The United States is facing the issue of a rapidly aging population that some say it’s not prepared for in terms of housing and care. Out of this need, a grassroots organization arose to start an initiative that allows seniors to remain in their communities and age in place, a now-nationwide effort that could provide ample market opportunity for reverse mortgage lenders.
The initiative, under the Village to Village Network umbrella, started about ten years ago in Massachusetts and has since spread to dozens of other locations across the nation; many of these villages belong to the network, while others remain independent. There are currently 55 villages with another 120 in development in the network.
The first, Beacon Hill Village, was founded by a group of seniors who desired to remain in their homes and age in place, rather than go some sort of senior living facility. They organized the neighborhood in such a way that their needs were met within the community.
Villages vary in size and demographics, averaging 100 members with entrance fees ranging anywhere from $25 to $1200 a year. In 2010, more than 90% of village members were aged 65 or older, according to research done by University of California, Berkeley, and 87% owned their own homes.
Each village compiles a referral list of trusted local service providers for assistance that seniors might need with transportation, finances, housekeeping, home repairs, and all sorts of other services, such as reverse mortgages. Then, once a village member needs a service, they can call the village office, and from there are connected with a service provider from the referral list, instead of needing to do research and make multiple calls.
Being added to a village’s referral list is up to each individual village and the needs of its members, so any sort of affiliation depends on the relationship that could be formed between a village and a service provider.
“It makes nothing but sense,” said W. John Moore, president of Eureka, Calif.-based Senior Finance Center, which specializes in reverse mortgages, in regards to forming a relationship with a village. “A lot of times, people need to make modifications to the home [for aging in place], and funding may need to come from a reverse mortgage for a lot of folks.”
Although no villages are located near where he’s based, Moore says he would absolutely make an effort to affiliate with one were it to develop nearby.
With people aging in place and staying in their homes longer, the need for increased cashflow might crop up, making many villages a possible marketplace for reverse mortgages.
Most village members are home owners on the moderate to low end of the middle income range, indicates research from the UC Berkeley, which could translate into a wealth of candidates for the loans.
“With the downturn in the economy, the loss of retirement savings, and the challenges in the housing market, villages are going to become more of an opportunity for seniors,” says Susan Poor, senior policy advisor for NCB Capital Impact, a non-profit investment organization that partnered with the original village in keeping with its goal to provide access to long term supports initiatives for seniors, among its other programs.
The village model allows people to access their home equity, she says.
“It’s a concept of people being able to stay in their homes, and leveraging the limited assets that they have,” Poor says.
Right now, that home equity appears to be largely untapped.
“To date, I have not heard of any villagers that have utilized the product or are actively engaged in that as a business service in their village at this point,” says Candace Baldwin, the co-director of the Village to Village Network. “It doesn’t meant that there aren’t villages that might be interested, or have a need for that.”
If reverse mortgages are a product the village deems they’d like to have available, after members have identified it as a need, then the village would build a strategic alliance with a lender, says Baldwin.
“I certainly see that there’s a need for lending services, period, and for financial planning, long term, which is a service that many villagers have identified as a need in their communities,” she says.
The idea of a reverse lender or broker forming a relationship with a village could catch on, and many originators report a strong referral-based business.
“It seems like a clever idea,” says Anthony Webb, a research economist at the Center for Retirement Research at Boston College. “I can see benefits from the point of view of the lender, or the broker. If you have a broker who’s active in a particular area, as these people often are, then I can see it would be to the broker’s advanatge to have them as a member of the network.”
Written by Alyssa Gerace