I started working with senior citizens five years after President Lyndon Johnson signed the Medicare program into law in 1965.
When LTCI was introduced, I was excited about it because I realized that these policies may help allow seniors to remain vital in the community and enjoy life without being dependent upon somebody else. I saw that these policies could provide options for community care (at that time, assisted living facilities and adult day care services were not available) and allow seniors to retain their dignity and a more meaningful quality of life. To ensure I was providing my clients with the best advice and products available, I read the fine print of every LTCI policy for four years before I sold my first policy.
Today, many of my clients are on claim. Many wanted to protect themselves and their families but simply could not afford the premiums. Others were rejected by insurance companies or were charged higher premiums because of their poor health. Most of the people I talk to about LTCI are in complete denial about the prospect of their future need for long term care, hence delaying the purchase of an LTCI policy that could help them pay for essential long term care services.
Just as I was originally cautious about LTCI, I approached the idea of reverse mortgages with trepidation — I really thought they were some kind of a scam. Fourteen months ago, however, I visited a couple of my clients, and when we met at their door, they were both very excited to tell me a bit of good news. On my last visit, we had looked at LTCI options. They had explained to me that they really wanted protection for their later years because they were from Britain and did not have any family here in America. They were in their late 70s and not in good health. I reviewed their LTCI options and, based primarily upon their income and medical statuses, explained that they would likely not be able to afford the premiums of a policy that would cover all their needs. In the place of LTCI, I electronically signed them up for the best Part D plan from the Medicare Web site.
My clients then explained to me that after they had paid off their $1,200-a-month mortgage, they used a reverse mortgage to free up the equity in their home so they could install a walk-in bathtub. The reverse mortgage proceeds also paid for dental work the husband needed badly.
They purchased a stair lift so the wife could manage going up and down the steps. They even enjoyed a trip back home, and tears swelled in their eyes as they talked of visiting relatives they did not think they would ever see again. My clients added that they still had a line of credit available to use any time they needed extra money. The wife said that they were aware they would not be able to pay for many years of extended home or assisted living care, but with their mortgage payment of $1,200 paid in full, they received enough cash each month to help ensure they would continue to be safe, independent, and happy.
This visit made it clear that I had not performed my due diligence for these people. They trusted me to advise them, and I had overlooked one of the only options that they had available to help them maintain their independence and quality of life. I felt fortunate, however, that someone else had provided this professional advice for my clients. Because of my closed mind, I was guilty by omission of malpractice. I had called myself a senior advisor for many years, yet, for 12 years, I refused to listen to anyone who tried to explain the benefits of a reverse mortgage.
After meeting with the aforementioned clients who were able to benefit from the proceeds of a reverse mortgage, I investigated over the next year the advantages of using home equity to pay for seniors’ needs. I was not easy to convince, however, and refused to accept a “just trust me” attitude. Many people became frustrated with my negative attitude and persistent questions and doubts about the real benefits of reverse mortgages. I was of the same mindset that some human resource directors displayed when I first explained cafeteria plans 20 years ago — it was just too good to be true.
As I came to learn, this is simply not true for reverse mortgages. The government requires that, before anyone can take out a reverse mortgage, they must speak to an independent, government-approved counselor and review the pros and cons of such a transaction.
Today, seniors are being sold repetitive equity loans that may be impossible to repay. Common sense tells us that if a 75-year-old senior cannot repay one mortgage, it is unlikely that they will automatically find a new income stream to help them repay a new equity loan. Yet banks all over America continue to rack up high-fee home equity loans, and the borrowers are not required to consult anyone when making their decision. Remember the old saying, “If you are in a hole, you should probably stop digging if you want to get out”? Seniors in the this situation may never be able to dig themselves out and can eventually face foreclosure. If seniors use a reverse mortgage, though, they are guaranteed a mortgage-free home that they can continue to live in for as long as they want.
The power of a reverse mortgage is becoming more and more clear, and seniors are beginning to use the trillions of dollars available in home equity across the nation. Government programs have been pushed into bankruptcy by expanding Medicare and creating the Part D prescription drug plan. Limited health care resources may force seniors to depend more on themselves.
As professional advisors begin to understand the advantages of reverse mortgages, many more seniors can begin using this rich resource. I am just as excited about the benefits of reverse mortgages as I was about LTCI 20-something years ago — and I hope you are, too.
Richard Gordon Green is president of Senior Security LTC and Christian Memorial Association. He can be reached at 770-924-9646.