Copyright Credit Union Executives Society Jun 2009One of the challenges with reverse mortgages is that they've changed a great deal over the last generation. Misconceptions about reverses stem from a previous generation when the loans weren't as consumer-friendly as they are today. For example, a senior citizen might say they've considered taking out a reverse mortgage, but a friend warns, "No! Don't do that! They'll take your house!"
According to an 
AARP study, only 15 percent of seniors said they were very knowledgeable about reverse mortgages, and 34 percent said they were somewhat knowledgeable.
It's good to know some of the objections you might hear from your members and what the truth is, before you start offering reverse mortgages. Whether you use a third party to counsel your members or you provide it in house, these are the most common misconceptions you'll hear.
Misconception: "The lender could take my house." This is the most misunderstood aspect of reverse mortgages.
Truth: The homeowner retains full ownership. A lender can't foreclose on the owner as long as the owner lives in the house and keeps up with taxes and insurance. Remember that a reverse mortgage is just a loan with a lien, like any other mortgage. The borrower can pay it off anytime he'd like.
Misconception: "I could end up owing more than my house is worth."
Truth: The homeowner can never owe more than the value of the home at the time the home is sold.
Misconception: "My heirs will be against it."
Truth: Experience demonstrates heirs are in favor of reverse mortgages. Mary Colonese, mortgage manager at $235 million Sarasota Coastal Credit Union (www.sccu.org), Sarasota, FIa., says it's not uncommon for members taking out reverse mortgages to be accompanied by their sons or daughters. They're happy that the parents are taking out a reverse mortgage. "A lot of people who attend our reverse mortgage seminars come with their children," says Colonese. "They are for it. They want their parents to enjoy their lives and have a better lifestyle." And often the alternatives for the senior would be entering a nursing home at $5,000 to $10,000 a month or living with the kids or in some other place that might not be safe or familiar.
This is an excerpt from Reverse Mortgages: Market Potential and Implementation Ideas. CUES members, CUES Director members and CUES Supplier members can download the complete report, and non-members can view an executive summary at cues.org/reversemortgagebriefing/. E-mail cues® cues.org for password assistance.
For more about CUES offerings orto placean order, visit cues.org, call CUES at 800.252.2664 or 608.271.2664, ext. 3400, or e-mail us at cues@cues.org.
My Research