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Putting Mortgage Misconceptions in Reverse, by Andrew Good of Sun Post News
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Added: 06/29/2006
Type: Summary
Viewed: 415 time(s)
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Putting Mortgage Misconceptions in Reverse, by Andrew Good of Sun Post News
OmniHome Financing has a lot of negative press to battle when it comes to reverse mortgages. Recently, when syndicated columnist Ken Harney wrote about the dangers of reverse mortgages – specifically, about a 94-year-old woman who owed a half-million dollars after taking one out in 1988 – members of the industry signed a collective letter to the editor defending themselves.
"I don’t take it as a personal attack," explained Keith Murphy, one of three partners at OmniHome. "It adds to the miscommunication out there, and gives us a stumbling block to get over, to take extra time to counsel and let seniors understand what they’re getting into.
"It’s part of the business we’re taking on to help them fully understand the product before they decide to do it or not do it."
For those unfamiliar, a reverse mortgage, or Home Equity Conversion Mortgage (HECM), lets anyone 62 years of age or older with some equity in their home take out a loan against that home.
As the website for the American Association of Retired Persons (AARP) puts it, it turns "the value of your home into cash without having to move or to repay the loan each month."
Dave Bancroft, president of OmniHome, warned that there’s "always room for abuse with seniors".
Prior to 1990, there were cases of equity share programs that could completely take over ownership of a lendee’s home.
Bancroft said companies are no longer allowed to completely take over the home’s equity because of a major revamping of regulations that year. Now, he said, the Federal Housing Administration ensures abuses like that can’t happen.
"There’s a tremendous amount of miscommunication out there," Bancroft added. "One thing I always say at the seminars is, ‘If someone doesn’t understand it, they fear it. If they fear it, they make it negative.’ When someone says ‘reverse mortgage’ and puts a negative connotation on it, I say they don’t understand it."
For seniors, Murphy added, it takes the burden of a monthly mortgage payment away, freeing up income to spend on medication, visiting family, or general, easing life in retirement.
Especially for the Depression-era generation, he added, it allows them to feel self-sufficient rather than rely on their children to pay off mortgage bills.
"To the seniors, it helps their self-respect", Murphy said. "That alone I think is very valuable and emotional to them."
On their reverse mortgage website, the company encourages seeking out a third-party counselor to help understand the ins and outs of reverse mortgages. |
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