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Letter to the editor: most advisors would rather preach 'buy, hope and pray'

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Richard Woychowski writes: Regarding Jim Connolly’s February 2009 feature article in Income Planning, The jury is still split on reverse mortgages for income , I find it quite ironic that most financial advisors focus on the cost of reverse mortgages.

It is ironic especially, since all of those “no load” mutual funds in which they have their clients have lost so much value in the last 18 months.

They would rather preach the “buy, hope and pray” philosophy of Modern Portfolio Theory as their clients’ retirement vanishes out of sight.

Nobody knows what is going to happen in the future and speculation is a fool’s game.

Let’s wait for the housing market to rebound? Again, what don’t these advisors understand? Home prices sky rocketed because the supply of money to buy those homes was cheap and easy. Any idiot with a pulse got a loan.

The cheap money is still here, but it is no longer easy. The banks learned their lesson the hard way and we will never see money that easy again. Which means fewer buyers resulting in declining home values. Home values are not going to “bounce” off the bottom. Hopefully, at some point they will hit bottom and the only sound you will hear is a “thud.”

Here is the next foreclosure crisis. It will be the “baby boomers” carrying “traditional” mortgage debt into their “fixed income, retirement years.” They will be servicing debt with Social Security and maybe a pension (their savings is already gone because their advisor had them the stock market). The foreclosure will take place one year after one of them dies. One of them is going to die and the surviving spouse is going to loose 1/3 to 1/2 of the income, so the ssurviving spouse will no longer be able to make the mortgage payment.

If you are 62 and still making a mortgage payment, you need to look at the reverse mortgage–now. You can still make a payment on a reverse mortgage to keep the debt from growing, but if something should happen to you financially and that payment becomes a burden, you can stop making the payment and not worry. If you stop making your payment on a traditional mortgage, you are going to get foreclosed on, guaranteed.

Just like annuities, with a reverse mortgage it is not about the cost, it is about the guarantees.

But, all the financial advisors out there would prefer “buy, hold, and pray.” Why? Because it keeps assets under management so they can collect the 1.5% management fee every year regardless of the client’s well being.

Richard Woychowski
Reverse Mortgage Advisor
Envoy Mortgage
St Clair, Mich.
[email protected]


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