Business 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.
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.”