7 minute read
Taking a reverse mortgage is a weighty decision, one that requires careful thought and consideration. To help assess the right course of action, some seniors opt to engage their children in the conversation. While some might assume that adding more people to the discussion can complicate matters, many HECM originators find that including a borrower’s children is usually a beneficial move.
“Almost all the time, it’s much better to have the children involved, no matter what the outcome is,” says Mike Gruley of 1st Financial Reverse Mortgages. “The children may give us more insight into the borrower’s motivations for taking the reverse mortgage. We can try to approach the borrower from a different standpoint and maybe protect them better by knowing the real story.”
Gruley says it’s also helpful to combat misinformation right off the bat. “By personally participating in conversations between the parents and the child, we can minimize the misinformation that exists.”
Janice Cohen of Retirement Funding Solutions agrees that presenting the facts from the start makes the process smoother for all parties involved. “Personally, I find that if you’re proactive instead of reactive, you’re much better off,” she says. “It all comes back to my desire not to be blindsided at the last minute, or to have a family member feel blindsided. I would rather have the chance to impart accurate information, because a lot of people do have questions as the heirs, and they have a right to know the correct answers.”
Still, a good number of prospective borrowers don’t ask their children to participate. “A large percentage of seniors are accustomed to making financial decisions on their own,” says Don Graves of Retirement Funding Solutions. “I always ask and invite, but I would say that less than 50 percent want to have their family present to help make these financial decisions.”
Graves says he is careful about suggesting that clients include their children. “If I suggest it, that can be offensive. That can backfire and make it seem like I don’t think they can make their own decisions. There’s a strong sense of dignity about financial independence.”
Cohen says she is also careful about asking clients to include their children, but that she finds it to be particularly helpful for some clients, especially recently widowed women who might not be accustomed to making financial decisions on their own.
“I think that it’s reassuring to them to talk with their children,” she says. “I try not to suggest it in a way that would indicate they shouldn’t trust their own judgment. I’ll say, ‘You know, this is a big decision and it might be good for you to have a family conversation about it.’ I’ll offer my presence at that family meeting or I offer to be available by phone while they’re talking to their children.”
“I won’t make that suggestion, though, if it’s a married couple. But sometimes they’ll say, ‘My son is a CPA,’ or, ‘My son is lawyer,’ and I welcome that opportunity and make the same offer to be present or to be available by phone,” says Cohen, adding that it’s most ideal when the inquiry is made by the child on their parent’s behalf.
When engaging the prospective borrower’s children in loan discussions, most originators agree that it’s important to first address their parent’s financial issues before explaining the details of the loan.
“Once we determine what the retirement income pain points are, then I ask their opinion of reverse mortgages,” says Graves. “We’ll discuss the retirement income goals Mom is trying to achieve, and the alternatives. What are the ways Mom could meet these retirement income needs apart from a reverse mortgage? Can she move? Can she move in with you? Would you be willing to send her $250 a month to help her through these next few years with this mortgage payment? Can she apply for welfare, food stamps, take a roommate, go back to work? I frame it in the context of: What are we trying to accomplish? If I’m just selling the product, then I’m just a salesperson, and that’s not what I am. I’m a retirement income consultant.”
“I always say in my 16 years I’ve sat with 5,500 people and about 2,300 people have gone forward to do a reverse mortgage, and all that tells you is that as good as reverse mortgages are for many, they’re not always the right thing to do. Together we can determine what the most appropriate steps should be for your mom and dad,” Graves says. “About as many people say ‘no’ or ‘not yet’ to me as they say ‘I will do it.’ That’s fine, because we have integrity in the process.”
Gruley says it’s important to discuss why the borrower is seeking a loan, and that bringing the children into this conversation can be helpful. “When we meet with a child advisor, we get to gauge their motivation,” he says. “If we get the distinct impression that the child wants his parent to do this for reasons that are to his benefit (and not to his parent’s), we can address it. We can’t tell people what to do, but we can certainly advise them in a way that might mitigate some of the risks of that situation for the borrower. It helps us act in an advocacy role.”
“We want to make sure that the motivations for the borrower and the children involved seem to be aligned,” Gruley says. “We want to establish that this is a good solution for the borrower, and since the children have been invited in, establish that they understand and agree that this is a good solution so that everybody is on the same page. That’s what we would hope to achieve.”
Cohen says she recommends that the children take part in counseling. “I always make the suggestion to a senior that if he is discussing the prospect of doing a reverse with his children, that they be on the counseling call,” she says. “I love to encourage that. I tell the children that it’s important because they are going to be getting unbiased information. The counselor has no interest in the borrower doing a reverse mortgage; they just want to answer questions, make disclosures, get the facts out.”
Inevitably, there are always a few skeptics. But some say a dose of doubt can be healthy. “I think the family should be skeptical and concerned. I absolutely believe that. That’s a good position to take, particularly if you’re dealing with someone over the phone.”
Graves says it’s important to walk skeptical family members through the process with patience. “If they seem to be resistant, I’ll say, ‘I understand. Let’s go back through. Is there an alternative I’ve missed?’”
Cohen says she also reviews alternatives when confronted with skepticism. “I try to investigate with them what the alternatives are, though that would generally involve assistance on their part… Usually that will help them come to the conclusion that the reverse mortgage is the best way for their parents to become financially independent again. Rather than telling, I like to ask questions. That helps people answer with their own voice and come to the conclusion themselves… You always want to present the fact that there isn’t just one option and this may or may not be right for your parents.”
Gruley says if children are opposed to their parents taking the loan, it is likely for one of two reasons. “One: They don’t understand the program and so they think it’s bad; or two: They understand the program and they don’t think it’s a good fit for their parent. Our presumption is, if they understand the product and give us a good reason why Mom and Dad shouldn’t be doing it, then we think it’s valid to have that discussion with the borrower.”
Gruley says the children can sometimes bring facts to the table they might otherwise not know. “Talking with the children can sometimes give us information that borrowers either leave out or don’t think is any of our business, but it’s in their best interest for us to know so we can advise them properly.”
Graves echoes this idea. “My goal is not to convince them that a reverse mortgage is the right thing, because I honestly don’t know if it is. My goal is to have a conversation. The reverse mortgage doesn’t need to be the conclusion, but let’s make it part of the conversation. And together, once we’ve looked at the alternatives and had this conversation, they’ll tell me.”
