GEORGE DOWNEY
‘Significant’ response

Many mortgage lenders make stops at Realtor offices in order to drum up business, but it isn’t often that they visit a council on aging or visiting nurse association to offer up information about their loans. One area lender, however, is doing just that.

George Downey, president of Harbor Mortgage Solutions in Braintree, recently introduced a “Speaker’s Bureau,” available free to civic organizations and elder service providers, to explain lending options to senior homeowners, including ways to unlock equity in their homes with reverse mortgages.

Downey began offering reverse mortgages to seniors about three years ago. As a member of Banker & Tradesman’s Advisory Board, he also has written several columns on the topic of reverse mortgages.

A reverse mortgage is a loan that enables older homeowners to convert part of the equity in their homes into income without having to sell their home, give up a title or take on new monthly mortgage payments. A homeowner borrows small amounts – monthly or at other intervals – through a line of credit. As time goes on, the loan balance increases and equity decreases. Payment is required once, at the end of the loan, which is usually when the borrower dies, sells or no longer uses the home as a primary residence.

The majority of reverse mortgages are provided through government-sponsored programs, such as the U.S. Department of Housing and Urban Development/Federal Housing Administration’s Home Equity Conversion Mortgage program and the Fannie Mae Home Keeper program.

According to Downey, there are no minimum income, asset or credit qualifications to meet and reverse mortgages have no effect on Social Security or Medicare benefits. The property must be the primary residence of the borrower and properly insured and maintained. Downey has provided many such mortgages to his clients.

“The response has been significant,” he said.

Harbor Mortgage has a separate Senior Lending Division, which Downey leads.

“It is devoted exclusively to providing solutions to senior financing problems,” Downey said.

‘A New Trail’
Downey also provides advice to seniors and their families about other options available to them, such as real estate tax deferral programs and initiatives by nonprofit groups to finance a furnace and new windows for seniors in a particular income bracket.

“It is rounding out a package of programs for seniors,” Downey said.

While his internal Senior Lending Division at Harbor Mortgage has been in operation for a few years, he is now taking his expertise to the general public. With plans to make presentations to councils on aging, home health care providers, church groups and other civic organizations, Downey said he hopes to educate seniors about their options to live more comfortably.

“[The Speaker’s Bureau] enables us to get the message directly to the seniors,” he said.

Downey added that educating and involving family members in the decision-making process is the best way to proceed when dealing with a senior’s finances.

“These issues are very significant and very complex,” he said. “Misconceptions about alternatives available to senior homeowners are widespread,” said Downey. “Each individual has a unique set of circumstances that needs to be assessed before the best solution can be determined for an individual senior homeowner, but it is important for all of those involved in the decision-making process to be informed about the range of available options.”

Even those who provide direct services to seniors aren’t always aware of the options that could best serve their clients.

The Speaker’s Bureau also will be used to educate those direct service providers, such as elder law attorneys. Downey, who joined the National Academy of Elder Law Attorneys, said the presentations differ based on the audience, but the educational seminars typically introduce what a reverse mortgage is and is not. Downey refutes the misconceptions, outlines the advantages and disadvantages and discusses how the product works and the cost involved.

Philip Murphy, an elder law attorney in Milton who works with Downey, said the reverse mortgage segment of the market is still relatively small, but growing. Murphy said Downey’s knowledge is crucial in order to educate those working with seniors, such as members of the National Academy of Elder Law Attorneys.

“[Downey’s] approach is ‘let’s educate people,'” Murphy said. “Someone needs to be educated as to why it is different than regular mortgages.”

Murphy admitted that three years ago, he had no interest in hearing about reverse mortgages. But these days, he added, he has realized it is a good product for many of his clients. After being educated on reverse mortgages, Murphy said he has been able to suggest the product to clients.

“I see situations that cry out for it frequently,” Murphy said.

Downey pointed out that reverse mortgages are not a typical mortgage product because the clientele is unique and the nature of the product is different than typical loans.

“It’s a completely different business,” he said.

Downey said he originally thought reverse mortgages would be good supplemental business, but soon realized it didn’t involve as much time in sales as it did in providing education to clients.

The Speaker’s Bureau is intended to be a public service for local seniors and those who work alongside the elder population.

For many seniors, increasing real-estate taxes, expensive health care costs and now gasoline and home heating fuel will dip deeper into their pockets, especially for those on a fixed-income. Downey said reverse mortgages have given many “house rich, cash poor” seniors the ability to make those payments and live comfortably.

But the product isn’t just for those with a fixed income. Even clients with significant financial assets can benefit from a reverse mortgage.

Downey provided a reverse mortgage for one client who purchased a second home in Florida using cash from the reverse mortgage. The client also had been drawing on his 401(k) account for his cash needs, which is taxable. By using the cash from a reverse mortgage, which is nontaxable, the client was able to reduce his 401(k) withdrawals.

“Here is a reutilization of his assets,” Downey said, adding that the client changed his income strategy. “It was a new source of liquidity.”

Downey said he has high hopes for the Speaker’s Bureau because the volume of reverse mortgages is increasing. However, he admitted that bureau activity may be slow at the beginning.

“We’re breaking a new trail,” he said.