Advisors, she has been able to recommend reverse mortgages in the right circumstances because she, too, takes a holistic view of what products work best for individuals. “When we are talking to clients, we don’t jump to reverse mortgages right away,” Mello says, adding that a traditional home equity line of credit often makes the best option for when people face emergencies. Because it is critical to know a client well, she will ask questions about why someone might want to age in place, such as retaining access to their doctors or proximity to family. And then it’s important to understand if the layout of their home will allow them to stay as they age. “It has to be more than just ‘I love my house, and I love my neighborhood.’ It really has to be conducive to aging in place before I would recommend a reverse mortgage,” she says. “And if you do the reverse mortgage, for example, and then decide later you want to go into assisted living, you just used the equity in your house to stay there. You really have to be sure. So, I wouldn’t say I am skeptical of the product—I am more of a skeptic in that they’re not for everybody.” She had one client who led a simple lifestyle but was running out of money. By unlocking equity, she was able to age in place, Mello says. “But it’s not for everyone. That is my main takeaway,” she adds. Working Social Security A more holistic approach to offering retirement help is part of Urwin’s approach. He has become a Registered Social Security Analyst (RSSA), a credential that helps him train other loan officers on how their clients can maximize Social Security benefits. (See Removing the Mysteries Behind Social Security on page 27.) “My RSSA has no benefit to me personally. I got it to help my advisers to better speak to their clients about ways for maximizing or delaying Social Security,” Urwin says. “It’s another tool in our toolbelt to win more business.” While developing expertise in the Social Security portion of planning, he has built relationships with Rethinking Your Role continued on page 26 A Reverse Mortgage Case Study Reverse mortgages can be a tool used by affluent individuals or couples to aid them in their retirement goals. This case study examines a scenario for a couple, Mike, 67, and Ann, 63, from California. Their children are doing well and aren’t interested in their property. Mike is in his highest earning years and plans to work a few more years before retiring, and they both think their house payments would erode their retirement savings. They don’t have pensions, and they expect their combined Social Security to be about $5,400 per month. They intend to claim Social Security when they each reach 70. They are the opposite of the stereotypical reverse mortgage borrower of last resort. Home loan value: $1.2 million. Household annual income: More than $600,000. First mortgage: $430,000, with principal and interest (P&I) of $2,386 per month. PACE loan: $120,0000, with a P&I of $729 per month. (This is an energy efficiency loan in California that’s like a second mortgage.) Totals: $550,000, with P&I at $3,115 per month. Outcome: With the Federal Housing Administration HECM, they shed the $3,115-per-month P&I payment. They could then send that $3,115 per month to their financial adviser. The $150,999 cash-in to close represented 48 months of house payments in advance, and they had the liquidity to come up with that cash. About the time Mike retires, they would be at breakeven for the amount of cash-in to close versus the amount of cash flow improved from no P&I payments. And, of course, they would not have P&I payments for as long as they live in the home. Kristina Mello REVERSE MORTGAGE /MAY-JUNE 2024 25
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