Sept/Oct 2021 Reverse Mortgage Magazine

The press is talking about ... Fighting Inflation with a Reverse Mortgage: What Retirees Need to Know Many older Americans worry about outliving their savings, and those fears have been magnified by recent spikes in inflation eating away at retirees’ nest eggs. The consumer price index increased by 0.8 percent in April from March and surged 4.2 percent from the previous year, the biggest jump since September 2008. As retirees weigh options to preserve purchasing power, financial experts say adding a reverse mortgage to a retire- ment plan may offer inflation protection, according to a recent article by CNBC.com personal finance reporter Kate Dore. Typically, retirees spend down their investment port- folios while preserving home equity. But research suggests making a reverse mortgage part of a retirement plan may offer an unexpected benefit, says Wade Pfau, professor of retirement income at The American College of Financial Services, in Dore’s story. “The bigger impact is you’re reducing pressure on the portfolio in retirement,” Pfau says. Full article, cnb.cx/3gLTJH2 . Podcast: Tap the Money Tied Up in Your Home with Keith Gumbinger During a discussion of home equity in an episode of Kiplinger’s “Your Money’s Worth” podcast, Keith Gumbinger of mortgage research firm HSH.com noted that reverse mortgages can be a very important part of a well-structured retirement plan. Gumbinger notes that the predominant reverse mortgage option is the Home Equity Conversion Mortgage backed by the Federal Housing Administration. “These are well-structured, easy to understand. And unlike in some of the wild and wooly days of yesteryear, you actually have to go get counseling before you can sign up for one. They’ll talk to you about the risks and rewards,” says Gumbinger on the podcast. Most importantly, he adds, any existing mortgage debt gets paid off. “You eliminate the debt you have to make payments on. You can borrow money that you don’t have to make payments on. And this can provide very good levels of flexibility, especially if we’re talking about a meager sort of asset structure when you’re retired.” The full article can be found at bit.ly/3gNTcmB . In Washington, they’re talking about ... White House Budget Forecasts Strong HECM Performance The Biden administration released a Fiscal Year 2022 proposed budget in late May that predicts strong economic numbers for the Home Equity Conversion Mortgage (HECM) program during the next federal fiscal year that begins on October 1. The budget projects the HECM program to operate at a credit subsidy level equal to negative 2.54 percent, which means it will generate substantially more receipts than it pays out in claims for that year’s book of business. Budget estimates also show HECMs made during the current fed- eral fiscal year will perform at a negative credit subsidy rate of 2.34 percent. The budgetary numbers are a further indication that the Federal Housing Administration’s reforms over the past few years are having the desired impact. Since the HECM program is self-sustaining and doesn’t require an annual appropriation from Congress, the President’s budgets provide a valuable bellwether on future HECM performance. In addition to the HECM performance indicators, the president’s proposed FY22 budget requested $61 million for housing counseling services, which represents a slight increase from the $54 million appropriated in 2020. What’s News continued from page 9 10 REVERSE MORTGAGE / SEPTEMBER-OCTOBER 2021