I disagree what that suggestion. The problems we’ve seen is when a Deferred Annuity is purchased and the early withdrawal fees aren’t explained properly. This happens with greedy Agents who aren’t performing their fiduciary responsibilities properly. However, there are professional Agents who genuinely care and those Agents may not recommend an Annuity, because it doesn’t make sense, or they may recommend an Immediate Annuity. They also fully explain the early surrender charges. Both HUD and AARP agree an Immediate Annuity can make sense when used properly. Everybody agrees a Deferred Annuity rarely makes sense. Unfortunately, Deferred Annuities pay the Agents more then Immediate Annuities, making them more desireable for Agents to sell.

If my client is considering an Annuity after their Reverse has funded, I provide them with a current copy of Annuities for Dummies. After they’ve read it, we talk about their goals and if an Annuity makes sense, we determine which type of Annuity fits them best.

Prohibiting homeowners with the ability to purchase an Annuity could eliminate a financial choice that provides a premium solution to their situation. Instead, lets do like we’ve done with Reverse Mortgages, and get a Counselor involved, or some sort of other medium (as I’ve done). The key is making sure the consumer isn’t taken advantage of and properly informed. If Deferred Annuities paid Agents the same as Immediate Annuties, the problem would probably go away. Maybe we should talk to the Annuity companies about this? Or make it so Deferred Annuities can’t be sold to folks that got a Reverse Mortgage.

My usual recommendation is to leave some equity in the line of credit in order to allow for equity line increases. I see this as an insurance policy should the need for additional cash be required in the future.

The secondary market will be hard pressed to get excited about purchasing a fixed HECM that doesn’t have fixed terms. IF a rate and balance are fixed, and then the balance is reduced, the investor is not making as much as anticipated and the value of the security is reduced. With Adjustable rates they have the ability to react to market adjustments.

My feeling is that one of the biggest reasons that Fixed HECM’s are so expensive is due to the fact that the equity will be exhausted in many cases prior to a senior moving out. This leaves the lender and Fed Govt. holding the bag on a loan that will not be fully paid off

.As one of my friends said…”looks like the making of another mortgage crisis”. I agree.