Reverse Mortgages

The Rabbi

1000 Post Club
I have become facinated by the Reverse Mortgage business. Anyone doing anything? I would be interested in a good mail house. Any positive input is appreciated.
I worked for a financial services company for the past 10 months that did mostly reverse mortgages. The owners (2 partners) did about 250-300 deals over the past 3 years.

They mainly did dinner seminars and were very successful. All of a sudden the market started to get saturated by companies and people were going to 2 and 3 seminars just for the food. Thens banks started going heavy into it and the market, in my opinion, has become saturated.

There business went cold over the winter (they held back on spending on marketing...big mistake) and now they are struggling. I got my walking papers a week ago. I was picking up the spill over from the smeinars.

I got my insurance license (again) last fall and started on MA's with their clients.

Overall I think there is money to be made (they made a few mistakes this winter and their set up is a bit different). But be prepared to spend to make money. Also beware of many bogus lead and appointment companies out there.

The biggest player, in terms of banks processing loans, is Financial Freedom. The have over 50% of the market and they are struggling mightly to keep up. They are a mess at processing the loans so it becomes a nightmare trying to get deals through. Vertical Lend is another good size player and they're processing is equally as bad if not worse.

With the forward market in the toilet many are trying to jump in the reverse business. Not a pretty picture. Banks are taking it over. Wells Fargo has become a big player.

Hope this helps.
And that's only from the sales side. Very rarely do they make sense for the client.

That's right I forgot. You used to sell RM's until you realized they were rarely any good for anyone.

I'm sure the 72 year olds with a $95,000 mortgage on their $190,000 home who got $115,00 to pay off the mortgage, fix it up and pay off some back taxes hated it.

I'm not sure what they are going to do with the $900 a month extra they'll have but I'm sure they'll figure out something.

Without the RM they were screwed and lived a miserable life. Instead they just thanked me over and over.

I could rattle off 5 more without even trying but what's the use.

You have been in the RM business and know all about it right?
Maybe you didn't get my point. My point was you are flat out wrong.

There are many, many scenarios that a RM fits. The only time it rarely fits is when the senior has no need for the money.

You made such a strong statement I figured you must have been in the industry at one time. bad.
To get back to the original question about giving positive points on reverse mortgages, they work in situations where:

1) The person is running out of liquid assets and is faced with nursing home care (Medicaid) because they cannot afford in-home care. Since something like 87% of seniors in a poll said they would prefer staying at home rather than a nursing home, a RM frees up money for 24/7 in-home care.

2) As stated, when a senior has a mortgage, a RM not only pays out the existing debt, which frees up income, it may also provide additional income.

3) The person is at the point of having to be dependent on others. Most seniors want independence --they do not want to either borrow from their kids or end up living with their kids.

There are other situations. There are also many arguments on the other side. The larger point is this: reverse mortgages are not the animal some people push in seminars and in their bullet-point seminar invitations. RMs have to be carefully crafted to a person's needs and, more often then not (IMHO), a RM may not make sense. When they do make sense, they are a terrific option. I have to say that I do not run into many seniors that have a current mortgage. Most of the seniors I talk to that are fired up about RMs have recently been to seminars that push getting a RM to fund a life insurance purchase.

On a further positive note for The Rabbi, I was running an investment seminar last summer at a large restaurant and had about 30 people each at two meals. Someone else was running a seminar and had 160 people each. They showed me their invitation and it stressed reverse mortgages. They told me that is what brought in the crowd. I don't know whether that would hold a year later, but it was impressive at the time.