The “Proprietary” market of Jumbo Reverse mortgages have made numerous steps to establish (and take!) market share (to the mixed joy of HUD and the FHA) and the relevant benefit of our Elder society. Seriously, I don’t see a down-side to the advance of private placement jumbo reverse mortgages. If anything, it will compel competition by FHA & HUD as market share and new premium is how they manage their books. A reduction in market share equals a potential cash flow problem for them as FHA does not use actuaries to price their products (that as Life and annuity products) ARE age sensitive and driven. One would think that Government would use statistical mortality mathmatics to price their products, but, We are painfully aware that government is (and always will be) the final bastion of the incompetent.

Meanwhile, back at the drawing board, several well-established dedicated reverse lenders (“dedicated” meaning they don’t loan anything but reverse mortgages) have recently expanded the number of States they can offer in, and made tweaks to their product offerings and added new products to meet the shortfall of FHA (Insured) products. Noteably, the Jumbo Reverse mortgages now offer HELOC features. They also loan against the full market value of the appraisal (FHA can only use up to $970,800 Effective January 3, 2022). An example of this is the $4 million value home with an FHA reverse gets about 12% of that $4 million; the jumbo would provide an age adjusted distribution of equity equal to approximately 50%.

Another significant benefit to the Jumbo programs is the seemingly lower level of overwhelming regulations and overlays to HUD regs. (An “overlay” is when the lender trumps a HUD/FHA regulation and makes the difficult extremely difficult). But one may surely see an advantage to ANY reduction in regulations as a benefit to the Borrower (assuming the Borrower is a grown adult). Almost ALL Borrowers are very competent.

Additionally, several Jumbo Lenders in the recent past 3-4 years REDUCED the APPLICANT AGE for their programs from 62, to 60, and this week, reduced the age further to 55. From a Retirement (Pre)-Planning perspective, this is a BRILLIANT move as many people enter retirement in much the same way someone would dive into a frozen lake-with significant trepidations and concern for their outcomes and survival. Allowing those who are 55 the ability to SUSPEND their mortgage payment and repurpose it to more important tasks like building their investments is a benefit of paramount importance. I can tell you personally that suggesting to someone who is in pre-retirement they need to come up with 30% more money to commit to investments to make their retirement objectives a reality is met with “are you joking?” facial expressions. It cannot happen with 34-45% of their monthly income going to mortgage debt service. There’s simply nothing left after taxes to save 3-5% let alone 20%, 30%, or moreper month. Suspending that and allowing the monies to be committed to dollar cost averaging strategies would make an age 65 retirement very do-able, but quite impossible if the Client has to carry BOTH a mortgage payment AND save 30% more to meet financial goals. (I’m pretty sure) there’s a child or two getting through College/getting married/grandkids/ etc somewhere in this mix also. The mortgage payment IS the problem, and converting it to Non-Recourse debt IS the solution.

Here’s why…The mortgage payment is mostly interest. With the current IRS personal income allowance of $12 &24K against expenses, most mortgage interest is useless. Even the math of deducting mortgage interest is terrible. Spending $10,000 to pay interest with the consolidation prize of getting back 12 cents on the dollar is a horrible way to manage real wealth, and it should be restructured to create advantages, not poverty. Yet, the mortgage payments are monthly, mandatory, endless, and relentlessly so. There’s simply nothing left to save. Using an Age 55 Jumbo HELOC would rearrange the cash flow to meaningful points of financial concerns. At 62, the Borrowers may then refi into the FHA strategy for the protections it offer as well as relevant uses for the remainder of the Borrowers time in the home. Or, they could simply do nothing. The refinance to the FHA program also allows the Borrower to utilize market value increases from the original age 55 refi to the 62 refi, and incorporate that equity wealth into their retirement plans for added strength, income, and protections.