Analysts Project 10 to 20 Percent Drop in Reverse Mortgage Volume

201003310744.jpgBusiness First of Columbus contributor Adrian Burns writes that after several boom years in the mid-2000s, the reverse mortgage industry shrunk in 2009 in correspondence with the ongoing problems in residential housing values.

With projections for this year calling for another contraction, two consecutive years of volume declines would be a first for the 21-year old reverse mortgage business and are a sign that despite its recent gains, the industry will continue to be tied to the broader housing market, industry experts say.

While many believe growth will return to the business, home price increases will likely be the key to making that happen, said Topher Thiessen, a vice president at Reverse Market Insight Inc. in Aliso Viejo, Calif., which studies trends in the reverse mortgage industry. The group projects a 10 percent to 20 percent drop in national volume in 2010 compared with 2009. Total reverse mortgage volume shrank 5.6 percent in 2009 compared with 2008, according to the group’s estimate.

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For an increasing number of potential borrowers whose homes have lost value, a reverse mortgage’s proceeds after expenses simply don’t justify the fees said Roger Teel, manager of the Marion office of Worthington-based Affinity Group Mortgage. Or, the home doesn’t have enough value to even cover loan and repair costs and the potential borrower doesn’t have the cash to cover the expenses, and so isn’t eligible for a reverse mortgage, he said.

“Five or six years ago, they got James Garner on TV and he was selling it,” Teel said. “And we had a lot of people with homes at around $175,000 to $225,000 coming in and paying off all their credit cards and getting one payment. But now a lot of those people saw (home) values that went down 20 percent or so and are more hesitant.”

Boomers, better home values should boost reverse mortgages

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  • I guess Topher is stating that RMI anticipates a 15%-25% reduction when comparing 2010 projected volume to 2008 actual. But I believe that is simply HECM volume statistics not total reverse mortgage origination volume. During 2008 not only was there significant proprietary product originations but we also were still originating the Fannie Mae Home Keeper.

    While Topher makes some interesting points, I really believe the actual 2010 total reverse mortgage origination reduction will be worse when compared to 2008 actual. I hope both of us are proven grossly pessimistic, but unless there is some very positive news on the home appreciation front, that wish is nothing more than Pollyannish.

  • This column, despite the on going deep recession (possibly turning into a depression) ignores one tiny demographic fact. WWII seniors, older baby boomers and the overwhelming desire, 90%+, of this fairly conservative, debt free, asset rich group to age / retire in place. Boomers alone total 78,000,000. As I and my business partner have spoke with seniors and their sometimes boomer children decision makers, clearly no information or bad press is what is effecting all RM products and HECM's are being tarred with a 5 year old (behaving badly FBN) brush.

    All hear is “I never knew” or “those people that swindle seniors”. Few if any, know the history, much less the variety, safety and flexibility of today's HECM.
    If I were head of marketing I'd target seniors and their sometimes boomer children decision makers and tell the truth.

    This is not a traditional shady reverse mtge, it is a brand new Gov backed, highly regulated way to sell part of your home to Uncle Sam in a down market with few buyers so that you can pay for medical bills, living expenses or eliminate your mtge payment. Also transaction costs of this have been dropping. The Government desperately wants to help seniors stay in their homes As long as you stay in your home, pay your taxes and insurance, nobody can take your home AND your estate and your heirs cannot be touched and have zero liability.

    When I put it that way I get a lot of positive response and people want to know more.

    • todddrumm,
      You are not saying anything all of us have been saying for the past 15 years. You make it sound easy to get the message to all but obviously after years and years many are not informed and have misconceptions.

      By the way what is a “traditional shady reverse mortgage”? Also its not brand new program? Possibly to you selling it but that would be a misconception to say that…this is possibly why so many seniors and their family members have misconceptions is because uninformed sales professionals?

    • Todd,

      While I find your short explanation of the program intriguing, it is also blatantly false and misleading. Calling a HECM a “highly regulated way to sell part of your home to Uncle Sam in a down market with few buyers” is not only wrong it is a total misrepresentation of a non-recourse mortgage. Where is the sale element, particularly to “Uncle Sam?” Neither the lender nor Uncle Sam go onto title. It is not just some of the home that is at risk on a non-recourse mortgage, it is all of it.

      A HECM has absolutely nothing to do with equity. No equity is converted and no equity is released. This is a plain old everyday non-recourse debt that is insured by FHA with some unusual features. It has absolutely no elements of a transfer in real estate but has all of the markings of a mortgage including payments; until termination payments just happen to be optional, that’s all. Unpaid principal and interest are due in full at termination; that is why if the owner or heirs want the home they must pay for it in full. Non-recourse means that if the loan is not paid in full, the home itself will suffice as payment in full.

      There is simply no need to fictionalize the transaction. I can see really why many seniors and their heirs might like your explanation better — only a “part of your home” is ever at risk.

  • Hey Todd – Be careful saying “zero liability” to the heirs. That's not necessarily the case, though I think it should be. The heirs can be stuck with a tax bill from the IRS for the forgiven debt upon the sale of the home.

    I think you were just using hyperbole when saying “sell part of your home to Uncle Sam”, but I'd refrain from making that comment too. It's already bad enough out there combating all of those that think the title “goes to the bank”.

    I'm sure you were aware of all this, but I wanted to mention it in case you weren't.

  • todddrumm,rnYou are not saying anything all of us have been saying for the past 15 years. You make it sound easy to get the message to all but obviously after years and years many are not informed and have misconceptions.rnrnBy the way what is a “traditional shady reverse mortgage”? Also its not brand new program? Possibly to you selling it but that would be a misconception to say that…this is possibly why so many seniors and their family members have misconceptions is because uninformed sales professionals?

  • Hey Todd – Be careful saying “zero liability” to the heirs. That’s not necessarily the case, though I think it should be. The heirs can be stuck with a tax bill from the IRS for the forgiven debt upon the sale of the home. nnI think you were just using hyperbole when saying “sell part of your home to Uncle Sam”, but I’d refrain from making that comment too. It’s already bad enough out there combating all of those that think the title “goes to the bank”. nnI’m sure you were aware of all this, but I wanted to mention it in case you weren’t.

  • Todd,rnrnWhile I find your short explanation of the program intriguing, it is also blatantly false and misleading. Calling a HECM a u201chighly regulated way to sell part of your home to Uncle Sam in a down market with few buyersu201d is not only wrong it is a total misrepresentation of a non-recourse mortgage. Where is the sale element, particularly to u201cUncle Sam?u201d Neither the lender nor Uncle Sam go onto title. It is not just some of the home that is at risk on a non-recourse mortgage, it is all of it.rn rnA HECM has absolutely nothing to do with equity. No equity is converted and no equity is released. This is a plain old everyday non-recourse debt that is insured by FHA with some unusual features. It has absolutely no elements of a transfer in real estate but has all of the markings of a mortgage including payments; until termination payments just happen to be optional, thatu2019s all. Unpaid principal and interest are due in full at termination; that is why if the owner or heirs want the home they must pay for it in full. Non-recourse means that if at termination the loan is not paid in full, the security, i.e. the home itself, will suffice as payment in full. rnrnThere is simply no need to fictionalize the transaction. I can readily see why many seniors and their heirs might like your explanation better — only a “part of your home” is ever at risk. That concept or idea is absolutely erroneous.rn

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