Reverse mortgages create dubious images in the minds of many consumers and financial professionals, but that shouldn’t discourage people from looking more deeply at the evolution that a product has gone through in terms of stricter regulations and heightened consumer protection that helped reverse mortgages. a more popular financial planning tool among planners, accountants and others.
This is stated in a new column published by the American Institute of Certified Public Accountants (AICPA) that looks at the history of a reverse mortgage product, its current status as a planning tool, and elements that consumers and professionals should consider when examining such a product. for client.
“[W]“While detractors characterize reverse mortgages as a quick fix that lowers borrowers’ net worth and the value of their property, keeps them in their homes for the rest of their lives, and exposes them to high upfront costs, this view may be outdated,” writes Joshua Wiesenfeld, attorney and accountant of the organization.
Wiesenfeld further cites the changing attitudes of organizations, including the Financial Industry Regulatory Authority (FINRA), as well as the growing prevalence of academics, including Dr. Wade Pfau, who describe reverse mortgages as a potentially useful tool for retirees to promote better development. funded pension.
However, this does not negate some of the caution that CPA clients should be aware of before deciding to receive a reverse mortgage loan, he writes.
“Be sure to advise clients who are considering a reverse mortgage to be careful to avoid falling into the trap of scammers who specialize in targeting older Americans,” Wiesenfeld writes. “Some unscrupulous home improvement sellers and contractors are trying to convince homeowners to take out a reverse mortgage to help cover repair costs. Some scammers are trying to convince unsuspecting homeowners to take out reverse mortgages as part of a home demolition scheme.
Wiesenfeld echoes the widely discussed concern of dishonest actors who cite reverse mortgages when substantively considering this option with clients who may recall similar warnings issued by organizations, including Federal Bureau of Investigation (FBI) and US Department of Housing and Urban Development (HUD) Inspector General’s Office (OIG).
“Encourage your clients to be wary of anyone approaching them for a reverse mortgage and to consult with a trusted financial advisor before proceeding,” he writes for AICPA. “Please note that meeting with a HECM advisor is mandatory prior to conducting a HECM.”
Among the circumstances that can make a reverse mortgage a “smart choice,” Wiesenfeld says, is when clients plan to stay in their current home indefinitely; prepayment for a reverse mortgage is available to the client; and the desire on the part of the client to coordinate the reverse mortgage proceeds with other assets in the investment portfolio.
Read column at AICPA.