U.S. News and World: What’s Holding Reverse Mortgages Back

Reverse mortgages should be gaining traction, and yet they are still not taking off, says a U.S. News and World Report article published this week. How will struggling retirees support themselves through later life? “Enter the reverse mortgage,” the article writes. “It is the only mainstream financial product that permits older Americans to tap the equity in their homes.”

Despite their effectiveness in converting home equity into retirement income, however, there are some challenges facing the industry, U.S. News and World reports.

Reverse mortgages should be a big success story these days, but the opposite is true. Lenders have left the industry, numbers of new reverse mortgages have declined, many borrowers are in technical default on their reverse mortgages, and efforts to develop better lending standards to expand the industry have, so far, fallen flat.

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…And in recent years, some very large financial companies decided that there would be a growth market for reverse mortgages among rising numbers of aging Americans searching for some kind of silver bullet to finance their retirements. The group included Wells Fargo, Bank of America, and MetLife. Great things were predicted for a financial security product that would meet a legitimate financial need and add to the product offerings of the insurance and retirement products industry.

Unfortunately, the Great Recession and housing collapse got in the way. Many older homeowners had paid off all or most of their mortgages, and should have been poised to boost reverse-mortgage activity. But many owners looked on as the value of their equity plummeted along with falling home values. Taking out a reverse mortgage didn’t seem like such a good idea until home values recovered. Today, of course, that largely still hasn’t happened.

Read the full article at U.S. News and World online.

Written by Elizabeth Ecker

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  • Finally, the press got it right.  It was a surprisingly good and accurate story.  It carefully addressed the cross-selling mess of some years ago and stated as well as possible why we find ourselves in the ever shrinking endorsement world of HECMs.

    Whomever Phil Moeller spoke to did a very good job of helping him get his facts right.  Kudos to that individual.

    Many in the industry say that some of us never have a single good word to say about the press.  Well, here is the exception that some 
    will say proves the rule but nonetheless this was an exceptionally good article.

    How can any originator not absolutely extol the fact that someone in the press referred to HECMs as —-  “mainstream.”  Because of the quality of the story, this label was somewhat breath taking.

    Again kudos to the writer and to those who have helped “educate” him.

  • Yes, good article, but marred by this quote….it could have been a little clearer. Maybe a lot clearer….”Once a borrower’s equity in their home is gone—that is, after a lender has used the borrower’s remaining home equity to make scheduled loan payments on the mortgage—the borrower can stop making the payments and continue to live in the home for as long as they want or are able.”

    • Peter,

      You are correct that there are flaws in his description of the loan but the quoted statement is so bad, it is evident that the writer does not understand the product.  I have yet to read a perfect article.  I am jazzed just to see the term “mainstream” used to describe HECMs, perhaps too jazzed.

  • The question is, what is holding the “Reverse Mortgage” back? The article talks about originators leaving the business, companies making an exit ETC.Lets look at what has happened over the past few years:1. The housing and economic crash of 2008.

    2. The Dodd-Frank bill with its CFPB patrol!3. The safe act, which led to many originators leaving the industry.4. Regulation after regulation hitting our industry. Originators can’t keep up with the changes from a compliance stand point.

    5. A complete change in the way the product is being treated from live pricing to to the establishment of a fixed rate product with no option’s other than lump sum!

    6. Financial Assessment procedures implemented.7. The restructuring of the actuary tables.

    8. Bad and inaccurate reporting by the news media.

    9. Many traditional ways of dealing with our seniors have changed to a much faster pace industry with the call center approach to a less educated originator counseling our seniors.

    I could go on and list many more reasons why the reverse mortgage is not gaining traction like it should be doing. We have made the reverse mortgage to complicated, we have developed the program into something similar to the forward mortgage industry.

    Our seniors are more afraid of the reverse mortgage today than they were of it 10 years ago. It should be just the opposite!

    Maybe we need to step back, look at the program for what it has evolved into.Maybe  we need to step back and see what we have  evolved into? Have we caused this great program and tool for our seniors to diminish in its value because of our greed, changes in our society, changes our mind set, because of our political system and our fear? We have a lot of questions to ask our selves, don’t we!John A. Smaldone

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