A recent survey sponsored by the National Reverse Mortgage Lenders Association (NRMLA) suggests that reverse mortgages are the panacea for senior citizens’ financial problems. While there are reasons to be skeptical of the survey (because of who funded it) there are also reasons to stand behind it and ponder its implications.

The poll was conducted on behalf of the NRMLA by Marttila Strategies. It involved 1,800 seniors and their adult children and was titled “The Retirement Abyss: America’s Seniors’ Search for Security.” According to the survey, “one-in-four seniors believe they will not be able to cover their monthly expenses in retirement, such as housing and utilities, and nearly 20 percent believe that, without additional cash flow, they will have to give up their homes.” In addition, a whopping 85% of those polled were pessimistic about the state of the economy, and 50% worry about supporting themselves in retirement. This is supported by current economic data, which show rising poverty rates among the elderly.

The survey also established that 80% of seniors want to keep their homes. This jibes with a similar survey conducted by the Joint Center for Housing Studies of Harvard University, which found that, “95 percent of seniors surveyed over the age of 75 want to remain and age in their home.” This presents an obvious conundrum: seniors want to remain in their homes, but lack the cash to do so.

Enter the reverse mortgage…

According to the survey, “74% of reverse mortgage borrowers in the survey described their use of a reverse mortgage as a positive experience.  Seniors in the survey expressed that they understood the financial terms of the product very well (75%) and ninety percent felt no sales pressure as part of the reverse mortgage process.” That would seem to rebut the claims of reverse mortgage critics, who continue to insist that reverse mortgages are poorly understood and inappropriate for most borrowers.

On the other hand, the survey also inadvertently confirmed these criticisms, since more than one quarter of all borrowers was either unhappy with or didn’t adequately understand the product’s financial terms. What this probably means in practice is that many borrowers either failed to properly investigate or simply overlooked the high upfront costs and rapid accrual of interest, until they went to repay their reverse mortgages and/or discovered that their home equity had been vastly depleted. These borrowers would no doubt be unlikely to recommend reverse mortgages to other borrowers.

Nonetheless, while the industry could certainly do more to discourage unsuitable borrowers from obtaining reverse mortgages, it deserves credit for the high rates of satisfaction among existing borrowers. For those that meet certain criteria, reverse mortgages can seem like a windfall. As one borrower summarized, “Why on earth aren’t more people telling seniors about this Federally Insured Reverse Mortgage?”

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