Journal of Accountancy Assesses Reverse Mortgage, Finds Potentials



The July issue of the flagship publication of the national association of certified public accountants featured reverse mortgage and its potentials to secure seniors the income they need in retirement.

The Journal of Accountancy (JofA), the publication of the American Institute of Certified Public Accountants (AICPA), believed that recent changes to reverse mortgage, including the introduction of Home Equity Conversion Mortgage (HECM) Saver, made it an attractive retirement funding tool.

JofA authors Nicholas Lynch, PhD and Charles Pryor, PhD advised all CPA financial advisers to be aware of reverse mortgage products and be ready to discuss whether they are viable choices to help qualifying seniors remain in their homes while receiving the needed money loaned from their home equity.

Lynch and Pryor encouraged practitioners to be prepared in discussing the advantages and disadvantages of reverse mortgage including alternatives to ensure that seniors planning to avail its products make an informed decision. With adjustable-rate HECMs at around 3 percent interest and fixed-rate HECMs at around 5 percent, Lynch and Pryor believed "now" is the best time to avail reverse mortgage products.

Lynch is an assistant professor of accountancy at Georgia Southern University while Pryor is an assistant professor of accountancy at Western Illinois University.

JofA is not the first trade publication, which acknowledged the possibility that reverse mortgage could be an effective tool in retirement financial planning. In February, the Journal of Financial Planning published a study showing that a retiree's residual net worth is likely to increase if a reverse mortgage is used in the early phase of retirement rather than as a last recourse.

In June, the Center for Retirement Research at Boston College released its own study naming reverse mortgage as one of the "retirement levers" that could be as powerful as asset allocation in attaining retirement security.

The Consumer Financial Protection Bureau (CFPB) then released a report on reverse mortgage following series of recognitions and media attentions given to the industry. The CFPB's report examined reverse mortgage products, consumers and markets in preparation for the industry's projected growth and impact.

While CFPB's key findings were not all favorable to reverse mortgage, the bureau's report raised issues that are expected to improve business practices within the industry.

Prior to the release of CFPB's study, the National Reverse Mortgage Lenders Association (NRMLA) has already implemented a code of conduct and ethics for the industry's key players.

Consumers Union's Senior Attorney Norma Garcia welcomed the NRMLA's move. In June, the Union called for improvement in suitability standards and fiduciary responsibility within the industry. It also advocated for the outlawing of deceptive marketing and strengthening of anti-cross selling promotions, counseling and protection of non-borrowing spouses and tenants.

In an interview with Reverse Mortgage Daily, Garcia said that the industry still needed to implement guidelines aimed at self-regulation.

With the addition of another financial trade publication like JofA confirming the feasibility of reverse mortgage for retirement financial planning, the industry is expected to continue with its boom and invite more players.



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