Reverse Mortgages, Going From Want to Need

“Clearly the opportunity exists for those with a more enlightened vision who can execute well,” says Bart Johnson, reverse mortgage veteran, on this promising sector of the housing finance business. Johnson, who is past president of Financial Freedom and now is in the process of funding and launching a company called Life Stages Financial, predicts expansion in 2009 at a higher rate than 2008, because of:

  • A growing eligible target market, with huge unmet needs and no other answers; and
  • Increased FHA loan limits

This will be offset, however, “in part, by reduced home values and by general industry travails around liquidity, etc.,” Johnson forecasts.  He believes “high, double-digit growth rates, comparable to that experienced in 2003-2006, will occur again – but not until “2010 and beyond.”

Indeed, a higher loan limit, the ability to use reverse mortgages for purchases and co-op eligibility should spur future growth within a highly fragmented market, in which 2,949 lenders produced at least one HECM last year.

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The product “may not work as well for the ‘highest need’ customers (due to reduced home values),” notes Johnson, “but the much larger group of ‘want’ customers have at least temporarily become ‘need’-based (i.e. no other answer but to monetize home equity, albeit reduced home equity, without incurring an additional monthly payment obligation).”

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