I can't believe that so much media attention about Reverse Mortgages is still negative

Michael, I'd love to see the articles if they are easy to send.  I'm curious to see what the basis is of their complaints.

Isn't AARP a supporter of the Reverse Mortgages?  I would  think if anyone was concerend about the product that they'd be the first to raise a red flag.

Mike

I still say anyone talking bad about reverse mortgages today, do not fully know and understand todays reverse mortgages.  When talking bad about them, it is purely lack of CORRECT information, or sometimes based on the reverse mortgages of the 70's & 80's which WEREa rip-off.  But todays products are NOT the same as those!  The more educated we can make everyone, they will understand more, and realize their potential POSITIVE impact!

That is just ONE of the myths, there certainly are a lot more as many do not understand.  Once you start correcting and explain WHY and with FACTS you can back up, it is amazing how they react then, including people in the real estate industry!  I've talked to several Realtors who at first were no, no no, but after I explained things, all but one said they would go look into it more!  I thought that was awesome!

Ok, may be I am missing something, but it appears to me that although reverse mortgages are simple easy and may be appropriate for some situations.

They are a BAD investment vehicle, and as such it would be much more advisable to just do an equity take out and invest the money in some cashflow vehicle, preferably REAL ESTATE.

That way there never will be an issue with running out of equity before running out of LIFE.

just my 2 bits, are we in the business to add value to people's lives or are we in the business of treading water, you tell me.

as always, live a pfanntastic life

Peter Pfann

Hi Micheal,

sorry to disagree with you on all points.

I understand that you are in the money business, we are in the property and lifestyle business.

after 20 years in the business, I am still to find a single person that is not interested in maximizing their returns, in one way or another.

Another big concern with many many seniors, is to "leave a legacy", not an empty hole.

Off course there is a way to run out of money, people are getting older, the markets are adjusting and hence the amount avialable for the reverse is getting smaller, and the need greater.

smart investing would easily cover any cost of borrowing and the added years in comfortable lifestyle.

Never yet found a reverse really adding anything to the bottom line other than a false sense of financial security.

We have seen a few where the estate had nothing but debt left due to evaporated equity

I do not deny it is a great product for financial institutions, because it is an easy sell, but it is a BAD financial planning option for all but very few.

It is like saying that it is a great idea to pawn all your belongings, as long as you can still look at them.

If you want to assist seniors in improving their quality of life, offer real cashflow options, that ADD to the bottom line, not extract from it.

I am always baffled that the financial world keeps thinking that negative cashflow is an acceptable life style choice, and keeps coming up with more and interesting ways to sell it.

I understand your objective, but can not support its merit in any logical manner and hence I have always advised my clients to really consider all their options before considering a reverse.

in this post I offered one, there are at least 20 other options to improve the cashflow of a senior, risk free and that would improve their status in life immediately and securely.

Let me close off with this thought, if the overall methods and approach of financing where so smart and "good" for regular people, how come your entire financial world is in the greatest mess ever and has put the entire ecnomy of the United States in great direstraights for many years to come.

It appears to me that reverse mortgages are just another extension of this thinking that it is oke to have the general public owe more money than it can ever afford to repay, and some how expect it to resolve itself.

I guess we will disagree about this issue and will do whatever we have to do to serve our clients the best way we can.

continue to Live a Pfanntastic Life

Peter Pfann

HI Micheal,

It is all good, you believe your product is the cats miauw, I don't.

Is there a time and place for reverse mortgages, sure, but it is not a blanket solution and as such needs to be put in context to the life and situation of the consumer, and as I stated, it is a little to easy to assume that creating a bigger debt (without cashflow) is a solution.

Let me give just a few little other options, all risk free and possibly suitable to a number of people in their situation;

granny suite, live in your own home and create rental accomodation

take on border(s) of an age and or personality style that fits the client

built another accomodation on the property for rental or own use

combine families grand parents, parents and kids all live on the same property and provide for each other and free up cash and or cashflow in order to buy more cashflow.

I can go on for at least 30 to 50 other options and or ideas, none of which are complicated and or risky, do they work for all people in all situations, no off course not. But some of them will and most offer more than just financial security, they enhance the overal quality of life and will offer allow people to eliminate issolation, depression and offer support and assistance when needed.

do I understand your product, sure I do, its simple, it is easy, but in most cases it is not the best solution for the consumer, it is however a great product for the financial institution. illustrating this by suggesting to replace one debt by another as a solution is realy funny, if it was not so sad and short sighted

Yes we will continue to dissagree, and that is fine, and I hope that you will understand that we are approaching this from a completely different angle and perspective.

I am solving lifestyle problems, often by not selling and or incurring debt, but by offering options that are not always mainstream sales pitches, but real solutions, in allowing the aging to live a pfanntastic life, whichever way they choose.

Take off the blind folds and open your eyes and mind to creative real solutions for people, rather than try and squeeze them in a product and or service that fits your particular business model, trust me it pays off in the end.

I would suggest consider taking the CSA course and also the SRES to get a broader perspective on seniors issues and concerns (money is a very small one).

I won't bug you any further on this, and have no intention to offend you in any way, we know our respective positions, and I wish you continued success and

Live A Pfanntastic Life

Peter Pfann

Peter, you and Michael have done a good job at addressing this subject but the specifics are lacking.  I'll preface my post by saying that I have never originated a reverse mortgage and only know a little about the product.  I am also not a financial planner.

All of the phone calls I receive from prospects regarding a reverse mortgage are people who have insufficient income to support their current lifestyle, have no way of increasing said income (although they could take one of your suggestions), and have significant equity in their homes.

1.  If we pull the maximum available cash out and invest in an appropriate low risk investment (we are talking about seniors) what would the rate of return be?  With variable equity loans running at Prime (+/- some) and fixed equity loans in the 8-9% range how is a low risk investment product going to produce enough cash flow to cover the new mortgage payment, let alone provide the extra cash the client needs?

2.  I would argue that an individual's wish to leave some cash behind for their heirs is completely irrelevant to the the equation - what's most important is their health and wellfare.  I told my mother to take a 30 year loan with a 15 year interest only loan.  I told her "If you make principal payments the only person that benefits is me and my sister.  We'll get all your hard earned equity when you die."  The wish to leave a legacy is a personal choice, not a financial necessisty.

3.  In what specific way is it wrong to suggest a Reverse Mortgage to a client?  How specifically does that decrease their financial well being from both a cash flow and current asset basis?

Peter, I'm asking becaues you seem to care and I'd really like to know.  I certainly don't want to offer a product that does not benefit my client but so far I have not seen any specific reasons that a RM is a bad idea.

Thanks

Mike

Peter, I see there is much you can learn about reverse mortgages.  And while getting a reverse mortgage is not usually thought about in conjunction with financial planning, most often it is someone struggling financially, but it CAN be a financial tool. Learn all the CORRECT facts about RM's before you chose to be so negative about them.  I could go pick out many things you said, (My blog goes into more details about this) but in all honesty, learn more about them is about the best thing I can say at this point in time.

BTW, Michael, some of what I was referring to in the '70's & '80's was equity sharing, annuity purchase requirements, etc.  Some people know about those things, and are RIGHTFULLY upset by these issues.  But as I am sure you know, they are no longer allowed, and for a good reason!  As I said in my previous comment, these types of things WERE a rip-off, and rightfully are no longer allowed!

I was honestly hoping to get a response to my questions to Peter as I'm curious.

Mr Mullin, in my previous comment, I was actually addressing it to Mr Pinter.  (confusing having two Michaels'  to address  :-D )   I hope Peter  does try and answer, as you insinuated, and I have said point blank, most that are so negative about reverse mortgages usually do not know all the correct facts.  I have talked to other mortgage brokers (YES mortgage brokers) Realtors, etc, and they say, "technically that's when the bank owns the property" and such. This misunderstandings about RM is tremendous, and there is so much correct info out there, but the incorrect seems to move faster than the correct info.  I wrote a blog  addressing a lot of the issues brought up throughout the comments of this blog (way to long to post in Mr Pinters blog) that you might all want to check out.

It really is hard to say why so many bash it.  But that certainly is a big problem!  Once they know the facts, it really is hard to be so negative.  UNLESS you are so concerned about inheritance, even over the quality of life for the senior homeowner!  I can't tell you how many loans I have closed and saw this first hand!  Sad, I am far more concerned about my mom's peace of mind over what I inherit - but many are more concerned about money over the person!  I think it is funny, I wrote a blog about a lot of the comments here, some of the myths, that reverse mortgages "can't be an investment tool", and many other aspects, and nobody commented.  Obviously the people that know the correct facts about reverse mortgages know it is all correct, and those that don't know about reverse mortgages can't find any loopholes to shoot in my blog.

One can only hope!