WSJ: Home Equity Squeeze Sparks Reverse Mortgage Revival

The real-estate crunch left most home values with much to be desired, and this has prompted a revival in reverse mortgages, reports the Wall Street Journal.

Although the number of reverse mortgage endorsements has decreased compared to its peak a few years ago, lending has been picking up, with MetLife Bank in the lead. In 2011, MetLife’s reverse originations shot up 171% to 10,512 compared to the previous year, says the article, citing Reverse Market Insight data, and other lenders also saw their volume increase.

This comes in spite of recent moves by HUD to lower the amount homeowners can borrow. The limit is now 62% of a home’s value for a 62-year old; an 80-year-old can borrow up to 72% of the home’s value.

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With falling home values making it difficult for homeowners to refinance or sell—and the stock market not delivering great gains—the loans are understandably attractive to many Americans.

However, there are still reasons behind why financial advisors recommend reverse mortgages as a “last-gasp way to raise cash,” according to the WSJ, citing high origination fees and continuing borrower responsibility to keep up with property taxes and homeowner’s insurance.

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In some cases, though, reverse mortgages make sense, the article continues, especially for older borrowers who are able to to convert more of their home equity into cash.

Read the full article here.

Written by Alyssa Gerace

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  • Anyone who believes that increased endorsements for the lenders cited is due to increased demand of HECMs needs their understanding adjusted.  This increase is the direct result of losing the two biggest lenders in the reverse mortgage industry, period.

  • Interesting topic posted here. The only drawback with reverse mortgage is that origination fees are quite heavy on the pocket as compared to conventional mortgage. Plus, falling behind of paying for insurance fees, repair and maintenance costs, and also property taxes could deem foreclosure of the property to the advantage of the reverse mortgage lending company.

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