New Push For Reverse Mortgages

"Reverse mortgages are a powerful funding tool that provide significant benefits, especially when incorporated into an overall financial plan," he says.

Reverse mortgages can be used to free up home equity as cash to buy long term care policies, annuities or life insurance. This provides additional security to the homeowner while allowing the financial advisor to generate new fee income, notes Gonzalo Garcia, sales business leader of BISYS insurance services division.

"Its an opportunity to assist people who have illiquid assets to create equity release for other financial planning needs," Garcia says. "Its a great financial planning tool in that it provides liquidity to the investor, and for BISYS agents, it opens up the chance to sell other products."

Mahoney points to recent American Association of Retired Persons research showing that 86% of Americans age 62 or older want to stay in their existing home. He says a reverse mortgage often makes it possible for them do so.

His company saw demand for the product increase by 50% last year, Mahoney says. He attributes that growth to a variety of factors, including stable home values, record low interest rates and the impact of the events of 9-11, which he says spurred many to see the need for estate planning to provide for themselves and family.

A recent educational campaign by the reverse-mortgage industry aimed at attorneys, financial planners and other advisors has also helped increase interest in the product.

Mahoney called the alliance with BISYS a "milestone" for his firm, citing BISYS extensive network of financial intermediaries and its training and administrative support services.

Financial intermediaries often find innovative applications for the reverse mortgage, such as freeing funds to establish Section 529 plans for their grandchildrens college education or to buy a second home, he says.

"One other application is the use of the equity release to fund irrevocable life insurance trusts to create life insurance proceeds outside of the estate." he says, "That enhances the clients wealth-transfer opportunity."

Financial Freedom says it originated $1 billion of home value in reverse mortgages in 2001 and has made more than 18,000 reverse mortgage loans totaling more than $3 billion in home value. The company currently services around 20,000 loans.

Reproduced from National Underwriter Life & Health/Financial Services Edition, April 1, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.