The Nightly Business Report aired a feature on reverse mortgages last night featuring the CEO from Circle Mortgage as well as NRMLA President Peter Bell. In The Reverse Mortgage Trend, reporter Jeff Yastine covers why the drop in the stock market has seniors weighing the pros and cons of reverse mortgages more than ever. I couldn’t find a copy of video but the transcript is below:
JEFF YASTINE: Reverse mortgages are just what they sound like. Part of the equity in a home is bought by a lender. The only caveat — the homeowner must be at least 62 years old. And unlike a home equity loan, a reverse mortgage doe snot have to be repaid, as long as the borrower lives in the home. Last year’s housing and economic recovery act boosted to $417,000 the amount of equity that can be used in a reverse mortgage and that has the phones ringing off the hook for originators like David Levitt.
DAVID LEVITT, CEO, CIRCLE MORTGAGE CORP.: We’ve definitely seen an influx in people seeking a reverse mortgage due to what just happened in the stock market — loss of income, loss of assets, loss of money or income stream.
YASTINE: More than 9,700 reverse mortgages were written last month, a 21 percent jump from year-ago levels. And reverse mortgages were popular even before the higher lending limits took effect last month, with originations booming in recent years. But there are costs. Origination fees can run up to $6,000, and there are other fees on top of that. Peter Bell of the National Reverse Mortgage Lenders Association says the biggest users are new retirees who still have a regular home mortgage payment to make.
PETER BELL, PRESIDENT, NRMLA: Once their income drops off after they stop working, it’s a challenge for them to continue to make those monthly payments. So they get the reverse mortgage to pay off the existing balance and then they continue to live in the house and they no longer have to make the payments. So the money that was going out each month to make those payments is now available for other uses.
YASTINE: For people like the Goldsteins, a reverse mortgage also means less equity left over for their heirs, Judy and Bob’s two adult children. But that’s not a problem.
B. GOLDSTEIN: My children are doing well on their own and I felt my obligation was to my wife, to see that she had a good quality of life, as well as myself and I think that was primary. Our kids are in good shape. I didn’t have to worry about that.
JUDY GOLDSTEIN, RETIREE: That’s why we’re married 51 years, because he cares so much for me.
YASTINE: With a housing market still in the dumps and a stock market that’s proven more risky than many anticipated, more seniors like the Goldsteins are weighing the pros and cons of reverse mortgages. Jeff Yastine, NIGHTLY BUSINESS REPORT, Delray Beach, Florida.