OP-ED: How Home Equity Improves Retirement Security

A new form of SRI: Secure Retirement Income

Two major retirement challenges could be addressed through a simple innovation. First, long-term investors are struggling to meet their (lowered) target rates of return. Attempts to raise returns by investing in riskier assets only raises the risk of future underperformance. Second, individuals have insufficient retirement savings and are facing the prospect of a meager retirement paycheck. A new real estate sub-asset class, iHomes (Income from Homes), created by innovative funds and real estate managers, could address these twin challenges with attractive results for all parties. The solution rests in allowing retirees to tap into home equity to generate income, and for innovative investors to get rewarded for supplying capital for these transactions.

To dig into the article regarding home equity and reverse mortgage, click here.

By  Dr. Arun S. Muralidhar on May 31, 2019

Reverse Mortgage Lenders Pivot as Sales Falter

By Greg Iacurci on May 24, 2019

“The reverse mortgage market is evolving for the first time in a decade, as the industry pivots to address sagging sales and what it sees as a new opportunity presented by the number of baby boomers retiring.

Reverse mortgages are a type of loan that allows seniors to tap their home equity, as a lump sum or line of credit, without having to make out-of-pocket payments. The market has been dominated by a single product, a home equity conversion mortgage, which is insured by the federal government and sold by approved lenders. “

Full article can be found here.

The FHA Can Improve its Reverse Mortgage Program by Changing Servicing Protocol

By Laurie Goodman and Edward Golding on May 31, 2019

The Home Equity Conversion Mortgage (HECM) program from the Federal Housing Administration (FHA) lets seniors tap into their $7 trillion in housing wealth to help them pay for living expenses that many have difficulty affording. But this program has proved very costly to the FHA, prompting the FHA to narrow the eligibility of the program, resulting in decreased participation.

To find out more about the potential solutions to this issue, click here.

FHA Commissioner Talks HECM Program Health, Second Appraisals

By Chris Clow on June 2, 2019

The Home Equity Conversion Mortgage (HECM) program is a unique hybrid of the public and private sectors, with a great deal of interest directed toward the Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD) who set the policies by which that program operates.

Full article can be found here.

Reverse Mortgage

by Marguerita M. Cheng, CFP® , RICP®, CRPC®, CDFA®

For homeowners over the age of 62, money may be tight due to a turbulent economy, greater longevity, and rising health care costs. And let us not forget the roller coaster ride called the housing market. One way to lessen the unexpected shocks that can jeopardize a comfortable retirement is to consider acquiring a reverse mortgage.

For article may be found here

Finding A High-Quality Reverse-Mortgage Lender

by Wade Pfau on May 30, 2019

A common question I receive regards how to find a trustworthy reverse-mortgage lender. This is not necessarily easy for those beginning the process with little more to rely on than an Internet search engine. A starting point may be with personal referrals from your financial advisor, or from friends or family who have felt satisfied with their lenders. I am also willing to help readers find the names of local lenders from reputable companies if you write to me providing your city and state. I am not compensated by reverse-mortgage lenders for giving such referrals.

Full article may be found here.

Integrating Home Equity and Retirement Savings through the “Rule of 30”

Figure 3: Ratio of initial home value to initial portfolio value

by Peter Neuwirth, FSA, FCA; Barry H. Sacks, J.D., Ph.D.; and Stephen R. Sacks, Ph.D.

This paper examines the effect of using reverse mortgage credit lines to supplement retirement income by two types of retirees that have not been addressed in the previous literature: (1) those whose retirement savings are significantly below those of the mass affluent; and (2) those who are “house rich/cash poor.”

Results of this analysis demonstrate an important contrast with the results of the earlier literature; specifically, the greater percentages of home value, when coordinated with the retirement savings portfolio, resulted in substantially greater percentages of the portfolio that can be drawn.

This paper suggests a new alternative to the 4 percent rule that can guide planners and retirees toward an optimal cash withdrawal strategy. This new rule takes into account the total of the retiree’s retirement savings plus his or her home value.

The quantitative analysis in this paper uses the same spreadsheet models and strategies first presented in the Journal by Sacks and Sacks (2012). This paper builds on that work by extending the analysis to a broader range of retirees.

Full paper here

Reversing the Conventional Wisdom: Using Home Equity to Supplement Retirement Income

by Barry H. Sacks, J.D., Ph.D., and Stephen R. Sacks, Ph.D.

Figure 1: Cash flow survival propability chart

This paper examines three strategies for using home equity, in the form of a reverse mortgage credit line, to increase the safe maximum initial rate of retirement income withdrawals.

These strategies are:

  1. the conventional, passive strategy of using the reverse mortgage as a last resort after exhausting the securities portfolio; and two active strategies
  2. a coordinated strategy under which the credit line is drawn upon according to an algorithm designed to maximize portfolio recovery after negative investment returns,
  3. drawing upon the reverse mortgage credit line first, until exhausted.

Full paper here.

Reverse Mortgage

Screen shot of PDF

by Marguerita M. Cheng, CFP® , RICP®

For homeowners over the age of 62, money may be tight due to a turbulent economy, greater longevity, and rising health care costs. And let us not forget the roller coaster ride called the housing market. One way to lessen the unexpected shocks that can jeopardize a comfortable retirement is to consider acquiring a reverse mortgage.

PDF of full article may be found at http://blueoceanglobalwealth.com/pdf/reversemortgage.pdf