Seniors Considering Larger Up Front Payments From Reverse Mortgages

GOLDEN GATEWAY FINANCIALGolden Gateway released new usage data from its online reverse mortgage calculator that showed seniors are increasingly considering larger up front payments as opposed to more substantial monthly payments.

Data from the second quarter of 2009 shows similar numbers in terms of the types of individuals researching reverse mortgages. Average age of users, the percentage with forward mortgages, and current self-reported home values all remained relatively flat between the first and second quarters of 2009.

The one notable change was in how people are considering receiving their reverse mortgage proceeds. For those considering a larger up front payment, the amount continues to grow with an increase of more than $12,000 from the second quarter of 2008 to this year. For those considering a monthly term payout, the amount they are planning to withdraw each month decreased by nearly 50 percent in that same period.

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"As we approach what appears to be the bottom in the housing market for seniors, the new reverse mortgage loan limit and a home price rebound means many could gain more now from a reverse mortgage than ever before," said Eric Bachman, founder and CEO of Golden Gateway Financial. "It’s also evident that many of these same seniors are still feeling economic pressure and hope to alleviate it in the near term by taking larger up front payments and smaller monthly amounts."

Additional observations from the data include:

  • Age and other determining factors remained roughly consistent, while home values dropped by 1.4%, or an average of nearly $6,000, on a national average between the first and second quarters of 2009
  • The percentage of borrowers with a forward mortgage remained almost identical, meaning there is potentially an even split between those researching a reverse mortgage for reasons related to their homes versus their investment portfolio
  • The amount of max up front payment available increased by 4.8% between the first and second quarter of 2009, and by 8.2% from the second quarter of 2008
  • The amount of max monthly payments available decreased by 2.9% between the first two quarters of this year, and by 48% between the second quarters of 2008 and 2009

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New Data Shows that Economy and Higher Reverse Mortgage Limits are Driving Seniors to Seek More Immediate Cash Benefits

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  • Mr. Bachman please describe why your data should be relied upon or cease and desist from making the conclusions and generalizations you do from it. Can you validate that your information is truly respresentative of the senior population you describe?

      • Admin,

        I just read what you, Mr. Veale, and Mr. LaFay, wrote. I really do not have much to add. When data has not been properly tested, it seems like anyone’s opinion could be right. For someone who promotes his own data, it is odd Mr. Bachman does not publicize the work that is done to make it trustworthy.

        Some voters on the so called talent shows have greater influence than others. Why? They find ways to register more votes than others. I really do not believe that the results of those votes are necessarily representative of all viewers since not everyone votes and because of the rules that allow some voters to have a disproportionate influence on the outcome through multiple voting. Or one of my friends who was originally from Chicago tells me just before election days: “Just remember. Vote early. Vote often.”

        I have also heard that the organizations that make awards presentations like the Oscars take real measures to make certain the votes they get are legitimate. A few invalid votes could ruin or uplift the careers of the wrong people. Look at the amount of work the people at the Nielsen ratings go through. Why? Because the results are important to the recipients. Even though the 2000 presidential election makes a mockery of it to some extent, we go through a lot of work for our elections to make sure that results are based on reasonably trustworthy data.

        This is nothing personal but there are some questions that need to be answered about the data Mr. Bachman uses if it is to be considered reliable.

  • The report is illuminating. There are bound to be differences from
    one originator to the other and possible trends in geographic locations.
    As an example HUD estimates average age of Seniors applying for
    FHA (HECM) Reverse Mortgage is right at 72. Again, those numbers
    are not set solid; they will vary from Lender to Lender and from month
    to month. All reports from originators should be welcomed. Keep them
    coming and thanks for the effort. Bob LaFay, Reverse Mortgage Consultant

  • Admin,

    The Critic can speak for herself/himself but I have real problems with the use of raw data that has been taken from the calculator of a relatively small operation and from that project trends, intentions, directions, activities, etc. of a national population of senior homeowners. In fact the data may not be representative of even those who actually used the calculator for the purposes that are represented.

    For data to be useable to make the claims in the press release, it needs to be examined and probably independently verified as useable for that purpose. Mr. Bachman makes no claims that any work has been done to verify or examine the quality of the data he is using. Just as it is not reasonable to believe that the information taken from any other calculator (including Security One Lending's or AARP’s) is representative of those who are actually using it without verification and descriptions about the bias inherent in the data such as coming disproportionately from a specific area of the country, from a specific subgroup (such as women, men, or couples) etc.

    For example, some people come into the calculator and only use it once in the period being reported. However, others may use it again and again not only at the same time but in the same day, week, month, or reporting period. But that is just one type of distortion from the users themselves. Another comes from mischief makers who want to influence a specific result from those who naively use its cumulative results. It could even be substantially distorted by staff use by just running scenarios in behalf of clients; data being gathered for speeches, seminars, and other purposes; or just personal purposes.

    There is no information given on the number of individual data items that were used in making these conclusions. Were there three, three thousand, fourteen million, or what? Further most calculators just gather data; they generally do not provide any filters or safeguards to ensure the validity of the information they provide.

    Based on the statements of Mr. Bachman, the information he relies upon is limited, biased, and potentially misleading. No statements have been made about any attempts to verify or ensure the validity of data whatsoever. Until validated the data Mr. Bachman brings to the table is little more than anecdotal at best.

    In auditing firms many times we found that business owners confidently told us that information we were using came from one source only to find out later that that was not true at all, it came from another. It did not matter if they were Harvard MBAs or in the same business for over 40 years. There was no apparent reason for the misinformation other than the owner thought it was one way when it was really another.

    While I personally have no knowledge about the quality of the data Mr. Bachman is providing, most providers of quality information want readers to understand its quality so they provide information regarding its reliability. Mr. Bachman chose not to, which leads one to question its quality.

  • I agree with the Critic and Mr. Veale. Just looking at the average property value reported, which is 151% higher than the actual average for the 86,522 HECM cases endorsed this FY (through June), you can tell the data is geographically skewed. CA homes are certainly not representative of national averages.

    The average IUPB, again for ACTUAL HECM endorsements this FY, is actually lower than it was in 3 of the past 4 years – at the same time that average property values increased. This is contrary to the claim by the report that seniors are seeking larger initial advances.

    Mr. Bachman's PR/press release should be targeted at local press, not published as truth or fact in an industry blog – especially when there are official sources of actual borrower characteristics available for professional/public use.

    Google: “HUD HECM Borrower Characteristics” and you can view real data for this, and past, years from the horses mouth.

  • I agree with the Critic and Mr. Veale. Just looking at the average property value reported, which is 151% higher than the actual average for the 86,522 HECM cases endorsed this FY (through June), you can tell the data is geographically skewed. CA homes are certainly not representative of national averages.rnrnThe average IUPB, again for ACTUAL HECM endorsements this FY, is actually lower than it was in 3 of the past 4 years – at the same time that average property values increased. This is contrary to the claim by the report that seniors are seeking larger initial advances.rnrnMr. Bachman’s PR/press release should be targeted at local press, not published as truth or fact in an industry blog – especially when there are official sources of actual borrower characteristics available for professional/public use.rnrnGoogle: “HUD HECM Borrower Characteristics” and you can view real data for this, and past, years from the horses mouth.

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