anomoly. We then saw the margins decrease to 1.0% then 1.25%. Today we live in an economic environment with live pricing. What intereste rates (spreads) were even a weeek ago, is likely different today. The secondary market (Fannie Mae) plays a critical role in these numbers.

My clients have been surprised by this phenomenon. Back in January the spread was at 2.50%, which provided x number of dollars of benefit. They thought they would wait a bit to make a decision. Well, today, that spread is at 3.25% or higher, depending on the lender. They no longer have the same amount of financial benefit that they did in January.  So, what should people do and how should they evaluate their situation. Here’s my take . . .

If, in evaluating a reverse mortgage provides the benefits that accomplishes your goals, why wait? In today’s ever changing market, home values are likely to stay level at best in the near future, and may even decline. Interest rates will likely go up, too. Margins are changing more than ever. Obviously, we want our clients to get the greatest benefit possible. But waiting for things to get better, in the short run, usually does not pencil out. More and more frustrated seniors are kicking themselves because they have waited. If the benefit accomplishes the goal, usually there is not a good reason to wait to move forward with the application. If it does not accomplish the goal, then it does not accomplish the goal and choosing not to move forward is probably the right decision.

Whenever there is confusion, it is wise to sit down with a good financial advisor . . . one who understands reverse mortgages and can assist you with decisions. I know several advisors that are non-partial and are available to give good advise, if needed.

Giving the Gift of “Peace-of-Mind”

November 27, 2007

j0407569.jpgOne of the things I love about doing what I do is the “feeling” that I am able to give to those who find themselves in financial pressures. Reverse mortgages are really a “Peace-of-Mind” product for those who want more out of life, but are held back by the financial pressures that surround them. In talking with hundreds of seniors over the course of almost three years, the fact that they are talking to me about a reverse mortgage is not that they have been careless with their money over their life. The majority of seniors state that unexpected events during retirement have sucked their savings dry. Whether these “unexpected events” are related to health issues, legal events, or poor business outcomes, the event changed their financial future.

Have you ever been in such a financial pinch that you lost sleep over it? Have you ever felt helpless in overcoming a financial obligation(s)? Or, have you ever looked at your life and felt like you wanted to do more to improve your quality of life? Most of us can answer “yes” to at least one of these questions. As a person in his working years, I can simply work more hours, or get another job in order to get enough money to do what I desire. But for those past their working years, they find themselves in situations that leave them feeling dependent and vulnerable to the next “life event.”

Giving “Peace-of-Mind” as a gift is one of the most satisfying things there is. It almost compares with the overwhelming pleasure of being loved and completely forgiven, even when you don’t deserve it. For those who have experienced such gifts, it projects freedom and an improved quality of life. is a website sponsored by The National Reverse Mortgage Lenders Association. This website has a lot of information about reverse mortgages and the industry. It also has a link on the page (called Borrower Profiles)that allows you to read about how other people have used a reverse mortgage. It is interesting to see all of the different ways in which people have chosen to improve their quality of life and give to themselves “Peace-of-Mind.” Enjoy!