Even before USA Today published an article this month taking aim at reverse mortgages and the associated industry’s practices, the news outlet had previously published articles that relate caution to its readers concerning the idea of engaging in a reverse transaction. One such article was posted back in April, and a prominent industry expert has highlighted the details that piece gets wrong in a new column at Forbes.
Professor Jamie Hopkins, director of retirement research at Carson Group and a member of the Academy for Home Equity in Financial Planning at the University of Illinois at Urbana-Champaign, took aim at the April USA Today article by highlighting three “half-truths” that he’s identified in it. These include “reverse mortgages are high-interest-rate loans;” “reverse mortgages are too expensive;” and “reverse mortgages aren’t a long-term solution.”
Hopkins concludes his Forbes article by urging people not to write off a financial tool that has the potential to help them in certain financial situations, at least not before learning specific details on how it could potentially work for them based on their own financial conditions.
“Like any retirement income strategy, reverse mortgages need to be researched, reviewed and considered beforehand,” Hopkins writes. “Don’t base your opinion on just one source. Reverse mortgages aren’t appropriate for everyone, as they come with costs and risks, but you might have the ideal situation. On a higher level, we need to encourage more transparency and broader incorporation of all products – annuities, investments, reverse mortgages – into financial planning. Pushing only one way puts Americans in a worse place for retirement.”
Responding to media criticism
When reached to expand on his perspective concerning the media challenges faced by the reverse mortgage industry, Hopkins reiterated a point he’s made previously that the best weapon against bad information is, basically, good information.
“Half-truths and misconceptions are a big issue for better utilization of reverse mortgages. We see this on the consumer side, the media side, and the advisor side,” Hopkins told RMD in an email. “We need to be better educating all across the board. But, this is not shocking given how poor America’s retirement income literacy is, that individual products like annuities and reverse mortgages are expected to be even less understood.”
Omitting non-recourse details
One of the bigger criticisms Hopkins leveled at the April USA Today story was the fact that it failed to make any mention of the non-recourse feature inherent in reverse mortgage loans, a major selling point of the product. That wasn’t the only detail that the April article missed, though.
“Let’s just say that the article overlooked a lot of things and the non-recourse feature was one of them,” Hopkins told RMD. “There obviously could be a lot of reasons for it being overlooked, but in general the article tried to simplify the reverse mortgage by leaving out things like the non-recourse feature and the lending limits. So, in an attempt to oversimplify it really ended up making some misleading claims as a result.”
The overall intent of the article in advocating that consumers understand the more specific details of a reverse mortgage loan was still an important message, Hopkins says, but that doesn’t mean that the intent of the message was a justification for leaving important details out.
“The message wasn’t a bad message. Reverse mortgages can be useful, but you need to understand them before using them,” he says. “That’s a good message, but some of the details were missing, which is unfortunate.”
Research from June’s investigative article
With respect to the most recent USA Today coverage including an investigation into reverse mortgage foreclosures, the research and methodology was more solid, Hopkins says.
“The underlying research mentioned by USA Today about reverse mortgage foreclosures was very solid and brought to light a significant issue,” he says. “It also brought to light some of the bad behaviors and predatory strategies that were going on.”
That’s not to say that the reporting was without its shortcomings, however, particularly in terms of reverse mortgage program refinements that have been made over much of the past decade.
“The USA Today piece should have noted that some of the issues mentioned in the research have since been resolved or at least addressed by the government,” Hopkins says. “Promoting the research and study was great and needed, but it is also needed that they tell the full story, that the government was aware of some of these issues and acted to reduce the number of homeowners that might lose their homes, miss property tax payments, and withdrawal more money than they need at the start of the loan.”
In the end, though, the data shared in the June USA Today investigation was not necessarily out of bounds, except where its lack of mention toward program refinements are concerned, Hopkins shares.
“Overall I am not as critical of the USA Today piece discussing the research besides that the article needed to go further in saying what the government has done to address the issues they brought to light,” he says.
Article by reversemortgagedaily.com