Nov/Dec 2021 RMM

In fact, there are 5.8 million more women than men over age 65, according to Hounsell. Given these challenges, Hounsell says there is a need for greater financial literacy among women. She focuses attention on programs, like Social Security and Medicare, as well as employer-sponsored retirement programs and emergency savings initiatives. But she also sees a role for reverse mortgages. The upfront fees associated with a Home Equity Conversion Mortgage (HECM) can be a disincentive, Hounsell acknowledges. But the more people hear stories about positive end results, the more inclined they may be to explore the option as a way to generate additional income in retirement. The HECM line of credit may be particularly attractive, she adds. “I think more people will lean toward it as it becomes more accessible and people understand it better,” Hounsell says. Tapping Equity Many older people already lean on home equity as a source of cash, and a growing number of U.S. retirees are carrying mortgage debt, according to research published last fall by Stephanie Moulton of The Ohio State University and Christopher Mayer, who serves as the Paul Milstein Professor of Real Estate at Columbia Business School, in addition to being CEO of Longbridge Financial, Mahwah, NJ, one of the largest reverse mort- gage lenders in the country. Moulton and Mayer found that more than 40 percent of people retired with mortgage debt in 2016, up from 20 percent in 1992. And many people add mortgage debt after they turn 62, the age at which they become eligible for HECMs. In 2018, more than 1.3 million people aged 62 and older took out first mortgages, home equity lines of credit, cash-out refinancings or other forward mortgage products. That compares to roughly 33,000 reverse mortgages in 2018. But one of the most surprising findings, Moulton says, is the number of people who apply for home equity and other mortgage-related loans but are turned down. Nearly one quarter of the 2.5 million applicants over 62 in 2018 were denied, according to Moulton and Mayer. One of the chief reasons was high debt-to-income lev- els, which led to about half the denials for home equity loans and lines of credit, says Moulton, a public policy pro- fessor at Ohio State’s John Glenn College of Public Affairs. “That’s much higher than what you see among younger folks,” she says. However, it is the problem that reverse mortgages were partly designed to solve, she says. “They were designed to help people who need liquidity but don’t have extra money for a mortgage payment.” The findings suggest a potentially larger market for reverse mortgages, she says. But it depends, in part, on greater consumer awareness, product transparency and trust, and putting the product squarely on the menu alongside forward mortgage options. Seeing the Value A stigma remains one of the obstacles for reverse mortgages, according to Thiago Glieger, a private wealth adviser with RMG Advisors in Rockville, MD. Many borrowers entering the prime years for a HECM came of age at a time when the product was getting adverse publicity. And that has kept people from looking at the new generation of reverse mortgages, including equity release products, says Glieger, who sees housing wealth as a key part of retirement planning. “It’s always really been a part of our business. Making sure our clients maximize their wealth is a core tenet of what we do for the families we serve,” says Glieger. Most of his clients have home values at around $1 million or more. If they take out a HECM, they generally take out between $500,000 and $600,000. “You can’t spend your house like you can spend your portfolio,” says Glieger. “If a large part of your equity is tied up in a home, you limit yourself to how the real estate market performs, as well as limiting your pool of liquid capital. I see this with real estate investors too—owning too many properties can make your overall portfolio too concentrated in real estate. Tapping into the equity of a home with a HECM can allow you to keep the property Academics continued on page 20 Stephanie Moulton Thiago Glieger REVERSE MORTGAGE / NOVEMBER-DECEMBER 2021 19