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.
…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