Has the Economy Led Borrowers’ Families to Revisit Ideas About Reverse Mortgages?

Many loan officers report having to address the questions and concerns of involved family when educating new potential customers about reverse mortgages, and gaining the support of family members is not a new challenge for originators. Today, however, in light of the current economic situation, those views are becoming more extreme as family members face their own struggles.

It might seem that the economy would lead family to encourage a reverse mortgage. Rather, what originators are finding is that family members are still split on reverse mortgages, but their ideas are seemingly stronger now than before.

“A lot more baby boomers are helping their parents, and are helping the senior out so they can live in their own home,” says Len Patanella of Residential Home Funding Corp.

With some in the so-called “sandwich generation” helping their parents to stay in the home but finding their own financial situations taking a downturn, the reverse mortgage becomes more appealing, some say.

A late 2010 survey of the sandwich generation conducted by Generation Mortgage found that 78% of respondents in the “sandwich” group, which includes those who are simultaneously helping to support their parents and children through the economic downturn, fear they will not be able to retire comfortably. Fifty-two percent believe they will have to work in retirement in order to make ends meet.

But for those facing their own specific struggles, their dependence on their parents’ home equity causes them to remain highly opposed to the reverse mortgage option.

“There are two types of situations,” says Patanella. “One is the children that are most interested in their parents’ well-being.” But there is also another population, Patanella says. “The others—not that they don’t care about their parents, but it’s more ‘What’s going to be in it for me?'”

Sometimes, Patanella says, the family members simply say no.

“You get both sides. Many are able to do it themselves, but sometimes the children are involved.”

In light of the down economy and financial hardship across all generations, however, there may be a slight shift in the attitudes of those children who are involved in the process.

One originator shared the experience of a recent potential client whose grandson was living in her home.

“[We] could have paid off the mortgage, credit card debt and given her a line of credit,” says Jack Belles, of Reverse Mortgage of New England. “It would have been perfect.”

But, Belles says, the grandson, who was 31 years old, was on disability for work-related stress issues. He was on board, until he learned that he could not be included on the reverse mortgage.

“The grandson said [his grandmother] was not going to do the reverse mortgage because when she dies, he was going to get less,” Belles says.

Some potential borrowers initially hesitate about the loan, but later change their minds. In those cases, says Ben Besosa, Net Equity Financial, it’s useful to find out what has caused that change.

In a recent case where a borrower had decided against the reverse mortgage but later sought more information from Besosa, the home sustained water damage in a recent hurricane and the owner did not have flood insurance.

A much more common response, though, is the loss of a job—increasingly common in the current economy with near 10% unemployment and zero job growth.

The loss of a job is a life event that can quickly change the reverse mortgage conversation, says Besosa.

“When the kids have lost their jobs, they call back and say ‘Can we still get into a reverse mortgage?'”

Written by Elizabeth Ecker

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