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#174: Advising financial planning clients on a reverse mortgage


Over the past few months, perhaps due to the plethora of TV ads for reverse mortgages, you’ve been receiving a number of inquiries from your financial planning clients about reverse mortgages. With a quarter to one third of your client base now in their sixties and seventies, their home equity represents a significant portion of their wealth.

Still, you are concerned about even discussing, much less promoting, any tactic or product which, in addition to having little potential to add to your own bottom line, represents an area in which you have no specialized training, and which is an area of planning not specifically covered in the compliance rules of your own broker dealer. On the other hand, you want to continue offering comprehensive advice relevant to the changing needs of your clients as they age.

As noted in Financial Advisor Magazine, American College professor Wade Pfau describes two very strong advantages of Home Equity Credit Mortgages taken out early in retirement:: a) “the HECM allows borrowers more comfort with investing other assets in a relatively aggressive manner” and b) “a HECM line of credit can be tapped after down-market years so that retirees aren’t forced to sell other assets at depressed levels to make ends meet”.

Specifically addressing areas of concern you mention: In terms of training and compliance, there are many courses available (both through the Certified Financial Planner Board and the CPA  Academy) on reverse mortgages. You can seek out and recommend experienced reverse mortgage professionals (regulated by the Housing and Urban Development) to help your clients understand their options and make appropriate choices.  In terms of “adding to your own bottom line”, when your clients use their largest asset as an incremental source of income, that allows them to keep more of their financial assets invested.

As a financial advisor, consider of reverse mortgages not as investment “instead-ofs”, but as “complements to” investment portfolio management.

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: Equal Housing Lender.